So Sau Lai Connie t/a Wing Fung Trading Company v. Dbs Bank (Hong Kong) Ltd

HCA 2807/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 2807 OF 2004

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BETWEEN

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HCMP  1361/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1361 OF 2005

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BETWEEN

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REASONS FOR DECISION

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I. INTRODUCTION

1.The trial of HCA2807/2004 and HCMP1361/2005 (collectively, “Two Proceedings”) is due to commence on 7 January 2015 with eight days reserved.  Pursuant to the order of Master A Ho dated 1 September 2005 (“Ho Order”), the Two Proceedings are to be heard and tried together.

2.The Two Proceedings came before me for pre-trial review (“PTR”) on 15 October 2014.  So Sau Lai Connie trading as Wing Fung Trading Company (“So”) is the plaintiff in HCA2807/2004 and the 2^nd defendant in HCMP1361/2005.  New Harvest International Development Limited (“New Harvest”) and So’s daughter Hui Wing Sze (“Hui”) respectively are the 1^st and 3^rd defendants in HCMP1361/2005.  For convenience, So, New Harvest and Hui are collectively referred to as the “Wing Fung Camp”.  DBS Bank (Hong Kong) Limited (“DBS”) is the defendant in HCA2807/2004 and the plaintiff in HCMP1361/2005.

3.At the PTR, So was represented by her assigned counsel Mr Richard Leung (“Mr Leung”) on legal aid.  New Harvest (represented by their director So) and Hui were self-represented.  DBS appeared by their counsel Mr Man.

4.Although late interlocutory applications should be few and far between after the Civil Justice Reform (“CJR”), this is the third case in a row within a month in respect of which I have handed down decision or reasons for decision on late applications made at the PTR.  This regrettable state of affairs is worrisome, and smacks of possible regression back to the slovenly habits before the CJR.  Litigants and their legal advisors are reminded again to take the lessons of the CJR to heart, and unless there are truly exceptional circumstances the court will dispose of late applications with a swift and sure hand so that they do not add to time, costs and anxiety for the “innocent” party or encroach on the court’s resources which are in huge demand for other court-users.

II.  BACKGROUND

5.At all material times, So was a customer of DBS having opened inter alia bills and current accounts.  Pursuant to So’s application for irrevocable documentary credit dated 2 July 2004 (“LC Application”), DBS as issuing bank issued an irrevocable letter of credit (“LC”) of the same date (“Subject LC”).  The beneficiary of the Subject LC was one Rosmet Ltd (“Beneficiary”) supposedly based in Germany, and the Beneficiary’s advising bank was Commerzbank in Germany (“Advising Bank”).  Under cover of their letter dated 19 July 2004, the Advising Bank presented documents to DBS for payment under the Subject LC.  By such letter, the Advising Bank confirmed that they (as confirming bank) had endorsed the Subject LC for the amount utilised, and that all terms and conditions of the Subject LC had been fully complied with.  Subsequent SWIFT tracer confirmed that the Advising Bank had released payment on 21 July 2004.  DBS also considered the documents presented by the Beneficiary to be compliant with the Subject LC.  On 2 August 2004, DBS booked a trust receipt loan for $4,400,455.39 to mature 90 days thereafter on 1 November 2004 (“TR Loan”) to settle reimbursement of payment made by the Advising Bank (as confirming bank).  It subsequently transpired that the documents presented to DBS were forged, and no goods were shipped by the Beneficiary.

III.  SYNOPSIS OF THE TWO PROCEEDINGS

6.On 10 December 2004, So commenced HCA2807/2004 against DBS for a declaration that DBS was “not entitled to demand, to have repayment, reimbursement, indemnity, right or whatsoever from [So] for all sums of money or any part thereof it had released to [the Beneficiary] under the [Subject LC] and the related expenses, charges or fees thereunder or at all”.  So also claimed “damages”, but Mr Leung confirmed at the PTR that So would not pursue such claim at trial.  DBS counterclaimed for recovery of the TR Loan granted in respect of the Subject LC.

7.On 29 June 2005, DBS commenced HCMP1361/2005 to enforce (a) a mortgage dated 18 June 2004 (“Mortgage”) of which So was the borrower and New Harvest was the mortgagor, and (b) a guarantee dated 19 April 2004 (“Guarantee”) by So and Hui that guaranteed the debts of New Harvest to the extent of a principal amount of $500,000.  So and Hui were the registered directors and shareholders of New Harvest.

8.In April 2006, New Harvest arranged for the mortgaged property to be sold with DBS’ agreement.  An amount equivalent to the outstanding indebtedness was paid to DBS pending the outcome of the Two Proceedings.  Pursuant to the order of Master de Souza made by consent on 19 June 2006 (“de Souza Order”), the surplus proceeds of $600,398.35 (“Surplus Proceeds”) were paid into court.  Mr Man submitted the parties would have to debate the disposal of the Surplus Proceeds at trial.

9.For the present purpose, it is unnecessary to discuss HCMP1361/2005 in any detail because at the PTR Mr Leung accepted that So’s defence in HCMP1361/2005 would stand or fall with her claim in HCA2807/2004.  Apart from non-admission or denial, there was no factual dispute on the pleadings as to the sums owed to DBS under New Harvest’s instalment loan and So’s overdraft loan under the two facility letters dated 14 April 2004 and other incidental banking documents (collectively, “Facility Documents”).  So’s liability under the TR Loan (and hence (a) the liability of New Harvest under the Mortgage in respect So’s indebtedness (if any) for the TR Loan, and (b) the liability of So and Hui under the Guarantee in respect of New Harvest’s indebtedness (if any) in (a) above) would depend upon the outcome of HCA2807/2004. 

10.On 27 August 2013, DBS filed/served a Notice to Admit Facts (“Notice”) which concerned (a) confirmation of the banker‑customer relationship between DBS and So/New Harvest, (b) execution of the Facility Documents, (c) the indebtedness under the instalment and overdraft loans and interest thereon, (d) subject to the question of liability, the calculation of the alleged indebtedness under the TR Loan and interest thereon, and (e) the issuance of demand letters by DBS or their solicitors.

11.To date, there had been no response to the Notice.  I was informed by Mr Leung at the PTR that the Notice was receiving his attention, and he expected So would not dispute most of the facts in the Notice and admission to such effect would be filed/served shortly.  This will certainly facilitate (a) the parties in narrowing the issues in dispute, and (b) the court in seeking clarification with New Harvest (who is represented by So) and Hui as to their stance on such matters at trial.

12.However, it must not be forgotten that the mortgaged property has been sold and the sale proceeds have been applied.  In light of the de Souza Order which was made by consent, there should hardly be any dispute as to the manner of disposal of the sale proceeds.  It would be useful if Mr Man and Mr Leung are to jointly put forward some agreed facts as between DBS and So as an annexure to their written opening submissions to deal with such non-contentious matters in a time‑ and cost-saving manner, which again will facilitate the court in seeking clarification at trial as to the stance of New Harvest and Hui.  Such matters should broadly cover the following:

(a) the date of sale, the sale price and the net sale proceeds in respect of the sale of the mortgaged property;

(b) subject to the question of liability, the date when the net sale proceeds were set-off against the outstanding indebtedness in respect of the instalment loan, overdraft loan and the alleged TR Loan due to DBS (“Settlement Date”);

(c) as at the Settlement Date, the amount of (i) the outstanding indebtedness in respect of each of the instalment loan, the overdraft loan and the alleged TR Loan, and (ii) interest on the aforesaid indebtedness;

(d) as at the Settlement Date, the breakdown of the set-off in (b) above that resulted in the Surplus Proceeds being paid into court.

IV.  HCA2807/2004

13.To understand the disputed issues, I start with the pleadings in HCA2807/2004.

(a) So’s pleadings

14.So claimed she opened inter alia a trust receipt account “upon advice by [DBS] officer” and an overdraft account “[upon] further invitation and advice by [DBS’] officer”.  She claimed that:

(a) as customer she sought, followed and relied on DBS’ professional advice on banking and related commercial matters, particularly DBS’ advice on transaction and risk management on the use of LC to settle payment for goods to be delivered by an overseas supplier;

(b) DBS gave some preliminary advice to her on “application, issuing, procedural aspects and operation of the bills trade account involving the [LC] facilities”, and “upon the opening of [her] bills trade account …… with [DBS], [DBS] deemed to be in a general banker and/or fiduciary position to give such advice to [her]”;

(c) DBS issued three LCs (including the Subject LC) for her, but before DBS did so she “requested and [DBS] did provide advice in relation to the terms to be included in each of the [LCs] , and each of the advice so provided were respectively relied upon by [her]”;

(d) at all material times, DBS knew (i) she purchased goods from an overseas supplier for sub-sale for profit and (ii) payment for the goods to be delivered was by way of LC through DBS as issuing bank because (1) as “a fully licensed bank in Hong Kong with vast experiences in banking operations” DBS had “the requisite knowledge and/or deemed to have such requisite knowledge ……”, and (2) “given the said status of [DBS] operating full retail and commercial banking services in a international financial centre like Hong Kong, [DBS] should reasonably be expected to profess such  knowledge, and have staff properly trained to have such knowledge in handling customer’s needs like [DBS]”;

(e) her banker-customer relationship with DBS was evidenced by the Facility Documents, and it was an implied term of the Facility Documents that (i) the credit facilities DBS granted to her were for the purpose of purchasing goods from overseas, (ii) DBS “should supervise the relevant payment with due diligence and give proper advice to [her]”, (iii) DBS should check and verify the documents presented by the overseas supplier for release of credit facilities money to the overseas supplier, and (iv) DBS should exercise all due prudence and diligence in rendering support and professional advice to her (collectively, “Implied Terms”);

(f) in the course of advising her on the credit transaction in respect of Subject LC, DBS was under a duty to exercise reasonable skill and care in advising her on the matters in paragraph 15(c) below.

15.So further claimed that:

(a) in breach of the Implied Terms, DBS made payment under the Subject LC by (i) “failing to properly check and verify the documents presented by [the Beneficiary] including a [purported bill of lading, “BL”] with due diligence and prudence”, (ii) failing “to give [her] proper advice …… on the documents presented including the [BL]”, and (iii) giving “negligent and/or reckless advice to [So trading as Wing Fung] on the [BL]”;

(b) further or alternatively, in breach of their close banker‑customer relationship, DBS made negligent misstatements (which she relied upon) that the BL “had no apparent fault and verified that [the BL] was genuine, real and valid despite [So] having pointed out a number of apparent irregularities on the face of the [BL]”;

(c) further or alternatively, DBS was negligent and/or reckless in making payment under the Subject LC by failing to (i) give proper and adequate advice to her on the BL, (ii) take all reasonable steps to assist, support and render proper advice to her to ensure that the credit transaction in respect of the Subject LC was carried out properly and with due diligence, (iii) take all reasonable steps to ensure that their officers handling or dealing with her discharged their duty with reasonable diligence, and (iv) exercise prudence, care and judgment “to advise [her] to secure a certificate of inspection of goods report for the purpose of ascertaining that the subject goods concerned were actually loaded on board a vessel as per the record on the [BL]”;

(d) further or alternatively, in breach of (i) the express term and condition of the Subject LC (which required a full set of clean shipped on board ocean Bill(s) of Lading made out to the order of DBS notifying her to be presented by the Beneficiary to DBS), (ii) DBS’ duty under article 13 of the Uniform Customs and Practice for Documentary Credits, 1993 Revision, International Chamber of Commerce (ICC) Publication No 500 (“UCP500”), and (iii) DBS’ fiduciary duty to exercise due diligence and reasonable care in examining the terms of the BL, DBS wrongfully released payment to the Beneficiary or their agent notwithstanding that the BL did not appear on its face to be in compliance with the express terms and conditions of the Subject LC; [1]

(e) in respect of (d) above, “the abnormality and/or absence of [the BL’s] number, container number, shipping marks, measurement of goods or voyage number, standing alone or in aggregate should be sufficient to alert an experienced banker like [DBS] who deal with such document in high volume on a daily basis”, and “due to [such] alerting signs ……, [DBS] was reasonably expected to exercise due diligence to examine whether the documents presented by [the Beneficiary] conformed to any requirement not provided for [the LC]”;

(f) further or alternatively, DBS failed to “conduct business in accordance with prudential standards of the banking industry in breach of the Code of Banking Practice, the applicable regulations for anti-money laundering and counter terrorist funding”.

16.So sought to support the averments in paragraphs 14(a)-(c) above by relying on the “expert opinion and findings” in the report by her expert on LC banking practice Lee To On (“Lee”) filed on 6 November 2012 (“Lee Report”):

(a) The LC is subject to UCP500, and the articles of UCP500 are to be interpreted by “International Standard Banking Practice for the Examination of Documents under Documentary Credits subject to UCP 500” (ICC Publication No 645) (“ISBP 645”).

(b) Paragraph no 2 of ISBP 645 provides that “[the] applicant bears the risk of any ambiguity in its instructions to issue or amend a credit.  Unless expressly stated otherwise, a request to issue or amend a credit authorises an issuer to supplement or develop the terms in a manner necessary or desirable to permit the use of the credit”.

(c) DBS as the issuing bank has a duty of care, which is automatic under paragraph 2 of the ISBP 645, to check So’s instructions in the LC Application, to ascertain whether they were workable, and to remove inconsistencies, conflicts or errors where necessary, the underlying purpose being that DBS as the issuing bank and service provider should have given advice to So, “particularly when [she] is a SME (Small and Medium Sized Enterprise) that may not have adequate knowledge about the UCP500 and would have to rely on the services and advice of the issuing bank to make its [LC] operation tick”.

(d) So “has only 5 staff members and has an office of 500 square feet.  It is a typical SME and should not be knowledgeable in UCP500.  So [she] naturally expects and relies on [DBS] to give advice on terms used in the LC”.

(e) In LC operations, parties deal with documents and not with goods according to article 3 of UCP500, which “means the seller can get payment by presenting compliant documents even if the goods are inferior in quality where the data contents are untrue or there is no goods shipped at all and the documents are forged”, so to cover such risk the buyer as an applicant will normally ask for a certificate of inspection in the LC to be issued by an independent inspection agency, which is very common and almost a default term in the LC, and which is “even more so when a buyer deals with a first time supplier”.

(f) DBS as So’s banker should be fully aware of the following facts, ie (i) her annual turnover was not very substantial, (ii) loss in the margin of EUR432,000 (ie the value of the Subject LC) could be catastrophic for her, and (iii) the Beneficiary was a first time supplier to DBS, so DBS should have given advice to her to add “a default term in the LC, calling for a certificate of inspection issued by an independent inspection agency, preferably of international fame”.

(g) “KYC (Know Your Customer) is a very popular jargon on the lips of the bankers when they talk about trade frauds prevention and risk management.  Unless [DBS] did not practice KYC, otherwise it would be strange for [DBS] not to give such advice to [So]”.

(h) “Since [DBS] is holding the real estate from [So, New Harvest and Hui] …… as collateral for the credit facilities extended, [DBS] should have added such protection clause in the LC for its own interests as a mortgagor”.

17.At the PTR, Mr Leung confirmed So would not maintain or pursue the further or alternative cause of action at paragraph 15(f) above at trial.  He also confirmed that So’s broad allegations as regards the negligent or reckless advice given to her by DBS and/or DBS’ failure to properly advise her in paragraph 14(a)-(c), (e)(iv) and (f) above as well as paragraph 15(a) and (c)(i)-(ii) above were founded on the specific allegations particularised in paragraphs 15(b), 15(c)(iv) and 16 above.

(b) DBS’ pleadings

18.DBS denied liability.  They referred to the terms and conditions of the Facility Documents, the Mortgage and the LC Application, and denied that (a) they had given advice to So and/or was under a duty to advise her on LC generally and/or on the Subject LC, and/or (b) they had knowledge of the underlying business transaction in respect of the Subject LC. DBS claimed the averments by So in paragraph 14(a)-(c) above were lacking in particulars and embarrassing.

19.DBS also denied the Implied Terms, which were contrary to the express terms of the Facility Documents, and were not obvious, reasonable or necessary.  DBS averred that in respect of all three LCs (inclusive of the Subject LC) they had issued upon So’s application, she had not requested and they had not offered advice in relation to the terms to be included in each of the LCs, and So herself included a requirement for an inspection certificate for one of the three LCs without consulting DBS. 

20.DBS claimed they had complied with their obligations under article 13 of UCP500, and denied (a) the BL was discrepant or (b) it contained “apparent irregularities” or anything that demonstrated it “was a forged document in its entirety”. 

21.DBS counterclaimed against So for the outstanding sum under the TR Loan.

V.  SUMMONS

22.On 10 October 2004, So applied by summons in HCA2807/2004 for the following reliefs (“Summons”):

(a) leave for her to file/serve Lee’s supplemental expert report as per the draft annexed to the Summons (“Lee Draft”) “in response to” the further expert report by DBS’ expert on LC banking practice Soh Chee Seng (“Soh”) dated 5^th March 2013 (“Soh 2^nd Report”)  within 28 days from the date of the order;

(b) leave for DBS to file/serve further supplemental expert report by Soh in reply (if any) within 28 days thereafter;

(c) no further expert reports to be filed without leave of the court.

On the same day, So filed her own affirmation in support of the Summons (“So Aff”).

23.DBS opposed the Summons on the basis that (a) there was no good reason or justification for the delay, (b) the Lee Draft contained a number of unpleaded and inadmissible allegations and hence could not be admitted in its present form, and (c) the Lee Draft, if allowed, would cause substantial prejudice to DBS.  Mr Man submitted that in seeking this extraordinary indulgence it was incumbent on So to put forward an expert report that was proper and admissible, and this she failed to do.

24.At the PTR, after hearing submissions by Mr Leung and Mr Man, I granted the following orders and reserved my reasons for decision which I now give:

(a) the Summons be dismissed;

(b) costs of and occasioned by the Summons be paid by So to DBS to be taxed if not agreed;

(c) there be no order as to costs as between So and New Harvest and as between So and Hui;

(d) So’s own costs to be taxed in accordance with the Legal Aid Regulations.

VI.  PROCEDURAL HISTORY IN HCA2807/2004

25.On 10 and 13 December 2004 respectively, So issued her Writ of Summons and re-filed her Amended Writ of Summons.  On 12 and 20 January 2005 respectively, DBS filed their Defence and re‑filed their Defence and Counterclaim.  On 5 February 2005, So filed her Reply and Defence to Counterclaim.

26.By the Ho Order dated 1 September 2005, the Two Proceedings were ordered to be tried at the same time or as directed by the trial judge, and the evidence in one action shall be treated as evidence in the other.  Case management directions were granted for filing/serving pleadings in HCMP1361/2005, and timetabling directions were granted for discovery and witness statements in the Two Proceedings.

27.The parties’ respective List of Documents and DBS’ Supplemental List of Documents were filed on 31 October and 1 and 9 November 2005 respectively.  So’s witness statement and Cheung Yuk Wing’s witness statement (for DBS) were filed on 20 December 2005.

28.At the Checklist Review hearing on 22 March 2006, by consent Master Lung (as he then was) granted (a) leave for So to call an expert in LC banking practice at trial and for his expert report to be filed/served within 28 days with liberty to DBS to file/serve their expert report in response within 28 days thereafter, and (b) leave to DBS to file/serve supplemental witness statement within three days with liberty to So to file/serve supplemental witness statement in response within 28 days thereafter.

29.On 22 March 2006, DBS filed the witness statement of Au Yeung Sau Hong.  So obtained an expert report by Wong Koon Nam Michael in April 2006 (“Wong Report”).

30.On 29 May 2006, by consent Master Lung (as he then was) ordered that the Two Proceedings be stayed for 45 days pending mediation, and the Checklist Review hearing was adjourned.

31.As explained above, by the de Souza Order dated 19 June 2006, the Surplus Proceeds were ordered to be paid into court within seven days, and such sum shall not be paid out except pursuant to a court order.

32.On 14 June 2007, DBS filed the Soh’s expert report dated 30 May 2007 (“Soh 1^st Report”).

33.On 29 December 2008, So was granted legal aid, and her assigned solicitors were Fred Kan & Co.  She claimed that due to “uneasiness and confidence” with Fred Kan & Co, her present solicitors (“So’s Solicitors”) were re-assigned to act for her on 2 March 2009. After various conferences with So’s Solicitors, So was advised to file an Amended Statement of Claim, a supplemental witness statement and to obtain another expert report.

34.As a result of correspondence between So’s Solicitors and the Director of Legal Aid (“DLA”), So obtained permission on 16 September 2009 to instruct Lee to prepare an expert report.  In/about mid-January 2010, So’s Solicitors informed So that the Lee Report had been completed and would “proceed with the same”.  However, it transpired that the Lee Report was dated about 11 months later at 8 December 2010.

35.Nothing happened until 25 January 2011 when So filed a Notice of Intention to Proceed after Year’s Delay.  Again nothing happened until 12 July 2012 when So filed another Notice of Intention to Proceed after Year’s Delay.  It was only on 4 October 2012 that So applied by summons for various case management directions. 

36.On 26 October 2012, Master J Wong granted leave for (a) So to amend her pleadings with liberty for DBS to consequentially amend their pleadings, (b) the Wing Fung Camp to file/serve So’s supplemental witness statement and Ng Chun Ping’s witness statement with liberty to DBS to file/serve witness statement(s) in reply (if any), (c) the Wing Fung Camp to file/serve the Lee Report in replacement of the Wong Report within 14 days, and (d) DBS to file/serve further expert report in reply (if any) within 60 days thereafter.  Master J Wong further directed that no further witness statement and expert report were to be filed without leave of the court.

37.On 5 November 2012, So filed the Lee Report, her supplemental witness statement and Ng Chun Ping’s witness statement. On 6 November 2012, So filed her Amended Statement of Claim.  On 8 January 2013, DBS filed their Re-Amended Defence and Counterclaim.  On 26 February 2013, So filed her Amended Reply and Defence to Counterclaim.  On the same day, DBS filed the supplemental witness statement of Au Yeung Sau Hong and the witness statements of Chan Mee Yin Brenda and Leung Wai Hung.

38.On 6 March 2013, DBS filed the Soh 2^nd Report dated 5 March 2013.  On 13 March 2013, DBS filed their 2^nd Supplemental List of Documents.

39.On 6 May 2013, DBS filed their Listing Questionnaire for the then upcoming Case Management Conference (“CMC”) scheduled to be heard on 15 May 2013.  On 8 May 2013, So filed her Listing Questionnaire.  So’s Listing Questionnaire confirmed she did not intend to take out any other interlocutory applications and she had served all expert reports by Lee.  The only outstanding matter in relation to expert evidence was the filing of Lee’s statement of truth.  So recognised that the merits of the case depended very much on expert evidence, and indicated her intention to call Lee to give evidence at trial.

40.At the CMC on 15 May 2013, Registrar KW Lung granted leave for So to set the Two Proceedings down for trial within 42 days from 15 July 2013 for an eight-day trial before a judge alone in the fixture list with a PTR to be heard 12 weeks before trial.  It was also ordered by consent that the parties shall within 35 days obtain counsel’s advice, and that all interlocutory applications as might be advised shall be taken out within 14 days thereafter.  So did not take out any such application.

41.On 3 July 2013, DBS applied to further amend their pleadings.  On 29 July 2013, DBS filed the Re-Re-Amended Defence and Counterclaim.  On 23 August 2013, So applied to set the Two Proceedings down for trial.  On 27 August 2013, DBS filed the Notice.

VII. LEGAL PRINCIPLES

42.Mr Leung frankly accepted that the Summons was made late in the day.  Such lateness was compounded by the history of delay in this matter, bearing in mind that the Two Proceedings commenced 10 years ago in 2004 and 2005.  Against such background, the parties should have expected that the court would shut its face against any further delay unless there are truly exceptional reasons and a good justification for any further delay.

43.I have recently in Nam Ching Wun v Tsun Un Pawn Shop also known as Tsun Yun Pawn Shop with Tang Yam Wan as trustee by Yeung Fook Mui and Tang Ying Ip (or Yip) as administrators of the estate of Tang Pui King alias Tang Yum (or Yam) Wan alias Tang Kin Cheung, deceased & ors[2] and in Chung Ming Yu & ors v Next Magazine Publishing limited & anor[3] summarised the relevant principles on late applications to introduce late witness statements, late discovery and late amendment of pleadings.  I see no reason why those principles should not apply mutatis mutandis to late applications to introduce fresh or supplemental expert evidence.  I rely on those summaries of the general principles without repeating the same.

VIII. REASONS FOR THE DELAY

44.According to the So Aff, So noted she was required to obtain counsel’s advice within 35 days pursuant to the order made on 15 May 2013.  On 3 June 2013, the DLA assigned counsel Mr Paul Leung to act for So.  At the conference on 10 July 2013, Mr Paul Leung explained to So and advised her on the main issues in the litigation, and indicated he wished to have a telephone conversation with Lee to ensure Lee would “be able to tell him what his views or responses are so that [they] will know how to challenge [Soh’s] evidence”.  On 7 March 2014, Mr Paul Leung had a long distance telephone conversation with Lee for about 45 minutes. On 10 April 2014, Mr Paul Leung by his written advice recommended that a supplemental expert report be obtained from Lee.  Following communications between So’s Solicitors and the DLA, permission was granted on 14 May 2013 to instruct Lee to prepare a supplemental expert report.  On 4 June 2013, So’s Solicitors told So they had just received a draft supplemental expert report from Lee, which draft was sent to Mr Paul Leung for his consideration.

45.Due to “uneasiness and confidence between [So] and [Mr Paul Leung]”, So informed and applied to the DLA to change Mr Paul Leung as assigned counsel.  Time was required for the DLA to consider her request and to seek written explanation by Mr Paul Leung and So’s Solicitors.  So also attended the DLA’s offices on several occasions.  So claimed the exercise was time-consuming and tedious since the DLA had to give serious consideration to her application by taking into account all factors.  After about three months, ie on 12 September 2014, the DLA re-assigned Mr Leung to act for her in place of Mr Paul Leung.  On 22 September 2014, So’s Solicitors informed So that Mr Leung considered it important for her to adduce Lee’s supplemental expert report in response to the Soh 2^nd Report.

46.On 25 September 2014, So’s Solicitors served on DBS’ solicitors a copy of the Lee Draft and enquired whether they would object to the same.  No attempt was made to explain the lateness and why the Lee Draft would be of assistance to the court.  On 30 September 2014, DBS’ solicitors replied by asking for the reasons and/or exceptional circumstances justifying the delay in the proposed filing of the Lee Draft.  Instead of responding to such enquiry, So (as she claimed in the So Aff) thought it would be better to take out the Summons and explain the reasons for delay more fully in the Soh Aff.  But it was ten days later that she filed/served the Summons and the Soh Aff, ie 14 months after the deadline imposed by the order of Registrar KW Lung dated 15 May 2013 for taking out interlocutory applications and slightly less than three months before trial.

47.I am not persuaded there is any good reason for the delay in taking out the application by way of the Summons.  The fact that So has put forward an account for the delay merely gives an explanation but not any justifiable excuse.  Plainly, notwithstanding the court orders, she has chosen her own time to prepare her case, and the fact that she is on legal aid and wished to change counsel does not excuse.  Litigants who are on legal aid and their assigned legal advisors have to prepare for the litigation by taking into account the known exigencies of the legal aid scheme, including the need to seek approval from the DLA on certain matters.  Privately-funded clients may have their own funding or other difficulties which they have to face, and a legally aided party cannot be advantaged in meeting the consequences of delay merely by waving the banner of legal aid.

48.But even on So’s own explanation, she has failed to give a convincing explanation for the delay.  So did not have to spend time to search for an expert since she only attempts to put forward a “supplemental” report by her existing expert Lee.  I will return below to consider whether the Lee Draft is, as suggested in the Summons, merely in response to the Soh 2^nd Report.

49.I further note there has been a history of delay by So in disclosing her expert reports.  In respect of the Lee Report, it was ready in mid-January 2010, but it was not dated until 8 December 2010, and no attempt was made to seek leave to adduce such report until 4 October 2012.  And this was despite the existence of the Wong Report which was already in existence in 2006. 

50.But there are still more unexplained periods of delay.  Although Mr Paul Leung was assigned to act for So in June 2013, it took So a year to prepare the Lee Draft and out of that year seven months were apparently spent in arranging a telephone conversation between Mr Paul Leung and Lee.  In making a late application, it is incumbent upon the applicant to give a full and frank account of the procedural history and delay.  As Mr Man submitted, these seven months remained totally unaccounted for.  Further, even though the Lee Draft was dated 14 June 2014, it was only in late September 2014 that So’s Solicitors alerted DBS’ solicitors of So’s intention to seek leave to adduce the same.  The only reason offered for the delay in alerting DBS when the Lee Draft was already available was merely So’s wish to change counsel. 

51.First, last-minute change of counsel does not provide any sufficient excuse, especially when So was all along under legal representation and advice.  Paragraph 42 of Practice Direction 5.2 makes clear that “change in the team of lawyers” is not a justifiable excuse where late applications put milestone events at risk.  Here, So’s Solicitors have remained as her solicitors all along, and I see no reason why they, being fully aware of the imminence of the PTR and trial, could not have advised So and assisted her in making an early decision to apply for leave to adduce the Lee Draft or at least to alert the other side of the likelihood of such an application in the wings.  Secondly, after the CJR, So’s presumption of sending the Lee Draft to DBS’ solicitors in late September 2014 to enquire whether they had any objection without any explanation for the lateness is, to say the least, surprising.  It should have been anticipated that DBS would complain that such late attempt to introduce further expert evidence would disrupt their preparations for the trial and/or even the trial itself.  So’s choice to delay provision of an explanation until five days before the PTR merely adds weight to DBS’ criticisms of unjustified delay.

52.In the end, at the PTR, Mr Leung conceded there was no justifiable excuse for the delay in taking out the application by the Summons.

IX.  LEE DRAFT

53.The Lee Draft is an unsigned 35-page draft expert report, and the Summons sought leave to file/serve such report within 28 days of the order to be made under the Summons.  With the trial less than three months away, no explanation has been forthcoming as to why a signed report with statement of truth by Lee was still not available when the Lee Draft was said to have been ready in mid-June 2014, and why a further 28 days would be required to procure a finalised and signed “supplemental” report from Lee.  This will only add unwarranted time pressure on DBS.

54.Significantly, and as admitted by So in the So Aff and as conceded by Mr Leung at the PTR, the Lee Draft is not (as suggested in the Summons) “in response to” the Soh 2^nd Report.  In fact, the Lee Draft raises three new or additional grounds allegedly to demonstrate that the documents presented for payment under the Subject LC were discrepant:

(a) a multimodal transport BL was presented rather than an ocean BL as required by the Subject LC;

(b) three different BL numbers were used to refer to the same set of BL;

(c) product description in BL was in conflict with the requirements in the Subject LC.

So believed the Lee Draft would be necessary for the court to understand the differences and irregularities in the documents presented to DBS. 

55.So claimed DBS would not suffer from any material prejudice since no new factual allegations were made, and the Lee Draft only contained opinion evidence.  Mr Leung submitted the trial was scheduled to start in January 2015, but there would be sufficient time for DBS to cause Soh to respond to the Lee Draft if they so wished such that the scheduled trial dates would not be affected.

56.Notwithstanding his submissions in the above paragraph, Mr Leung was constrained to concede at the PTR that without leave to amend So’s pleadings to raise the new or additional matters in paragraph 54 above, it would be impossible for So to adduce the expert evidence in the Lee Draft on those matters.  However, So has not prepared any draft Re-Amended Statement of Claim or taken out any application to seek leave to re-amend her pleadings accordingly.  To facilitate early disposal of the Summons, Mr Man was content to make arguments based on the admissibility or otherwise of the Lee Draft such that if the Summons were dismissed there would be no basis for any application by So for further amendment of her pleadings.  But let me say that in future the court will not smile kindly on piecemeal late applications, and in the absence of a complete “packaged” approach the court may simply dismiss an “incomplete” or “piecemeal” application without further ado.

57.At the PTR, Mr Leung submitted that So proposed to rely on the new or additional alleged “discrepancy” in paragraph 54(a) above and to abandon the other grounds in paragraph 54(b)-(c) above.  But, the Lee Draft was presented as the overall opinion of So’s expert Lee, and at the PTR Mr Leung was unable to assure this court that Lee would have permitted his overall opinion in the Lee Draft blue-pencilled by So or the court.  In the end, Mr Leung decided to put forward the Lee Draft in its entirety.

58.In respect of the three alleged discrepancies in paragraph 54 above, the fact that they are new or additional to those set out in the Lee Report was recognised by Lee himself.  I bear in mind that So’s complaint all along was that the documents presented by the Advising Bank were discrepant “on their face”, but there is no explanation inherent in the Lee Draft or forthcoming from either So or Lee as to why these new or additional alleged “discrepancies” (which are necessarily said to be obvious) have not been addressed in the Lee Report and is now raised for the first time more than 10 years after payment was made. 

59.The court is generally unhappy with last minute applications. Here, the intended last-minute introduction of these new matters will have wide ramifications since they put So’s case on a new dimension.  If allowed, time will be required for So to seek leave to further amend her pleadings, and for DBS to seek further expert evidence and to amend their pleadings when such expert evidence is obtained.  It is not correct to say definitely no new factual matters will be raised.  In my view, DBS will have to revisit their factual witness evidence to see if their bank officer witnesses need to address any of the new matters.  Bearing in mind that Soh is not stationed in Hong Kong and his availability to render further expert evidence within short notice is uncertain, and taking into account the real risk that this late attempt to bring forth new evidence will encroach on the time that ought to be spent on proper preparations in the run‑up to the trial, in carrying out the balancing exercise and taking into account all the circumstances in fair manner, I am not persuaded that So should be allowed to move the litigation goalposts, including laying down new lines of defence, so shortly before trial.

60.As regards the other parts of the Lee Draft, Mr Man complained that in paragraph 21-23/7 under “The Expert’s Responses on Issue No 1” Lee purported to rely on ISBP 745 paragraph (v) (which is an updated version applicable to UCP600 rather than UCP500, and UCP500 is the version applicable to the Subject LC) to support his argument that DBS owed a duty of care to So to advise her to require a certificate of inspection for the Subject LC, but such provision had not been pleaded.[4]

61.Mr Lee also complained that the Lee Draft also plainly travelled beyond the realms of “expert opinion” on banking practice:

(a) In paragraph 21-23/12 under “The Expert’s Responses on Issue No 1”, Lee commented on whether DBS “should have been aware” of certain facts.  Mr Man submitted this plainly would be a matter for the court.

(b) In paragraph 34/1 under “The Expert’s Responses on Issue No 1”, Lee made a similar attempt to argue that DBS “should have known [So] thoroughly, amongst other things, particularly [So’s] little knowledge of the UCP 500.  This can easily be achieved by day to day communication with [So]”.  Mr Man submitted this must be a matter for the court.

(c) In paragraph 40/1 under “The Expert’s Responses on Issue No 2”, Lee latched onto Soh’s statement that he had been advised by DBS’ solicitors that Issue No 2 was ill-defined, and then launched into an attack on Soh’s reliance on this and also on the propriety and impartiality of Soh’s advice.  Mr Man submitted this again must be a matter for the court, and not for Lee who spent an entire paragraph making submissions on why the court should place little weight on Soh’s opinion. 

(d) In paragraph 52/1 under “The Expert’s Responses on Issue No 2”, Lee made an accusation (which Mr Man argued was entirely unjustified, ill-considered and misconceived) that “[Soh’s] opinion expressed here … are obviously under the influence of DBS’ solicitors (as admitted by him in paragraph 40 of [the Soh 2^nd Report]) ……”[5] For the present purpose, Mr Man submitted that even if this accusation had any foundation (which it did not), it would surely be a matter for submissions and determination by the court, and not for an expert in a hopelessly late supplemental report.  Mr Man noted that such accusation was repeated in paragraphs 60/1-2, 61/1, 62/1, 67/1 and 69/1-2.

(e) Paragraph 56/1-3 under “The Expert’s Responses on Issue No 3” was, according to Mr Man, argumentative, and he said Lee clearly made submissions.  Mr Man further submitted that whilst such arguments could well have formed part of So’s closing submissions, they had no place in an expert report, and the same could be said for paragraphs 63-69.

62.At the PTR, I raised with Mr Leung the propriety of the four issues as set out in both the Lee Report and the Lee Draft:

(a) whether the issuing bank (ie DBS) has been negligent in its failure to give advice to So to call for an inspection certificate issued by an independent inspection agency in Germany;

(b) whether the issuing bank (ie DBS) has been negligent in its failure to take note of the red flags in the data content of the BL that should lead to suspicions for fraudulent documents and/or trade frauds;

(c) under such circumstances, whether the issuing bank (ie DBS) should have refused against the presented documents under the Subject LC;

(d) under such circumstances, whether the issuing bank (ie DBS) is entitled to claim reimbursement from So for their payment under the Subject LC.

I note with interest from the “Introduction” in the Lee Report that Lee was instructed to “prepare an expert’s report to identify the issues within [his] specialist field that arise in this case and to express [his] opinions with full reasons on each issue based on the assumed facts, the documents bundle, [UCP 500], [ISBP 645] ……” In short, Lee as expert witness framed and addressed the issues himself.  At the PTR, Mr Leung conceded that the framed issues appeared to be ultimate questions for the court rather than true expert issues that called for expert opinion on LC banking practice, but claimed that Lee’s views on those issues were expert opinion.

63.I drew the attention of Mr Leung and Mr Man to the guidance by Gleeson NPJ in Fu Kor Kuen Patrick v HKSAR[6] as to the limits of expert opinion evidence, and to the need to draw a careful distinction between matters that are legitimately the subject of opinion (and hence within the expertise of the expert witness) and the issue of fact and/or the ultimate question which are for the trial judge.  Quite simply, an expert witness does not possess expertise of a kind that qualifies him to express, for the information of the court, an opinion about matters of fact; rather it is for the trial judge to form a judgment on those matters.  The expert witness is confined to providing the court with relevant opinion evidence in respect of the industry guidance and practice to assist the judge to find facts relevant to a judgment as to whether there has been any negligence, recklessness, breach of duty of care, breach of fiduciary duty or breach of contract, etc.  The parties here should take to heart the admonitions by Gleeson NPJ as to the dangers of an expert witness who travels beyond matters within his area of specialised knowledge.  Such matters may be inadmissible as opinion evidence, or may undermine the expert witness’ overall opinion and/or his credibility as an expert witness.

64.Since the trial is to be tried before me, it is inappropriate for me to dwell at length on the propriety of any aspect of the Lee Draft that may impact on the admissibility/weight of Lee’s opinion in the Lee Report.  However, it suffices to say that the matters highlighted by Mr Man in paragraph 61 above are largely either matters for the court and/or matters that should be addressed in submissions rather than by an expert witness.  Bearing in mind that I have rejected Lee’s opinion on the new or additional alleged discrepancies, and further noting there is no assurance from Lee that he is agreeable to have his overall opinion in the Lee Draft blue-pencilled, I am not persuaded the Lee Draft should be allowed.  Taking into account the lateness of the application and lack of satisfactory explanation for the delay, I see no reason why So who had the luxury of time in preparing the Lee Draft should require DBS to rustle up expert evidence in reply in an unduly tight time schedule with intervening Christmas and New Year public holidays and with the trial looming large on the horizon.

65.For all of the above reasons, the Summons was dismissed.  There was no reason why costs should not follow event.  Accordingly, I granted the orders in paragraph 24 above at the PTR.

X.  POSTSCRIPT

66.At the PTR, I also granted other case management directions for the purpose of the trial.  Upon more mature consideration of the expert evidence, it would be useful for DBS to write to the court with copy to So, New Harvest and Hui within seven days to clarify whether they will rely on and adduce the Soh 1^st Report at trial. 

67.In respect of the Lee Report, So and DBS should check whether the documents in the Table of Documents annexed to such report (which Lee confirmed in paragraph 3 of the “Introduction” of the Lee Report that he had reviewed) have been discovered and disclosed in the parties’ Lists and/or Supplemental Lists of Documents, and if not, whether any of those documents will be used for cross-examination purpose.  In the former case, the discovered documents (if relevant) should be included in the trial bundle.  In the latter case, perhaps copies can be readied if they are needed for cross-examination.  

68.I note with interest that So would have sought independent expert opinion from Lee by providing Lee with the Wong Report (which the Lee Report was supposed to have replaced), and that Lee had reviewed the same for the purpose of preparing the Lee Report. 

69.If any of the documents referred to in paragraph 67 above have not been discovered, the parties’ attention are also drawn to Kinetics Medical Health Group Limited & ors v Dr Tse Ivan Cheong Yau[7] and Ues International (HK) Ltd (formerly trading as Grand View Development (HK) Limited) v Maritima Maruba SA (formerly known as Maruba ASCA)[8] which reminds that it is incumbent upon a litigant giving late discovery to make proper inter partes application to seek leave of the court for further discovery, which should not be slipped in under the guise of voluntary discovery.

Mr Richard Leung, instructed by AM Mui & Kwan, for So Sau Lai Connie trading as Wing Fung Trading Company

Mr Bernard Man, instructed by Wilkinson & Grist, for DBS Bank (Hong Kong) Limited

New Harvest International Development Limited by its director So Sau Lai Connie, acting in person and present

Hui Wing Sze acting in person and present