EFFISCIENT LTD v. EDWARD EUGENE LEHMAN

HCMP 2524/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2524 OF 2011

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BETWEEN

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J U D G M E N T

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1.  I have an application before me to extend time for entering for hearing an originating summons issued on 8 December 2011 for an order that the respondent is in contempt of court for the reasons set out in the originating summons.

2.  Order 52(3)(ii) of the Rules of the High Court provides that:

“Unless within 14 days after leave to commence contempt proceedings has been granted an originating summons is entered for hearing, leave shall lapse.”

3.  I granted leave on 28 November 2011.  Accordingly, notice of application to hear the originating summons, which was issued on 8 December should have been issued by 12 December 2011.  It appears that initially neither firm of solicitors were aware of Order 52 rule (3)(2) and as a result the matter proceeded as follows.

4.  The originating summons was served on 5 December 2011.  On 15 December 2011 the respondent acknowledged service stating that he would contest the proceedings.  On 10 January 2012, the respondent issued a summons to extend time for filing evidence.  On 11 January 2012, Master Ho made an unless order extending time for service until 8 February 2012.  The respondent’s affidavit was filed on 8 February 2012.

5.  The individual solicitors handling the matter on behalf of the applicant, left Richards Butler (which was acting for it) to establish a new law firm in late December 2011.  In the fullness of time, the applicant’s solicitors realised their oversight in complying with Order 52(3)(ii).  On 17 February 2012 they issued a summons to extend time. The summons also seeks an extension of time to serve evidence in reply of 14 days.  The procedural position would, if Order 52(3)(ii) had been complied with, have been as follows.

6.  A notice of application would have been issued and it would, in the normal way, have been returnable before me for a directions hearing, probably at 9.30 am.  At that hearing I would have made directions for the service of evidence.  It is possible that I might have made a direction that the matter be set down for substantive hearing at that time but it may well be that I would have taken the view that such a direction should not be made until such time as the respondent had filed evidence and it was possible for the court and the parties’ counsel to arrive at a considered estimate of the length of the hearing.

7.  In such circumstances, I have difficulty seeing how the failure to file the relevant notice and fix a hearing of the originating summons in accordance with the rules has caused any delay to the progress of the proceedings.

8.  The respondent, however, argues that an extension of time should not be granted and indeed at the hearing before me requested that the summons be adjourned for a longer argument for the following reasons.  I was told by Mr Allman‑Brown, who appeared for the respondent, that a similar error was made in contempt proceedings commenced by the applicant against the respondent in relation to an earlier defamation action.  Mr Allman‑Brown suggested that in the circumstances a rather more comprehensive explanation of how the alleged oversight occurred was required than that set out in Mr Bowers’ first affidavit.

9.  In short, what Mr Bowers says is that the omission was no more than an oversight and an oversight which arose at a time when his firm was busy both with the present and related proceedings and also a move by him and his team of lawyers from the applicant’s previous solicitors to a new firm which they were establishing and which, at the time of this application, now represents the applicant.

10.  Mr Allman‑Brown also suggested that it was relevant that in December of 2011 the applicant’s previous solicitors had been writing without prejudice correspondence which contained impermissible threats.  I allowed Mr Allman‑Brown to rely on the material letter which is dated 13 December 2011.  That letter sets out terms proposed by the applicant for settling the various disputes and legal proceedings that it and its beneficial owner has with Mr Lehman.

11.  One of the terms, term 12, is:

“Our clients will discontinue the fresh committal proceedings against Edward Lehman upon the basis that there be no order as to the costs of the proceedings.”

12.  After the proposed terms are listed, reference is made in the next paragraph to the proceedings currently underfoot between the parties, including the present committal proceedings.  The last sentence of that paragraph states:

“The inevitable end result of the fresh committal proceedings against Edward Lehman is a prison sentence.”

13.  In the final paragraph on that page it says:

“If no global settlement is agreed by then, your clients will end up on the wrong end of a very substantial damages award in both the consolidated and defamation actions, the total amount of which will be way in excess of the purchase price for Lehman & Co.’s shares in the company and Edward Lehman will be facing a prison sentence.”

14.  As I have already indicated, Mr Allman‑Brown characterises the passages that I have just quoted from the letter of 13 December 2011 as constituting an impermissible threat which suggests that the committal proceedings are part of a strategy to put pressure upon Mr Lehman to settle the various proceedings between him and the applicant.

15.  I accept that the language that has been used is heavy-handed.  It does not, however, seem to me that it is sufficiently objectionable or in practice was likely to prove sufficiently oppressive to support either of the two arguments for which Mr Allman‑Brown relied on it. The first argument related to the explanation, or rather what Mr Allman‑Brown characterises as the inadequate explanation, for the failure to comply with Order 52(3)(2).  Mr Allman‑Brown suggests that it is consistent with the failure to issue a notice having been, rather than an oversight, a conscious decision with a view to delaying the resolution of the committal proceedings and thus keeping the threat of them hanging over Mr Lehman’s head for as long a period as possible with a view to increasing the prospects of a commercial settlement of their various disputes.

16.  The second is that in some respects, the precise ambit of which was not clear to me, it was relevant to the court’s determination of whether to grant an extension of time.  It does not seem to me that the letters themselves would constitute any separate reason for refusing to grant an extension of time.  I accept that if the letters formed, with other evidence, a sufficient basis for inferring that there had not been an oversight, then it might well be appropriate for the court to refuse to grant an extension of time.

17.  I do not think, on the evidence before me, that there is sufficient evidence or any real basis for inferring that the failure to comply with Order 52(3)(2) was anything other than an unfortunate oversight.  I certainly see no basis for reading into the fact that it would appear that a simiar mistake had been made several years ago in connection with other committal proceedings and the contents of the letter of 13 December 2011, that the failure to issue a notice was a conscious tactical decision.

18.  As I have already indicated, it does not seem to me that in practice the failure to issue the notice has caused any delay to the progress of the proceedings and I will now go on to make appropriate directions for their progress.

(Discussion re originating summons)

19.  I will make quite simple directions:

(1)    The respondent has leave to file and serve the evidence of Mr Andrew Allman-Brown by 5.00 pm on 2 March 2012.

(Discussion re dates)

(2)    The applicant has leave to file and serve evidence in reply by 5.00 pm on 16 March 2012.

(3)    The parties may write to the court applying to fix a hearing for the substantive determination of the originating summons as soon as their respective counsel have had the opportunity to assess its likely length.

(Further discussion re dates)

(Discussion re costs)

(4)    The applicant to pay the costs of the summons of 17 February 2012 and delay, such costs to taxed if not agreed.