Commerzbank Aktiengesellschaft (Hong Kong) v. Peregrine Fixed Income Ltd. (in Liquidation)

HCA008033/1998

HCA 8033/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 8033 OF 1998

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Coram: DJ Woolley in Chambers

Date of Hearing: 17 January 2000

Date of Decision: 25 January 2000

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D E C I S I O N

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1. I have before me two applications, both of which arise out of an "unless" order made by me on 30 September 1999. That of the plaintiff is to strike out the defence on the ground that the order has not, or not fully, been complied with within the time specified. The defendant's application is for a retrospective extension of time to comply with the order. To see how we arrived at this situation it will be useful to set out the immediate history of the matter.

2. The plaintiff's claim herein is in respect of a sum of DM73226599.97 remitted to the defendant on 9 January 1998 under a foreign exchange transaction agreement made the previous day, and under which the defendant should have remitted to the plaintiff at the same time the sum of US$40117130.13, but failed to do so. In its defence dated 21 July 1998, the defendant, now in liquidation, pleaded, inter alia, that it did not know on 9 January 1998 that it would not be able to meet its financial obligations, and that a number of payments due to it under foreign exchange transactions were not received. On 11 September 1998 the plaintiff sought a number of further and better particulars of the defence and received an answer to that request dated 9 December 1998. The defendant not being satisfied with a number of these answers, a summons was issued on 28 January 1999 which came before Mr Justice Waung on 31 March 1999 when he ordered the particulars in question to be filed and served within 28 days. Further particulars were provided on 29 April 1999. However, the plaintiff was still not satisfied in respect of the answer to one request, namely under paragraph 1(f)(iv)(d) of the order of Mr Justice Waung and made the application for an unless order which I heard on 30 September.

3. The request was for particulars of:-

"whether the Defendant or PIHL defaulted on any payments or obligations due on or before the close of business (New York time) on 9 January 1998, either on foreign currency transactions or otherwise and either due in New York or elsewhere in the world (other than the 14 outgoing payments referred to in paragraph 15.6)? If the answer is in the affirmative, was such default in relation to any of the counterparties who failed to make the 10 payments referred to herein?"

4. When the order for particulars was made on 31 March 1999, I am told that Mr Justice Waung told the defendant in respect of this request, to do the best it can, requiring as it did information to be sought from the liquidators and directors of PIHL (Peregrine Investments Holdings Limited), which, being a separate body, albeit being wound up by the same firm of accountants and with some common liquidators, had no duty to supply information or documentary evidence.

5. It was submitted at the hearing on 30 September that the affidavit evidence filed on behalf of the defendant showed that enquiries had been made of the liquidators of PIHL in respect of the particulars, that the information requested was not within their personal knowledge or in readily available form, although it could be assembled from PIHL records, which would be a substantial task, and that the former directors had not been asked for the information, as previous interviews with them showed that they would not have the detailed accounting information necessary to answer the request. I considered this insufficient and formed the view that no great effort had been made by the defendant's solicitors to comply with the order, and that they were saying in effect that it was too difficult. It was also clear that the liquidators of PIHL had not been asked if their documents could be made available for the defendant's solicitors and liquidators to seek the information, only if they would look for it themselves. In making the unless order, I made it clear that the defendant's solicitors should make further efforts to gain access to the documents in possession of the liquidators of PIHL, and to interview the directors of the defendant again in respect of the specific information required. My order was that unless this was done and the particulars supplied within 60 days, the defence would be struck out and judgment entered for the plaintiff.

6. In purported compliance with my order, the defendant's solicitors served on the plaintiff's solicitors at 10:19 a.m. on 1 December 1999 an answer to the request.

7. Mr Hingorani on behalf of the plaintiff now seeks an order for judgment to be entered on the ground that the unless order has not been complied with, firstly by the defendant not complying within the time specified which expired at close of business on 29 November 1999, and secondly by not making sufficient efforts to obtain the information necessary to answer the request more fully.

8. As to the first, Mr Jamison for the defendant frankly admits responsibility. He says that he initially made an error in the computation of the time available, thinking that it expired on 30 November. In respect of this, I have to accept some of the blame myself. In making the order I overlooked the provisions of Practice Direction 17.9 which require peremptory orders to state clearly the date and time by which they are to be complied with, so as to avoid any later argument. I should not have left it to the parties to calculate the relevant date, and I can well understand that confusion may have been caused thereby. However, Mr Hingorani points out that, even if 30 November was the last date for compliance, the answer was still out of time, being served the next day after 10 a.m. Mr Jamison says that he was making a last effort to obtain information from the directors by way of their solicitor with whom he had been in communication, and believed the short extra delay (as he thought it to be) would be acceptable to the plaintiff's solicitors.

9. There can be no doubt that the defendant is in default by not complying within the time required and the defence must be struck out unless I accede to their request to extend the time for compliance.

10. The principles upon which the discretion to exonerate a party in default should be exercised have developed in Hong Kong along a rather different path to that followed in England. There they are set out very clearly in the judgment of Ward LJ in Hytec Information Systems Ltd v Coventry City Council [1997] 1 WLR 1666 at p. 1674 and point out that an unless order is an order of last resort as a last chance, and a party who intentionally or deliberately flouts such an order can expect no mercy. However, he goes on (at p. 1675):-

(5)

A sufficient exoneration will almost inevitably require that he satisfy the court that something beyond his control has caused his failure to comply with the order. (6) The judge exercises his judicial discretion in deciding whether or not to excuse. A discretion judicially exercised on the facts and circumstances of each case on its own merits depends on the circumstances of that case; at the core is service to justice.

11. While disobedience to a peremptory order will normally be considered to be contumelious conduct resulting in the party in default not being allowed to proceed in the litigation, except where the default was caused by extraneous circumstances or otherwise beyond his control, in practice the default will be that of his solicitor rather than the litigant himself. While in most areas of litigation a party is bound by the acts of his solicitor, with his only remedy a claim for negligence against him, in Hong Kong a clear line has been drawn in cases of disobedience to peremptory orders between acts of a party to the proceedings and those of his legal representatives. In Tan Eddy Tansil v PT Bank Pembangunan Indonesia (Persero) [1996] 1 HKC 231 Bokhary JA declined to allow a party to suffer as a result of the mistake of his solicitors, quoting with approval Lord Denning MR in Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158 who said, at p. 166:-

We never allow a client to suffer for the mistake of his counsel if we can possibly help it. We will always seek to rectify it as far as we can. We will correct it whenever we are able to do so without injustice to the other side.

12. This principle was followed by Keith J, first in Chow Kai Sang v Toi Samuel [1996] 4 HKC 330 where he took the view at p. 335 that:-

The failure to comply with the "unless" order was due to outside circumstances when looked at from the plaintiff's point if view, namely the conduct of his solicitor.

and second, in Ming Pao Enterprise Corp. Ltd v CIM Co. Ltd [1999] 1 HKC 497 where he found that the only blameworthiness was that the defendant had allowed a relatively inexperienced solicitor to have conduct of the case. This is certainly not the case here.

13. In any event, had I been concerned only with the conduct of the solicitor here in deciding whether there had been "intentional and contumelious" behaviour such that the usual result of disobedience to such an order should follow, I would have difficulty in putting Mr Jamison's conduct in such a category. As I have said, there was room for error in calculating the final date of the order, for which I do not lay any blame at his door. His behaviour then in waiting a few more hours I do not consider a deliberate intention to flout the order of the court, when he had hoped to be able to gain more information from the directors' solicitor, the more fully to be able to answer the plaintiff's request. It was possibly a somewhat relaxed attitude to the time limit, and certainly careless, but not in my view the kind of behaviour intended to show contempt for the court and its orders.

14. As to any prejudice to the plaintiff, the delay in effect was less than one day if I exclude, as I must, the day added in error. And while Mr Hingorani has sought to point out the previous orders, the failure to fully comply earlier, and the time thereby wasted, I can only look at the prejudice caused by this default, and that is, as I have said, less than one day. It would be difficult to say in those circumstances that there is prejudice such that the defendant should be denied the opportunity of further defending these proceedings. In so saying I take into account not only the large sum of money at stake here, but the fact that, the defendant being in liquidation, a judgment under these circumstances would not just affect this defendant, but its creditors whose prospects of recovering their claims would inevitably be reduced.

15. I accordingly accede to the defendant's application to extend the time for compliance with the order, and I must therefore go on to consider whether the order has been complied with.

16. The particulars requested by the plaintiff and the subject of the orders of Waung J and myself were in respect of defaults on payments or obligations which may have been made by PIHL on or before close of business on 9 January 1998. To provide such particulars it was necessary for the defendant to seek information outside its own resources and requiring the cooperation of others, and this was recognized by the Court, first by Waung J in saying, so I am told, that they must do their best. When the matter came before me on 30 September 1999 I was not satisfied that they had done their best. Indeed, I took the view that little effort had been made to comply because they thought it was too difficult. In making my order, I required the defendant to make their best effort to obtain access to the documents of PIHL's liquidators, or to pay the costs of searching those documents for the information needed, and to make a proper attempt to interview the directors of the defendant and PIHL again.

17. It is apparent to me from the affidavit of Mr Jamison that from shortly after the date of the order in September he made serious efforts to obtain the consent of the liquidators of PIHL for access to their papers. However, in spite of a favourable response initially from the more junior staff of the liquidator, when the matter was referred to a senior manager a different view was taken and, despite a number of discussions and meetings with the main liquidators, Mr Jamison was informed that, without an order of the court, they had no power to permit such access.

18. Mr Hingorani makes some criticism of these efforts on the basis that the senior staff should have been approached earlier. That may be so, but I cannot see that it would have made any difference to the outcome. Mr Jamison would just have learnt of their views at an earlier stage and possibly saved effort and costs to his client.

19. In the circumstances, as far as the records of PIHL are concerned, I am satisfied that the lack of effort I found fault with in the September hearing has now been remedied. The fact that it has borne no fruit cannot be blamed on the defendant.

20. As to the directors, Mr Jamison has again made a number of efforts to obtain further information from them and I accept his evidence as to this and the resulting failure to add to their earlier statements. One director he did not try to approach again was Mr John Eng Lee, who was a director of the defendant, but not PIHL, and Group Treasurer. Mr Hingorani pointed to this as a failure in itself to attempt to comply with the order as Mr Lee, as Group Treasurer must have had knowledge of the matters in question. However, in the signed statement of Mr Lee, exhibited to the affidavit of Sayedur Rahat Khan of 12 May 1998, in the possession of the plaintiff's solicitors, he makes his position clear that he did not and does not have the sort of information that would assist the defendant in answering this request, that his position as Group Treasurer was not concerned with operations and payments by companies within the group. It therefore seems to me, as no doubt it seemed to Mr Jamison, that even if he were able to contact and interview Mr Lee, the possibility of obtaining any useful information for the purposes of these particulars was so remote that I am not prepared to blame him for not seeking to do so.

21. I am accordingly of the view that the defendant's solicitors have done what they can and made attempts I now consider adequate to obtain the particulars the plaintiff seeks, and I do not find their lack of success in doing so a failure to comply with my order.

22. In all the circumstances I find that there are insufficient grounds for striking out the defendant's defence.

23. In view of the default by the defendant as to the matter of time, necessitating their application for retrospective extension, I am of the view that the plaintiff should have the costs in any event not only of that application but also of the application to strike out, and I accordingly make an order nisi to that effect.

Representation:

Mr Jeevan Hingorani, instructed by Messrs Barlow Lyde & Gilbert, for the plaintiff

Mr James Jamison, of Messrs Clifford Chance, for the defendant

Remarks:
Appeal by the Plaintiff to the Court of Appeal.  Appeal allowed.  Please refer to the Appeal Judgment CACV000875/2001.

(I) Appeal by the Plaintiff to the Court of Appeal. Appeal allowed. Please refer to the Appeal Judgment CACV875/2001. (II) Please refer to CACV296/2002 for the relevant appeal(s) to the Court of Appeal.