XCHRX TONG YI SANG and Another v. FUNG, LAW & NG, SOLICITORS and Others

1993 Action No. 2721

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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H E A D N O T E

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Practice Direction - application to set aside regular judgment - non- compliance with Practice Directions on interlocutory applications and affidavits - likely attitude of the court - application to extend time for appealing - no affidavit on merits - defence not verified - need for affirmation condescending to particulars.

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J U D G M E N T

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1. Everything that could go wrong with this case, so far as the 2nd - 5th Defendants are concerned, has gone wrong. I regret to say that these defendants have been grievously let down by their lawyers. The chapter of disasters that I am about to recount should serve as a reminder to all those who practice in these courts that Practice Directions are to be complied with and that the required procedural steps cannot be ignored with impunity.

2. On 22nd November 1993, I dismissed this appeal against the decisions of two Masters and said I would give my reasons later which I now do.

3. The claim is a fairly straightforward one. The plaintiffs are husband and wife. They purchased a property in Hong Kong. The 1st defendants were their solicitors on this transaction. The 2nd defendant was a clerk employed by the 1st defendant and he was also a director of the 3rd defendant. The 3rd defendant was the vendor. The 4th defendant represented the vendor and the 5th defendant was an estate agent who was also a director of the vendor. A dispute has arisen about an alleged unauthorized structure on the premises and various claims are made against the various defendants. It is not necessary to go into the details of the claim. The writ was issued on 31st March 1993.

4. The 1st defendant filed an Acknowledgment of Service and has served a Defence. The 2nd - 5th defendants handed the matter over to solicitors (not those now appearing) and the solicitors did nothing and failed to return the Acknowledgment of Service.

5. Not surprisingly, judgments were obtained against the various defendants for damages to be assessed and this occurred on both 21st and 27th April 1993.

6. On 14th May 1993, the 2nd - 5th defendants applied to have the judgments against them set aside.

7. On 4th June 1993, these summonses came before Master Jones who dismissed them for lack of any affidavit in support, let alone one that condescended to the details of the proposed Defence.

8. Here things went very wrong. Instead of appealing that order (or seeking an adjournment of the summons before Master Jones), the 2nd - 5th defendants issued a fresh summons seeking yet again to set aside the default judgments.

9. These summonses came before Master Bokhary on 25th August 1993 and not surprisingly she dismissed the summonses on the ground that they attempted to traverse ground covered by the summonses which Master Jones had dismissed on 4th June 1993.

10. On 1st September 1993, the 2nd - 5th defendants issued a Notice of Appeal against both the decisions of Master Jones and Master Bokhary.

11. On this occasion, those acting for the 2nd - 5th defendants ignored Order 58 rule 1(3) and failed to serve the Notice of Appeal on the plaintiffs until 3rd November 1993. Order 58 rule 1(3) provides that the Notice of Appeal must be served within 5 days of it being issued and not, as previously was the case, not less than 2 days before the hearing of the appeal. Quite sensibly no point was taken by the plaintiffs in relation to late service of the Notice of Appeal, but the plaintiff did object to the applications which the 2nd - 5th defendants had to make for extension of time for appealing. The Notice of Appeal was some 2 months and 20 days after the decision of Master Jones.

12. Not only did the 2nd - 5th defendants need my leave to appeal out of time, but as it transpired, they also required an adjournment of this appeal in order to place before me evidence that went to the merits of the proposed Defence.

13. Although Master Jones had dismissed the summonses to set aside, on the grounds that there was no evidence, somewhat surprisingly, by the time the matter came before me, all the 2nd - 5th defendants had done was to file affirmations each of which ended as follows;

"In these circumstances, I humbly ask that the interlocutory judgment entered in favour of the plaintiff on 4th June 1993 be set aside. A copy of the Defence to be filed by me is now produced and shown to me and marked as Exhibit A."

14. Mr. Chan, who appeared as bravely as he could, for the 2nd - 5th defendants, conceded that without an affidavit as to the merits, he could not succeed on this appeal. He rightly conceded that the passage above quoted was insufficient to bring himself within the principles applicable to the setting aside of default judgments.

15. In the light of this chapter of accidents, I decided that in the exercise of my discretion, it would be unjust and unfair to adjourn the matter to enable the defendants to put in further evidence going to the merits. I formed the view that these plaintiffs were blameless and had obtained a judgment over 5 months ago. I felt some sympathy for the defendants who have been let down by the legal profession. However, these defendants may well have rights over against their lawyers and they may be able to obtain justice by other means if they can establish, not only negligence, but also that they had suffered loss by not being able to put forward a Defence which, on the balance of probabilities, was more likely than not to succeed. However, all that must be left for another day.

16. In coming to the decision I did, I was much impressed by the fact that Master Jones had pointed out to these defendants that they had no affidavit on the merits and their attempt to cure this by reference to a Defence which was not even verified on oath, fell far short of what was necessary.

17. In view of the fact that I have had several cases of late which have been blighted by procedural irregularities, I thought it might assist practitioners if I reminded them of certain basic principles.

The Practice Direction for Interlocutory Application

18. The Practice Direction for inter partes applications and appeals to a judge in chambers, which appears at page 6.7 of the collection of Practice Directions, states as follows;

1. In all inter partes applications, and appeals to a judge in chambers estimated to last more than 30 minutes, the following steps will be taken not less than 3 clear working days before the day fixed for the hearing:-

(a) Each party shall inform the judge's clerk in writing the affidavits and exhibits which it proposes to use;

(b) The applicant or appellant shall lodge with the judge's clerk a bundle containing the pleadings and previous court orders in chronological sequence.

(c) Each party should comply with the Practice Directions for "Affidavits".

19. Far too frequently, this Practice Direction is ignored. For reasons which I will explain in a moment, great inconvenience is caused to the court. The Practice Direction must, of course, be read with the Practice Direction which appears at page 11.3. Paragraph 12 reads as follows;

"Where by the time of a hearing, there are more than 30 pages in total of affidavits and exhibits (not including affidavits of service) to which reference will be made, copies should be provided in consolidated bundles or files paginated successively throughout in the top right hand corner, affidavits and exhibits being in separate bundles or files" [my emphasis]

20. Time and time again, I have had cause to complain about the non- observance of these Practice Directions. In this case, the appeal was listed for 2 hours and there were over 30 pages of exhibits and affidavits. No bundle was produced until the matter was opened which was by then far too late.

21. Practice Directions are intended to be complied with. They are designed, in consultation with the profession, to ensure the efficient, expeditious and economical dispatch of the court's business. In a case involving over 30 pages (and in my experience, most cases far exceed that number), it is just impossible for the judge to work from the court bundle which is prepared solely on a chronological basis with all documents being held together through a treasury tag in the top left hand corner. This is the court's bundle - it is not the bundle for the judge who may wish to mark, colour or detach documents from his own bundle. The court bundle should be with the clerk and the judge's bundle for the judge. The court bundle is far too unmanageable for the judge to pre-read properly or to use at the hearing. That is why this Practice Directions have been made and that is why judges expect them to be complied with.

22. I am grateful to Mr. Lo for the plaintiffs for having drawn my attention to a decision of Keith J. in Sanyo Electric Trading Co. Ltd. v. Leung Kwok-king (1993) 1 HKLR 253 where at 261, the learned judge, over 12 months' ago, gave practitioners a timely reminder of the terms of the above Practice Direction relating to interlocutory applications. I respectfully adopt the learned judge's explanation as to the reason why this Practice Direction was introduced and the help that it gives to judges. He ended up by expressing the hope that this Practice Direction will not be ignored in the future.

23. Regrettably this Practice Direction and that relating to affidavits has been ignored in a large number of interlocutory cases coming before me. Now that the Sanyo judgment appears in the Hong Kong Law Reports, there is no excuse for not heeding the words of Keith J. to which I give my unqualified support.

24. I propose to go further. Save in exceptional circumstances, I do not propose to tolerate a breach of these Practice Directions in future. It is to be noted that the Practice Direction at page 6.7 imposes a duty on both parties not just the applicant/appellant. If in future, these Practice Directions are ignored, but save in the most exceptional circumstances, I propose to refuse to hear the case and adjourn it to a date to be fixed by which time I will expect the Practice Directions to be fully complied with. Further, I will expect an undertaking from solicitors who have ignored the Practice Directions to the effect that they will not seek to charge their clients for the costs thrown away. If not given, then I will consider inviting the solicitors to show cause why they should not pay the costs personally.

25. I have been dealing with interlocutory applications for most of the last 3 years. I have given warnings, time and time again that I expect these Practice Directions to be complied with. I believe that the time has now come for judges to enforce these Practice Directions and I for my part intend to do so.

26. I express the hope that the Law Society will take the opportunity of bringing to the attention of its members the observations made by Keith J. and supported by myself in this judgment.

27. I would add this. Counsel cannot shirk their responsibilities. If instructed, other than the night before, it is also their duty to advise their instructing solicitors about compliance with these Practice Directions. If they do not do so, they should not complain if certain directions are given to the taxing master. I hope the Bar Council will also remind their members of this responsibility.

Extending time for appealing

28. In this case I do not think that it would be a proper and fair exercise of my discretion to extend the 2nd - 5th defendants time for appealing. I gratefully adopt the resume of the relevant principles stated by Keith J. in Chiu Sin - Chong v Yu Yan-yan [1993] 1 HKLR 225 at 227-8.

29. In the present case, a crucial factor was the fact that, without the yet further indulgence of an adjournment, the defendants could not possibly succeed on their appeal. The delay in issuing the Notice of Appeal against the decision of Master Jones was, in any event, a substantial period of delay.

Affidavit showing merits

30. The note to Order 13 rule 9 under the heading "Regular Judgment" at page 137 of the Annual Practice state as follows;

"Delay in making an application - There is no rigid rule that the applicant must satisfy the court that there is a reasonable explanation why judgment was allowed to go by default, though obviously the reason, if any, for allowing judgment and thereafter applying to set it aside is one of the matters to which the court will have regard in exercising its discretion (Evans v. Bartlam [1937] A.C. 437, p.480).

The application should be made promptly and within a reasonable time (see O.2, r.2). But the court will in a fit case disregard lapse of time (Beale v. Macgregor (1886) 2 T.L.R. 311). See also Vann v. Awford, (1986) L.S. Gaz. 1725; The Times, April 23, 1986; C.A., noted under para. 13/9/5, above).

Thus, in an action against a married woman where default was due to a bona fide misapprehension on the part of the defendant, and delay subsequently occurred in applying to set aside the judgment, the court set it aside notwithstanding the delay, because the action was wrong in form (Atwood v. Chichester (1878) 3 Q.B.D. 722; and see Davis v. Ballenden (1882) 46 L.T. 797).

Apart from express rules there is an inherent power in the court to prevent an abuse of its proceedings and a judgment, although the application is out of time, will be set aside if circumstances require it (Beale v. Macgregor (1886) 2 T.L.R. 311, where a judgment was set aside by the C.A. for oppressiveness).

On the other hand, if delay is coupled with prejudice occasioned to the plaintiff or to a bona fide assignee of the judgment debt, the court may refuse to set aside the judgment (see Harley v. Samson (1914) 30 T.L.R. 450).

The Third Cumulative Supplement to the Annual Practice adds the following passage;

"Discretionary powers of the court Add after reference to The Saudi Eagle:

More significantly the propositions to be derived therefrom are:

(a) It is not sufficient to show a merely "arguable" defence that would justify leave to defend under Order 14; it must both have "a real prospect of success" and "carry some degree of conviction". Thus the court must form a provisional view of the probable outcome of the action.

(b) If proceedings are deliberately ignored this conduct, although not amounting to an estoppel at law, must be considered "in justice" before exercising the court's discretion to set aside.

The Court of appeal in Allen v. Taylor [1992] P.I.Q.R 255, holding that a judge had misdirected himself by giving too little weight to an assertion of a defendant on merits and too much to conduct, allowed an appeal following an analysis (at p.228) of the principles emerging from The Saudi Eagle. It qualified the requirement to form "a provisional view of the probable outcome" where assessment of facts at a trial is essential to form a view. The Court held it enough that certain exculpatory facts "could well be established". It is submitted that this is not easily reconcilable with the robust approach of The Saudi Eagle and is a dilution thereof. The preferred view is that unless potentially credible affidavit evidence demonstrates a real likelihood that a defendant will succeed on fact no "real prospect of success" is shown and relief should be refused." [my emphasis]

31. In the present case, it is clear that no affidavit on the merits has ever been put in. The draft Defence was merely exhibited and was not even verified on oath or affirmation.

32. However, even if it had been verified on oath or affirmation, in the usual perfunctory way, I am not prepared to go so far as to say that this would have been sufficient. I believe that there is a substantial onus on an applicant who seeks to set aside a regular judgment. This is clear from the Saudi Eagle [1986] 2 Lloyds Ref. 221. In a case such as this, I would expect a defendant to condescend to particulars of his Defence on the merits in his own words. To verify a draft Defence, drafted, no doubt, on the basis of instructions given by the defendant and expressed in the usual obscure wording of a pleading, may not be sufficient to discharge the onus placed on a defendant in a situation such as this. What is far more preferable (and I leave over the question whether it is strictly necessary) is an affidavit in narrative form explaining precisely what the proposed Defence will be so that the court can be assisted in forming a value judgment as to whether it can be satisfied that there is some degree of conviction and a real prospect of success in the proposed defence.

Conclusion

33. It was, therefore, for the above reasons that I decided to refuse the 2nd - 5th defendants (a) leave to appeal out of time, (b) an adjournment to file further evidence. The appeal is therefore dismissed with costs and in the sincere hope that this catalogue of disasters never occurs again.