XCHRX DINERS CLUB INTERNATIONAL (HONG KONG) LTD. V. NG KOON CHIANG and Another

1995 No. A8539

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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INTRODUCTION

1. This is an appeal against a master's extension of time for the filing of a pleading. The pleading is the Defence to Counterclaim. The circumstances are unusual, and it is therefore necessary to explain in some detail what has occurred.

THE HISTORY OF THE PROCEEDINGS

2. The Plaintiff's claim against the Defendants is a straightforward one. Its case is that it issued a credit card to the 1st Defendant. The 2nd Defendant guaranteed the payment of all sums debited to the Plaintiff as a result of the 1st Defendant's use of the credit card. By July 1995, a sum of $29,167.38 was due. It was not paid. On 21st August 1995, the Plaintiff issued its proceedings against both Defendants.

3. On 13th October 1995, the 2nd Defendant filed a Defence and Counterclaim. His case is that he had not realised that he had guaranteed the 1st Defendant's debts to the Plaintiff. He claims that the 1st Defendant asked him to sign what he now knows to be the proposal form and the guarantee. He does not read English, and he believed the 1st Defendant when the 1st Defendant told him that the forms were only a reference, and that the 2nd Defendant would bear no liability for the 1st Defendant's use of the credit card. It was contended in the Defence that, in making those representations, the 1st Defendant was acting as agent for the Plaintiff. The allegations were pleaded in paras. 4-14 of the Defence. The Counterclaim is short. It reads:

"18. The 2nd Defendant repeats paragraphs 4-14 inclusive of the Defence of the 2nd Defendant.

19. In the premises, the 2nd Defendant seeks to rescind the said forms by reason of the said misrepresentations and seeks for a declaration that the said forms were void ab initio on the ground of non est factum."

4. The Plaintiff did not file a Reply and Defence to Counterclaim. In fact, the action went to sleep for over a year until the Plaintiff filed a summons for summary judgment under Ord. 14 against the 2nd Defendant on 29th November 1996. That summons came before Master Jennings on 30th January 1997. He dismissed the Plaintiff's summons with costs. The Plaintiff is appealing that order, and the appeal is due to be heard by Findlay J. on 3rd April.

5. The Plaintiff's solicitors realised that a defence to the 2nd Defendant's Counterclaim had not been filed. Accordingly, immediately after the dismissal of the Ord. 14 summons, the Plaintiff's solicitors filed a summons seeking leave to file and serve the Defence to Counterclaim within 7 days. It was, in effect, a summons under Ord. 3 r. 5(1) to extend the time for filing it. That summons came before Master O'Donnell on the following day - 31st January 1997. He gave the Plaintiff leave to file and serve the Defence to Counterclaim within 7 days. It is that order which the 2nd Defendant now appeals.

THE DEFENCE TO COUNTERCLAIM

6. The Defence to Counterclaim which the Plaintiff wishes to file contains nothing new. It amounts to a bare denial of the allegations in the Defence which, as a matter of form, were repeated in the Counterclaim. The Defence to Counterclaim reads:

"1. Paragraphs 18 and 19 of the Counterclaim of the 2nd Defendant are denied.

2. The Plaintiff denies each and every allegation contained in the Counterclaim as if the same were herein set forth and traversed seriatim.

3. In the premises the 2nd Defendant is not entitled to counterclaim against the Plaintiff as alleged or at all."

7. In view of the fact that the Defence to Counterclaim consists of nothing but bare denials, what, it may be asked, is all the fuss about? The answer lies in why Master Jennings dismissed the Ord. 14 summons. He dismissed it, so I am told, because a defence to counterclaim had not been filed. The consequence of that was that the allegations in the Counterclaim were deemed to have been admitted. The impact which that had on the Plaintiff's claim for summary judgment against the 2nd Defendant is, no doubt, going to be an issue to be canvassed before Findlay J. on the appeal, but that explains why the Plaintiff is so anxious to be able to file a pleading which consists of nothing but bare denials.

THE GROUNDS OF APPEAL

8. Mr. Patrick Szeto for the 2nd Defendant contends that the Plaintiff's time for filing the Defence to Counterclaim should not have been extended for two reasons. I propose to deal with each of them in turn.

(i) Election. The Plaintiff's solicitors filed the Ord. 14 summons when a Defence to Counterclaim had not been filed. The Ord. 14 summons was subsequently argued on that footing. It is said that the Plaintiff therefore elected to conduct the case on the basis of the pleadings as they then were, and that it would therefore be wrong to allow the Plaintiff to file the Defence to Counterclaim now. I reject that argument. At the most, it can only prevent the Plaintiff from relying on the Defence to Counterclaim on the appeal from the dismissal of the summons for summary judgment. That will be a matter for Findlay J. to decide, but the fact that the Plaintiff was content for its summons for summary judgment to proceed on the basis that a defence to counterclaim had not been filed does not mean that the Plaintiff was content for the action to proceed on that basis as well.

(ii) Delay. The Plaintiff was over 15 months out of time for filing the Defence to Counterclaim. The delay in filing it was therefore very considerable. Sir Thomas Bingham MR said in Costellow v. Somerset County Council [1993] 1 WLR 256 at pp.263G-264A:

"... the rules of court and the associated rules of practice, devised in the public interest to promote the expeditious dispatch of litigation, must be observed. The prescribed time limits are not targets to be aimed at or expressions of pious hope but requirements to be met.... [On the other hand,] a plaintiff should not in the ordinary way be denied an adjudication of [the defendant's counterclaim] on its merits because of procedural default, unless the default causes prejudice to his opponent for which an award of costs cannot compensate. This principle is reflected in the general discretion to extend time conferred by Ord. 3 r. 5, a discretion to be exercised in accordance with the requirements of justice in the particular case. It is a principle also reflected in the liberal approach generally adopted in relation to the amendment of pleadings."

Sir Thomas concluded at p.264G-H:

"Save in special cases or exceptional circumstances, it can rarely be appropriate, on an overall assessment of what justice requires, to deny the plaintiff an extension (where the denial will stifle his [ability to defend a counterclaim]) because of a procedural default which, even if unjustifiable, has caused the defendant no prejudice for which he cannot be compensated by an award of costs. In short, an application under Ord. 3 r. 5 should ordinarily be granted where the overall justice of the case requires that the action be allowed to proceed."

Despite Mr. Szeto's submissions, I have not discerned any prejudice to the 2nd Defendant caused by the Plaintiff's failure to file the Defence to Counterclaim when it should have done which cannot be compensated by an award of costs, or by denying interest to the Plaintiff on the sums claimed, or by transferring the case to the District Court, or by making orders that the costs incurred so far should be taxed on the District Court scale. But for one matter, therefore, I would have had no hesitation in saying that Master O'Donnell was entirely correct to extend the Plaintiff's time.

9. What causes me to pause is the fact that the Plaintiff has not given the reasons for the default. It has never explained why the Defence to Counterclaim was not filed earlier. A series of cases have held that that is, potentially at least, a reason for not granting the indulgence sought: see Ratnam v. Cumarasamy [1965] 1 WLR 8 at p.12A-B, Revici v. Prentice Hall Inc. [1969] 1 WLR 157 at p.160C, Ford v. Lewis [1971] 1 WLR 623 at p.633A, and Savill v. Southend Health Authority [1995] 1 WLR 1254 at p.1259C-E.

10. I recognise the force of these authorities, but in my view an unexplained delay must be seen in its context. The fact that the delay is unexplained is merely a factor, albeit an important one, in determining whether time should be extended. Mr. Szeto accepted that that was the true effect of the authorities. Indeed, as the Court of Appeal held in Technalloy Chemical Corp. v. International Merona Ltd. (CA 107/92), there is no absolute and rigid rule that a failure to explain delay inevitably means that an indulgence will not be granted. Otherwise, the requirement in Ord. 3 r. 5(1) on the court to act "as its thinks just" cannot be complied with. In my view, the formal nature of the Defence to Counterclaim in this case, consisting as it did of bare denials only, is sufficient to justify a departure from the practice relating to unexplained delays. Accordingly, although the Plaintiff's delay in filing the Defence to Counterclaim is unexplained, I remain of the view that Master O'Donnell was right to extend the Plaintiff's time for filing and serving it.

CONCLUSION

11. Accordingly, this appeal must be dismissed, though I should make one final observation. The Ord. 14 summons was issued more than a year after the last step in the proceedings. Accordingly, it should have been preceded by a notice of intention to proceed under Ord. 3 r. 6(1). No such notice was filed. However, that did not have the effect of nullifying any steps in the proceedings taken since the time when such a notice should have been filed: see Ord. 2 r. 1(1).