WORLD CHINESE BUSINESS INVESTMENT FOUNDATION LTD AND OTHERS v. SHINE RAINBOW MARKETING LTD AND OTHERS

HCA 2547/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2547 OF 2007

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J U D G M E N T

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1. The Plaintiffs’ solicitors failed to turn up at the case management conference (“CMC”) and the action was provisionally struck out by a Master  The Plaintiffs now seek restoration of the claim pursuant to Order 25, rule 1C(3).

Order 25, Rule 1C

2. Rule 1C provides as follows:

“(1)   Where the plaintiff does not appear at the case management conference …, the Court shall provisionally strike out the plaintiff's claim.

…

(3)     Where the Court has provisionally struck out a claim … under paragraph (1) …, the plaintiff or the defendant may, before the expiry of 3 months from the date of the case management conference …, apply to the Court for restoration of the claim …

(4)     The Court may restore the claim … subject to such conditions as it thinks fit or refuse to restore it.

(5)     The Court shall not restore the claim … unless good reasons have been shown to the satisfaction of the Court.

(6)     If the plaintiff … does not apply under paragraph (3) or his application under that paragraph is refused, then-

(a)   the plaintiff's claim … stands dismissed upon the expiry of 3 months from the date of the case management conference …; and

(b)   (i) in the case of the plaintiff's claim, the defendant is entitled to his costs of the claim; …”

3. Mr. Lam submits that rule 1C(1) is akin to:

(i)  a regular default judgment to be set aside by a defendant; and

(ii)  a standing unless order so that “unless the plaintiff attends the CMC, his claim will be struck out and will not be restored without leave of the Court”.

Therefore the principles for applying for relief against sanctions and setting aside a default judgment are equally applicable.

4. I find force in Mr. Lam’s submission by comparing the wording and considering the legislative scheme under various rules.  Order 25, rule 1C(4) is drafted in very similar terms to Order 13, rule 9 (and Order 19, rule 9).  The latter provides that “… the Court may, on such terms as it thinks just, set aside or vary any judgment entered in pursuance of this Order.”  A defendant has to apply promptly to set aside a default judgment and explain any delay;  he has to explain why he let judgment go by default and that he has reasonable prospect of success.

5. Likewise, under Order 2, rule 5 where a party has failed to comply with  an unless order, on any application for relief from any sanction, the Court shall consider all the circumstances including 10 factors.  An application for relief must be supported by evidence. 

6. Similarly, any judgment obtained where one party does not appear at a trial may be set aside by the Court, on the application of that party, on such terms as it thinks just.  Again, the applicant has to,amongst others, explain his absence and show reasonable prospects of success.  Unless the absence was not deliberate but was due to accident or mistake, the Court will be unlikely to allow a rehearing: paragraph 35/2/1 of the Hong Kong Civil Procedure 2010.

7. The general theme derived from these rules is that the Court will not lightly accede to the request of a defaulting party to restore an action without sufficient explanation and consideration of the merits.   This is to maintain the integrity of the timetable laid down by the Court or the rules and to ensure that a matter without merits should not continue to haunt an innocent party.

8. It is thus clear that under rule 1C(4) and (5), a plaintiff should first meet the threshold of showing “good reasons” in stage 1 and then the Court will consider whether, as a matter of discretion, it should grant the restoration in stage 2.  If it decides to restore the Claim, the Court may consider conditions to be imposed in Stage 3.

Stage 1 - Good Reasons

9. The Plaintiffs’ solicitors gave 3 reasons to explain their absence:

(i)      Parties were negotiating for mediation.

(ii)     Complications in the sense that there were 3 other actions involving the same parties.

(iii)     Mistake/oversight of a Plaintiff’s solicitor.

10. With regard to reason (i), mediation is done beyond the precincts of the court, and cannot override the milestone date fixed by the Court.  In this case a Master has granted stay of proceedings for the purpose of mediation.  That stay has long lapsed and the court’s timetable started to run again without a mediator even agreed upon.  Thus reason (i) is not a good one.

11. With regard to reason (ii), many cases are complicated and have related actions, but that is not a good reason for not appearing on a milestone date.  Thus reason (ii) is not a good one.

12. With regard to reason (iii), solicitor’s fault may constitute a good reason.  In PT Bank Pembangunan Indonesia (Persero) v. Tan Eddy Tansil [1997] HKLRD 57, in deciding whether to grant an extension of time for compliance with an unless order, the Court of Appeal held that where non-compliance was due to the default of the solicitor rather than the litigant himself such default should be regarded as an extraneous caus­e of non-compliance so far as the litigant is concerned, inclining the court towards granting him an extension of time.

13. However, the solicitor has to explain how the fault came about.  In Secretary for Justice v. Hong Kong & Yaumati Ferry Co. Ltd. & anor [2001] 1 HKC 125, the solicitor wrongly calculated the time for filing a notice of appeal.  Le Pichon JA held that the absence of any explanation of how the error arose made the solicitor’s conduct “inexcusable”. 

14. In the present case, four weeks had elapsed after Master Ho informed the Plaintiff that the action was provisionally struck out before the Plaintiff wrote to him stating that "the parties were absent for the Case Management Conference by mistake.”  The affirmation in support of this application stated that the failure to attend was due to oversight.  Whose mistake?  Whose oversight?  It was only at the hearing that Ms. Kan for the Plaintiff affirmatively stated that it was the oversight of the solicitor as he had failed to mark his diary.  She explained that it took them 4 weeks to write to Master Ho because they needed to study rule 1C.

15. To present evidence in this manner is clearly unsatisfactory.  What is more troubling is that reasons (i) and (ii) would have led to a deliberate decision not to attend the CMC, whereas reason (iii) would have arisen out of inadvertence.  These reasons were inconsistent amongst themselves.

16. I am however mindful of the fact that all along the Plaintiffs’ solicitor has assumed the responsibility for the non-attendance and went on affirmation.  It appears that the fault was not with the Plaintiffs themselves.  Given this is the 1^st application of its kind before me and practitioners may not be familiar with rule 1C, I give the benefit of the doubt to the Plaintiffs’ solicitor.  The Court would not want to dismiss a good cause for pure technical breach or inadvertence. I find that reason (iii) is a good reason in the circumstances of this case.

Stage 2 - Exercise of Discretion

17. The Defendant has filed an affirmation to state that the Plaintiff’s claim has no merits.  As rightly pointed out by the Plaintiff, the contents of this affirmation had been used when the Defendant applied previously to serve voluntary particulars but the application was dismissed by Master Levy.  It is not permissible for the Defendant to introduce such positive facts again, especially since the defence is just a bare denial. 

18. The Plaintiffs, on the other hand, has not filed evidence to show merits of their claim although the amended statement of claim has pleaded a proper cause of action.  Since rule 1C does not require on its face reasonable prospect of success to be shown, the Plaintiffs’ failure to show merits is understandable. 

19. Mr. Lam submits that the Plaintiff has had a history of failure to comply with court orders, e.g. in failing to attend a mediation briefing before Master Lung.  I note, however, that despite the Plaintiff’s personal absence the Court proceeded to manage the case and no time was wasted.

20. I also note that, like the Plaintiffs, the Defendants failed to attend the same CMC and they have not shown any prejudice if the action were restored.

21. This is the 1^st application of its kind when practitioners may not be familiar with how rule 1C operates.  I err on the side of caution and restore the action.  This must not be taken to mean that I am satisfied with the way the case is presented on either side.

Stage 3 - Conditions for Restoration

22. Mr. Lam has invited me to impose 2 conditions:

(i)      That the amended statement of claim be re-amended so that English translation of the Chinese words can be provided. 

(ii)     That the Plaintiff be required to provide security for the Defendants’ costs.

23. As a matter of law, a set of pleading should be only in one of the official languages: Chan Kong v. Chan Li Chai Medical Factory (Hong Kong) Ltd [2009] 2 HKLRD 455; and the English translation of the allegedly defamatory words in Chinese should be pleaded: Cheung Kong (Holdings) Ltd v. Chan Wai Yip Albert [2000] 4 HKC 591. The English translation can be provided either by re-amendment or certified translation of the article in question.  I do not see the need to make it a condition for restoration of the action.

24. In principle, condition (ii) can be imposed.  Unfortunately, the affirmation of the Defendants did not propose the amount of security required and what stages of the proceedings it should cover.  It is not appropriate for the Court to guess the amount.

Conclusion

25. Under Order 25, rule 1C, a plaintiff who seeks restoration of an action should give good reasons as to why he did not attend the milestone event.  Absence due to the fault of the solicitor instead of the party may be a good reason but the solicitor should explain fully how the fault came about.  The plaintiff should also show that he has reasonable prospects of success.  A defendant who wishes the Court to impose conditions for the restoration should propose the conditions.  Where payment of security or other conditions are required, details should be given to enable the Court to come to a fair decision.

26. In the present case, I permit the Plaintiff to restore the action.  No condition will be imposed.

27. Since it involved an indulgence granted by the Court, I make an order nisi that the Plaintiffs should bear the costs of and incidental to the present application.  However, for the reason given in paragraph 17 above, I disallow the costs of and incidental to the preparation and use of the second affirmation of Wong Siu Cheung.  I find Mr. Lam’s submission to be very helpful.  I also make an order nisi that there should be certificate for counsel.

28. The matter is adjourned to 5^th March 2010 for summary assessment of costs on paper.  The defendants shall file and serve a costs statements by 24^th February 2010.  The plaintiffs shall file and serve the grounds in opposition by 3^rd March 2010.

29. Some practitioners still do not comply with paragraph 8 of PD 14.3 to lodge their costs statements together with their skeleton submissions.    I can understand this if a hearing involves cross-summonses and complicated issues when parties may wish to consider the ruling before presenting a costs statement for summary assessment or apportionment of costs.  The present case does not belong to this category.  It will defeat the exercise of summary assessment if a hearing has to be adjourned for several weeks for parties to lodge costs statement, grounds in objection and the Court has to refresh his memory of the case.

30 Practitioners are thus reminded to comply with paragraph 8 of PD 14.3, especially for hearings before Masters.  Failure to comply, thereby necessitating a separate hearing for summary assessment, may cause the receiving party to be penalized in costs.