HERO RICH INTERNATIONAL LTD v. BENEFUN INTERNATIONAL HOLDINGS LTD AND OTHERS

HCA 1433/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1433 OF 2009

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D E C I S I O N

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1.  This is an application by the 1st Defendant for extension of time to file and exchange expert reports. Directions for preparation and exchange of expert reports were first given on 23 March 2010. The expert reports are for use at the hearing for assessment of damages payable by the 1st Defendant to the Plaintiff.

2.  The Plaintiff’s claim is for damages payable by the 1st Defendant for its failure to register the transfer of 234,375,000 shares of and in the 1st Defendant by the Plaintiff to HKSCC Nominees Limited.  The Plaintiff says that the 1st Defendant’s failure to register the transfer had delayed its sale of the shares and it had thereby suffered loss and damage.  Judgment on liability was entered on 9 December 2009. 

3.  The hearing for directions including the directions for exchange of expert report took place on 23 March 2010.  On 22 March, the solicitors for the Plaintiff wrote to the solicitors for the 1st Defendant and suggested the issue for expert evidence.  The relevant part of the letter read:

“As appears on our counsel skeleton submissions, our client wishes to adduce expert evidence on the selling price and the total sum that the sale of the shares would have been fetched but for your client’s refusal or failure to register the transfer of the shares.”

4.  The Plaintiff’s solicitors also proposed that there should be separate experts for the parties.  They also named their proposed expert who is the executive director and officer of a securities company. 

5.  The 1st Defendant’s solicitors replied on the same day.  They agreed that there should be separate experts.  They also named their proposed expert who is a director and officer of another securities company.  They made no comment on the issue for the expert evidence as defined by the Plaintiff’s solicitors.  The understanding must be that both sides were ad idem with the issue as defined by the Plaintiff’s solicitors.  Both letters were copied to the court for reference. 

6.  The 1st Defendant also proposed some directions including those for the exchange of expert reports.  The proposed directions were adopted by me on 23 March with the consent of the parties.

7.  The directions have not mentioned the issue for the experts but nobody mentioned that there was any problem as everybody understood what was the issue.  In accordance with the directions, the expert reports should have been filed and exchanged within 60 days from 23 March 2010 on or before 22 May 2010.  On 27 May 2010, the 1st Defendant’s solicitors issued a summons for extension of time for seven days from the hearing of the summons for exchange of expert reports.

8.  The summons was heard on 31 May. The Master asked the parties to define the issues for the experts.  Neither party appeared to have advised the Master that the issue had already been defined and agreed. On the second hearing on 25 June, the 1st Defendant invited the Master to allow the experts to define the issues but the Master declined as it is undesirable to leave this matter to the experts.  The Plaintiff’s solicitors again did not seem to have informed the Master that the issues had been defined and agreed.  At the third hearing on 6 September before the Master, the Plaintiff took the stance that the issue for the expert had been defined and agreed but the 1st Defendant disagreed.  The matter was therefore referred back to me.

9.  On 16 December, the 1st Defendant further filed a list of very detailed proposed directions containing proposed issues for the experts to prepare their reports. 

10.  On the same day the 1st Defendant also issued a summons for leave to file and serve a defence within 21 days.  There is, however, no draft defence annexed to the summons.  The supporting affidavit also gave no clue as to what issue will be raised in the defence.  There seems to be a hint of an allegation of the plaintiff’s failure to mitigate its loss, but there is nothing further than a hint.  Counsel for the 1st Defendant said in her skeleton submissions that for saving costs, drafting would only be done after leave has been given. 

11.  I take the view that the issue for the experts had already been defined in the letter of 22 March from the Plaintiff’s solicitors. The Defendant’s solicitors had tacitly agreed to it in their letter of the same day, in proposing directions for exchange of expert reports and in concurring with those directions being made an order of the court.  There is no need for the issue to be defined again.

12.  Regarding the so-called issues now proposed by the 1st Defendant, they include the ascertaining of the first day that the Plaintiff could sell the shares but for the 1st Defendant’s refusal to register the transfer of shares, the determination of the period or number of trading days for all the shares to be sold by the Plaintiff and the price(s) of such sale, the finding out of how soon the Plaintiff could have effected the sale after obtaining summary judgment on liability. 

13.  These are in fact the steps that can be taken to provide the answer for the issue already defined for the experts.  They represent one possible way to come to the answer for the issue, but may not be the only way.  To make these proposed directions an order of the court would be to tie the hands of the experts on how they should address the issue as defined.  I decline the proposed directions of the 1st Defendant.

14.  Regarding the 1st Defendant’s application for leave to file a defence, I cannot see any issue that needs to be identified and joined by the exchange of pleadings.  The 1st Defendant has not demonstrated any need for exchange of pleadings.  I therefore dismiss this application.

15.  Since the directions for expert reports were given on 23 March 2010, I would only extend the time for filing and exchange of the reports for 28 days from today.  I must, however, warn the parties that any further application for extension may result in a very short period of further indulgence and backed by an unless order. 

16.  I now deal with costs.  Subject to hearing from counsel, I propose to order the 1st Defendant to pay the costs of the application for leave to file defence. 

17.  Regarding the application for the extension of time, I would make no order as to costs for the hearings on 31 May and 25 June before the Master as the Plaintiff did not in those hearings take the stance that the issue for the experts had already been agreed.  For the hearings on 6 September and today, I would order the 1st Defendant to pay those costs to the Plaintiff in any event.  I also certify the matter before the Master and me fit for counsel.

(Discussion re costs)

18.  So I would make those orders of costs which I have proposed.