Wealthy Channel Ltd v. Yam Sam Leung

HCA 8680/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 8680 OF 1999

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BETWEEN

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AND

HCA 8681/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 8681 OF 1999

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BETWEEN

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Before: Hon Chung J in Chambers

Date of Hearing: 8 November 2010

Date of Handing Down Decision: 18 November 2010

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D E C I S I O N

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Introduction

1.The plaintiffs in both actions took out an application in February 2010 to extend the time under RHC Ord. 35 r. 2(1) to apply for the setting aside of the order dated 14 March 2006 (“the dismissal order”) (there was a lapse of about 4 years between the date of the dismissal order and the date of the summonses).

2.Ord. 35 r. 2 provides:-

“(1) Any judgment, order or verdict obtained where one party does not appear at the trial may be set aside by the Court, on the application of that party, on such terms as it thinks just.

(2) An application under this rule must be made within 7 days after the trial.”

3.The dismissal order was made on the second day of the 4-day trial scheduled to commence on 13 March 2006 upon the application of the defendant (“Yam”) for want of prosecution; the plaintiffs failed to appear in court.

Background

4.To better understand these applications, the background leading to them should be briefly stated.

5.The plaintiffs were the alter egos of two individuals, Lai and Tou.  For convenience, in the paragraphs below no distinction will be made between the plaintiffs and these individuals.  Hence, unless otherwise stated, “the plaintiffs” or “the plaintiff” include references to either or both (as the case may be) Lai and/or Tou.  Further, apart from some factual details, the issues in both applications are accepted to be the same (the contents of the plaintiffs’ affirmations are also similar), no distinction will thus be made between them except where it is necessary to do so.

6.It is undisputed the plaintiffs became acquainted with Yam in the early 1990’s, and Yam borrowed $2.8 million from Lai in about September 1995.

7.Until June 1997, Yam was a director of one Stereo Ltd. (“Stereo”).  The other director and major shareholder of Stereo was Ho.  Stereo was appointed by a developer, Fook Tai, to be a consultant to procure the re-development of a land lot in Caine Road.  Fook Tai agreed to transfer to Stereo certain parts of the re-developed property, including Units 36D and 6A (collectively “the suit properties”) (the new property was completed in March 1999).

8.Yam did not repay the sum, but offered to nominate Lai to take up Unit 36D for a total price of $5.5 million.  Lai agreed.  The balance payable was thus $2.7 million. Further, Yam offered to nominate Tou to take up Unit 6A for $4.3 million and Tou agreed ($1 million was then paid).  Yam’s offers were evidenced in documents signed by him personally.  For present purpose, the other terms in those documents are the same.

9.In late December 1996, the plaintiffs learnt of an internal dispute between Stereo’s directors, Yam and Ho.  They turned to Ho and discussed with him about the suit properties.  In short, it is the plaintiffs’ case the discussions culminated in an agreement between the plaintiffs and Stereo (through Ho) as follows:-

“In about early 2006 … Ho promised us again that … [the suit properties] would be assigned to the [plaintiffs]. Ho also said that he would settle all matter with [Yam], including inter alia all monies having been paid by the [plaintiffs] to [Yam] for acquiring [the suit properties] … ” (para. 41, Lai’s affirmation dated 11 January 2010).

10.Further, the plaintiffs have expressly stated:-

“… all that … [they] wanted were [the suit properties] … ” (para. 42, Lai’s affirmation dated 11 January 2010);

“All that [they] want is to be assigned [the suit properties] … ” (para. 45, Lai’s affirmation dated 11 January 2010).

That stance is maintained in the plaintiffs’ skeleton submission and during the hearing, and consistent with the fact that they are pursuing the legal proceedings referred to in para. 14 below. It is also accepted (fairly and correctly) that the plaintiffs cannot sue for both the suit properties and Yam’s repayment of the sums claimed herein at the same time.

11.The above factual background led to the legal proceedings below.

12.HCA 3890/1999 (“A3890”) was commenced by Yam against inter alia Stereo and Fook Tai over their competing claims for the suit properties.  That action was settled by way of a Tomlin order on 15 March 2006 (one day after the dismissal of these actions).  The plaintiffs accept that they learnt of the settlement in March 2006.

13.These actions were commenced by the plaintiffs against Yam for the repayment of $2.8 million and $1 million because of Yam’s failure to procure the assignment of the suit properties.

14.HCA 666/2006 and 667/2006 (“A666” and “A667”) were commenced by the plaintiffs against Yam, Stereo and Fook Tai for the assignment of the suit properties.

Delay and Reasons for the Delay

15.The plaintiffs accept the delay to be inordinate.  In view of the length of the delay, that is a correct concession.

16.They also accept the delay to be not entirely inexcusable.  For the reasons given below, I will go further and find that it was inexcusable.

17.In their affirmations, the plaintiffs claimed in effect that because of Stereo’s repeated promises to honour the promise to assign the suit properties (the latest of which occurred in early 2006), they:-

“… were persuaded to think that [they] did not need to [be concerned] about the development of [these actions]. [They] did not bother about the dates of the hearing, nor were [they]informed of the same. As a result, neither [of the plaintiffs] attended the trial hearing … ” (emphasis supplied) (para. 42, Lai’s affirmation dated 11 January 2010).

There is no allegation Yam was involved in the above, nor is there evidential basis for so thinking.

18.The explanation given for their absence in the pleadings in A666 and A667 was:-

“Acting in the belief that there was no issue in relation to [Stereo’s assignment of the suit properties], [the plaintiffs] did not attend the trial of [these actions]” (para. 14, amended statement of claim dated 6 November 2006).

There was no claim they were not informed of the trial date.

19.The plaintiffs further explained in the affirmations: the manner in which they dealt with the above legal proceedings since 2006 was in accordance with the advice given by the legal representatives (it should be noted they were also legally represented in these actions, which were commenced in 1999).

20.They attributed the timing for the taking out of these applications (February 2010) to the advice given by a new team of legal advisers.

21.Although it has not been expressly stated, it can be inferred the legal advice referred to in para. 19 and 20 above was concerned with:-

(a) the substantive merits of the plaintiffs’ case in the above legal proceedings;

(b) procedural and/or tactical considerations in relation to the above legal proceedings.

22.As regards whether the plaintiffs should be treated as having notice of the trial, the relevant matters were:-

(1) on 1 February 2005, the plaintiffs’ solicitors took out a summons applying to cease to act (returnable on 21 February 2005);

(2) on 18 February 2005, Yam took out a summons applying for leave to set down these actions for trial (returnable on 21 February 2005);

(3) on 21 February 2005, the court ordered that:-

(1) leave to Yam to set down these actions for trial;

(2) upon compliance with the requirements of RHC Ord. 67 r. 6(1), the plaintiffs’ solicitors to cease to act;

(4) on 22 February 2005, the notice of setting down was served on the plaintiffs’ solicitors;

(5) on 4 March 2005, the plaintiffs’ solicitors filed a certificate of service of the order for them to cease to act on 3 March 2005 (this must have filed in compliance with Ord. 67 r. 6(1)(c)).

Thus, according to Ord. 67 r. 6, the plaintiffs’ solicitors only ceased to act for the plaintiffs with effect from 4 March 2005.

23.The Registrar sent to the plaintiffs the following letters:-

(a) dated 1 March 2005 informing them to attend the listing office for fixing trial dates;

(b) dated 9 March 2005 informing them of the trial dates and 1^st pre-trial review;

(c) dated 25 January 2006 informing them of the date of the 2^nd pre-trial review.

24.In these circumstances, the plaintiffs should be regarded as having notice of the progress of these actions.  Not being bothered with it is not a sufficient answer on their part.

25.By reason of the matters set out above, I find the pleaded explanation (November 2006) to accord more with what must have been the facts; that is, their absence resulted from the belief that “there was no issue in relation to [Stereo’s assignment of the suit properties] … ”.  In addition, I consider this to tantamount to (and may actually be) a conscious and deliberate decision to do so.

26.Further, by reason of the matters set out in para. 19 to 25 above, it can also be inferred the plaintiffs’ inaction until February 2010 in relation to the dismissal order was again a conscious and deliberate decision (which must have been based on legal advice (and which the plaintiffs apparently now contend to be erroneous)).

Merits of the Plaintiffs’ Claim

27.By virtue of the plaintiffs’ primary case (which seeks the suit properties to be assigned to them), at least as between them and Stereo, the proper party to claim for the $2.8 million and $1 million must be Stereo rather than the plaintiffs: see para. 9 to 10 above.

28.During the hearing, the plaintiffs argued that whatever went on between them and Stereo is not something which should avail Yam by way of defence (or part of the defence).

29.I disagree with the argument; it only has merits if the matter is looked at from a purely technical perspective and limited to the facts pleaded in these actions (but without considering the wider picture).  In applications of this kind, the court is not obliged to adopt a mechanical approach, and should look at the whole circumstance.

30.The wider picture is this.  As stated above, the plaintiffs accept their claim against Stereo and/or Fook Tai in A666 and A667 to be their primary claim; their claim against Yam in these actions is only an alternative: para. 49 and 56, Lai’s affirmation dated 11 January 2010.

31.In such a case, the law requires that:-

“In actions where alternative defendants are [sued], the plaintiff must be careful not to sign judgment by default, or under O.14, against one of such defendant, unless he is prepared, by so doing, to abandon his claim against the other”: Hong Kong Civil Procedure 2011, Vol. 1, para. 15/4/11.

32.Thus, unless and until the plaintiffs’ primary claim for the suit properties has been abandoned or dismissed, the plaintiffs face the paradox that Yam can in effect make use of their primary claim to “shelter” himself from liability.

33.As a result, the plaintiffs are put in a rather difficult position in these applications: purely for present purpose, it seems to serve them better to contend their primary claim is not strong (in fact, they have hinted at several legal difficulties in that claim, without conceding those difficulties would pose real obstacles), because they can then argue the prospect of their obtaining final judgment against Yam is real.  On the other hand, adopting such a stance may prejudice their position in A666 and A667.

34.It is unnecessary to consider if the original lines of defence pleaded in the defence and amended counterclaim are meritorious. If it was necessary, I am more inclined to think Yam may have difficulties showing they are.

Relevant Legal Principles

35.The relevant legal principles are largely undisputed:-

(1) where a party with notice of proceedings has disregarded the opportunity of appearing at and participating in the trial, he will normally be bound by the decision;

(2) where a judgment has been given after a trial it is the explanation for the absence of the absent party that is most important: unless the absence was not deliberate but was due to accident or mistake, the court will be unlikely to allow a re-hearing;

(3) where the setting aside of a judgment would entail a complete retrial on matters of fact which have already been investigated by the court the application will not be granted unless there are very strong reasons for doing so;

(4) the court will not consider setting aside judgment regularly obtained unless the party applying enjoys real prospects of success;

(5) delay in applying to set aside is relevant, particularly if during the period of delay the successful party has acted on the judgment, or third parties have acquired rights by reference to it;

(6) in considering justice between parties, the conduct of the person applying to set aside the judgment has to be considered: where he has failed to comply with orders of the court, the court will be less ready to exercise its discretion in his favour;

(7) a material consideration is whether the successful party would be prejudiced by the judgment being set aside, especially if he cannot be protected against the financial consequences;

(8) there is a public interest in there being an end to litigation and in not having the time of the court occupied by two trials, particularly if neither is short.

(quoted from para. 22, plaintiffs’ skeleton submission; see also para. 19, Yam’s skeleton submissions).

Conclusion

36.In relation to para. 35(1), (2) and (6) above, by reason of para. 18 to 25 above, I find that the plaintiffs have (or should be treated as having) notice of the trial and their absence was (was akin to) a deliberate decision to do so.  At the very least, they took the risk of not appearing at trial.

37.Insofar as the plaintiffs rely on their legal advisers’ erroneous advice (assuming the same to be erroneous), the error must have been related to merits and/or litigation tactics, and not a relatively minor error relating to prescribed time limit, which resulted in an inadvertent and short delay; the decision and reasoning in Chiu Sin-chung v. Yu Yan-yan, Angela and Another [1993] 1 HKLR 225, 227-8 is therefore of no assistance to the plaintiffs.

38.In relation to para. 35(4) above, by reason of para. 29 to 33 above, the merits of the plaintiffs’ case (and Yam’s defence) should not be of such weight as would tip the balance in the plaintiffs’ favour.

39.In relation to para. 35(5) above, the length of the delay is substantial, it is accepted to be inordinate and found to be inexcusable.

40.In relation to para. 35(8) above, the post-Civil Justice Reform rules (especially Ord. 1A rr. 1(a), (b) and (f)) have heightened attention to this aspect.

41.Quite some argument has been advanced in relation to the terms of the Tomlin order made in A3890.  I will not go into the details save to say they have been taken into account.

42.Having considered the matters put forth by the parties (including those set out above), my discretion should be exercised to refuse these applications.  They are accordingly dismissed.

Other Matters

43.Directions have earlier been given in these applications (when Yam was present) for the filing and service of affidavit.  Yam has failed to comply with those directions.  Instead, he took out a summons in November 2010 seeking an extension of time for doing so.

44.I have been able to determine these applications without the need to consider Yam’s late affirmation.  For this reason, it is unnecessary to consider whether time should be extended.

45.Accordingly, no order is made on Yam’s application save that the costs thereof be paid by Yam to the plaintiffs.  It is common in the masters’ chambers for the costs of similar applications to be summarily assessed at $800.  There is no reason to depart from that amount.

46.The parties’ submissions on Yam application were relatively short, and those costs should be treated as part of the costs of the plaintiff’s applications to set aside the dismissal order.

Costs Order

47.The plaintiffs do not object to the usual rule that costs should follow the event if these applications are dismissed.  There will accordingly be a costs order that the costs of these applications be paid by the plaintiffs to Yam to be taxed if not agreed.

Mr Edward Chan SC leading Mr Ernest Koo, instrusted by Messrs Tam, Pun & Yipp, for the Plaintiffs in both actions

Mr James Lee, instructed by Messrs Robert Siu & Co., for the Defendant in both actions