XCHRX LI FOOK CHU v. CHUNG SHAU CHING

HCA8549/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.8549 OF 1998

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J U D G M E N T

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1. By the Notice of Appeal dated 21 September 2000, the defendant sought to appeal against the decision of Acting Registrar C. Chan's (as he then was) decision given on 8 September 2000, ordering that the defendant's summons dated 8 May 2000 and 9 June 2000 be dismissed with costs to the plaintiff. The defendant asked for an order from this court to :

(1) set aside Registrar Chan's judgment;

(2) give leave to the defendant to file and serve an Amended Defence and Amended Further and Better Particulars of the Defence; and

(3) an extension of 14 days within which to file the list of documents and witness statements.

2. Affidavits had been filed by the parties. Having heard the submissions and read the relevant papers, I have dismissed the appeal with costs to the plaintiff. I shall now give the reasons for doing so.

The Background

3. The plaintiff had issued the amended writ of summons on 26 May 1998. The claim was made against the defendant as the maker of a promissory note dated 1 March 1989, the amount of which was payable to the plaintiff upon demand with interest thereon at the rate of 9% per annum. It was averred that by a letter dated 23 September 1992, the plaintiff had, through its then solicitors, Messrs Brocklesby & Co., demanded the defendant for payment.

4. The Defence was served on 30 June 1998. The defendant admitted to be the maker of the promissory note. However, the defendant denied that there was a demand for payment by the plaintiff through his solicitor. Further, it was averred in the alternative that that a payment had been made to the plaintiff in or about June 1991, which was accepted by the plaintiff (through Messrs Woo & Co.).

5. The Defence was prepared by Messrs Langley Wellingtons, an English firm of solicitors, stating to be "solicitors for the defendant". The address of the firm was 57 Westgate Street, Gloucester, GL1 2NY, England. On 22 September 1998, Messrs Langley Wellingtons, again, as solicitor for the defendant, gave further and betters particulars in response to the plaintiff's request. The case had actually progressed to the stage where directions had been given for the exchange of documents and witness statements. Thereafter, the defendant failed to comply with the directions of the Hong Kong court. He took no further steps despite the "unless order" that the defence be struck out unless the defendant filed a List of Documents within seven days. Default judgment was duly entered as no such List was filed. Then the plaintiff commenced enforcement proceedings in England in August 1999. The defendant responded and resisted the action but subsequently his English solicitors advised him to seek independent legal advice in February 2000. Consequently, the defendant instructed Hong Kong solicitors to apply to have the original judgment set aside.

6. Counsel for the applicant, Mr Coleman, stated in his very clearly written skeleton that the relevant principles to be considered were as follows :

"11. .....

(1) Where there has been a failure to comply with an unless order for discovery, and the sanction being the dismissal of the action, if discovery is not given the within the time period stated, the action stands dismissed.

(2) However, the action is not so 'dead' that it cannot be revived by an extension of time for compliance with the original order : see Samuels v. Linzi Dresses Limited [1980] 1 All ER 803 and RHC Order 3 rule 5.

(3) The court may extend time after the expiry of an unless order, even though time has expired and the effect of the default has occurred.

(4) Naturally, however, the jurisdiction to extend such time will be exercised cautiously.

(5) The party seeking to extend time and to set aside the default judgment has to demonstrate that there was no intention to ignore or flout the order and that the failure to obey was due to extraneous circumstances, such that the failure is not to be treated as contumelious and therefore does not disentitle the litigant to rights which he would otherwise have enjoyed : see Re Jokai Tea House [1993] 1 All ER 630. "

7. Mr Coleman further submitted that the court should also take into consideration the merit of the defence in deciding whether to set aside the default judgment and/or to allow an extension of time for filing. In this respect, Mr Remedios, for the plaintiff, acknowledged that the time bar defence was a good one, however, he argued that merits of the defence had no relevance in the present situation.

8. Based on his client's affidavits, Mr Coleman submitted that throughout the period, i.e. from the time when the directions for exchange of documents were given (January 1999) to the time when the default judgment was entered (May 1999), the English solicitors had not informed the defendant about the development of the case. It was said that the lack of reporting from the solicitors had not caused the defendant any concern because the solicitors had previously given the advice that even if judgment were ultimately obtained in Hong Kong, they could still defend the enforcement proceedings in England on the merits of the case. Hence, the defendant took no steps to set aside the default judgment until after he was asked to seek independent legal advice.

9. Mr Coleman further submitted that :

"20. Particularly against the circumstance that he has a good defence, the Defendant ought not to be penalised for the mistakes of his English solicitors. That this is a relevant principle appears to be common ground also : see Doyle v. Olby (Ironmongers) Limited [1969] 2 QB 158, 166 and Tan Eddy Tansil v. PT Bank Pembangunan Indonesia [1996] 1 HKC 231, 235 (per Bokhary JA).

21. However, the Plaintiff invites the inference to be drawn from the material that the failure to comply with the unless order was not the mistake of the English solicitors, but rather was a conscious decision on the part of the Defendant to flout the order and to take no further action in the Hong Kong proceedings.

22. The inference is expressly denied on oath by the Defendant. Indeed, in his second affidavit, the Defendant has given further explanation and emphatic denial. Further, the Defendant has given honest and open disclosure of two other documents from the relevant period of time, and the appropriate explanation of them, in so far as the Defendant is able to give one from his own knowledge.

23. The explanation given by the Defendant, in the context of all the material available, is credible, cogent and persuasive. It may be possible for the Plaintiff's lawyers to try to take forensic advantage of some small parts of that material, but it is submitted that when the totality of material is considered, the Defendant has demonstrated that there was no contumelious default."

10. Mr Remedios had first raised a number of procedural matters in relation to his appeal. He pointed out that the Hong Kong judgment obtained as a result of the unless order had already been perfected on 27 May 1999 and there was no application made by the defendant for any extension of time. It was only after the plaintiff had commenced proceedings in England that the defendant sought to set aside the judgment on 8 May 2000. That was more than 11 months after the perfection of the judgment.

11. Mr Remedios also submitted that this court had no jurisdiction to set aside the judgment because, inter alia, that the action was already "dead" after judgment had been perfected. The court is now functus officio in relation to the case, and that there is no provision in the Rules for the setting aside of a judgment entered pursuant to an unless order. In his view, the defendant should have appealed against the unless order and asked for leave to do so out of time, but that was not done here.

12. In relation to the attitude of the defendant towards the Hong Kong proceedings, Mr Remedios submitted that the defendant had displayed an "arrogant disdain for the authority of the Hong Kong courts". He drew reliance on the contents of certain correspondence in support of this submission. He pointed out the following in his skeleton submission :

"6. Langley Wellingtons by a letter dated the 30th of December 1998 wrote to the plaintiff's solicitors. They said inter alia :

'... even if your client is successful in his action in Hong Kong, if there is any attempt to enforce such judgment in the UK then it will have to be the subject of further court proceedings.

Consequently, as our client has no assets in Hong Kong, we would be grateful to know your client intentions.'

7. By a letter dated the 5th of January 1999, Langley Wellingtons wrote to the Defendant. In the letter they stated inter alia :

'If my points are ignored and the Directions are issued as requested by H.H. Lau & Co. then the decision either have to be made to arrange representation in Hong Kong for the Hearing or to take no further action until such time as Mr. Li has obtained judgment and then seeks to enforce it in the United Kingdom.

I will let you know when I hear further but if you have any questions to ask me in the meantime, please do not hesitate to get in touch.'"

13. On 7 January 1999, in the absence of the defendant, the order to file and exchange list of documents was made in Hong Kong. A draft of the order was sent to Langley Wellingtons. On 12 January 1999, a sealed copy was sent to the same firm. Due to the lack of response, the plaintiff's solicitors issued an inter parte summons on 2 February 1999 seeking an unless order. Such an order was perfected and later served on Langley Wellingtons on 17 March 1999. The final judgment was perfected on 27 May 1999. It is against such a background that I must consider the merits of the appeal.

14. Having read the papers and the affidavits, and having heard the submissions, I have to say that in these circumstances, even if I had the power and jurisdiction to grant the relief sought, despite arguments to the contrary, I would not do so. A clear inference could be drawn from the material before this court that the defendant, having had the benefit of legal advice regarding the possible alternatives, had made a conscious decision and given instructions to his solicitors to ignore the Hong Kong proceedings. It was a deliberate move on the part of the defence.

15. The relevant principle for determining the consequence of a failure to comply with an unless order is laid down in Re Jokai Tea Holdings Ltd [1993] 1 All ER 630, in which Sir Nicholas Browne-Wilkinson VC stated that :

"In my judgment, in cases in which the court has to decide what are the consequences of a failure to comply with an unless order, the relevant question is whether such failure is intentional and contumelious. The court should not be astute to find excuses for such failure since obedience to orders of the court is the foundation on which its authority is founded. But if a party can clearly demonstrate that there was no intention to ignore or flout the order and that the failure to obey was due to extraneous circumstances, such failure to obey is not to be treated as contumelious, and therefore does not disentitle the litigant to rights which he would otherwise have enjoyed."

16. As Mr Remedios submitted, this approach was approved by the Hong Kong Court of Appeal in Tan Eddy Tansil v. PT Bank Pembangunan Indonesia (Pesero) [1996] 1 HKC 231 and had been applied in a number of subsequent cases.

17. In the present circumstances, I considered that the failure to comply with the unless order could not be said to be a simple mistake on the part of the English solicitors. I would accept Mr Remedios' analysis that it was implicit from the event that had occurred after Langley Wellingtons' letter of 5 January 1999 that the defendant must have instructed his solicitors in England not to take any further action in the Hong Kong proceedings. In this regard, perhaps the fact that the defendant had no assets in Hong Kong could be one of his considerations.

18. I found that the defendant's failure to comply with the unless order was intentional and contumelious. I would agree with Mr Remedios that merits of the defence had no relevance in this situation. Even if it was a relevant factor, the serious delay on the part of the defence would have offset its effect. Regarding the submission that the defendant should not be penalized by the conduct of his solicitor, I would accept Mr Remedios' view that the defendant could consider seeking redress against his former solicitor for his loss, if any.

19. The appeal was therefore dismissed with costs against the applicant, to be taxed if not agreed, with certificate for counsel.