PHILIP SECURITIES (HONG KONG) LTD v. 3i CAPITAL GROUP CORP AND ANOTHER

HCA 1905/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1905 OF 2014

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D E C I S I O N

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1.  I will give detailed reasons for my decision ex tempore in view of the time scale. 

2.  This action, commenced by writ of summons endorsed with statement of claim issued on 25 August 2014; the defence and counterclaim were filed on 11 February 2015; a reply and defence to counterclaim was filed on 10 March 2015; an amended defence and counterclaim was filed on 1 June 2015, an amended reply and defence on 24 June 2015; a re-amended defence and counterclaim was served on 11 January 2016, and finally a re‑amended reply and defence and counterclaim on 4 February 2016. 

3.  There have been a total of five case management conferences in this action, on 22 May 2015, 5 October 2015, 22 February 2016, 5 May 2016 and most recently 19 December 2016, when the case was ordered to be set down within 42 days for a 5 day trial.  That trial is scheduled to start next Tuesday, 22 November 2017. 

4.  At the 4^th case management conference held on 5 May 2016, the defendants’ solicitors informed Mr Registrar Leung that the defendants intended to reamend their defence within 60 days.  Accordingly, the registrar directed that the defendant should take out an application for leave to amend the defence and counterclaim within 60 days from 5 May.  No application to amend was lodged. 

5.  Prior to the 5^th case management hearing held on 19 December 2016, again, before Mr Registrar Leung, by way of a timetabling questionnaire, the defendant solicitors stated again that they intended to re‑amend their pleadings, albeit for different reasons than on the first occasion, within 30 days from the case management hearing.  Again, no such application to amend was made. 

6.  The present application by the defendant is by way of summons dated 24 August 2017, which was served on the plaintiff solicitors several hours after the pre-trial review, before B Chu J on the same date.  The learned judge subsequently heard the application on 24 August 2017, and gave directions for the further conduct of the application.  It thus comes before me only three clear working days before the trial is scheduled to commence, and so I am giving my decisions and reasons ex tempore. 

7.  There is no dispute that the court has a wide discretion under the Hong Kong Civil Procedures Rule 20 to admit amendments to pleadings at any stage of the proceedings.  This is because the courts are there to decide the rights of the parties, and so they should always be open to amendments which would determine the real questions and controversy.  The underlying principle is to ensure that justice is served, and cases are disposed of fairly.  Having said that, the court shall not order a pleading to be amended, unless it is of the opinion that the order is necessary either for disposing fairly of the case or matter, or for saving costs.  That is the new Order 20, rule 8(1)(a). 

8.  The amendment sought in this case are detailed in the summons and addressed in the defendant’s skeleton argument, although it is hard to understand their precise nature and effect without delving into the case in more detail then has been possible on this hearing.  However, in reaching my decision, I am required to balance all of the relevant circumstances, including the nature of the amendments which it is sought to make. 

9.  Mr William Leung for the defendants has filed no evidence and makes no submissions to justify the lateness of his application, and proceeds as if this were a straightforward application to amend.  The amendments sought are, however, extensive.  He focuses his submissions on the nature of the amendments he seeks to make.  He submits that the proposed amendments are simply to give the proper legal meaning and legal effect to particular wordings, and/or passages in the plaintiff’s own documents.  If this were the sole reason, then such matters could likely be dealt with by submissions at trial. 

10.  Mr William Leung also says that the amendments are merely explanations of what has already been pleaded, in which case I do not see the need for the pleadings to be amended in the manner suggested. 

11.  Finally, to the extent that the amendments are new allegations of breach of duty, it is prodigiously late in the day to be making such an application without any explanation or evidence in support.  In the circumstances, I am not prepared to allow the amendments at this time, and I set out my reasons now.

12.  In reaching my decision, I have had regard to the fact that this application is made very late indeed.  There is no evidence to justify the lateness, particularly given the number of times this matter has been before the court at the pre-trial stage, and having regard to the defendant’s previousstatement as to his intention to apply to amend its case.  I have been referred to the judgment of Deputy High Court Judge Marlene Ng in DBS Bank (Hong Kong) Limited (HCA 382/2009, 6 February 2014), where she said:

“ After the implementation of the CJR and in view of the underlying objectives which emphasise not only substantive but also procedural fairness, if there is any last minute application (which necessarily must be a rare occurrence), the court expects a full account for the lateness of the application and full justification as to why the application should be entertained at all at such a late stage. The court expects litigants to give careful and conscientious consideration and attention to the completion of the listing questionnaires before the case is set down for trial to minimise if not totally eradicate late interlocutory applications.”

13.  The DBS case was a case in which a late amendment was also sought, and the learned judge made reference there to the leading House of Lords authority of Ketteman v Hansel Properties Ltd [1987] AC 189, and cited the judgment of Deputy High Court Judge Lok (as he then was) in Li Shiu To v Li Shiu Tsang & ors HCA 416/2003 (14 August 2012), in which after affirming that the principles under which the court exercises its discretion to allow or refuse amendments of pleadings, set out in Ketteman remain good law after the CJR, had this to say about the CJR:

“ First, the new O 1A of the RHC makes it clear that the court shall give effect to the underlying objectives when it exercises its power or interprets the RHC, including increasing cost-effectiveness of litigation, ensuring that a case is dealt with as expeditiously as is reasonably practicable, promoting a sense of reasonable proportionand procedural economy in the conduct of proceedings, facilitating the settlement of disputes and ensuring that the resources of the court are distributed fairly. If the amendment application is made in circumstances offending these underlying objectives, the court may have to balance all the factors in the case in determining whether to grant the application.”

His Lordship went on:

“ Second, there is a heightened concern to guard against late applications after the implementation of the CJR. For case management purposes, there are now certain milestone dates in the course of litigation, and one of which would be the trial date. If a party makes a late application to amend the pleading with the effect that the trial date may have to be adjourned, the court would be very reluctant in allowing the application unless there are exceptional circumstances. Indeed, adjournment of the trial is now considered as a serious prejudice to the parties involved in litigation. Hence, one should not assume that, once the Ketteman principles are established, the court would automatically grant an application for amendment of pleading in particular at a very late stage of the proceedings.”

14.  This seems to me an eloquent summary of the present position, and in this case, the delay has been so egregious, especially when wholly unexplained, that the principles underlying the CJR would be undermined were I to accede to the defendant’s present application.  The question of potential procedural as well as substantial prejudice to the plaintiff is a matter which I have to take into account, and the imminence of the trial date is, to my mind, the most significant factor in this.  There needs to be very strong and exceptional circumstances to risk warranting a postponement of the trial date at this 11^th hour, and I am persuaded that allowing the amendment sought would inevitably risk the derailment of next week’s proceedings. 

15.  I therefore decline to allow the amendment sought, and urge the parties’ attention now to preparation for the trial which commences on Tuesday. 

16.  The defendant then has a second summons before me, seeking specific discovery in connection with the same action.  The relevant legal principles are well-established, and are not in dispute.  They are set out in Order 24, rule 7 of the Rules of the High Court.  Those legal principles which underlined the court’s approach are conveniently summarised by Ng J in Jade’s Realm v Director of Lands HCA 1509/2012 (10 June 2014), at paragraph 21, and I can do no better than to set them out:

“ (1) There is no jurisdiction to make an order for specific discovery under RHC O 24 r 7 unless there is sufficient evidence or prima facie case that: (a) the documents or classes of documents exist which the other party has not disclosed; (b) the documents relate to a matter in issue in the action; and (c) the documents are in the possession, custody or power of the other party.

(2) Once it is established that those three prerequisites for jurisdictiondo exist, the court has a discretion whether or not to order discovery.

(3) The Court will not make an order unless the discovery sought is necessary either for disposing fairly of the cause or matter or for saving costs.

(4) The order must identify with precision the documents or categories of documents which are required to be disclosed, for otherwise the person giving discovery may find himself in serious trouble for swearing to a false affidavit, even though doing his best to give an honest disclosure.

(5) Where discovery is sought in relation to a class of documents, it is important that the class should not be defined or described too widely, and should not be defined so as to include documents which are not relevant.

(6) Despite the Peruvian Guano test for relevance, ‘fishing’ is not allowed, and discovery should not be oppressive.

(7) Statements in a party’s affidavit of documents are conclusive e.g. on the question whether he has or has had any documents other than those disclosed, as to their relevancy or as to the grounds stated in support of a claim for privilege from production.

(8) The respondent may answer an application for specific discovery by an affidavit stating that he does not have the documents, and this will be conclusive at the interlocutory stage.”

17.  This is an area that has also been affected by the CJR.  I refer to what Deputy High Court Judge Mimmie Chan (as she then was) said in Sunny Tadjudin v Bank of America, National Association (HCA 322/2008).  It is clear that post CJR, the court should give effect to the underlying objectives of the rules and procedures when it exercises its power under Order 24, and when it interprets the provisions of Order 24.  In deciding whether any document relates to the matter in question in the action, whether any document is or has been in the possession, custody or power of the party, and whether discovery of a document sought is necessary either for disposing fairly of the cause or matter or for saving costs, the court should always bear in mind the objectives of cost-effectiveness, expeditious disposal of cases, proportionality, procedural economy, and insurance of fairness between the parties. 

18.  If I turn to consider the categories of documents which the defendants seek, I would first observe that they are extremely broad in their nature, and secondly, that in many cases, they seek categories of documents which are, or should already have been, in the defendant’s possession, or in respect of which there is no clear evidence of their relevance.  I am not satisfied that the documents, discovery of which is sought, have been specifically identified so as to be clear of their existence, nor am I persuaded that such categories are necessarily relevant to the matters in issue in the action, and these are prerequisites for the exercise of my discretion.  The lateness of this application without any explanation would, in any event, militate against my exercising the discretion I have here.  That is the conclusion of my decisions.

(Discussions on costs)

19.  I make an order that the defendants should pay the plaintiff’s costs because I think, in this case, the costs should follow the event.