XCHRX AQUA-LEISURE INDUSTRIES INC. AND ANOTHER v. AQUA SPLASH LTD.

1998 HCA No. 18928

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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J U D G M E N T

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The request for information

1. On 12th February, it was ordered that there be a speedy trial of this action. The trial was subsequently fixed to begin on 24th May. That is now only 10 days away. The estimate of the length of the trial was 5 days. However, on 29th April an order was made declaring that the Defendant's solicitors had ceased to be the solicitors acting for the Defendant in the action. That gave rise to some concern. The order for a speedy trial had meant that the work to be done to get the action ready for trial had had to be completed within a shorter timescale than usual. By 29th April, there was still much work to be done.

2. In addition, the Plaintiffs' solicitors were anxious to know how they should prepare for trial. A number of the Plaintiffs' witnesses live overseas, and if the trial proceeds, they will have to come to Hong Kong. And if the Defendant decides not to be legally represented, it may well be that the Plaintiffs' solicitors will not instruct leading counsel for the trial. Accordingly, the Plaintiffs' solicitors asked me to exercise the powers conferred on the court by Ord. 25 r. 6(1), which provides, so far as is material:

"... it shall be the duty of the parties to the action and their advisers to give all such information and produce all such documents on any hearing of the summons [for directions] as the Court may reasonably require for the purposes of enabling it properly to deal with the summons."

The information which the Plaintiffs' solicitors suggested I sought related to whether the Defendant was still proposing to defend the action. If so, did it propose to be represented? If so, by whom? And if by solicitors, when did the Defendant propose to engage them?

The hearing on 29th April and its aftermath

3. It was on 29th April that the Plaintiffs' solicitors asked me to require the Defendant to give the court that information, which was when various summonses relating to amendments to the Statement of Claim, specific discovery and the exchange of witness statements were before the court. I was not prepared to consider whether the Defendant should be required to give that information other than at a hearing which had been convened for that purpose. Accordingly, I directed that a date be fixed for determining whether any further directions should be given in the action. In the meantime, the Plaintiffs' solicitors wrote to the Defendant on 4th May in the following terms:

"At the hearing before Mr. Justice Keith on 29 April 1999 we requested the summons for directions be restored for the purposes of his Lordship obtaining information from your company as to how ... you propose to defend these proceedings now that you have instructed Messrs Wilkinson & Grist to cease to act. The information that we will be asking Mr. Justice Keith to request is set out on the attached sheet. His Lordship has power to request this information pursuant to the ... Rules of the High Court."

The questions set out in the attached sheet were as follows

"1. Do you propose to defend these proceedings?

2. If the answer to no. 1 is no, do you wish to amend your acknowledgement of service to indicate that you do not wish to defend these proceedings.

3. If the answer to no. 1 is yes:

(a) do you intend to instruct lawyers?

(b) how many witnesses do you propose calling?

4. If the answer to no. 3(a) is yes:

(a) which firm of solicitors and which barrister will you be instructing?

(b) when do you propose instructing these lawyers?

5. If the answer to no. 3(a) is no, will you be applying for leave of the Registrar for a director to act on behalf of the company.

6. If the answer to no. 5 is yes, when will this application be made?

7. If the answer to no. 5 is no, how do you propose defending these proceedings?"

4. The sanctions for not complying with a requirement under Ord. 25 r. 6(1) are set out in Ord. 25 r. 6(3), which provides:

"If the Court on any hearing of the summons for directions requires a party to the action or his solicitor or counsel to give any information or produce any document, and that information or document is not given or produced, then ... the Court may -

(a) cause the facts to be recorded in the order with a view to such special order, if any, as to costs as may be just being made at the trial, or

(b) if it appears to the Court to be just so to do, order the whole or any part of the pleadings of the party concerned to be struck out, or if the party is plaintiff or the claimant under a counterclaim, order the action or counterclaim to be dismissed on such terms as may be just."

The Plaintiffs' solicitor's letter to the Defendant referred to the latter of those sanctions. The letter included the following statement:

"If you do not attend the hearing before Mr. Justice Keith or do not provide the information sought by Mr. Justice Keith at the hearing we shall request that his Lordship exercise his power pursuant to Ord. 25 r. 6(3)(b) to strike out the Defence and enter judgment for our client in terms of the relief claimed in the Amended Statement of Claim."

The hearing yesterday

5. The restored summons for directions came before me yesterday. No-one from the Defendant appeared, nor had anyone communicated with the Plaintiffs' solicitors since its own solicitors' instructions had been withdrawn. Nor had anyone replied to the Plaintiffs' solicitors' letter of 4th May. At this hearing, I considered whether the Defendant should be required to give the information sought. I decided that it should be. Effective case management required nothing less. With the trial of the action so imminent, the Plaintiffs' solicitors had to know the answers to their questions to enable effective preparation of the case for trial to be completed. Apart from the judgment of Jerome Chan J. in Luigi Benetton S.r.1. v. Face Time International Ltd. (HCA 4135/93), in which the Defendant was ordered to state whether it proposed to call witnesses at trial, I knew of no case, reported or otherwise, in which Ord. 25 r. 6(1) had been used for this purpose. However, the fact that the application was a novel one did not mean that the order ought not to be made.

6. The difficulty was that no-one from the Defendant was present in court to answer the questions, and I did not think it right to proceed further until the Defendant had been notified (a) that I had required it to give the information sought, and (b) that in the event of such information not being given, I would have to consider whether to strike out the Defendant's Defence. I therefore adjourned the summons until today. My order adjourning the summons stated that it was being adjourned

"for the purposes of (a) allowing the Defendant to answer the questions on the attached schedule, and (b) enabling Mr. Justice Keith to determine whether, in the event of such questions remaining unanswered, the Defendant should be debarred from defending this action and judgment should be entered for the Plaintiffs."

In addition, the Plaintiffs' solicitors wrote to the Defendant yesterday. Having referred to yesterday's hearing, the letter continued:

"Mr. Justice Keith ordered that your company answer the questions set out on the sheet attached to our letter of 4 May 1999 (further copy attached). The hearing was adjourned until tomorrow to give you an opportunity to answer the questions. A director of your company should attend the hearing. If you do not appear or do not provide the information you have been ordered to provide, we shall apply to Mr. Justice Keith pursuant to Ord. 25 r. 6(3) for your Defence to be struck out and judgment entered for our clients."

The hearing today

7. No-one from the Defendant has appeared today. The information which I required should be given has therefore not been given. Mr. Douglas Clark for the Plaintiffs now asks me to strike out the Defendant's Defence. Apart from the Defendant's recent conduct of the litigation, Mr. Clark relied upon the following three matters. First, the evidence filed by the Plaintiffs in support of the application for a speedy trial of the action demonstrates that the Plaintiffs have a "very strong case". Secondly, although the Defendant is the Hong Kong subsidiary of a "financially strong" Dutch company, it may well have been incorporated as a "special purpose" vehicle with few assets. It may therefore not be good for damages and costs. Thirdly, the Plaintiffs would be put to unnecessary expense if they have to bring witnesses from overseas for what might be a trial in which the Plaintiffs may have to do little more than prove their case.

8. I am very reluctant to make an order which has the effect of debarring the Defendant from defending the action for non-compliance with a requirement to provide information when the Defendant has been given comparatively little time to consider its position, though I recognise that the shortness of time has been the result of the Defendant's solicitors' instructions being withdrawn so soon before the trial of the action. As it is, I have decided that I must take a robust view of the case. Since the Defendant is not even prepared to tell me that it proposes to defend the case, I can only assume that it is proposing not to do so. In those circumstances, I see no reason why the Plaintiffs should be required to go to the trouble and expense of proving a case which is not to be defended. In the exercise of my discretion under Ord. 25 r. 6(3), therefore, I order that the Defendant's Defence be struck out. The effect of that is that the Plaintiffs will be entitled to such relief as they are entitled to on the facts pleaded in the Amended Statement of Claim, and I shall hear from Mr. Clark as to the terms of the judgment which I should enter.