Daimler Ag (Formerly Mercedes-benz Aq) v. Leiduck, Herbert Heinz Horst and Another

BETWEEN

HCA 4089/1994 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 4089 OF 1994 _________________________

	DAIMLER AG (FORMERLY MERCEDES-BENZ AG)	Plaintiff
	And
	LEIDUCK, HERBERT HEINZ HORST	1st Defendant
	INTERCONTINENTAL RESOURCES COMPANY LIMITED	2nd Defendant

_________________________

Before: Deputy High Court Judge Au-Yeung in Chambers

Date of Hearing: 21 November 2011

Date of Decision: 21 November 2011

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D E C I S I O N

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1.By this Summons, the Plaintiff seeks to overturn the directions (“the Directions”) on setting down for inquiry as to damages which I have given on 28 July 2011.  It asks for a wholly new timetable to be given.

BACKGROUND

2.The background of this case leading to the inquiry has been set out in my decision dated 28 July 2011 (“the Decision”).  Put briefly, the Defendants sought to enforce the Plaintiff’s undertaking as to damages arising from discharge of a Mareva Injunction unduly obtained by the Plaintiff.   The Defendants alleged fraud against the Plaintiff.  Points of claim, defence and reply have been filed on the question of liability (but not damages). Interrogatories have been served but not duly answered by the Plaintiff pursuant to an unless order.  The Points of Defence was struck out and an inquiry as to damages was ordered.  In paragraph 69 of the Decision, I gave the Directions for the parties to file and serve affidavits, counsel’s certificates as to estimation of time and laid down the timetable for setting down for hearing in relation to the inquiry.  I also gave liberty to apply.

3.There had been variation of the Directions in 2 aspects:

(i) to vary the time for filing of counsel’s certificate as to estimation of time to after filing of the Defendants’ affidavits in reply; and

(ii) to extend the time for the Defendants to file and serve their affidavits in support.

4.On 30 September 2011 the Defendants filed 4 affidavits (“the New Affidavits”) pursuant to the Directions.  They were within time (taking into account the extension of 21 days granted by the Plaintiff).  It is the Plaintiff’s case that senior counsel who has newly joined the team took the view, having considered those affidavits, that this Summons should be taken out.  Effectively, the Plaintiff now seeks to abandon the timetable laid down in the Directions and asks for the filing of pleadings on damages, general discovery, filing of affidavits to be deferred until after the pleadings and discovery have been completed, expert directions and directions for cross-examination of witnesses. 

THE BASES FOR THE PLAINTIFF’S APPLICATION

5.The Plaintiff says that the New Affidavits disclose a materially different case from what the Defendants did in the affidavits filed on the questions of liability.  In the previous affidavits, the Defendants claimed that the injunction had caused the 2^nd Defendant, which used to be a successful company, to collapse.  In the New Affidavits, other heads of claim for substantial damages to the tune of over US$100 million were disclosed.  In summary it was alleged that:

(i) the 2^nd Defendant suffered loss of profit;

(ii) the 1^st Defendant had lost an opportunity to sell his shares in the 2^nd Defendant which could potentially have been a very profitable deal;

(iii) the 1^st Defendant suffered loss of benefits under a “housing project” of one IRSAM (a company controlled by the 1^st Defendant and not a party to this inquiry); and

(iv) the 2^nd Defendant might have lost an opportunity of listing on the Hong Kong Stock Exchange.

The Defendants also indicated that they intended to adduce expert evidence to show the value of the 2^nd Defendant and the 1^st Defendant’s shares in it.

6.The Plaintiff asserts that such claims were vague and unparticularized, most of which were no more than mere assertions not backed up by concrete evidence.  Insufficient particulars have been given as to causation of loss and computation of the damages.  There are likely to be disputes of facts. Disclosure of documents by the Defendants was selective and incomplete “as the 1^st Defendant himself admitted”.  The shares of the 2^nd Defendant were sold eventually at HK$3,000,000.  It was not clear if the Defendants would give credit to this in its claim for damages.  Even if the 1^st Defendant was the shareholder of IRSAM, the loss would not be recoverable as it was reflective loss.

7.The Defendants oppose the application.  They considered that the change in directions will lead to delay.  The filing of pleadings and general discovery are unnecessary.  It is pre-mature to give directions on cross-examination and expert directions.

THE ORIGINAL DIRECTIONS

8.The Court gives great weight to the parties’ views when fixing a timetable unless those views are wholly inappropriate and display no good faith in the conduct of proceedings.

9.The Plaintiff was aware from day one that there had been no pleadings on damages.  At the hearing which resulted in the Decision, counsel’s focus was on the substantive issue of the sufficiency of the answers to the interrogatories and whether the unless order had taken effect.  There was no dispute on appropriateness of the directions to apply after my ruling.

10.I gave the Directions, which I considered to be appropriate.  Apparently the Plaintiff did not consider that problematic as there had been no appeal against them and any variation was insubstantial.  Even Ms Tong conceded today that the Directions were apposite.

11.It is in my view not appropriate for the Plaintiff now to come back under the “liberty to apply” provision.  That provision was to enable the Directions to be implemented and to give further directions.  It did not exist to enable a party to overturn the previous directions (in this case, almost in a wholesale manner).

DELAY

12.I am aware that any directions for proper preparation of a case should aim at fairness to both parties.  Expediency should not be achieved at the expense of just resolution of the dispute in accordance with the substantive rights of the parties.  However, where the conduct of a case has headed for one course, to reverse it will require material change of circumstances.

13.In this case, the circumstances have not materially changed.  The Plaintiff took advantage of the Directions in having sight of the New Affidavits.  It then turned round to claim deficiency in the Directions 3 ½ months after the Directions were given and 3 days before the Plaintiff’s own affidavits were originally due.  Under the proposed timetable, it will be another 343 days before the inquiry can be set down (compared to about early January 2012  under the current timetable).

14.When looking at whether there will be delay resulting from a change of course, the Court is not limited to looking at the potential delay caused by that particular application but all the circumstances.

15.The grant and discharge of the injunction was made 17 years ago.  The application for inquiry as to damages was made 4 years ago.   It took a chequered history.  I had commented adversely on the Plaintiff in terms of delay in my Decision (paragraph 62).  The filing of the Points of Defence (on liability) was after 3 extensions of time for a total of 115 days.  The answers to the interrogatories were served by the Plaintiff after an appeal was allowed by consent but still out of time even under compulsion of an unless order.  The Directions were given with the long history in mind. There is now an appeal on the interrogatories to be heard in February 2012.  The 1^st Defendant is aged over 80.  Any change in time-table should not be readily accepted by the Court.

16.Ms Tong has helpfully prepared a chronology to set out the steps taken after the Decision to show that there has been no delay on the part of the Plaintiff.  However, the picture shows that out of 42 days available for preparing an affidavit in reply, 32 days have been spent on finding a senior counsel in replacement of the former one and confirming instructions.  A conference with the new senior counsel was only held one month and a day after the New Affidavits were served.  There was no attempt to make prior arrangements before service of the New Affidavits to secure the availability of senior counsel to give advice or prepare the affidavit in opposition even if the Defendants have not “considerably increased the scope and amount of damages claimed” (as Ms Tong puts it).  

17.There was clear delay on the part of the Plaintiff in taking out this application with no substantial change of circumstances demonstrated.

THE REQUIREMENT FOR PLEADINGS

18.Ms Tong has referred to various authorities on the need for pleadings to set out items of damages being claimed.  With respect, those authorities were aimed at the usual situations involving writ actions.  An independent action for enforcement of the undertaking in question does not lie: Hong Kong Civil Procedure 2012, para 29/1/28.

19.Moreover, the automatic directions under Order 37, rule 1 apply only if (1) judgment is given for damages to be assessed: and (2) where “no provision is made by the judgment as to how they are to be assessed”.  Even if (1) applied, the Directions have provided for how the inquiry of damages is to be conducted.

20.The request for pleadings was something the Plaintiff could have asked for at the hearing which led to the Decision but it failed to do so.   Given the stance of the Plaintiff in the past, one could expert it to hotly contest the claim for damages.  The fact that the Defendants’ claim turned out to be more substantial than the Plaintiff expected was not a substantial change in circumstances to justify varying the directions.

21.The Defendants had deposed to their various heads of loss in their affidavits.  Ms Tong has no difficulty in summarizing the purported heads of claims and Mr Wong SC does not show disagreement over her summary.  The complaints of Ms Tong described in paragraph 6 above are more matters for specific discovery, cross-examination and comments than for a request for pleadings.  By way of example, Ms Tong pointed out that the Defendants said in their previous affidavits that the business of the 2^nd Defendant slumped to zero as a result of the Injunction whereas the Defendants’ Affidavits said that the 2^nd Defendant’s shrank by almost 95%. This, to my mind, does not detract from the position that the Defendants had a viable claim in loss of profits although the extent of their loss might appear to be inconsistent.  I see no justification for ordering pleadings.

THE REQUIREMENT FOR DISCOVERY

22.Likewise the directions for automatic discovery under Order 37, rule 1 did not apply.  Ms Tong has shown no authority to show that for an inquiry of this sort, general discovery will be ordered.

23.Having read the affidavits filed by both sides so far, it can be seen that the Plaintiff is effectively saying that their witnesses who had first-hand knowledge of the case can hardly be found.  Effectively it is putting the Defendants to strict proof.  I cannot see how general discovery can assist the Plaintiff to establish a positive case.  The Defendants have filed and served affidavits with substantial exhibits.  It is not uncommon for a party to find the other party’s affidavits to be vague and lacking in particulars.  The Plaintiff can comment on such affidavits, raise issues and ask for disclosure of more documents in its affidavit in opposition.  (It had done so in its affidavit filed to contest liability.)

24.I do not agree with Ms Tong that the Defendants have admitted that the disclosure of documents was selective and incomplete.  Events happened over 17 years ago.  The employees of the 2^nd Defendant had left en mass as a result of the injunction and the banking facilities were cancelled.  It was “due to the passage of time and the chaos of IRC in 1994 after the injunction” that one cannot expect discovery from the Defendants to be “complete” in the sense of having a complete set of documentation.  Read in context, the Defendants were deposing to the difficulty they faced in making full discovery rather than avoiding disclosure of relevant documents.

25.Mr Wong SC saw no difficulty with any application for specific discovery and I agree with him that that should be the course the Plaintiffs should take.

REQUIREMENT FOR EXPERT DIRECTIONS

26.The Defendants’ affidavits do disclose a need for expert directions, at this stage, for valuation of the 2^nd Defendant.  I agree with Mr Wong SC that only after the Plaintiff has filed its affidavit in opposition should expert directions be framed and given.  There is no need to do so now.

REQUIREMENT FOR WITNESSES TO ATTEND FOR CROSS-EXAMINATION

27.I agree with the Defendants that though in principle the deponents should attend to be cross-examined, it is pre-mature to make an order now. This can be left to the next case management conference or pre-trial review. Given the age of the 1^st Defendant and physical mobility, the need for video linking may be relevant considerations at a later stage.

CONCLUSION

28.In summary, I find there to be delay on the part of the Plaintiff in making this application and without sufficient change of circumstances since the Directions were given.  This means that the Directions do stand, subject to the variations. 

29.I am told that the time for the Plaintiff to file and serve its affidavit in opposition falls on 2 December 2011 as a result of extension of time granted by the Defendants.  The Plaintiff has to meet this deadline.  The parties have by correspondence agreed and it was approved by me that counsel’s certificate as to estimation of hearing time can be submitted within 7 days after the Defendants’ affidavit  in reply has been filed.  This will stand.

30.I order that:

(i) Paragraphs 1-8 and 15-16 of the Summons be dismissed; and

(ii) Paragraphs 9 -14 be deferred to a later occasion when the affidavits have been filed by the parties

31.I make an order nisi that costs should follow the event and be to the Defendants.  I disallow the costs for preparing the statement of costs and allow only one hour’s time of attendance this morning.  Since this is a case management matter, I disallow the attendance of senior counsel as a matter of principle but allow his fees for advice in conference.  I also allow a higher amount of fees for junior counsel to reflect the work and higher responsibility that he would have assumed were he to appear alone.  I allow costs, nisi, in the amount of $85,000 in favour of the Defendants.

32.I thank counsel for their assistance.

(Queeny Au-Yeung) Deputy High Court Judge

Ms Sara Tong, instructed by Messrs Baker & McKenzie for the Plaintiff

Mr Horace Wong SC and Mr Clark Wang, instructed by Messrs Robertsons for the 1^st and 2^nd Defendants