HONGKONG CHANGYI REAL ESTATE DEVELOPMENT LTD v. NEO-CHINA (GROUP) INFRASTRUCTURE INVESTMENT LTD AND ANOTHER

HCA 1576/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1576 OF 2011

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D E C I S I O N

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1. Nearly 5 years after the implementation of the Civil Justice Reform, parties should be under no doubt by now that the courts will have no hesitation now to reject a late application, made when trial is imminent, for either amendment of pleadings, discovery or the filing of witness statements, which application has the effect of disrupting the preparation for trial with the risk of milestone dates such as a pretrial review or the trial dates themselves being affected. Delay itself is a ground justifying refusal of leave, since delay of a trial is prejudice to a party, who has every right to expect that a trial fixed months ahead with due notice to the parties can proceed without disruption and time and costs being wasted. I can add very little to what has already been summarized and set out in Kinetics Medical Health Group Co Ltd v DrTseIvanCheongYau, HCA 1115/2010, unreported, 8 May 2013 and in the decision of the Court of Appeal in LiXiaoYun v China Gas Holdings Limited, CACV 38/2013, 11 March 2013. The applicant for leave must establish, by affidavit evidence, exceptional circumstances to explain and justify the delay. Change of the legal team has rarely, if ever, been accepted as justification for a last minute change of case or amendment of pleadings, which would result in or necessitate a response from the other side which it cannot in all fairness be expected to do in the availability of time before trial. PD 5.2 makes it clear that change of the legal team will not be treated as exceptional circumstances.

2. The duty of a party making late disclosure of documents for use as evidence in the trial is also clearly set out in Hong Lok School Limited v Chow Sai Yiu, [2003] 2 HKLRD 782.

3. The objectives of the Civil Justice Reform are to encourage early preparation of trial, dealing with cases expeditiously, cost‑effectiveness and proportionality.  Although there is no doubt that the primary aim in exercising the powers of the court is to secure the just resolution of disputes in accordance with the substantive rights of the parties, it can hardly be said to be just if a party is required, as a result of late applications made by its opponent at the last minute, in disregard of timetables laid down by the court in good time at case management hearings and pretrial review hearings, to plead to amendments, consider new documents and evidence, and to file supplemental witness statements at the eve of trial.

4. In this case, directions for discovery and filing of witness statements were made as early as 15 August 2012.  On 20 December 2012, the court granted further time to the 1^st defendant to take out interlocutory applications within 14 days.  Such time was further extended on 1 February 2013.  On 27 February 2013, the master made an unless order for witness statements to be filed by the 1^st defendant by 27 March 2013.  On 29 May 2013, leave was granted to the parties to set the case down for trial.  Trial dates were fixed thereafter, for trial to start on 26 March 2014, with three days reserved.  The pretrial review was scheduled to take place on 8 January 2014, and it was not until 18 and 24 December 2013, that the 1^st defendant applied for leave to amend its Defence and to file supplemental witness statements.  The 1^st defendant also filed on 24 December 2013 a supplemental list comprising 55 new documents, and on 6 January 2014, a further list comprising 2 new documents.

5. Ms Po says that the amendments to the Defence do not raise any new points: that they only set out the pleaded events in a chronological order and clarify the defendant’s case.  If that was indeed the case, then the amendments are not necessary and should not be allowed.  At this late stage, the parties will have to be content with the original Defence, since it already sets out succinctly the issues in dispute for determination at trial.

6. However, it seems to me that the proposed Amended Defence does raise new matters to which the plaintiff will have to plead as well as file evidence to answer the factual matters raised.  These new facts pleaded in the proposed Amended Defence include, for example, the allegation of the parties’ common intention regarding the Agreement of September 2007 and how payment of the consideration was to be made; and the Agreement being part of a series of other agreements made between the parties which the defendant says have to be considered by the court when construing the Agreement.  I agree with Mr Shum that by contrast, on the original Defence, the defendant has not raised any questions of construction of the Agreement, as the original Defence turns simply on the fact that the defendant had made payment to the joint venture company in accordance with the instructions and directions of the plaintiff’s Mr Xu.

7. The new documents disclosed by the defendant in December 2013 and January 2014 deal with the defendant’s payments of the amounts in dispute and include the other agreements connected with the transaction in dispute, claimed by the defendant to be relevant to the construction of the Agreement relied upon by the plaintiff.  Unless the plaintiff agrees to the late amendments to the Defence and has sufficient time before trial to amend its own pleadings and to prepare supplemental witness statements to deal with both the new allegations in the pleadings and the new documents disclosed, the plaintiff will be prejudiced.

8. At the hearing of arguments on the applications for amendment etc, the trial is 4 weeks away.  At the time when the applications were first made, trial was 15 weeks away.  The whole objection to late applications is that hearings will have to be fixed for argument, these hearings will be delayed, and the parties will be taken nearer and nearer to the dates of trial (as events transpired in this case).

9. At the end of the day, the issue in dispute for determination at trial is whether payment of the consideration for the transfer of shares under the Agreement had been made, whether the payment was made on the instructions of Mr Xu (as the defendant alleges) and what the payment of RMB10 million made in October 2007 was for.  This is something within the knowledge of the defendant as payer, and I fail to understand why the defendant was not able to give the necessary explanation as to the nature of the payments made, by whom the payments were made, how they were made, and produce the documents to explain these payments, at the time when the witness statements were first signed and exchanged, and why it only applied for leave to explain these matters, 16 months after the court first gave directions for the filing of witness statements.  If the defendant had wished to reply to the matters raised in the plaintiff’s witness statements, as it now claims to do by the supplemental statements, the relevant statement of the plaintiff was served in December 2012.  The defendant decided only to file supplemental statements in reply in December 2013, 12 months later.  It only has itself to blame for this delay and its inactivity.

10. The only explanation given by the defendant, apart from the change in the legal team, is that the plaintiff had delayed payment of costs against the 2^nd defendant and the 1^st defendant had decided to withhold action “until it was clear that the plaintiff wishes to seriously proceed with the action”.

11. There should be no doubt that after the Civil Justice Reform, both parties have the duty to proceed with an action.  A defendant is no longer entitled to take a “let sleeping dogs lie” attitude.  The defendant can apply to strike out or stay an action if the plaintiff fails to progress an action or has acted in breach of a court order.  If it does not, and delays its own preparation and conduct of the case, then it has to accept the consequences of its own failure to act.

12. In any event, the plaintiff in this case paid the costs to the 2^nd defendant in August 2013, and had applied to set the case down in June 2013. It was not until 6 months after setting down and 4 months after payment of costs to the 2^nd defendant, that the defendant applied for leave to amend and to file further statements.  I do not regard any failure to act or delay on the plaintiff’s part as any excuse for the defendant’s own tardiness. 

13. Moreover, having been taken by Mr Shum through the proposed further statements of the defendant, I agree that they appear to be of little probative value.

14. In summary, after balancing all relevant matters, I am not satisfied that the defendant has shown any exceptional circumstances to justify either the late applications for leave to amend its Defence and to file further witness statements, or the late discovery of new documents for use as evidence.  I am not satisfied that the last minute amendments are necessary for the fair resolution of the issues in dispute for determination at trial.

15. Particularly in relation to the 55 new documents sought to be produced by the defendant, it has failed since December 2013 to explain by affidavit how these documents relate to any specific issues in dispute, and how it proposes to use the documents at trial.  At this stage when the defendant seeks the indulgence of the court for the late production of documents, it behoves the defendant to adequately and promptly inform the court and the plaintiff of the reason for the late production, the relevance and the purpose of the documents to be produced.  The onus should not be put on the plaintiff to seek explanation of the documents.

16. If the defendant’s late applications are allowed, there is a real risk that the March trial dates will be disrupted as a result, and the plaintiff will be prejudiced by the delay of a fair trial and the inevitable postponement of the trial to the end of 2014, or 2015.  Time, costs and judicial resources have been wasted as a result of the late applications and all these are against the objectives of the Civil Justice Reform and should not be condoned.

17. The applications are refused with costs to the plaintiff (including the costs reserved at the last hearing on 8 January 2014).