XCHRX WONG CHI HUNG, AUGUSTINE-MICHAEL v. TSE YUEN YEE IRENE

HCA 4864/95

H E A D N O T E

Practice and procedure. 'Unless order'. Effect of non-compliance with Practice Direction. Whether order obtained regular or irregular order.

HCA 4864/95

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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J U D G M E N T

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1. This is an appeal from the order of Master Chung made on 13th March 1998 dismissing the Defendant's summons dated 24th December 1997 to set aside the earlier order of Master Chung dated 27th January 1997. There is also before me a summons issued on behalf of the Defendant recently on 16th October 1998 for an order that the order made by Mr. Registrar Betts dated 26th September 1996 be set aside and/or alternatively, that the Defendant do have further time to file and serve her list of documents.

Background

2. Until their relationship broke up in about February 1994, the Defendant was the Plaintiff's girlfriend.

3. In 1992, a flat was purchased in the Defendant's name in Hong Kong. The Plaintiff's case is that both the Plaintiff and the Defendant were to take beneficial interests in the property as the purchase of this property was with monies contributed by both of them. The Defendant's case is that this property was purchased with her own monies and with the aid of a mortgage loan. The parties' respective cases are set out in the pleadings filed in this action.

4. According to the Statement of Claim, the flat was sold in June 1992 without the Plaintiff's knowledge and consent and with the net proceeds from such sale, two further properties were purchased. According to the Defence, the Defendant's case is that the two further properties were purchased with her own monies and the aid of a mortgage loan and it was denied that the Plaintiff had any beneficial interest in the properties.

5. The Plaintiff claimed, inter alia, declarations that the properties were held on trust by the Defendant for both the Plaintiff and the Defendant at the ratios set out in the claim. Consequential relief was also claimed.

Steps in the proceedings

6. It is necessary to see what transpired in these proceedings. Mr. Cheung for the Plaintiff helpfully referred me to a chronology of the relevant events in the proceedings.

7. The writ with the Statement of Claim indosed thereon was issued on 19th May 1995.

8. On 18th January 1996 there was a hearing before Master Wooley at which the Defendant appeared in person. Master Wooley gave certain directions including directions that the Defence be filed and served within 14 days and that the parties do within 14 days of close of pleadings serve their list of documents.

9. On 14th February 1996 the Defendant acting in person took out a time summons to file her Defence & Counterclaim out of time. This was filed on 29th February 1996. The Plaintiff took out a time summons on 12th March 1996 to file the Reply and Defence to Counterclaim out of time. This was filed on 26th March 1996.

10. On 4th June 1996 the summons for directions was taken out by the Plaintiff. This was heard on 21st June 1996 before Master Wooley. The Defendant was acting in person and was present. Master Wooley gave certain directions including directions that the Plaintiff and Defendant respectively serve their list of documents within 21 days. On 30th July 1996 the Plaintiff's list of documents was filed and served. The Defendant failed to file and serve her list of documents.

11. As the Defendant had not filed and served her list of documents, the Plaintiff's solicitors wrote to her on 5th August 1996 informing her that the time for filing and serving her list of documents had expired on 12th July 1996 and warning her that unless the same were served within 7 days, an appropriate order would be sought.

12. As there was no response from the Defendant, on 10th September 1996 the Plaintiff took out a summons for an 'unless order' returnable before Mr. Registrar Betts on 26th September 1996 and which was served on the Defendant together with a covering letter at her address for service. The Defendant did not appear at the hearing before Mr. Register Betts on 26th September 1996. He made an order that:

"unless the Defendant do file and serve her List of Documents on the Plaintiff by 4.15 p.m. on or before 3rd October 1996, the Defence and Counterclaim filed herein on 29th February 1996 be struck out and interlocutory judgment be entered against the Defendant together with interests and costs."

I shall come back to this 'unless order' later on.

13. On 27th September 1996 the Plaintiff's solicitors sent a letter to the Defendant informing her of Mr. Registrar Betts' order and enclosing a copy of a draft order. That order, however, was not sealed until 10th October 1996 and could not be served until then. This was done on 10th October 1996. The time for complying with the order had expired by then. Three months later, on 21st January 1997 the Plaintiff took out a summons for judgment against the Defendant as the 'unless order' had not been complied with. This was returnable before Master Chung on 27th January 1997 and was served, as is permitted by the rules, by inserting the same through the letter-box of the Defendant at the address for service. The Defendant did not attend the hearing before Master Chung on 27th January 1997 and he made an order in terms of the Plaintiff's claims. The sealed order was served by post on 20th February 1997. On receiving this, the Defendant applied for legal aid on 27th February 1997. This was refused on 7th April 1997.

14. It was not until 24th December 1997 that the Defendant instructed solicitors to act for her and applied by summons to set aside the order of Master Chung dated 27th January 1997. No irregularity whatsoever was alleged in the summons.

15. On 7th January 1998 the Defendant's 1st Affirmation was filed in support of her application to set aside the said order. The affirmation dealt at length with the merits of the case and tried to explain her default. No irregularity was alleged.

16. The Plaintiff filed an affidavit in answer on 13th February 1998 and on 11th March 1998 the Defendant filed her 2nd affirmation which dealt with the merits of her case. At the hearing before Master Chung on 13th March 1998 the Defendant was represented by solicitors. Master Chung dismissed the application to set aside after hearing arguments on the merits of the case and explanation for default. The Defendant did not rely on any irregularity in the arguments that were advanced.

17. The Notice of Appeal was filed on 17th March 1998. On 3rd June 1998 the Defendant filed a notice to act in person and on 8th June 1998 the Defendant's present solicitors filed a notice to act for her. The appeal was due to be heard on 10th June 1998 but was adjourned. It was only on 16th October 1998 that the Defendant's summons was taken out to set aside Mr. Registrar Betts' 'unless order'. On 17th October 1998 the Defendant filed her 3rd affirmation alleging irregularity. This was raised for the first time in a letter from her solicitors two days earlier.

The 'unless order'

18. Mr. Dykes S.C. for the Defendant submitted that the order made by Master Chung on 27th January 1997 was founded on the 'unless order' of Mr. Registrar Betts dated 26th September 1996. That order was an irregular order and as Master Chung's order of 27th January 1997 was based on it, it should be set aside. The recent summons dated 16th October 1998 was also taken out to seek to vary the 'unless order' dated 26th September 1996 so as to allow the Defendant further time to file her list of documents.

19. The fundamental point in Mr. Dykes' submission was that the 'unless order' of Mr. Registrar Betts was an irregular order. It was not made in compliance with Practice Direction 17.9 dealing with Peremptory Orders.

20. The Practice Direction is headed 'Peremptory Orders'. Paragraphs 1 and 2 provide as follows:

"1. For clarity, the nature and forms of peremptory orders in terms of R.S.C. O. 42 r. 2 are defined.

2. The common form of peremptory order known as an "unless" order should prescribe the period within which an act is to be done, failing which the ordered consequences will follow. These orders fall into two categories:-

(a) where the party ordered is not present/represented in which case the wording should be-

"unless within 14 days of the service of this order the defendant [serves his list of documents the defence be struck out and judgment entered for the plaintiff with costs.]"

or (b) where the party ordered is present/represented, or if a consent order is made, in which case the wording should be-

"unless by [4 p.m. on Thursday, 1st December 1988] ..... etc. as above".

It is desirable that the time be spelt out to avoid future argument."

21. In my view, the 'unless order' made by Mr. Registrar Betts was not in strict compliance with the Practice Direction as the Defendant was neither present nor represented at the hearing. The time for her to file her list of documents should have run from service of the order. The order that was made required her to file her list of documents "by 4.15 p.m. on or before 3rd October 1996". This would have been appropriate had the Defendant been present or represented at the hearing.

22. As the order made was not in strict compliance with the Practice Direction, does it mean that the order that was obtained was an irregular order?

23. It is necessary to look at O42 r2 Rules of High Court. O42 r2(1) provides:

"Subject to paragraph (2), a judgment or order which requires a person to do an act must specify the time after service of the judgment or order, or some other time, within which the act is to be done."

So, according to that rule, a peremptory order requiring a person to do an act must set out either the time after service of the order or some other time within which the act is to be done. As a matter of construction of the rules, the 'unless order' of Mr. Registrar Betts was not, in my judgment, an irregular order. It was in accordance with O42 r2(1). The fact that it did not strictly comply with the Practice Direction did not, in my view, make it an irregular order. A Practice Direction does not, in my view, have the force of law in the same way as the rules of the court. Non-compliance with a Practice Direction is not the same as non-compliance with the rules of the court.

24. The cases of Hitachi Sales (UK) Ltd. v. Mitsui Osk Lines [1986] 2 Lloyd's Rep. 574 and Van Houten v. Foodsafe [1980] 124 SJ 277 do not, in my view, assist the Plaintiff. In both of those cases, the 'unless order' made did not specify a starting date and it was ambiguous as to when the time was to run. It is not surprising that in those cases the order made was held to be irregular. They were not in compliance with the rules.

25. There is a difference in the equivalent Practice Direction in England. Paragraph 6 of the equivalent Queen's Bench Practice Direction in England provides:

"If an order of these types is made that does not fulfil either of these requirements a supplementary order should be obtained, fixing the time; until this is done the order cannot be enforced."

In Hong Kong, the Practice Direction is not as specific as that. It is, of course, important that Practice Directions be complied with. They are meant to be observed. If they are not complied with and an order is obtained, the Court may well in its discretion refuse to enforce such an order depending on the circumstances of the case. But in my judgment that does not mean that the order that was obtained was an irregular order. It was not obtained in breach of O42 r2(1) and it was not an irregular order.

26. Mr. Cheung also submitted that even if the 'unless order' were an irregular order, it is too late now to set it aside for irregularity as the application was not made within a reasonable time and before the Defendant took a fresh step after becoming aware of the irregularity. He relied on O2 r2(1).

27. Mr. Dykes informed me that it was only when he was instructed in the matter recently that the point of irregularity was first considered and that is why the point was not taken earlier. Mr. Dykes also relied on the evidence contained in the recent 3rd and 4th affirmations of the Defendant to show that notwithstanding the Plaintiff's evidence of service of the 'unless order' and the summons for the hearing before Master Chung on 27th January 1997, the Defendant says that she had not been given notice of those hearings. I observe, however, that in her 1st affirmation filed on 7th January 1998 the Defendant said this in paragraph 25:

"I felt fatigue, both mentally and physically and was not able to cope with the remaining proceedings. I therefore did not file the list of documents on time and had been absent from several summons hearings."

There was no suggestion there of not having been given notice of the summons hearings or of the 'unless order'. However, in her 3rd and 4th affirmations filed recently she categorically states that she did not have notice or knowledge of the hearing on 26th September 1996 where the 'unless order' was made and of the hearing before Master Chung on 27th January 1997. She also states that the letters produced by the Plaintiff's solicitors informing her of the hearing on 26th September 1996 and of the making of the 'unless order' never came to her attention. She states that she knew about the 'unless order' only on or about 28th November 1997.

28. Even taking 28th November 1997 as the date when she knew of the 'unless order', the Defendant then instructed solicitors in December 1997 who took out the summons on 24th December 1997 to set aside the order of Master Chung of 27th January 1997 not on the ground of irregularity but on the basis that she had a good defence on the merits. Indeed her 1st and 2nd affirmations went into the merits of the case to show that she had a good defence on the merits. She has also, as Mr. Cheung submitted, taken fresh steps in the proceedings after becoming aware of the irregularity. He referred also to Fry v Moore [1889] 23 QBD 395 and Pringle v. Hales [1925] 1 KB 573.

29. Until Mr. Dykes was recently instructed in the matter, neither the Defendant nor her solicitors appreciated the legal point on irregularity that could have been taken. That does not, however, assist the Defendant in my view. I do not accept Mr. Dykes' submission that waiver in the context of O2 r2 meant waiver of a legal point and as the Defendant did not waive a legal point she is not prevented from raising the irregularity point now. It is, in my view, knowledge of facts and not law that is material. The Defendant knew of the fact of the making of the 'unless order' at least by 28th November 1997 on her own evidence. Thereafter, it is clear that fresh steps were taken in the proceedings. Her solicitors applied by summons dated 24th December 1997 to set aside the order of Master Chung of 27th January 1997 which was founded on the 'unless order'. That application was made on the basis that the order was regularly obtained and the Defendant filed affirmations dealing with the merits of the case with a view to showing that she had a good defence on the merits. She in no way disputed the regularity of the order and proceeded on the basis that it was regular. At the hearing before Master Chung on 13th March 1998 the matter was argued by the Defendant's solicitors on the basis that the order was a regular order. Even the Notice of Appeal that was filed on 17th March 1998 did not raise irregularity. Those were all, in my view, fresh steps taken by the Defendant and it is much too late for her now to apply to set aside the order on the ground of irregularity.

30. In the course of the arguments of Mr. Cheung, Mr. Dykes also applied to amend the summons dated 16th October 1998, the Notice of Appeal and the summons dated 24th December 1997 to specifically include the irregularity point in view of the requirement in O2 r2(2) that the grounds of objection must be stated in the summons. In view of my decision that the 'unless order' was not an irregular order but a regular one and further, that if there were an irregularity such has been waived, I see no point in granting leave to amend. I refuse the application to amend.

31. The matter, however, does not end there. I am troubled by two matters. The first is that the 'unless order' was sealed only on 10th October 1996, which was seven days after the date when the Defendant should have complied with the order. The sealed order could only have been served on or after 10th October 1996. The second is the evidence of the Defendant in the 3rd and 4th affirmations that she knew about the 'unless order' only on or about 28th November 1997 and that she did not have notice or knowledge of the hearings on 26th September 1996 and 27th January 1997. Notwithstanding the evidence filed on behalf of the Plaintiff as to service of the summonses for those hearings and the sending of the letter after the making of the 'unless order', I cannot ignore the Defendant's evidence on this. On that evidence, the Defendant plainly did not have an opportunity to comply with the 'unless order' before the expiration of the time limit provided for in the order. That being so, I do not think the situation is the same as that in Hytec Information Systems Ltd. v. Coventry City Council [1997] 1 WLR 1666 where the English Court of Appeal at 1674-5 gave certain guidance in respect of an 'unless order'. I think that the guidance given there was meant to be applicable to situations where a party in fact had ample opportunity to obey a peremptory 'unless order' but nevertheless did not do so. In that case, counsel's conduct after the making of the 'unless order' was found to be contumacious.

32. Of course, where a party has had ample opportunity to comply with an 'unless order' but nevertheless ignores the same, then he should expect no mercy. But that is not the situation here.

33. I was also referred by Mr. Dykes to the judgment of Keith J. in Chow Kai Sang v. Toi Samuel & others [1996] 4 HKC 330 at 337 where he said:

"However, there are two reasons which convince me that the merits of the plaintiff's claim have no relevance to the present case. Firstly, that is what Sir Nicholas Browne-Wilkinson himself said in Jokai Tea at p 1203C:

... 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.

In the other words, once the failure to obey an 'unless' order is not regarded as contumelious, the action should proceed as it would have done if the default had not taken place. After all, Sir Nicholas Browne-Wilkinson had already said that 'the relevant question is' (and the use of the singular suggests that this is the only relevant question) 'whether such failure is intentional and contumelious'"

The reference to Jokai Tea is, of course, to Re Jokai Tea Holdings Ltd. [1992] 1 WLR 1196. I respectfully agree with the observations of Keith J. that once the failure to obey an 'unless order' is not regarded as contumelious, the action should proceed as it would have done if the default had not taken place.

34. The failure to obey the 'unless order' by the Defendant in this case should not, in my view, be regarded as contumelious. By her summons dated 24th December 1997 taken out shortly after she knew of the 'unless order' she also applied for further time to serve her list of documents. I have considered her evidence in her affirmations including her 3rd and 4th affirmations filed recently. In the circumstances of this case, I think that it would be too harsh to impose on the Defendant the full sanction for not obeying the 'unless order' as provided therein. I am of the view that she should be given one last chance. Any prejudice to the Plaintiff can, in my view, be compensated for by an order for costs in his favour.

35. I allow the appeal and set aside the order of Master Chung dated 13th March 1998. I also order that the order of Master Chung dated 27th January 1997 be set aside. I make an order that unless the Defendant do file and serve her list of documents on the Plaintiff by 4 p.m. on Tuesday 17th November 1998, the Defence and Counterclaim filed herein on 29th February 1996 be struck out and interlocutory judgment be entered against the Defendant together with interests and costs. As the Defendant has been granted an indulgence by the court, I make an order nisi that the costs of the application before Master Chung heard on 13th March 1998 and of the appeal before me as well as the costs of the summons dated 16th October 1998 be borne by the Defendant. Such costs are to be taxed and paid forthwith by the Defendant to the Plaintiff.