Lam Po Chiu Mark v. Ion Global (Bvi) Ltd. and Another

HCA 4754/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4754 OF 2003

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Before: Deputy High Court Judge Carlson in Chambers

Date of Hearing: 21 April 2006

Date of Judgment (Handed Down): 28 April 2006

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J U D G M E N T

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Introduction

1.This is an appeal by the 1^st Defendant against two orders.  Firstly, an Unless Order made by the Registrar on 13 February 2006 requiring the 1^st Defendant to file and serve its amended defence by 5:00 p.m. on 27 February 2006, failing which the Plaintiff would be at liberty to apply to enter judgment as claimed in the amended statement of claim.  In respect to this part of the appeal, the 1^st Defendant is 31 days out of time and therefore seeks an extension in order to bring its appeal.  No amended defence having been filed within the requisite period the Plaintiff has applied for and obtained a judgment in the sum of US$741,937.

2.If the appeal against the Unless Order succeeds the judgment consequent upon it must, of necessity, also go.  If the 1^st Defendant fails on this part of the appeal then it appeals against the judgment itself.  So that is how the matter stands.

Background

3.In arguing the appeal Mr Hart, who appears for both Defendants, has laid great stress on the history of the action which, he says, had the Registrar been made aware of, it is most unlikely that he would have made the order that he did. 

4.I have a chronology which is agreed by the parties.  As a matter of convenience, I propose to attach it to the judgment and will refer to the dates and events which I consider essential in order to determine the outcome of the appeals. 

5.On 31 December 2003, the Plaintiff issued his writ which was served on the 1^st Defendant, it being the only Defendant at that stage.  The defence came on 24 February 2004 and the matter proceeded uneventfully until 17 November 2004 when on that date Master Lung was asked by the Plaintiff to adjourn the Check List Review hearing (“CLR”) because, I believe, he wished, through his solicitors of course, to investigate the possibility of getting more witnesses and preparing additional witness statements.  The Master acceded to the request and adjourned the CLR to 26 January 2005, when again, at the Plaintiff’s request he adjourned the hearing sine die again for the same reason. 

6.Then there was a hiatus of nine months.  The Plaintiff did nothing, at all events, in terms of progressing the action.  Mr Hart draws attention to this really by way of deflecting any criticism of the Defendants for any delays by them in amending and/or filing their defences.  Miss Linda Chan, for the Plaintiff, submits that this delay is completely irrelevant to the decision that I have to make, and I think that she must be right about that, although it does account for part of the history of the matter.

7.The case came to life again on 18 October 2005 when the Plaintiff issued its summons upon which an order was made by the Registrar on 24 October giving the Plaintiff leave to add the 2^nd Defendant to the action, it being the 1^st Defendant’s parent company.  Leave was given for the statement of claim to be amended, the amendments being substantial alleging that the 2^nd Defendant, as parent, had influenced the 1^st Defendant to breach its agreement with the Plaintiff.  For present purposes it is not necessary to investigate the detail of the pleadings beyond this.  Under paragraph 4 of the Registrar’s order [page 33] the 1^st Defendant was to “be at liberty to consequentially amend its defence” and to serve it within 14 days of the order.  I should observe, at this juncture, that Mr Hart is anxious to draw attention to the fact that the 1^st Defendant (at that stage still referred to as the Defendant) was only “at liberty” to amend its defence.  It was not a requirement that it do so.  This is a matter that I will need to return to presently. 

8.This order was appealed against by the 1^st Defendant to Deputy High Court Judge Saunders.  The basis of the appeal was that the summons to add the 2^nd Defendant had come unannounced in previous correspondence and, on the hearing itself, the summons was not supported by affirmation to explain the basis of the application.  Notwithstanding objection to this course, the Registrar declined to adjourn the summons for argument and to require the Plaintiff to file an affirmation in support of it.  On the appeal, the Deputy Judge required an affirmation from the Plaintiff and adjourned the appeal for that to be done.  On the substantive hearing of the appeal on 19 December 2005, having heard the argument, he reserved his decision to 13 January 2006 when the appeal was dismissed.

9.In the meantime, there was agreement between the parties, starting on 5 December 2005, when the appeal first came on before Deputy Judge Saunders, that the time for filing and service of the 1^st and 2^nd Defendants amended defence and defence respectively should be extended until the determination of the 1^st Defendant’s appeal.  Following its dismissal on 13 January 2006, the Plaintiff agreed to a further extension on 26 January 2006 which was to expire on 10 February.  On 10 February the 1^st Defendant issued its time summons asking for a further 14 days, which was the one heard by the Registrar on 13 February when he made the Unless Order now appealed from.  That is how the matter got to the stage of the making of the order that I am now considering. 

The Defendants’ case on their failure to comply with the Unless Order

10.A convenient starting point to this is the 4^th affidavit of Mr Hart, the Defendants’ solicitor, dated 21 February 2006 [page 46], which he swore in support of the 2^nd Defendant’s summons under O. 12 r. 8 RHC of the same date.  In this affidavit, he sets out the fact that the 2^nd Defendant is a foreign corporation with no established place of business in Hong Kong.  The purported service of the amended writ, he says, on the 2^nd Defendant at the 1^st Defendant’s Hong Kong office on 10 November 2005 was therefore defective.  In such circumstances, it is submitted that the court has no jurisdiction over the 2^nd Defendant.  This summons came before the Registrar on 3 March 2006 and has been adjourned for argument.  It therefore remains outstanding. 

11.Mr Hart’s principal affidavit in support of this appeal is his 5^th, dated 3 March 2006 [page 60].  In it he says that the principal reason for the taking out of the time summons on 10 February was to give him time to consider, with his client, whether to issue a summons under O. 12 r. 8 to challenge jurisdiction, which was done on 21 February.  What is clear is that a lot went wrong on the hearing of the time summons on 13 February.  Before I come to that I should set out what Mr Hart has told me in the course of the appeal as to why he had previously sought and obtained extensions from the Plaintiff’s solicitors for the filing of any amended defence by the 1^st Defendant and by the 2^nd Defendant of its defence, following the Registrar’s order allowing the addition of the 2^nd Defendant to the action on 24 October 2005.  He has explained, in my judgment perfectly sensibly, that it would have been a pointless exercise to go to that trouble and expense before his appeal had been determined.  He stresses the fact that under the terms of the order of 24 October the amendment of the 1^st Defendant’s defence was permissive rather than mandatory.  The expression used in the order is “to be at liberty to amend” and so I consider that Mr Hart is right about that.  It was therefore entirely correct that the Plaintiff’s solicitors agreed to that course.  Then, having lost the appeal, the 2^nd Defendant, perhaps somewhat tardily, decided on its O. 12 r. 8 summons to challenge the court’s jurisdiction.  Once the summons was issued a decision would have had to be made by the court as to whether service on the 2^nd Defendant was valid.  If it held that it was, then the defence would have to come; if service was held to be invalid the Plaintiff’s solicitors would have to apply under O. 11 for leave to serve out of the jurisdiction, where it might be met with the familiar arguments as to whether Hong Kong is the appropriate jurisdiction to have the action tried between the 2^nd Defendant and the Plaintiff.

12.Until all of this is resolved the amended writ and statement of claim would remain in a state of suspension.  That being so there would be no need for the 1^st Defendant to amend its defence.  This therefore is how the argument proceeds.  Unfortunately, the Registrar was told none of this by the assistant, and inexperienced, solicitor for the Defendants’ who appeared before him on 13 February in the unavoidable absence of Mr Hart.  I have read the transcript of that hearing which I had ordered for the appeal.  The message that the Registrar got was that this was the 4^th attempt to extend time and nothing else.  Understandably this exercised him and on that basis he only allowed the time summons on “Unless” terms.  The Defendants’ assistant solicitor in fact had agreed to the making of the Unless Order.  If a full exposition of the facts, background and reasoning had been in placed before him, as it has before me in the course of a 2½-hour appeal, it may well be that the Registrar would have taken a different course. 

13.Now, on the appeal, Mr Hart has made a number of criticisms including that the order made by the Registrar [page 2P-Q of the transcript] and the order as drawn and entered differ.  Nevertheless, I am satisfied that the order as drawn and entered correctly reflects what the Registrar expressed and intended in his ruling.

Why the delay in this appeal?

14.Mr Hart has tried to provide an answer to this in his 5^th affidavit which was made before he had a sight of the transcript.  At paragraph 5, page 61, he says that he understood that the Unless Order only related to the 2^nd Defendant’s filing of its defence.  As to the 1^st Defendant, there would have been no need for an Unless Order because it had already filed a perfectly good defence, particularly in view of the final paragraph of the defence which included the standard general traverse and joinder of issue.  He says that had he known that the order also covered the 1^st Defendant he would have entered an appeal straightaway.  It must follow from this that the assistant solicitor must have misunderstood the Registrar and then passed on her misunderstanding to Mr Hart.  Miss Chan, for the Plaintiff, says that this is curious.  If that was really the case there should be an affirmation from the assistant solicitor deposing to her misunderstanding of what the Registrar had said during the hearing. 

15.What happened next was that Mr Hart issued his O12 r. 8 summons on 21 February, before the expiry of the Unless Order, on the 2^nd Defendant’s behalf.  In order to complete the chronology, I should observe that on 27 February this year, being the 14^th day following the date of the Unless Order, the Plaintiff drew up and entered the order.  The following day, he applied to enter judgment against both Defendants.  On 3 March, the Registrar, as I have already observed, gave directions on the 2^nd Defendant’s O. 12 r. 8 summons and separately, declined to enter judgment against both Defendants.  He was of course absolutely correct to refuse judgment against the 2^nd Defendant with its O. 12 r. 8 summons still to be determined.

16.What then happened was that there was correspondence (ex parte) between the Plaintiff’s solicitors and the Registrar about the entry of judgment against the 1^st Defendant.  On 9 March, the Unless Order was served on both Defendants.  Mr Hart submits that the ex parte correspondence between the Plaintiff’s solicitors and the Registrar was irregular.  The terms of the Unless Order were that the Plaintiff could “apply” to enter judgment and this being the case, Mr Hart submits, that the application to enter judgment should have been inter partes.  As to this I am satisfied that he cannot be right.  The original time summons, under which the Unless Order had been made, was of course inter partes.  The Defendants’ solicitor was present and taken to know what order had been made.  In fact as it was these solicitors who had taken out the time summons, they would have had carriage of the order and it would have been their initial responsibility to draw up the order.  They did not and after expiry of the requisite period, the Plaintiff’s solicitors were entitled to and did draw it up.  Once time had expired, the entitlement to enter judgment engaged and they applied to do so.  I can see no requirement for them to serve their application to enter judgment on the Defendants.  It was then a matter for the Plaintiff’s solicitors to satisfy the court that no obstacles existed to the entry of judgment.  The court was satisfied as to the 1^st Defendant and so judgment was entered on 28 March 2006, followed by this appeal on 30 March.

The extension of time for the appeal

17.The reasons for the delay appear in Mr Hart’s 5^th affidavit [see pages 61 and 62].  Having misunderstood the position that the Unless Order only related to the 2^nd Defendant and having issued his O. 12 r. 8 summons on its behalf he felt able to await the determination of that summons having considered that the 1^st Defendant was not in receipt of an Unless Order.  He was dis-abused of that only when he received the Plaintiff’s solicitors’ letter of 29 March enclosing a sealed copy of the judgment against the 1^st Defendant.  Miss Chan has suggested in her written submission that Mr Hart is not being frank about this which is, of course, a very strong thing to say against an experienced solicitor.  It is unfortunate that she has chosen to say this in the course of what otherwise were a series of very helpful and persuasive submissions.  I am entirely satisfied that Mr Hart has been completely frank in the explanations that he has given.  I have absolutely no doubt that had he been told by his assistant that the 1^st Defendant was also in receipt of an Unless Order he would have appealed against their straightaway.  The test in deciding whether to extend time on an appeal from a Master is that set out in Mortgage Corporation Plc v Sandoes (1997) PNLR 263.  Millett LJ (as he then was) held that “the overriding principle was that justice must be done”.  The merit(s) — the prospect of the appeal succeeding and/or its intrinsic importance from the perspective of justice is now the dominant consideration.  I must therefore have regard to the following in descending order of importance :

1.      The prospect of injustice;

2.      The length of the delay;

3.      The reason for the delay; and

4.      The degree of prejudice to the other party.

[See O. 58 r. 1 at 58/1/9, page 842 of the current practice].

The Outcome

18.Accepting, as I do, Mr Hart’s explanations as to his approach and in particular the fact that there will be no need to amend the 1^st Defendant’s defence until it can be shown by the Plaintiff that the court has jurisdiction over the 2^nd Defendant, this because the amended statement of claim is all directed to the 2^nd Defendant in its relationship with the 1^st Defendant; the1st Defendant is perfectly entitled to stand on its present defence.  I am therefore satisfied that this appeal has real merit.  The delay is not inordinate given the reasons put forward by Mr Hart, and the prejudice to the Plaintiff is not fatal by any means.  It will lose the judgment but it is still left in its original position of having to prove its case, as all Plaintiffs’ have to and, in any event, it is also able to be compensated for in costs should the judgment go.  For all these reasons, I will therefore extend time and entertain the appeal. 

19.Having done so the matter comes before me as a hearing de novo.  I am of the view that it is not appropriate to make an Unless Order against the 1^st Defendant nor a fortiorari against the 2^nd Defendant which, still has its O. 12 r. 8 summons outstanding.  It is pointless requiring the 1^st defendant to amend its defence until everybody knows what is to happen to the 2^nd Defendant’s O. 12 r. 8 summons.  The fact that I am disposed to allow the appeal and set aside the Unless Order can in no way reflect on what the Registrar did.  On what he had been told I am sure that he was correct to have made the order that he did.  Had he known what I have now been told, he would perhaps have come to the conclusion that I have arrived at, but that does not matter because I am free to make such order as I consider correct on what is now before me.

20.I will therefore make the following orders :

(a)     The 1^st and 2^nd Defendants’ time to bring this appeal is extended by the requisite number of days;

(b)    The order of the Registrar will be set aside and as a consequence so will the judgment of 28 March 2006;

(c)     Time for service of the 1^st Defendant’s amended defence, if so advised, will be extended to 14 days following the determination of the 2^nd Defendant’s summons under O. 12 r. 8;

(d)    The time for service of the 2^nd Defendant’s defence, if the matter arises, will be determined by the Master hearing its O. 12 r. 8 summons; and

(e)     The issue of the costs of this appeal is adjourned to enable the parties to file submissions in writing no later than 31 May.  These submissions are to be exchanged and not served sequentially.

21.Given the way that I have determined this matter, the judgment having been set aside, there is no purpose to be served in saying how I would have found had I not given leave to appeal against the Unless Order and therefore had I been required to determine the matter on the basis of an appeal against the judgment itself. 

Linda Chan, instructed by Messrs S K Lam, Alfred Chan & Co., for the Plaintiff

Andrew Hart, of Messrs Barlow Lyde & Gilbert, for the 1^st and 2nd Defendants

Chronology

	re Ion Global BVI Limited (D1)	re CDC Corporation (D2)
31/12/2003	P issued Writ of Summons with Statement of Claim against D1.  P served the same on D1.
13/1/2004	D1 filed Acknowledge of Service.
24/2/2004	D1 filed and served Defence.
24/3/2004	P filed and served Answer to Request for F&BP.
6/4/2004	P filed and served Reply.
28/5/2004	Master Hui gave directions at the direction hearing.
25/6/2004	D1 filed and served List of Documents.
29/6/2004	P filed and served List of Documents.
12/11/2004	P filed and served Supplemental List of Documents.
17/11/2004	Master Lung adjourned checklist hearing with directions.
26/1/2005	Master Lung adjourned checklist hearing sine die.
24/10/2005	Mr Registrar Chan ordered D2 be joined.  Leave to D1 to file Amended Defence.	Mr Registrar Chan ordered D2 be joined.  Leave to D2 to file Defence.
10/11/2005		P served Amended Writ of Summons with Amended Statement of Claim on D2.
7/11/2005	D1 appealed against Mr Registrar Chan’s order.
23/11/2005		D2 filed Acknowledge of Service.

-  2  -

5/12/2005	Deputy Judge Saunders adjourned D1’s appeal.  P agreed with D1 and D2 that time for filing and service of D1’s Amended Defence and D2’s Defence be extended until determination of D1’s appeal.	P agreed with D1 and D2 that time for filing and service of D1’s Amended Defence and D2’s Defence be extended until the determination of D1’s appeal.
19/12/2005	Deputy Judge Saunders heard the appeal and reserved his decision.  P further agreed with D1 and D2 that time for filing and service of D1’s Amended Defence and D2’s Defence be extended to 14 days after the determination of D1’s appeal.	P further agreed with D1 and D2 that time for filing and service of D1’s Amended Defence and D2’s Defence be extended to 14 days after the determination of D1’s appeal.
13/1/2006	D1’s appeal was dismissed.
26/1/2006	P agreed by way of consent order that time for filing and service of D1’s Amended Defence and D2’s Defence be extended to 10/2/2006.	P agreed by way of consent order that time for filing and service of D1’s Amended Defence and D2’s Defence be extended to 10/2/2006.
10/2/2006	D1 and D2 issued time summons for filing and service of D1’s Amended Defence and D2’s Defence.	D1 and D2 took out time summons for filing and service of D1’s Amended Defence and D2’s Defence.
13/2/2006	Mr Registrar Chan made an unless order for filing and service of D1’s Amended Defence and D2’s Defence.	Mr Registrar Chan made an unless order for filing and service of D1’s Amended Defence and D2’s Defence.
21/2/2006		D2 took out an O12 r8 summons to dispute service.
27/2/2006	P drew up and entered Mr Registrar Chan’s unless order.	P drew up and sealed Mr Registrar Chan’s unless order.

-  3  -

28/2/2006	P applied to enter Judgment against both D1 and D2.	P applied to enter Judgment against both D1 and D2.
3/3/2006		Mr Registrar Chan gave directions on D2’s O12 r8 summons.
3/3/2006	Mr Registrar Chan refused to enter Judgment against both D1 and D2.	Mr Registrar Chan refused to enter Judgment against both D1 and D2.
9/3/2006	P applied to enter Judgment against D1.
10/3/2006	Mr Registrar Chan raised requisition as to service of the unless order.
9/3/2006	P served the unless order on D1 and D2.	P served the unless order on D1 and D2.
10/3/2006	Mr Registrar Chan raised further requisition.
13/3/2006	P answered Mr Registrar Chan’s further requisition.
14/3/2006	Mr Registrar Chan asked for copy of a case.  P lodged the same with Mr Registrar Chan.
18/3/2006	Judgment entered against D1.
28/3/2006	Clerk to Mr Registrar Chan approved the draft judgment.  P sealed the Judgment.
29/3/2006	P served sealed copy of the Judgment on D1.
30/3/2006	D1 appealed against the unless order.