Chun Wo Building Construction Ltd v. Metta Resources Ltd

HCCT 29/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 29 OF 2013

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D E C I S I O N

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1.I have lost count of the number of interlocutory applications which had come before this court.  Today is the 2^nd day of trial and there are 3 interlocutory applications before the court, 2 from Metta and 1 from Chun Wo. It is quite unusual for the court to be swamped with such applications at the trial.  Only last Wednesday, this court had to deal with Metta’s application for security for costs.  Tomorrow, there is another application by Metta for leave to make yet another interlocutory application. 

2.In this court’s decision on the security for costs application (“Decision”), it was made clear that such application had seriously impaired the court’s ability to properly prepare for this trial (Decision, §28) (see the observations of the Court of Appeal in Li Xiao Yun & Anr v China Gas Holdings Ltd, unrep, CACV 38/2013, 11 March 2013, §18).  Even though each side is represented by 4 counsel, I have little doubt that the burden of these interlocutory applications is affecting their work.

3.It cannot be over emphasised that this is a construction dispute involving vast amount of details.  The trial bundles consist of 119 box files.  This trial, set down very long ago, is scheduled to take 36 days, with the final day reserved for top-up submissions after the filing of written final submissions.  Each party will call 5 expert witnesses, with 1 joint expert on 1 area.  There is a chess clock procedure in place. Ironically, both parties have made submissions that the original estimate for this trial was insufficient, which resulted in an extra week being added.  A reasonable person may think that there is no time to be wasted, and they parties should focus their attention on this trial. 

4.The present situation is simply absurd.  These are some of the most litigious parties who have come before the court.  There is little regard paid to costs or proportionality in the conduct of this action.  As indicated in the Decision (§29), disruptive interlocutory applications are to be dealt with appropriately. 

5.At a hearing on 19 February 2016, this court made clear to the parties that it will require assistance on why these interlocutory applications should be entertained in light of the circumstances of this case and O 1A, r 1, as well as the potential impact upon the trial if the applications are to be granted.

6.Invariably, late interlocutory applications are supported by argument based on the proposition that the real issue of the case should be determined so as to do justice to the parties.  With great respect, this argument cannot be used as a badge for inadequate trial preparation or for oppression of the opponent.  Under our system, justice can only be achieved under a well-established set of rules and procedure which govern the conduct of litigation.  Non-compliance with the rules can cause injustice.  Litigants who do not conduct themselves with openness and fairness deserve little sympathy from the court.   

7.With these general comments, I turn to consider each of the applications.

Metta’s application to amend Appendix 10B (and consequentially, Appendices 10A and 4) of its Further and Better Particulars.

8.Appendix 10B is an important part of Metta’s pleadings.  It provides the particulars for its counterclaim on defects.  Such counterclaim is relied upon to set-off part of Chun Wo’s claim.  It is said that what gave rise to the amendments was the finalisation of the accounts of the rectification contractors.  Some of the amendments are not resisted.  They have been identified in footnote 20 of Chun Wo skeleton arguments dated 16 March 2016. 

9.I understand from Mr Clayton SC that the controversial new claims contained in the amendments, if allowed, will increase Metta’s defect claim by some HK$14m. 

10.The opposed amendments involve a huge amount of details.  On a very rough count, some 100 “line items” are involved.  The key argument here is whether permitting such late amendments would prejudice Chun Wo.  In order to resolve this argument, this court is required to consider the details concerning, eg, whether each line item has or has not been, as Metta contents, adequately dealt with in Chun Wo’s case.  This exercise alone is the equivalent of a small trial.   

11.A prevailing feature of this case is that even simple factual matters of what transpired between the legal teams are often subject to controversy.  This serves to underscore the fact that unless the parties are in agreement, there is little concession made in even basic factual matters. 

12.Given the pressure on the court, and on Chun Wo, to properly prepare for this trial (due to the imposition of these interlocutory applications, this court has been prevented from properly preparing for this trial), I simply do not begin to see why Metta can be allowed to make disruptive interlocutory applications in succession.  Hence, the observations made by the court on 19 February 2016 (see para 5 above).

13.There is no proper explanation for the delay in this application.  The final accounts were available since November 2015. However, any explanation for delay must start from the effort, if any, made in expediting the finalisation of the rectification accounts.  In this regard, this court was informed in another interlocutory application in August 2015 that the finalisations were expected in mid-September 2015 (see Decision dated 18 August 2015, §21).  This deficiency flies in the face of this court’s observations on what is needed in the evidence in support of this application.

14.I agree with Mr Clayton, especially in light of the imminence of this trial, there is no justification for Metta not to have advanced the new claims before the finalisation of the accounts.  Metta must be in possession of the factual evidence for those claims well before the conclusion of the finalisation exercises. 

15.Metta is a resourceful litigant, and its case has been conducted with the assistance of a large team of specialist lawyers. It must be taken to be fully aware of the proper way to conduct this litigation.  Unexplained default on its part can deserve little sympathy from the court.

16.There is no proper attempt to satisfy the court that this application should be entertained in these circumstances and in light of O 1A, r 1.  I bear in mind the authorities cited to me by the parties.  The relevant principles are trite and it is unnecessary to repeat them.  In these circumstances, I have no hesitation in rejecting this application. 

17.For completeness, I should say that there is a logical flaw in Metta’s argument that Chun Wo has already adequately addressed various new claims in the amendments.  It is difficult to see how that can be so when there were, hitherto, no such claims to be dealt with.

18.Finally, I am unable to accept Metta’s submission that Chun Wo requires no new evidence, whether factual or expert, in order to address the controversial amendments.  Whilst the court must be vigilant with unmeritorious claim of such nature advanced to fend off an amendment application, the fact of the matter is that save for a simple amendment involving no complication it is very difficult for the court to say that the respondent requires no further evidence.  It is the right of the respondent to properly consider the amendment with the benefit of his legal advisors, possibly also with the input of his expert, and then come to a decision whether to advance further evidence. 

19.This court has been taken by Mr Clayton to the assertions made in the 3^rd affirmation of Mr Yuen at A8/2237 to 2239 that Chun Wo requires no further evidence, and it has been demonstrated that the assertions are not properly founded.  

20.I am satisfied that to allow this application in full would constitute serious prejudice to Chun Wo in that it would seriously disrupt Chun Wo’s conduct of this trial due to, at the very least, the need to consider its own consequential amendments, additional evidence (both factual and expert) and discovery.  There is a real risk that these may lead to an abortion of this trial. 

21.In conclusion, save for the uncontroversial amendments, this application is declined. 

22.I move next to Metta’s 2^nd application.

Metta’s specific discovery application

23.There is a history to this application.  It can be traced to Metta’s specific discovery application made in November 2014 (“November Application”) in respect of 6 very general classes of documents. When that application came before this court for hearing in February 2015, it had to be adjourned because there was insufficient time to deal with it due to the need to dispose of another interlocutory application of Chun Wo on that day.  When the November Application was heard on 3 June 2015, it was dismissed but the door was left open for Metta to make another application based on properly identified documents: see Decision dated 3 June 2015 (“June Decision”), §15. 

24.The present application involves 12 classes of documents.  I should explain that in the course of the voluminous exchange of correspondence and evidence filed for the November Application, the 6 classes of documents became 174 classes.  That was the state of affairs when the November Application was argued.  After the disposal of the November Application, Chun Wo filed an affirmation to verify its discovery. 

25.On 14 September 2015, by correspondence Metta put forward a demand for discovery in respect of 40 categories of documents. Chun Wo responded to that demand on 19 October 2015.  There was no further exchange on this subject.  This application was taken out on 28 January 2016, which only concerns 12 of the 40 categories of documents. 

26.Notwithstanding that this application is confined to 12 categories of documents, it is self-evident from the definitions of these categories that very extensive discovery is being sought. 

27.In the June Decision, it was observed by this court that :

“1. The parties are at loggerheads. Adds to this, they are plainly resourceful and have little interest in maintaining proportionality in the resolution of this action.

2. The interlocutory skirmishes between them are numerous and extensive in scope. This action was started in August 2013. It is a good reflection of the impasse generated by the litigious stance taken by the parties that there is yet to be an exchange of witness statements in this case.

3. There is a danger that this action will spiral into a runaway train, if that has not already happened. It is the duty of the court to try to keep it under control.

…

15.  I do not discount the possibility that, given the nature of this case, there are omissions in the discovery by the parties.  The answer is to make a specific discovery application on properly identified missing documents.  I hope this will not be taken as an encouragement.  As stated above, the parties should focus their energy on the trial.”

28.Regrettably, there is a limit as to what the court can do in trying to keep this very substantial litigation on the right track when there is no cooperation from the resourceful litigants.  Indeed, a good deal of the case management works by the court have been unravelled for this reason.    

29.It is difficult to find the right word to describe the absurdity of this discovery application.  What purpose is Metta trying to achieve?  What will it do with the mountain of additional documents if they are provided?  It is clearly impossible for such material to be immediately digested and deployed in the cross-examination of Chun Wo’s witnesses, which is going to take place very soon.  The absurdity of this application fortifies the view that this is another disruptive effort.  See also Citibank NA v Days Properties Ltd [2013] 4 HKLRD 264, §§23-34, per DHCJ Lok (as he then was).   

30.There is no proper evidence before the court on the issues identified in para 5 above.  There is nothing more than a blanket statement from Metta’s solicitor that: “In advising Metta to pursue these matters questions of proportionality, expedition and procedural economy have been fully considered.”  With respect, such evidence is not acceptable. 

31.In these circumstances, bearing in mind in particular the delay in bringing this application, it must be rejected. 

32.For completeness, I will say a few words about the merits of this application.  The applicable principles of law on specific discovery are trite.  They were succinctly set out in Nokia Corp v TCT Mobile Ltd [2014] HKLRD 43, §15, per Ng J.

33.To begin with, the fact that Metta has sat on this application until after the evidence has substantially completed (after the filing of 2 rounds of witness statements and expert evidence) speaks volumes for the necessity of the documents for the fair disposal of this case or saving costs.

34.Secondly, there is substance in Chun Wo’s criticism that the 12 categories of documents are basically the products of re-packaging from some of the original 174 classes of documents. 

35.Thirdly, unless there is anything new in the 12 categories of documents, they have been covered by Chun Wo’s verifying affirmation.  Chun Wo’s evidence in opposition to this application has, again, confirmed that discovery has already been made, where the documents exist, in respect of most of the discovery being sought.  In addition, some of the alleged deficiencies in Chun Wo’s discovery are premised upon misunderstandings.  In respect of the remainder, they are irrelevant. 

36.Fourthly, on relevance, the main plank of Metta’s argument is that: “These documents are mainly communications between Chun Wo and its subcontractors that are relevant to mismanagement of TSM project and poor management of Chun Wo.”  Discovery must be conducted with proportionality in mind, especially for a case of the present type.  These documents may contain some ammunition for deployment in cross-examination.  I do not consider such evidence essential or necessary because Metta is in the position to adduce direct, as well as expert, evidence of Chun Wo’s mismanagement if that be the case.  A good test of the proposition is that there is no suggestion that the lack of discovery in question has hindered the preparation of Metta’s factual or expert evidence.  I should add that it is evident from the supporting evidence in this application that there are in fact documents available to Metta to explore the dealings between Chun Wo and its subcontractors. 

37.Fifthly, it is fairly obvious that in making this application Metta has gone through the evidence with a fine toothcomb to see what else it can throw at Chun Wo.  Category 12 provides a good illustration.  Under this category, tender build up and price formulation are sought.  It is perplexing why such documents are of any relevance to the issues in this trial.  Price and quality are governed by the contract between the parties.  Chun Wo had either carried out its works which conformed with the contract or failed to do so.  It matters not whether it had or had not under-priced the contract. 

38.Sixthly, in respect of the discovery of accounting information under Category 37, I fail to see why the adoption by Chun Wo of the Hudson’s formula for the calculation of prolongation claim justifies this highly intrusive request.  If Chun Wo’s position on that issue is wrong, no doubt Metta will have the opportunity to say so in this trial.  I should mention that Chun Wo had, on a confidential basis, permitted Metta’s expert to inspect its “payroll records, banks transfer records, staff assignment records, etc.”

39.For these reasons, this application is dismissed. 

Chun Wo’s specific discovery application

40.It is ironic that Chun Wo is both resisting and seeking specific discovery in the course of this trial.

41.The specific discovery in question is very extensive.  It covers various documents between Metta/Cheung Kong and the rectification contractors as well as internal documents of the former in respect of the rectification proposals of the latter. 

42.Much of what have been said above in respect of Metta’s specific discovery application apply with equal force here.  First and foremost, Chun Wo asks to have these documents provided within 4 calendar days.  If the application be granted (and assuming there are such documents), Chun Wo will receive a substantial amount of documents whilst its witnesses are being cross-examined.  Again, the absurdity is self-evident and I do not begin to see the point of the exercise.   

43.Secondly, I do not accept that the issues identified by the court on 19 February 2016 (see para 5 above) have been properly addressed.  What is source for the goose is source for the gander. For this reason alone, this application must be rejected.  It is indisputable that there is no evidence at all to explain the impact of this application, if granted, to this trial.  As regards the explanation for the delay in making this application, I am not convinced that the application could not have been made in about April 2015 when Chun Wo sought to amend its pleading with the introduction of a case that the rectification works were the result of design changes.  This must be viewed in light of the imminence of this trial.       

44.Thirdly, the preparation of evidence has completed by now.  There is no suggestion that the preparation of the factual or expert evidence has been hampered (see para 33 above).

45.Fourthly, I am unable to understand the relevance of the documents in question.  Prima facie, I agree with Metta that design changes should be identifiable by comparing Chun Wo’s scope of work and completed works with the remedial contactors’ scope of work and completed works.  This is fortified by fact that the production of expert evidence has not been hampered.  I am unable to see the relevance as to who proposed the alleged design changes and how they were followed up.  In respect of Chun Wo’s argument that some of the contractual specifications were “performance based”, it has not been demonstrated that the relevant expert(s) are unable to tell if the rectification works had exceeded what was reasonably required and therefore constituted design changes. 

46.Fifthly, it is evident from Chun Wo’s pleadings that it has at its disposal a substantial amount of details on which to base its case on design changes.  Appendix Q to the Amended Statement of Claim sets out Chun Wo’s case on “Major design changes identified by Chun Wo”.  It is a 17-page document with considerable details.  It is augmented by Further and Better Particulars laid out in a 9-page table, again containing considerable details.

47.For these reasons, this application is dismissed.

48.I now hear the parties on the costs of these applications.

[Submissions on costs of the application]

49.These unmeritorious last minute applications have seriously hampered the trial preparation of the court.  They have taken up 2 ½ long days of preparation and this 2^nd day of trial is wasted. The costs order must reflect the strong disapproval of the court.  See also Li Xiao Yun cited in para 2 above. 

50.I order that the costs of and occasioned by Metta’s amendment application be to Chun Wo to be taxed on indemnity basis, if not agreed. 

51.The costs of Metta’s discovery application is likewise to Chun Wo on indemnity basis, save and except that counsel’s fees incurred for Chun Wo’s skeleton arguments in opposition are disallowed.  The exclusion of such fees is to reflect the lateness of Chun Wo’s skeleton arguments.  It was only received late Friday afternoon when this court has completed the preparation for this application.  I should mention that enquiry was made by the court’s clerk that morning about the missing skeleton arguments.  There was no time for reading that document when it was received, and thus the effort is wasted.   

52.I should say that there is in place a standing direction made on 10 February 2015 that skeleton arguments in opposition is to be filed no less than 3 clear days before the hearing.  This is not the first infringement of this kind by both parties.  It is time for sanction to be imposed. 

53.The costs of Chun Wo’s discovery application is to Metta on indemnity basis, to be taxed if not agreed. 

Mr Peter Clayton SC, Mr Jonathan Wong, Ms Emerald Shek and Ms Yvonne Ngai, instructed by J Chan, Yip, So & Partners, for the plaintiff

Mr John Scott SC, Mr Anthony Chow and Mr Anthony HK Chan, instructed by Hogan Lovells, for the defendant