佰勝集團有限公司 v. 孫仲明以浩天貿易公司之名進行貿易

DCCJ 1140/2018

[2022] HKDC 202

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1140 OF 2018

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DECISION

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THE APPLICATION

1.  Today is the first day of the trial which has been scheduled to last for 3 days.

2.  By summons filed on 16 February 2022 (“the Summons”), the defendant applied for leave to:. 

(1)  amend his Re-Re-Re-Amended Defence;

(2)  adduce his 2^nd supplemental witness statement;

(3)  make further discovery of documents.

3.  When Mr Yu sought to explain the proposed amendments of the defendant’s Re-Re-Re-Amended Defence, he put it as follows in his skeleton submissions:

“The amendment serves two purposes. First, it aims to clearly state the equitable defence (namely ministerial receipt and change of position) that D intends to run at trial, which was required and necessary: RDC Ord 18 r 8; Hong Kong Civil Procedure 2022 Vol 1 §18/8/13. Secondly, D seeks to correct and update the Annexure A of the existing defence, having discovered some contemporaneous documents.”

4.  Upon further clarification in court, it seems that the above categorisations are not entirely correct, because the proposed amendments to Annexure A and to two figures referred to in paragraph 16 of the Re-Re-Re-Amended Defence are in fact rendered necessary not by the new documents but by documents which have been properly disclosed beforehand by the defendant and included in the trial bundle.  In relation to these amendments, Ms Leung has indicated fairly that no objection would be made.  I will therefore allow these proposed amendments by consent.  I will also allow the defendant’s deletion of a sentence in paragraph 17B of the Re-Re-Re-Amended Defence as to which the plaintiff did not object.

5.  I will now turn to the two issues which I have to resolve, namely:

(1)  Whether the defendant should be allowed to amend his pleading (by adding paragraphs 17C and 17D); and

(2)  Whether the defendant should be allowed to adduce his 2^nd supplemental witness statement and rely on new documents at the trial.

DISCUSSION

Introduction of equitable defence in the pleading

6.  When this court considers whether the amendment should be allowed, the trite principles which have been referred to by DHCJ M Ng (as she then was) in DBS Bank (Hong Kong) Limited v Sit Pan Jit (HCA 382/2009, unreported, 6 February 2014) will be borne in mind:

“19. 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 […]

20. […]

21. Whether the court in the exercise of its case management discretion should allow a late application to amend pleadings requires a balancing exercise to be undertaken upon consideration of all relevant circumstances.

22. Mr Lee SC submits that the court is not to punish a party for his error or mistake, and a party has a right to amend and frame his case (and the court should allow all amendments to pleadings) for the purpose of determining the real question in controversy between the parties to the proceedings or for correcting any defect/error in any proceedings ‘if it can be done without injustice to the other party’, but he accepts that the court should not order a pleading to be amended unless it is of the opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs. He says there is no injustice if the opposing party can be compensated by costs, and the burden falls on such party to show prejudice.

23. Mr Lee SC submits that such principles are reflected in the judgment of DHCJ Lok in Li Shiu To v Li Shiu Tsang & anor, a case cited by Mr Dawes. In that case, the learned judge confirmed that the principles under which the court exercises it discretion to allow or refuse amendments of pleadings in Ketteman v Hansel Properties Ltd ‘remain good law after the CJR’. The principles in Ketteman have been summarised by DHCJ Lok as follows:

‘(i) first, all such amendments should be made as are necessary to enable the real questions between the parties to be decided;

(ii) second, amendments should not be refused solely because they have been made by the honest fault or mistake of the party applying for leave to make them: it is not the function of the court to punish parties for mistakes which they have made in the conduct of their cases by deciding otherwise than in accordance with their rights;

(iii) third, however blameworthy (short of bad faith) may have been a party’s failure to plead the subject-matter of a proposed amendment earlier, and however late the application for leave to make such amendment may have been, the application should, in general, be allowed, provided that allowing it will not prejudice the other party; and

(iv) fourth, there is no injustice to the other party if he can be compensated by appropriate orders as to costs.’

However, the learned judge said he ‘must put a caveat here’:

‘16. …… 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 proportion and 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.

17. 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 litigations. Hence, one should not assume that, once the Ketteman principles are satisfied, the court would automatically grant an application for amendment of pleading in particular at a very late stage of the proceedings.’ (my emphasis)

24. I respectfully agree with the learned judge. In my view, whilst the broad considerations in paragraph 22 above put forward by Mr Lee SC may well be relevant to applications to amend pleadings at an earlier stage of legal proceedings, they must be viewed through the prism of delay (especially when it is unexplained and/or unjustified) in the case of a late application made at the eleventh hour before trial. This brings into focus the underlying objectives in Order 1A rule 1 of the Rules of the High Court (‘RHC’), including the need to increase costs-effectiveness, ensure expeditiousness, promote reasonable proportion, and ensure fairness between the parties.

25. Mr Lee SC reminds that in giving effect to the underlying objectives the court must bear in mind Order 1A rule 2 of the RHC which provides 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, so one must avoid dogmatic or misguided reliance on the underlying objectives to override any proper exercise of case management to give effect to the aforesaid primary aim.

26.  But in my view, the just resolution of disputes requires consideration of the question of potential procedural as well as substantive prejudice to the other party, which in the present case necessarily becomes more acute given the extreme lateness of the Summons.  Post-CJR case management recognises that the closer to trial an application to amend pleadings is made the more likely it is to cause real prejudice to the other party, especially when the trial (which is an immovable milestone event unless there are exceptional circumstances) may be compromised by insufficient remaining time until the commencement of trial to accommodate the other party’s reaction to the new pleas if the application is granted, or by the even greater danger of putting the milestone trial at risk.”

7.  With the above in mind, I turn to consider the proposed addition of equitable defence in the defendant’s pleading. 

8.  Having balanced all matters, I am of the view that the court should not exercise its discretion in allowing the amendment.

9.  Firstly, while Mr Yu asserted in his skeleton argument that the amendment “does not set up wholly new defence and is not substantial”, he frankly admitted at the hearing that if the amendment is not made, the defendant cannot rely on the defence of “change of position” and “ministerial receipt”.  Hence, he accepted that, in substance, there are new lines of defence.

10.  In my view, it will be a prejudice to the plaintiff if it is required to deal with new lines of defence at the very last minute.  If the trial is to proceed as scheduled, then the plaintiff would be required to plead to the new defence within a very short period of time (according to the defendant’s proposal, the plaintiff would be given one day to do so).  This cannot be right because it would be very unfair to the plaintiff.

11.  To ensure fairness between the parties, in my view, the trial has to be re-fixed if the amendment is allowed, so that the plaintiff would be given adequate time to consider its position and its consequential amendment to its pleadings.  However, the trial is a milestone date which cannot be changed without exceptional circumstances. 

12.   I have not lost sight of the defendant’s argument that the amendment is necessary as a matter of principle so as to enable the real questions between the parties to be decided.  However, I do not think such a necessity would amount to “exceptional circumstances”.

13.  Secondly, it is noted that while the defendant initially acted herein in person, he has been legally represented since 14 November 2018.  His Re-Amended Defence filed on 30 May 2019 was signed off by counsel. This pleading was amended on 30 November 2020, and the Re-Re-Amended Defence was also signed off by counsel. 

14.  On 2 December 2020, the defendant filed a Listing Questionnaire and confirmed thereby that his pleading was in order and it required no amendment.

15.  The current version of the Defence, namely the Re-Re-Re-Amended Defence was only filed one-and-a-half month ago on 5 January 2022.

16.  I have referred to the fact that two previous versions of the Defence were signed off by counsel so as to emphasise the fact that, on the face of it, the plea of equitable defence could have been made earlier. However, there is no explanation given in the Supplemental Affirmation of Sun Chung Ming as to why the proposed addition of equitable defence was not made earlier, not to mention full account or full justification.    In my view, this must weigh heavily against the exercise of the court’s discretion in allowing the amendment.

Discovery of new witness statement and documents

17.  In the case of Chu Hsiao-Chiu alias Chu Tony Chu Hsiao Chiu alias Chu Hsiao Chiu, deceased v Ma Jinrui & Another [2020] HKCFI 942, in which the plaintiff sought leave to file two affidavits in opposition to various applications taken out by the defendants at a very late stage, Coleman J. had the following to say:

“18. It is well-established in the ‘post-CJR era’ that the underlying objectives emphasise not only substantive but also procedural fairness. Therefore, late or last-minute applications trigger the Court’s expectation that the applicant will provide a full account of the lateness of the application, and full justification as to why the application should be entertained at all at such a late stage.

19. There is no longer room for the notion that delay, even though inordinate and unexplained, will be forgiven as long as there is no prejudice and costs are paid.  Courts should take into account that there may be an irreparable element of unfair prejudice in unnecessarily delaying proceedings.  Further, the vacation or adjournment of the hearing occasioned by last-minute applications may mean the loss of the hearing day which could have benefited other litigants, and inefficiencies in the use of Court time, which is a public resource.  Hence, late applications can be dismissed on the basis of lateness alone.”

18.  While the above authority concerned the filing of affirmations, I cannot see why the same principles should not be applicable to the present case, as the defendant herein is also trying to rely on new evidence at the last minute.

19.  The defendant has put forward a number of reasons for the very late application.  In his own words:

“(1) Due to financial constraints and to save costs, counsel was instructed last minute to consider the case. It was until in or about late January 2022 that I instructed my solicitors, Messrs. WT Law Offices to engage counsel for trial preparation.

(2) I work as a garage mechanic and do not have a high education level. I do not have much experience in litigation and did not know the importance of preserving evidence. As the material events occurred nearly 5 years ago, I thought my WhatsApps records with Mr CHU Kin Tak (朱健德) have lost by the time I made my witness statements in 2020.

(3) Having pressed by counsel to adduce contemporaneous documents to support my case, I took extra effort to retrieve my WhatsApps record to see if any communications with the said Mr Chu could still be in existence. Having obtained some technical support, it was discovered that many documents in my WhatsApps conversations were there and available to support my case. These recently discovered materials lend support to my case that the said Mr Chu asked me to make money transfers for him to his nominated bank accounts or to withdraw cash and give it to him at the material time (see paragraph 16 of the existing re-re-re-amended defence).

(4)  Once the WhatsApp’s records were discovered and retrieved, I passed them to my solicitors for consideration and handling. As far as I understand, they wasted no time to follow up on the matter and make this application at the earliest opportunity.”

20.  I hold the view that the court should clearly exercise its discretion against the defendant for the following reasons:

(1)  It is not entirely appropriate, if not misleading, for the defendant to refer to the fact that trial counsel was only instructed in late January 2022, as if he had not had the benefit of counsel’s advice earlier, for he has been legally represented for a long time, and counsel had been instructed in as early as May 2019 to prepare his pleading for him;

(2)  I reject the defendant’s excuse of being ignorant by reason of his education level.  I do not think one needs a high education level to appreciate that it is important to preserve evidence especially contemporaneous evidence;

(3)  As the defendant pointed out himself in his supporting affirmation, the new contemporaneous documents would be used to support paragraph 16 of the Re-Re-Re-Amended Defence.  This paragraph was added by his legal team to his pleading when he filed his Re-Amended Defence on 30 May 2019.  At that time, the court had not even given any case management directions on the exchange of witness statements. The defendant’s 1^st witness statement was only signed by him subsequently on 7 January 2020.  It is therefore inexcusable that the defendant did not produce or look for those documents in support of his case at the time.  As pointed out by Ms Leung for the plaintiff, trusting that the defendant’s legal team had fulfilled its duty in advising him properly on evidence, he should be taken to have known what he needed to produce in support of his defence, and he had had plenty of time to do so;

(4)  The above point is made even more apparent if we compare the Annexure A attached to the Re-Amended Defence and the one attached to the draft Re-Re-Re-Re-Amended Defence.  There is no substantial difference between the two versions (apart from the correction of a few figures and dates). That means the defendant should have known back in mid-2019 what evidence he had to produce in support of the entries therein;

(5)  The defendant stated that he only instructed counsel in late January 2022, and it was upon being pressed by counsel that he took extra effort to retrieve the new documents.  At the end of the day, he could make the present application by filing the Summons on 16 February 2022.  In other words, if real effort was spent, he could retrieve those documents within 3 weeks to a month. That means if he did such retrieval work earlier, he could have produced those documents much earlier but not one week before the commencement of the trial;

(6)  If this court allows the defendant to rely on the new documents, it should allow adequate time for the plaintiff and its legal team to consider the same.  Even if we take the last week into account, the plaintiff has only had around a week to consider the new documents.  Worse still, as pointed out by Ms Leung, among the WhatsApp messages, there are a large number of audio messages and images (around 1,500 files in total) which have only been provided by the defendant to the plaintiff on 18 February 2022.  I have been told by Ms Leung, which I do not doubt, that she had not been able to consider them in details before today.  As a matter of fairness, the plaintiff must be given an opportunity to consider those new files, but this is not possible unless the trial is adjourned.  As aforesaid, trial is a milestone date which should only be moved if there are exceptional circumstances.  However, no such circumstance is present;

(7)  Mr Yu alleged that the plaintiff cannot be said to be prejudiced because the new audio and images files would only benefit the plaintiff in the sense that the plaintiff’s counsel would be given more ammunition to cross-examine the defendant.  The problem is, given the very limited time, the plaintiff could not even know what ammunition it had been given;

(8)  Mr Yu admitted very frankly that when he took over the case, he found that the defendant’s case was underprepared.  That may be so.  However, I do not think the plaintiff should have to bear the consequence of such under-preparation, particularly when the defendant has been legally represented for more than 3 years by now.  The plaintiff is certainly entitled to have the trial proceeded with as scheduled but not adjourned for the reasons caused entirely by the defendant (and/or his legal team), and indeed, one of the underlying objectives of the Rules of the District Court is that a case is dealt with as expeditiously as is reasonably practicable.

21.  Mr Yu proposed the court to allow the admission of the new documents on de bene esse basis.  I cannot accept this suggestion, because the question is not about whether the documents are relevant.  The objection here is the undue delay on the part of the defendant to produce those documents.  As a matter of fairness, the plaintiff should be given adequate time to take further instructions and prepare for cross-examination.  But this cannot be achieved without adjourning the whole trial, which, as explained above, is totally inappropriate in the circumstances of the present case.

ORDER

22.  For reasons of the aforesaid, I make the following orders:

(1)  Leave be granted to the defendant to amend:

(i)  paragraph 16 and Annexure A of the Re-Re-Re-Amended Defence as per the copy of the draft Re-Re-Re-Re-Amended Defence attached to the Summons (save that the figures of $613,059 should be replaced by $613,419);

(ii)  paragraph 17B of the Re-Re-Re-Amended Defence by deleting the 2^nd sentence thereof;

(2)  The defendant shall file the Re-Re-Re-Re-Amended Defence on or before 24 February 2022.   Service of the same be dispensed with;

(3)  Paragraphs 2 and 3 of the Summons (for leave to adduce the defendant’s 2^nd supplemental witness statement and disclose further documents) be dismissed.

COSTS

23.  Costs should follow the event.  The plaintiff’s costs of and occasioned by the Summons should therefore be borne by the defendant, with certificate for counsel, to be taxed if not agreed.  For the avoidance of doubt, such costs shall include any costs incurred for considering the new evidence provided by the defendant since the filing of the Summons.