MEI SHENG TEXTILES VIETNAM CO. LTD. v. CHINA GRACE GARMENT LTD

HCA 2311/2013

[2018] HKCFI 1688

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2311 OF 2013

________________

________________

________________________________

REASONS FOR DECISION

________________________________

Introduction

1.  This was the adjourned hearing of the plaintiff’s application for summary judgment in the sum of US$196,747.50 plus interest and costs, pursuant to Order 14, rule 1, Rules of the High Court (“RHC”).

2.  The defendant did not appear.  I heard only submissions from the plaintiff’s counsel, Mr Wong Cho Lik.

3.  After hearing from Mr Wong, I made an order that the defendanthave leave to defend on the condition of payment into court of the judgment sum within 28 days.

4.  I indicated that I would provide reasons for my decision, which I now do.

Procedural history

5.  The action was commenced in 2013, and pleadings closed in 2014.  The parties filed Timetabling Questionnaires.  In 2016 the plaintiff filed a List of Documents, but the defendant did not.  In April 2017, the plaintiff took out its summons seeking summary judgment.

6.  Both parties filed evidence in respect of the summary judgment summons. That summons first came on for substantive argument before Deputy High Court Judge Sakhrani on 11 January 2018 (the “January Hearing”).

7.  The events at the January Hearing are set out in the learned judge’s Reasons for Decision dated 6 February 2018 [1].  On that occasion, both parties appeared by counsel and solicitors.  The court heard and rejected the defendant’s summons dated 4 January 2018 seeking leave to file further evidence to oppose summary judgment. Since the defendant’s said application took up all of the time which had been reserved, it was necessary to adjourn the summary judgment summons, which was later re-fixed for hearing before me. 

Proceeding in the defendant’s absence

8.  Since the January Hearing, Master KW Wong made an order dated 9 April 2018 that on compliance with the requirement in Order 67, rule 6(1) of the RHC, the defendant’s former solicitors cease to act for the defendant.  On 10 May 2018 those solicitors filed a Certificate of Service of Order Ceasing to Act. 

9.  Subsequently, the defendant has not filed a notice of appointmentof solicitor, nor has leave been granted for the defendant to be represented byone of its directors.  The defendant was absent from the hearing before me.

10.  Under Order 32, rule 5(1), where a party to a summons fails to attend, the court may proceed in his absence if, having regard to the nature of the application, it thinks it expedient to do so.  Order 32 rule 5(2) provides that before so doing, the court may require to be satisfied that the summons or notice of the time appointed for the resumed hearing was duly served on the absent party. 

11.  The defendant attended the January Hearing by solicitors and counsel.  After that hearing, notice of the date and time of the adjourned hearing fixed before me, was sent by the Registrar to parties’ solicitors on 24 January 2018 (before the defendant’s former solicitors ceased to act).  Although I do not have evidence to this effect, it seems likely that the defendant’s former solicitors would have informed the defendant, when they ceased to act, of the date appointed for the adjourned hearing. 

12.  In addition, the day prior to the hearing before me, the plaintiff filed an affirmation stating that the hearing bundles, plaintiff’s skeleton submissions and list of authorities, had on 22 June 2018 been served by the plaintiff’s solicitors on the defendant by leaving at the defendant’s registered office.

13.  In the above circumstances, I was satisfied that sufficient steps had been taken to bring the hearing to the defendant’s attention and that it was appropriate to proceed in the defendant’s absence.  I so directed at the hearing.

Background facts and issues

14.  The plaintiff’s evidence in support of summary judgment is contained in two affirmations of its director, Wong Pui Ching (“Wong”). The defendant’s substantive evidence in opposition is contained in the affirmation of its director, Chun Kwok Leung, Deavy (“Chun”).  The background facts and issues appear from the pleadings and those affirmations.  

15.  The plaintiff is a company incorporated in Vietnam, which carries on the business of the production and sale of yarn and fabrics.

16.  The defendant is a company incorporated in Hong Kong, which carries on the business of the purchase of fabrics and the production and sale and of garments. 

17.  It is common ground that the plaintiff sold to the defendant certain fabrics (the “Fabrics”) in 2013.  The Fabrics were to be delivered from Vietnam overland by container trucks to Cambodia.

18.  The Fabrics were ordered by 11 documents signed by the defendant entitled “Purchase Contract”, with dates ranging from 18 February to 25 March 2013. The plaintiff issued and signed a document entitled “Contract of Sale” dated 14 March 2013, and a revised version dated 2 April 2013.

19.  The defendant caused two letters of credit to be opened in the plaintiff’s favour.  The first was issued on 11 April 2013 by First Commercial Bank Taipei in the amount of US$248,833.55.  The second was issued on 15 April 2015 by Hong Kong and Shanghai Banking Corporation Limited (“HSBC”) in the amount of US$299,611.33.

20.  It is the plaintiff’s case that the Fabrics were shipped in ten shipments, and that it has been paid for the first seven of those shipments, whether by telegraphic transfer (in respect of the first two shipments)or by successfully drawing on the letters of credit (in respect of the next five shipments).

21.  However, the plaintiff has not been paid, it says, for the last three shipments, shipped on 21 and 22 May 2013, despite them being delivered and received by the defendant’s consignee in Cambodia.

22.  The plaintiff’s claim for US$196,747.50 comprises the purchase price for the last three shipments.  The plaintiff says that it was unable to draw on the letters of credit for those three shipments, because the defendant refused to issue cargo receipts despite repeated requests.

23.  The defendant denies liability and counterclaims for damages of US$773,030.48, plus interest and costs.  The defendant accepts that it made partial payment for the Fabrics, and that it has withheld payment of US$196,747.50.  The defendant pleads that it was entitled to do so due to the plaintiff’s breaches of contract by delivering defective samples and/or goods, and late delivery.

24.  In particular, the defendant alleges that:

(1)  Since early 2013, the defendant entered into a series of contracts with Carrefour Global Sourcing Asia Ltd (“Carrefour”), for the supply by the defendant to Carrefour of garment products.  The defendant was required to deliver the garment products from Cambodia to various global destinations including in Europe.

(2)  The Fabric bought from the plaintiff was for the purpose of fulfilling the defendant’s contracts with Carrefour.

(3)  The Purchase Contracts between the parties included terms that the fabric quality must meet certain specified Carrefour quality standards (“Carrefour Quality Standard”).  They required the plaintiff to provide samples for testing (including for a “Fabric Performance Test” and “ECO Test”). They also provided that “Late delivery is not allowed”.

(4)  In breach of contract, certain of the samples and/or Fabrics were unable to comply with the Carrefour Quality Standard and/or to pass the Fabric Performance Test and ECO Test.  Despite repeated requests, improvements to quality were not made.

(5)  In further breach of contract, certain of the Fabrics were delivered late.

(6)  The plaintiff’s repeated breaches amounted to a repudiation of the Purchase Contracts, which the defendant accepted.

(7)  As a result of the plaintiff’s breaches of contract, the defendant suffered loss and damages as particularised (see further below). 

Applicable principles

25.  The principles applicable on an application for summary judgment are very well known, and I will not here set them out in detail.  They are summarised in Hong Kong Civil Procedure 2018 including at §§14/4/4, 14/4/8 and 14/4/9 – 9B.

26.  The defendant must show that there are triable issues. He or she must satisfy the court by credible evidence that there is a fair probability or reasonable grounds that a bona fide defence exists.  If the defendant raises credible, triable issues, the matter should go to trial. The court will not conduct a mini-trial on affidavits on complicated factual issues. 

27.  However, mere assertion in the defendant’s affidavit does not, ipso facto, justify leave to defend.  The court will not take the defendant’s evidence at face value, but will test it against the affidavit evidence and contemporaneous documents, and any inherent improbability.  The defendant’s evidence must condescend to particulars; sufficient facts and particulars must be given to show that there is a triable issue.

28.  Where the defendant raises a set-off or counterclaim, the principles are as summarised in Shenzhen Baoming Ceramics Co Ltd v Companion-China Ltd [2000] 2 HKLRD 288 per Keith JA at 293 – 294 and Hong Kong Civil Procedure 2018 at §§14/4/14 – 14B.  If the defendant can show an arguable and bona fide set-off, or counterclaim arising out of the same subject-matter as the claim, the usual order is unconditional leave to defend.

Application of principles: alleged defence and counterclaim

29.  Mr Wong, for the plaintiff, argued that the alleged heads of defence and counterclaim were not credible in light of the contemporaneousdocuments.  Further, the defendant had failed in its evidence to condescend to sufficient particulars. 

30.  One of Mr Wong’s arguments was that there was no evidence that the defendant rejected any of the Fabrics shipped.  The uncontroverted evidence was, he said, that all of the Fabrics had been accepted by the defendant and used for production of garments for on-sale.

31.  It is true that there is no evidence of complaint by the defendant at the time of the deliveries themselves, until a letter dated 16 August 2013 (the “August Letter”).  The August Letter sets out certain of the defendant’s complaints (in outline) and purports to accept the plaintiff’s repudiation of the Purchase Contracts.

32.  Further, the defendant’s position appears (from the nature of the losses claimed by counterclaim) to be that the Fabrics were in fact incorporated into garments which were on-sold to Carrefour.  In these circumstances, it is somewhat difficult to see that a claim for repudiation and termination of the sale contracts could be maintained. 

33.  However, this point is not necessarily fatal to a counterclaim for damages, or a set-off.  Even where goods have been accepted, that does not bar a claim for breach of warranty for defective or late delivery: see for example section 55 of the Sale of Goods Ordinance (Cap 26).

34.  Below, I consider the credibility of, and supporting evidence adduced in respect of, each of the defendant’s complaints turn (ie defective samples/goods and late delivery), followed by the defendant’s claimed losses.  

Alleged defective samples and goods

35.  The Purchase Contracts contain express terms which require compliance with a Carrefour Quality Standard, by reference to provisions ofa particular Carrefour manual.  They also require the plaintiff to provide samples including for a Fabric Performance Test and ECO test.

36.  Chun’s affirmation states that since March 2013, some samples were delivered, but were of poor quality and could not comply with the Carrefour Quality Standard.  Part of the samples were unable to pass the Fabric Performance Test and/or the ECO Test in that: (i) the weight and quantity of some samples were out of tolerance allowed under the purchase orders; (ii) the colour of some samples was incorrect; and (iii) the width of some samples was too long.  Since about March 2013, the defendant’s staff complained to the plaintiff by telephone and email over the quality of the samples. However, improvements were not made, and most samples/‌Fabrics were still unable to meet the standard and pass the tests. 

37.  Wong’s 2^nd affirmation, for the plaintiff, accepts that various samples were sent to the defendant since around March 2013 for testing, and that the defendant made some requests to improve the fabrics; though Wong says there was never reference to the Carrefour Quality Standard or disclosure of any test results.  The Fabrics were improved in terms of weight and width, which was subsequently approved by the defendant.  Wong denies that any of the shipped fabric was defective. 

38.  On the face of the affirmations themselves, there is a dispute as to whether the samples and/or Fabrics shipped were defective.

39.  However, I consider that the documentary evidence adduced by the defendant to support its complaint, is thin.

40.  First, there is an exchange of emails in March 2013 (up to 26 March), in which the defendant raises certain complaints on fabric quality, including some references to weight, handfeel and width.  As Mr Wong for the plaintiff pointed out, this appears to relate to samples supplied prior to shipment, rather than the actual Fabrics delivered pursuant to the Purchase Contracts.  The emails make no reference to the Carrefour Quality Standard nor to any specific test having been failed.

41.  Second, there is next the August Letter (dated 16 August 2013) referred to above, which sets out some of the defendant’s complaints regarding the Fabrics, including allegedly defective quality.  There is again no reference to the Carrefour Quality Standard or tests said to have been failed, and virtually no particulars are given as to the alleged defects.  

42.  As submitted by Mr Wong, the timing of this letter sits poorly with the defendant’s position, given that on the defendant’s case the “1^st Batch” of Fabrics was delivered between 18 April and 22 May 2013. There is no evidence of any contemporaneous complaint being made by the defendant on receipt of the Fabrics, until several months later in August 2013.  

43.  Third, and of particular importance, the defendant exhibited no primary documents (such as a technical report or test result or even photographs) to substantiate its complaint of defective quality or failure to pass specified tests.

44.  I regard this as a significant deficiency.  If the defendant had valid, arguable complaints on defective quality and failure of specific tests, it ought to have been in a position to produce evidence of this nature at the summary judgment stage to lend credence to its defence.

Alleged late delivery

45.  Each of the Purchase Contracts specifies a date for fabric delivery ranging from 22 March 2013 to 19 April 2013 ex Vietnam.

46.  It is common ground between the parties that there was an agreement to extend the delivery dates for the Fabrics.

47.  According to the plaintiff’s pleadings and affirmations, after the issuance of the letters of credit there was an agreement to extend the latest shipment date to 20 May 2013.

48.  According to the defendant’s pleadings and affirmation, at the request of the plaintiff, the defendant extended the contractual delivery dates for some of the Purchase Contracts to 30 March 2013.

49.  The defendant complains that in breach of the terms of the Purchase Contracts, certain of the Fabrics (described as the “1^st Batch Delivery”) were delivered late on dates ranging from approximately 7 April to 22 May 2013.

50.  Again, there is a dispute on the face of the affirmations, as to the agreed time for delivery and whether there was late delivery.  However, for the reasons submitted by Mr Wong, I consider that the documentary evidence supports the plaintiff’s position.

51.  The First Commercial Bank of Taipei letter of credit originally specified an expiry date of 7 May 2013 and a latest date of shipment of 22 April 2013.  The HSBC letter of credit originally specified an expiry dateof 15 May 2013 and a latest date of shipment of 30 April 2013.  On 13 May2013, both letters of credit were amended to specify an expiry date of 9 June 2013 and a latest date of shipment of 20 May 2013. The amendments would have been made at the defendant’s behest, and are consistent with the plaintiff’s case as to the revised latest shipment date.    

52.  Conversely, I am not aware of any documentary evidence to support the defendant’s version of events of a (partial) amendment of delivery dates to 30 March 2013.

53.  Further, there is no evidence of any contemporaneous complaint of late delivery prior to the August Letter.  The defendant sent that letter approximately three to four months after it claims to have received late delivery of the 1^st Batch.  The defendant also accepts that payment was made for most of the Fabrics shipped (ie even in respect of goods which, on the defendant’s case, were received long after the revised delivery date of 30 March 2013).

54.  I consider that these features significantly undermine the credibility of the defendant’s complaint that there was substantial late delivery leading to the losses claimed.

55.  There is also, on the face of the affirmations, a factual dispute as to which party was at fault for a particular delay in obtaining Cambodian import permits. However, I accept Mr Wong’s submission that this issue isof limited relevance if any for present purposes; since if the plaintiff is correct as to the revised date for shipment, there is in any event little or no lateness.  

Alleged losses

56.  The losses which the defendant claims to have suffered as a result of the plaintiff’s alleged breaches of contract are particularised at §6(p) of the Defence and Counterclaim, as follows:

“                                                                         PARTICULARS

(i) Additional air shipment cost in the sum of US$236,938.33 for delivering garment to Paris, Madrid and Brussels for use by Carrefour was incurred. However … a partial sum of US$192,853.72 was withheld by the Defendant. Therefore,a sum of US$44,084.61 is still outstanding (‘Outstanding AdditionalAir Shipment Cost’);

(ii) Additional cutting and making cost in the sum of US$42,466.78 was incurred due to the employment of subcontractor (‘Additional CM Cost’);

(iii) Additional FOB cost loss in the sum of US$33,979.05 was incurred due to the lack of replenishment from the Plaintiff forbroken size ratio noted on the finished garment (‘AdditionalFOB Cost’);

(iv) Trim cost lost for the accessories purchased in the sum of US$39,679.53 was incurred due to the cancellation of some orders as a result of the Defendant’s breach of the Purchase Contracts (‘Trim Lost’);

(v) Additional transportation cost in the sum of US$12,820.51; and

(vi) Termination of business relationship with Carrefour and the consequential loss of profit is US$300,000 per season and profit loss of 2 seasons is incurred.”

57.  The evidence adduced by the defendant to support these alleged losses, is very thin.

58.  The losses are dealt with in a few short paragraphs towards the end of Chun’s affirmation.  For most of the items of loss, no explanation is given beyond the contents of the defendant’s pleading.

59.  The only document regarding losses exhibited to Mr Chun’s affirmation, is a two-page table described as containing a breakdown of the costs incurred as a result of the plaintiff’s breaches.  The table is undated.  It is unclear who prepared it, though it is presumably the defendant’s internal document.

60.  The table contains details of various costs and expenses, which apparently correspond to some of the defendant’s pleaded heads of loss (eg the Additional CM Cost, Additional FOB Cost, Trim Lost, and Additional Air Shipment Cost).

61.  No primary documentation is provided, to substantiate that these costs were actually incurred and were related to fabrics shipped by theplaintiff.  For example, there is no underlying air shipment documentation tosupport the alleged Additional Air Shipment Cost.  There are brief references in the pleading and table to non-acceptance and cancellation by a buyer, but no documentation supports this, such as correspondence from the buyer.

62.  I consider that the table, of itself, adds little in terms of substantial evidence supporting a bona fide counterclaim.

63.  The final, and largest, item of loss claimed is for the alleged termination of business relationship with Carrefour (ie US$600,000 for two seasons’ loss of profit).  As Mr Wong submitted, this item is essentially based on Chun’s bare assertion.  No document or correspondence has been exhibited to show that the said business relationship was terminated nor, for example, to evidence any complaint by Carrefour.

64.  In its affirmations, the defendant attempts a brief explanation for the dearth of documents proffered.  These arguments have, in effect, already been rejected in the Reasons for Decision of Deputy High Court Judge Sakhrani dated 6 February 2018, at §§30 to 37.

65.  In short, the proceedings have been on foot for several years, and the defendant pleaded its losses as early as February 2014.  The defendant ought to have been in a position to adduce sufficient documentary evidence to give credence to its claimed losses.

Conclusion

66.  In my view, on the basis of the materials and arguments presented, this case is not quite suitable for summary judgment on the plaintiff’s claim. 

67.  The defendant’s evidence does raise some spectre of arguable defences and triable issues.  

68.  However, as set out above, the defendant’s evidence is thin to say the least, and I conclude that the defence and counterclaim are “shadowy”.  Compare, for example, Xpoly Recycling Ltd v Gold Leader Enterprises Ltd [2011] 4 HKLRD 230 per Johnson Lam J (as he then was) at §§28 and 29.

69.  Of course, one does not expect a defendant on summary judgment to include in its affidavit of opposition the totality of the evidence which might be relied on at trial.  However, a defendant can be expected to file evidence which goes beyond mere assertion, which condescends to appropriate particulars, and with sufficient documents to support a credible and believable defence or counterclaim.

70.  For the above reasons, I considered it appropriate to grant conditional leave to defend. 

Disposition

71.  I made an order that unless the defendant pays the sum of US$196,747.50 (or the Hong Kong dollar equivalent at the time of payment)into court within 28 days from the date of the order:

(a)  the plaintiff may enter final judgment against the defendant for the amount set out in the plaintiff’s summons dated 19 April 2017 with interest thereon as claimed, and costs; and

(b)  the costs of the plaintiff’s application for summary judgment be to the plaintiff to be taxed if not agreed.

72.  I further made orders as to the costs consequences and directions for further conduct of the main action, in the event that the defendant complies with the condition imposed.

HCA 2311/2013

[2018] HKCFI 244

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2311 OF 2013

________________________

________________________

________________________

REASONS FOR DECISION

________________________

1.  By a summons dated 4 January 2018 (“the summons”) the defendant (“D”) applied for leave to file and serve the affirmation of Cheng Yuet Fong Yvonne (“Yvonne”) as per the copy attached to the summons. The hearing of the summons came before me on 11 January 2018 which was the date fixed for the substantive hearing of the plaintiff’s summons for judgment dated 19 April 2017 under Order 14, rule 1 of the Rules of the High Court (“RHC”) (“the O. 14 summons”). The hearing of the O. 14 summons was fixed for argument with 3 hours reserved.

2.  By the summons D was seeking leave to file further evidence to oppose the O. 14 summons.  After hearing the submissions of counsel, I made an order that the summons be dismissed with costs of the hearing before me and the costs of and occasioned by the summons to be costs to be paid by D to the plaintiff (“P”), such costs to be taxed on a common fund basis and to be paid forthwith.

3.  As the hearing of the summons took up all the time reserved and allotted for the substantive hearing of the O. 14 summons, I adjourned the substantive hearing of the O. 14 summons to a date to be fixed in consultation with counsel’s diaries before any judge with an estimated length of hearing of 3 hours.

4.  I indicated at the time that reasons in writing would be given.  This I now do. 

5.  P is a company incorporated in Vietnam.  At all material times, P has been and is still carrying on principally the business of the production and sale of yarn and fabrics.

6.  D is a company incorporated in Hong Kong.  At all material times, D has been and is still carrying on principally the business of the purchase of fabrics and the sale and purchase of garments.

7.  P’s claim against D is for the price of fabrics sold and delivered to D in 2013.

8.  At all material times, P sold and D bought fabrics manufactured by P. P’s claim against D is for the sum of US$196,747.50 being the outstanding price for fabrics sold and delivered to D, with interest thereon. 

9.  D denies P’s claim as set out in the defence and counterclaim.  D’s case essentially is that there was delay in deliveries of some of the fabrics by P to D and that some of the fabrics delivered were of defective quality.  These are pleaded and particularized in the defence and counterclaim.

10.  It is D’s case that as a result of P’s delay in delivery of some of the fabrics, additional air shipment costs were incurred by D.  D withheld a sum of US$192,853.72 owing to P as part of the additional air shipment costs.  D accepts that the sum of US$192,853.72 was payable to P but that it withheld that sum as D’s case is that the additional air shipment costs that it incurred exceeded that amount.

11.  D’s case is that as a result of P’s breaches by late delivery and the delivery of defective fabrics, it has suffered loss and damage.  D counterclaims for loss and damage in the total sum of US$773,030.48 as pleaded as para 14 of the defence and counterclaim which pleads:

“ 14. As a result of the Plaintiff’s breach of the Purchase Contracts, the Defendant suffered loss and damages.

PARTICULARS OF LOSS AND DAMAGES

        Loss and Damages                                                     Amount (US$)

Outstanding Additional Air Shipment Cost                             44,084.61

          Additional CM Cost                                                        42,466.78

               Additional FOB Cost                                                             33,979.05          

                  Trim Lost                                                                 39,679.53

Additional Transportation Cost                                                   12,820.51

Loss of Profit for 2 seasons                                                        600,000.00

___________________________________________________________

                              Total                                                              773,030.48

12.  At para 6(p) of the defence and counterclaim D gives some particulars of the loss and damage that it avers that it has suffered as a result of P’s breaches as follows:

“                                                                                     PARTICULARS

(i) Additional air shipment cost in the sum of US$236,938.33 for delivering garment to Paris, Madrid and Brussels for use by Carrefour was incurred. However, as pleaded in paragraph 6(k) hereinabove, a partial sum of US$192,853.72 was withheld by the Defendant. Therefore, a sum of US$44,084.61 is still outstanding (‘Outstanding AdditionalAir Shipment Cost’);

(ii) Additional cutting and making cost in the sum of US$42,466.78 was incurred due to the employment of subcontractor (‘Additional CM Cost’);

(iii) Additional FOB cost loss in the sum of US$33,979.05 was incurred due to the lack of replenishment from the Plaintiff for broken size ratio noted on the finished garment (‘Additional FOB Cost’);

(iv) Trim cost lost for the accessories purchased in the sum of US$39,679.53 was incurred due to the cancellation of some orders as a result of the Defendant’s breach of the Purchase Contracts (‘Trim Lost’);

(v) Additional transportation cost in the sum of US$12,820.51; and

(vi)    Termination of business relationship with Carrefour and the consequential loss of profit is US$300,000 per season and profit loss of 2 seasons is incurred.”

13.  D’s case is that the fabrics that it purchased from P in 2013 were to be used by D to perform its contractual obligations to Carrefour Global Sourcing Asia Ltd (“Carrefour”) and that because of P’s breaches D was unable to perform its contractual obligations with Carrefour resulting in the loss and damage it claims that it has suffered.

14.  The O. 14 summons was returnable before Master Leong on 22 May 2017.  In support of the O. 14 summons, P relied on the 1^st affirmation of Wong Pui Ching (“Wong”), a director of P, filed on 19 April 2017 which was served on D.

15.  By a consent order made by Master Leong on 18 May 2017 it was ordered that the O. 14 summons be adjourned for argument before a judge with 3 hours reserved in consultation with counsel’s diaries.  By the consent order, directions were also given for D to file and serve an affirmation in opposition to the O. 14 summons within 28 days of the date of the order.  P was to file and serve an affirmation in reply within 35 days thereafter. 

16.  Para 3 of the consent order made by Master Leong clearly provided that:

“ No further or additional affirmation(s) shall be filed without the leave of the Court;”

17.  Pursuant to the consent order, D filed and served the affirmation of Chun Kwok Leung, Deavy (“Chun”) which was filed on 16 June 2017.  D also filed and served the 1^st affirmation of Kam Fai (“Kam”) the handling solicitor in Hon & Co, solicitors for D.  Kam’s 1^st affirmation was also filed on 16 June 2017.

18.  On 20 July 2017 P filed and served the 2^nd affirmation of Wong in reply to the evidence filed by D.

19.  As I have said, the substantive hearing of the O. 14 summons was fixed to be heard on 11 January 2018.

20.  By the summons dated 4 January 2018 returnable before me on 11 January 2018 D applied for leave to file and serve the affirmation of Yvonne as per the copy attached to the summons.  I would observe that although it was clearly made known to D’s solicitors before the summons was issued that the summons would be opposed, D’s solicitors nevertheless gave a wholly inadequate estimate of 3 minutes for the length of the hearing as stated in the summons.

21.  The applicable principles are not disputed.

22.  In respect of interlocutory applications which have been adjourned by a master to be heard either by a master or a judge, Order 32, rule 11A(4) of the RHC provides that:

“ Where the determination of the application is adjourned for the hearing of the summons, no further evidence may be adduced unless it appears to the Court that there are exceptional circumstances making it desirable that further evidence should be adduced.”

23.  By the consent order made by Master Leong on 18 May 2017 it was clearly provided that no further evidence should be filed without leave of the court.

24.  It is plain that in the post-CJR era, a late application to introduce further evidence has a fairly high threshold to pass (Wise Union Industries Limited v Hong Kong Science and Technology Parks Corporation(HCAL 12/2009, 21 September 2009, Andrew Cheung J (as he then was) at para 2).

25.  I would refer to what DHCJ Le Pichon said in Jose Miranda da Costa Junior and another v Lorenzo Yih, also known as Yu Chuan Yih and others (HCA 156/2010; 28 April 2014) at paras 9 to 13 of her reasons for decision:

“ 9. The October order made it abundantly clear that no further affidavit was to be filed without the leave of the court. In the post-CJR era, it is inconceivable that leave would be granted in the absence of genuine extenuating circumstances, for example, that the evidence was not available at the date of the earlier affidavit or only came into existence after the date for the filing of that affidavit. In other words, they would be exceptions that normally would fall within the rule in Ladd v Marshall.

10. Further, in exercising the discretion to grant leave, the court is bound to have regard to the objectives of the CJR set out in O 1A, r 1 and to seek to promote the attainment of such objectives.

11. For those reasons, where a direction prohibiting further evidence to be adduced without leave has been given, it has to be read with RHC O 32, r 11A(4). That provides that where the determination of the application is adjourned for the hearing of the summons, no further evidence may be adduced unless it appears to the Court that there are exceptional circumstances making it desirable that further evidence should be adduced.

12. It will be seen that the rationale of O 32, r 11A(4) is to ensure that a case is dealt with as expeditiously as is reasonably practicable and to ensure fairness between the parties (those being the objectives of the CJR stated in O 1A, r 1(b) and (d)): Fortune Assets Development Ltd v De Monsa Investments Ltd, HCA 167/2009, (unrep) 21 August 2009 at §§10 – 11 and the annotation in Hong Kong Civil Procedure 2014 at 32/11A/3 which states that the sort of ‘exceptional circumstances’ envisaged are likely to be along the lines of the exceptions laid down in Ladd v Marshall [1954] 1 WLR 1489.

13. ‘Special circumstances’ are not made out if a proper review of the potential issues that might arise in proceedings ought to have resulted in the information contained in the affidavit being filed within the time limits imposed: Fortune Assets at §12.  I agree with that approach which is in line with the rationale underlying O 32, r 11A(4) and furthers the CJR objectives identified above.”

26.  There is no doubt that the summons was taken out very late.  It was a very late application for leave to adduce further evidence.  The further evidence is contained in the affirmation of Yvonne.  She used to work for D as a merchandising and sales manager since 2010 for about 5 years. Yvonne exhibits voluminous documents in her affirmation which are contained in 4 lever arch files running into over 900 pages in total.  D’s case is that these documents support D’s counterclaim on the various heads of claim as pleaded at para 14 of the defence and counterclaim.

27.  In support of the summons, D relied on the 2^nd affirmation of Kam also filed on 4 January 2018.  In his 2^nd affirmation, Kam referred to and relied on what he had said in his 1^st affirmation namely, that he had been told by Chun that D had not reasonably expected that P would pursue its claim in this action as since June 2014 when P and D filed their timetable questionnaires and lists of documents, P had not proceeded with this action apart from a failed attempt to mediate on 20 October 2016.  Chun told Kam that D did not expect that P would suddenly proceed with an application for summary judgment by the O. 14 summons.  Kam said that as some of the key staff of D dealing with D’s business with Carrefour and P had left the employment of D:

“ it would take quite a while to extract the relevant information and business records in support of the Defendant’s defence and counterclaim against the Plaintiff.”

28.  In his 1^st affirmation Kam went on to say that he had been told by Chun that he had planned a long holiday with his family and would not be back in Hong Kong until 11 August 2017.  He said that Chun would not have time to access and dig up the relevant documents among the huge bulk of business records of D dated 2013.  Kam concluded his 1^st affirmation by saying that he was instructed that D reserves its right to apply for leave to adduce further evidence at a later stage out of time.

29.  Kam purports to explain the delay in preparing Yvonne’s affirmation at para 2 of his 2^nd affirmation where he said that after Chun returned to Hong Kong in late August 2017 he sought the assistance of key staff of D including Yvonne for assistance to retrieve and dig up the relevant documents with Carrefour and related documents.  He further said that he was given to understand that most of the documents were in storage and that Yvonne was in full time employment elsewhere and had to travel away from Hong Kong frequently.  That being so, she could only help out during her spare time when she was in Hong Kong.  This was an attempt to explain the delay in making the late application for leave to adduce the further evidence.

30.  The reasons for the delay as provided by Kam in his 2^nd affirmation are neither convincing nor satisfactory. 

31.  The voluminous documents exhibited to Yvonne’s affirmation are business records of D which were in existence in 2013 and which were at all times in the possession, custody or control of D.  D still carries on business.   The fact that Chun went away on holiday until late August 2017 does not assist D.  There is no explanation given as to why no one else in D could not have retrieved the documents earlier.  D is and was carrying on business at all times and there is no reason why a staff member could not have retrieved D’s documents which were in D’s possession, custody or control. 

32.  I would observe that although Kam at para 2 of his 1^st affirmation states that both P and D “filed their respectively Timetabling Questionnaire and List of Documents in relation to the proceedings”, a perusal of the court file does not show that D ever filed a list of documents.  P filed its list of documents on 12 April 2016. 

33.  I would also observe that in D’s timetable questionnaire filed on 24 June 2014, which was signed by Kam, it was clearly stated at Section D that he intended to file and serve a list of documents within 21 days.  As I have said, a perusal of the court file does not show that D ever filed a list of documents. 

34.  There is also no evidence as to when Chun first approached Yvonne to assist D to retrieve the relevant documents and to provide an affirmation to exhibit and to explain the voluminous documents with reference to the counterclaim.  The defence and counterclaim was filed on 21 February 2014.  I find it surprising that D was able to plead its loss and damage with precise figures as set out at paras 6(p) and 14 of the defence and counterclaim without having had access to the documents at that time.

35.  It was pointed out by Mr Wong, for P, that Yvonne’s affirmation was made on 21 December 2017.  Yet it was only on 28 December 2017 that D’s solicitors provided a copy of the same to P’s solicitors.  No explanation has been provided as to why there was this delay in providing a copy of the affirmation to P’s solicitors. 

36.  Also, although a copy of the affirmation was provided only on 28 December 2017, none of the voluminous exhibits to Yvonne’s affirmation were provided at that time.  They were only provided to D’s solicitors on 29 December 2017 which was the last working day before the New Year. 

37.  There is, in my view, no merit in the assertion of Kam in his 1^st affirmation that D had reasonably expected that P would not pursue the action any further until it issued the O. 14 summons. As Mr Wong, for P, submitted, the parties were actively involved in mediation proceedings which were unsuccessful in October 2016.  

38.  On the evidence, P had very limited time to consider the further evidence of Yvonne with the voluminous exhibits before the substantive hearing of the O. 14 summons fixed for 11 January 2018.  In my view, the very late application taken out by D has prejudiced P.

39.  I would also refer to what DHCJ Le Pichon said in Jose Miranda at para 18 of her reasons for decision:

“ … Such a last-minute manoeuvre creates a dilemma for the innocent party: to seek an adjournment which would mean having to derail the hearing (when the innocent party was anxious to have its summons heard as soon as possible) or to live with it and doing what was possible within the limited time available. It has been said that ‘[t]he unenviable position that such a party finds himself in its in itself a prejudice’: see per A Cheung J (as he then was) in Wise Union Industries Ltd v Hong Kong Science and Technology Parks Corporation, unreported, HCAL 12/2009, 21 September 2009 at §9.”

40.  As I have said, the substantive hearing of the O. 14 summons had to be adjourned because the hearing of the summons took up all the allotted time which was fixed for the hearing of the O. 14 summons on 11 January 2018.   P has in fact been prejudiced by the delay in the hearing of the O. 14 summons brought about by the late application to adduce further evidence.

41.  D has failed to satisfy me that the further evidence could not have been obtained earlier with reasonable diligence.  I am not satisfied that there are exceptional circumstances to justify the granting of leave for D to adduce the further evidence.

42.  For those reasons, I dismissed the summons with the costs order that I made. 

43.  P asked for the costs to be taxed on an indemnity basis.  I did not consider it appropriate to do so but I did consider that it was appropriate to order the costs to be taxed on a common fund basis in view of the lateness of the application and further, the lack of any explanation as to why a copy of Yvonne’s affirmation which was made on 21 December 2017 was only supplied to P’s solicitors on 28 December 2017 without the voluminous exhibits, which were only supplied on 29 December 2017, the last working day of the New Year.