SKYRUN LIGHT INDUSTRY (HONG KONG) CO LTD AND ANOTHER v. SWIFT RESOURCES LTD AND OTHERS

HCA 1278/2014

[2018] HKCFI 753

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1278 OF 2014

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J U D G M E N T

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1.  This case concerns contractual arrangements made between the parties in relation to their business co-operation in respect of a rubber plantation in Cambodia named the Rattanak Kiri Plantation (the “rubber plantation”). The 1^st plaintiff is a company incorporated in Hong Kong and the 2^nd plaintiff was at all material times a director of that Company. The 1^st defendant is also a company incorporated in Hong Kong and the 2^nd defendant was at all material times a director of that Company.

2.  The foundation of the parties’ contractual relationship was a Joint Acquisition Agreement dated 26 January 2010 entered into between the 1^st plaintiff and 1^st defendant.  Pursuant to this agreement, the 1^st plaintiff and 1^st defendant would each invest and pay US$9 million into the project.  This Agreement was subsequently varied as to the amounts to be invested, and it was further agreed that the 2^nd plaintiff would jointly manage the business of the rubber plantation.

3.  Thereafter various disputes arose between the plaintiffs and the defendants.  The plaintiffs alleged that the defendants had misrepresented the size of the rubber plantation as warranted under the Joint Acquisition Agreement, and that the rubber plantation had been initially purchased at a considerably smaller price than that represented by the defendants.  Furthermore, the defendants eventually demanded that the plaintiffs’ withdrawfrom the management of rubber plantation to facilitate the restructuring of the business for listing purposes. 

4.  After entering into the Joint Acquisition Agreement, the 1^st plaintiff and the 1^st defendant entered into further agreements dated 30 July 2010 and 27 June 2011 aimed, inter alia, at resolving the issues which had arisen.

5.  I note at this stage whilst there was considerable disagreement between the parties as to the management of the plantation and the parties’ respective obligations in relation to this venture, for the purposes of determining the issues in this case those matters are very much background matters.  The parties do not ask this Court to determine the rights and obligations of the parties arising from the agreements that were made prior to 8 August 2011, nor to specifically determine the rights and wrongs of the various disputes that had arisen between the parties before this date.  The parties do ask the Court to have regard to these matters but as noted as background only in determining the real crux of this case, which is the construction and effect of a written agreement made between the plaintiffs and the defendants and dated 8 August 2011 (“the August Agreement”).

6.  The plaintiffs’ pleaded position in relation to the August Agreement is that the same was to settle the disputes and to vary all relevant matters and terms under the Joint Acquisition Agreement, the 30 July 2010 Agreement, and the 27 June 2011 Agreement made between the parties.

7.  The defendants’ pleaded positon in relation to the August Agreement is that it provided for the plaintiffs to relinquish management control of the plantation and payment of US$12 million by the defendants conditional upon (i) the 1^st plaintiff fully repaying its share of investment in the rubber plantation as stipulated in the Joint Acquisition Agreement and (ii) that the rubber plantation business was to be first successfully listed.

8.  These “conditions” do not appear in the written document dated 8 August 2011.  In this context, it should be noted that on 13 June 2017 DHCJ Marlene Ng made an Unless Order in respect of the 2^nd defendant.  In subsequent breach of that Order the 2^nd defendant was debarred from giving oral evidence and the 1^st and 2^nd defendants were debarred from adducing the 2^nd defendant’s witness statement at trial.  As such, there is no evidence from the defendants as to the existence of the alleged oral conditions. 

9.  In conjunction with the August Agreement the parties entered into two other agreements, both dated 8 August 2011; the first being an undertaking which provided, inter alia, that the 1^st and 2^nd defendants jointly and severally unconditionally undertook payment of the sums under the August Agreement.  Furthermore, a guarantee which provided, inter alia, that in the event of default in any payment pursuant to the August Agreement, the 2^nd defendant guaranteed the payment of the sums said to be due under the August Agreement.

10.  Despite this plethora of agreements, Mr Hon, Counsel for the plaintiffs made clear in respect of the Joint Acquisition Agreement and the Agreements dated 30 July 2010 and 27 June 2011, that he was not in any way relying upon the contractual effect of these agreements in relation to the plaintiffs’ claims in this action.  Furthermore that although on one analysis it might be said that the 30 July 2010 and 27 June 2011 Agreements were incorporated into the August Agreement, Mr Hon has specifically disavowed any such interpretation.  Mr Hui, Counsel for the defendants also confirmed that it was not his position that the terms of any of the earlier agreements were incorporated into the August Agreement.

11.  In relation to the aforesaid undertaking and guarantee, both entered into on 8August 2011, Mr Hon submitted that if his clients’ claims in respect of the August Agreement should succeed, then the undertaking andguarantee would be immaterial.  He also accepted that if the claim in respect of the August Agreement failed, any claim made by the plaintiffs in relation to the undertaking or guarantee would correspondingly fail.

12.  The August Agreement was a “homemade agreement” prepared by the 2^nd plaintiff and is a fairly short document.  As such and being the crux of the determination of this case, it is appropriate to set out the relevant terms of that agreement (in English translation) as follows:

“ Party A: Skyrun Light Industrial (Hong Kong) Company Limited & Mr Guo Ming Fu (Identity Card No. P294738(6)

Party B: Swift Resources Limited and Madam Ma Muk Ying (Identity Card No. D504484(8)

….

For the sake of faster, better and more efficient proceedings of the project for cooperation and to conform to Party B’s request for public listing of the project, the Parties have reached this agreement after Parties’ serious consideration and amicable negotiation. Also, this agreement shall supplement and improve the original undertaking made by Party B to Party A dated 18^th January 2010, the agreement between Party A and Party B dated 30^th July 2010 and the memorandum relating to Guangtung Co. Ltd., the agreement between Party A and Party B dated 27^th June 2011 concerning the rubber plantation in Cambodia. If any part of this agreement is in conflict with the existing undertakings, agreements and memorandum,this agreement shall prevail:

1. Party A shall withdraw from the daily management of the processing factory of the rubber plantation, subject to conditions(specific conditions fully set out in Clause 3 of this supplemental agreement).

2. After Party B unconditionally accepts all conditions referred and set out by Party A in Clause 1 of this supplemental agreement, and upon Party B is wholly responsible for the daily management of the processing factory of the rubber plantation, Party B shall unconditionally undertake to bear all liabilities.

3. Specific conditions referred in Clause 1 of this agreement are set out as follows:

(a) Party B shall pay US$1.2 million to Party A’s designated bank account before 30^th December 2011 (striving to be earlier);

(b) Party B shall pay US$4 million to Party A’s designated bank account before 30^th June 2012 (striving to be earlier); Party B shall pay US$1.5 million to Party A’s designated bank account before 30^th September 2012 (striving to be earlier);

(c) Party B shall pay US$2.3 million to Party A’s designated bank account before 30^th December 2012 (striving to be earlier);

(d) Party B shall pay US$3 million to Party A’s designated bank account before 26^th October 2013 (striving to be earlier);

Regardless of any situation which may occur, Party B shall comply with the aforesaid deadlines to pay each installment of monies to Party A’s designated bank account, and shall not causeany delay in making payments by whatsoever reasons and means.  Otherwise, Party B shall unconditionally undertake to pay Party A interests accrued thereon at daily rate of 1 over 1,000 as agreed by Parties as a result of any delay in making the said payments.”

13.  Before analyzing this Agreement, I turn first to consider the alleged oral conditions advanced by Counsel for the defendants that the August Agreement would not be enforced before the successful listing of the Rubber Plantation, and that the August Agreement would not be enforced before the payment of the plaintiffs’ investment of US$9 million. 

14.  The 2^nd plaintiff Mr Guo Ming Fu gave evidence.  I found Mr Guo to be a careful and reliable witness.  The alleged pre-conditions to the August Agreement were put to Mr Guo and he denied the existence of such pre-conditions.  As noted there was no evidence from the defendants to contradict Mr Guo on these points, and I had no hesitation in accepting Mr Guo’s evidence.  As such I find that the pre-conditions contended for by the defendants in respect of the August Agreement did not exist.

15.  The guidelines applicable to considering the construction of a contract are well-established.  I have been referred to and have considered, inter alia, the decisions in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, Al Sanea v Saad Investments Co Ltd[2012] EWCA Civ 313, Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900 and Arnold v Britton [2015] AC 1619.

16.  The plaintiffs case in respect of the August Agreement is a simpleone.  The August Agreement was entered into with a view to settle the disputesthat had arisen between the parties.  The defendants unconditionally accepted the conditions referred to in the Agreement. The plaintiffs withdrew from the daily management of the Rubber Plantation.  The sum of US$2,071,222.67 was paid to the plaintiffs pursuant to the Agreement, and thereafter and in breach of the August Agreement no further payments were made by the defendants.

17.  The defendants’ case with regard to the August Agreement is primarily that the same was subject to the preconditions examined hereinbefore,and which the Court has rejected as having been part of the August Agreement.  There was also initially a suggestion in the pleadings that there was no consideration for the defendants’ agreement, but that has not been actively pursued by Mr Hui, and indeed the unchallenged evidence is that upon entering into the Agreement the plaintiffs did in fact then withdraw from the management of the Plantation.  At trial, however, Mr Hui pursued a further argument submitting that the August Agreement merely created an option forthe defendants to effectively buy out the plaintiffs’ management of the RubberPlantation, such that clause 3 of the Agreement creates a right or a choice but not an obligation for the defendants to pay the plaintiffs US$12 million in accordance with the timetable therein.

18.  Mr Hon objected to Mr Hui advancing this option argument on the basis that the same had never been pleaded nor had appeared in any witness statement, and indeed the word “option” does not appear in the August Agreement.  Having considered Mr Hon’s objection, however, I decided that it would be appropriate to permit Mr Hui to advance this argument. The true construction and meaning of the August Agreement has always been an issue between the parties and I did not think that Mr Hui should be inhibited in advancing the construction of the contract that he seeks the Court to adopt. 

19.  Mr Guo’s unequivocal evidence was that the sum of US$2,071,222.67 admittedly paid by the defendants to the plaintiffs was paid in settlement of the first instalment under the Agreement and in partial settlement of the second instalment.  No evidence was forthcoming which in my view contradicted Mr Guo’s evidence and, as noted, I found him to be a careful and reliable witness.  I had no hesitation in accepting that the status of the payment of these monies was indeed in payment of instalments detailed in the August Agreement.

20.  Mr Hui has summarized his option argument as follows:

(i) Clause 3 of the August Agreement creates a right or a choice but not an obligation for the defendants to pay the plaintiffs US$12 million in accordance with the timetable therein.

(ii) It is up to the defendants to choose to pay in accordance with that timetable.  If the defendants do not adhere to the timetable they have to pay interest at a daily rate of 0.1%.

(iii) Unless and until the defendants satisfy the conditions in Clause 3 (ie when they pay all instalments in accordance with the timetable or when they pay all instalments not in accordance with the timetable but pay the requisite interest) the plaintiffs have no obligation whatever under the Agreement.

(iv) But if (and only if) Clause 3 is fully satisfied, then the plaintiff’s obligation under Clause 1 will be triggered and the plaintiffs will be obliged to withdraw from the management of the Rubber Plantation. 

21.  In support of these propositions, Mr Hui took the Court through the principles applicable to the construction of contracts, and the different types of conditions precedent that are found in certain contracts. 

22.  Having carefully considered Mr Hui’s various submissions, I readily conclude, with respect, that there is no “option” or “condition precedent”to be found in the August Agreement.  As noted the Agreement makes no specific mention of any option or condition precedent.  Indeed the same has never been pleaded by the defendants, and with respect the argument now advanced appears to be an afterthought by Counsel for the defendants. 

23.  The August Agreement although a homemade one and in some respects imprecise and poorly worded, is tolerably clear.  The plaintiffs are to withdraw from the daily management of the Rubber Plantation and the defendants are to pay US$12 million to the plaintiffs by instalments on certain defined dates.  Furthermore, as noted the Agreement expressly records that:

“ … regardless of any situation which may occur Party B shall comply with the aforesaid deadlines to pay each instalment of monies to Party A’s designated bank account and shall not cause any delay in making payments by whatsoever reasons or means.”

This is not the language of an option. There is no room to imply or infer the making of “a choice” by the defendants whether or not to comply with their contractual obligations once they had signed this contract.

24.  If I am wrong about this and that somehow there is an option or choice contained within the August Agreement to the benefit of the defendants, then the defendants have exercised the option by, as I have found, paying the 1^st instalment and part of the 2^nd instalment, in total US$2,710,222.67.  Furthermore, the undisputed evidence is that the plaintiffs did withdraw from the management of the rubber plantation after the signing of the August Agreement.  There is in my view no merit in the defendants’ contention thatany option arose under the August Agreement and, if it did, then the said option has been exercised and the plaintiffs have correspondingly relinquished their management rights over the plantation. 

25.  The defendants having failed to establish the alleged oral pre-conditions to the August Agreement, and having failed to establish that the August Agreement contained any option, the defendants’ defences in this matter fail, and I find that the plaintiffs have proven their case and the 1^st and 2^nd defendants are liable to the 1^st and 2^nd plaintiffs under the August Agreement in the sum of US$9,928,776,33 being the unpaid balance of the primary sum of US$12 million together with contractual interest.  I note that although the interest here is substantial, it has never been the defendants’ case that such interest was in any way a penalty or was otherwise unenforceable.

26.  As noted the 2^nd defendant entered into a personal guarantee dated 8 August 2011 whereby she unconditionally guaranteed the payments to be made by the defendants under the August Agreement.  Mr Hon on behalf of the plaintiffs has submitted that should his clients’ claim under the August Agreement succeed, that this guarantee is immaterial.  However, he has through an abundance of caution still relied upon the same, and the claim under the guarantee has never been abandoned.  In these circumstances I find that if, for whatever reason, any payment due under the August Agreement is not made to the plaintiffs, that the 2^nd defendant remains liable for the same under her guarantee dated 8 August 2011. 

27.  The undertaking entered into by the 1^st and 2^nd defendants and also dated 8 August 2011 does not in view of the joint and several liability of the 1^st and 2^nd defendants under the August Agreement, add anything further.  However, the claims under the said undertaking have never been abandoned and I find that the undertakings given by the 1^st and 2^nd defendants are valid and subsisting, and if the sums payable under the August Agreement are not made to the plaintiffs, that the undertaking entered into by the 1^st and 2^nd defendants is enforceable.

28.  The 2^nd plaintiff gave evidence as to the methodology and the calculation of the contractual interest due under the August Agreement.  In the amended Statement of Claim the plaintiffs have pleaded that the total outstanding principal is US$9,928,777.33 [US$12,000,000 − US$2,071,222.67].  Interest on the instalments under the August Agreement is then calculated as at 19 November 2014, being the date prior to the date of the last payment made by the defendants, at US$7,989,992 in total US$17,918,769.33 and thereafter accruing at the rate of US$9,928.78 per day. 

29.  In their pleaded case the defendants made a general denial of the interest due but this was on the basis that the defendants had no liability to the plaintiffs.  At trial Counsel for the defendants did not seek to challenge or contradict the plaintiffs’ calculation of interest.

30.  In these circumstances, I accept the plaintiffs’ calculation of the contractual interest on the sums due under the August Agreement.

Disposition and costs

31.  In the premises, there will be judgment for the plaintiffs.  The Court makes the following Orders:

(i) The 1^st and 2^nd defendants are jointly and severally liable under the August Agreement to pay to the plaintiffs the sum of US$17,918,769.33.

(ii) The 1^st and 2^nd defendants are jointly and severally liable to pay to the plaintiffs interest at the rate of US$9,928.78 per day from 20 November 2014 on the said sum of US$17,918,769.33 until the date of judgment, and thereafter at the prevailing judgement rate. 

(iii) If the said sums or any part thereof payable under the August Agreement are not made to the plaintiffs, the said guarantee entered into by the 2^nd defendant and dated 8 August 2011 may be enforced against the 2^nd defendant in respect of the same.

(iv) If the sums or any part thereof payable under the August Agreement are not made to the plaintiffs, the same may be enforced pursuant to the undertaking made by the 1^st and 2^nd defendants and dated 8 August 2011. 

(v) There will be an order nisi that costs of this action be paid by the defendants to the plaintiffs forthwith to be taxed if not agreed.

HCA 1278 /2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1278 OF 2014

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REASONS FOR DECISION AND
DECISION ON SUMMARY ASSESSMENT OF COSTS

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I. INTRODUCTION

1.  The trial of the present action was originally scheduled to be heard on 21 June 2017 with 5 days reserved (“Trial”). On 31 May 2017, the 1^st and 2^nd defendants (collectively, “Ds”) applied by summons (“Summons”) for leave to vacate the Trial with consequential reliefs. On 13 June 2017, after hearing counsel’s submissions, I made the following order (“Adjournment Order”):

(a)   the Trial be vacated and adjourned;

(b)   the 1^st and 2^nd plaintiffs (collectively, “Ps”) shall arrange to attend before the Listing Clerk within 14 days to re-fix the trial of the present action with 5 days reserved before any Judge at the earliest possible trial dates (and time to run during summer vacation) without accommodation of counsel’s diaries or the 2^nd defendant’s (“D2’s”) availability or otherwise for the re-fixed trial dates;

(c)   at the same time as re-fixing the trial pursuant to (b) above, Ps shall also fix a date for the 2^nd Pre-Trial Review (“PTR”) with 30 minutes reserved no later than 8 weeks before the re-fixed trial;

(d)   the re-fixed trial once fixed and scheduled by the Listing Clerk shall proceed as scheduled irrespective of any unavailability of D2 to attend such re-fixed trial due to legal proceedings and/or prohibition order involving her in Cambodia and/or any inability to depart or leave Cambodia;

(e)   unless Ds do on or before 4pm on 4 July 2017 pay into court a sum of US$1,800,000 (or its equivalent in Hong Kong dollars at the time of payment into court, “Unless Sum”) (“Condition”), D2 shall be debarred from giving oral evidence at the re-fixed trial and Ds shall be debarred from adducing D2’s witness statements by hearsay at the re-fixed trial (“Sanction”) (“Unless Order”);

(f)   Ds shall pay Ps costs of and occasioned by the Summons (including costs of the hearing on 13 June 2017) and costs of and occasioned by and also thrown away by vacating and adjourning the Trial all on indemnity basis, such costs to be summarily assessed and paid forthwith (“Cost Order”).

By the Adjournment Order, case management directions were granted to facilitate summary assessment of costs under the Cost Order.

2.  On 19 June 2017, this court handed down Reasons for Decision in respect of the Adjournment Order (“Reasons”).

3.  In re-fixing the trial, with a view to save costs (which would benefit Ds who were liable for such costs under the Cost Order) but at potential risk of further delaying the re-fixed trial, Ps applied to this court on 16 June 2017 for leave to re-fix the Trial in consultation with the diary of Ps’ existing counsel. On the same day, this court granted such leave as sought. The trial of the present action was re-fixed to be heard on 15 March 2018 with 5 days reserved (“New Trial”), and the 2^nd PTR was scheduled to be heard on 8 January 2018.

4.  In respect of the Cost Order, summary assessment of costs was dealt with by paper disposal and handed down on 6 July 2017 (“Cost Decision”). Costs payable by Ds to Ps forthwith under the Cost Order was assessed at HK$287,325 (“Assessed Cost”). Such costs were paid on 13 July 2017 via solicitors’ cheque.

5.  To date, Ds had not paid the Unless Sum into court notwithstanding that it should have been paid by 4 July 2017 under the Unless Order.

6.  For convenience, I shall adopt the abbreviations in the Reasons and Cost Decision. These Reasons for Decision should be read together with the Reasons and Cost Decision, and the background of the present action leading to the Adjournment Order will not be repeated here.

II.  PRESENT APPLICATION

7.  On 4 July 2017 (ie the deadline for complying with the Condition), Ds filed a summons pursuant to Order 3 rule 5 of the RHC for extension of time until 4pm on 15 January 2018 to pay the Unless Sum into court failing which D2 shall be debarred from giving oral evidence and Ds shall be debarred from adducing D2’s witness statements by hearsay at the New Trial (“Time Summons”). In short, Ds now sought the court’s indulgence to extend the deadline for complying with the Condition for over 6 months. The Time Summons also asked for “costs be provided for” and sought “liberty to apply”.

8.  On 4 July 2017, Ds filed Yeung’s 3^rd affirmation that exhibited D2’s 3^rd affirmation in support of the Time Summons. On 11 July 2017, Ds filed D2’s 3^rd affirmation that was duly legalised/ notarised (“D2 3^rd Aff”). Ps did not file any affirmation in opposition, but objected to the application.

9.  On 17 July 2017, Mr Hon, counsel for Ps, lodged his written submissions in opposition. On 18 July 2017, Ds filed Yeung’s 4^th affirmation that exhibited D2’s signed (but not yet affirmed) draft 4^th affirmation (“D2 4^th Draft Aff”) and, and undertook to file the notarised version as soon as practicable. On 21 July 2017, Ds filed D2’s 4^th affirmation that was duly legalised/notarised (“D2 4^th Aff”). For convenience, I shall refer to the D2 4^th Aff rather than the D2 4^th Draft Aff in these Reasons for Decision.

10.  Several matters were of note. First, there was no appeal against the Unless Order, and Ds did not seek to challenge its validity and/or the Sanction thereby imposed. Indeed, D2 accepted the Sanction would take effect if she were unable to comply with Condition by the proposed postponed deadline of 2 months before the New Trial. Essentially, Ds sought time indulgence to comply with the Condition.

11.  Secondly, the application was procedurally incorrect. As Mr Hui (and Ms Chung with him), counsel for Ds, recognised, the proper approach would be to apply under Order 2 rules 4-5 of the RHC for relief against sanction rather than for extension of time under Order 3 rule 5 of the RHC. This was recognised in the D2 4^th Aff. However, Mr Hon did not take procedural issue over such error, and the application was treated as an application for relief against sanction under Order 2 rules 4-5 of the RHC.

12.  Thirdly, given the nature of the Time Summons which was for relief against sanction on the ground of present impecuniosity (as evident from the D2 3^rd and 4^th Affs) which allegedly could be remedied if time were granted, one would have thought the fullness of Ds’ grounds would have been elaborated in detail in the D2 3^rd Aff without reservation of material information to be disclosed in the D2 4^th Aff in response to criticisms raised in Mr Hon’s written submissions. It is interesting to note that Ds adopted similar modus operendi in relation to the filing of affirmation evidence for the Summons (see paragraphs 6-9 of the Reasons). Such litigation conduct did not reflect a candid approach.

13.  After hearing counsel’s submissions at the hearing on 19 July 2017 (“Time Hearing”), I granted the following order and reserved my reasons for decision which I give below:

(a)   the Time Summons was dismissed;

(b)   notwithstanding paragraph 1(b) above, the dates reserved for trial of the present action was revised to 2 days instead of 5 days;

(c)   paragraph 1(d) above be set aside;

(d)   Ps be at liberty (i) to expedite and re-fix the New Trial scheduled to commence on 15 March 2018 (with 5 days reserved) to the earliest possible dates before 15 March 2018 (and time was to run during summer vacation) with accommodation for the diary of Ps’ counsel but without accommodation for the diary of Ds’ counsel, and (ii) to consequently re-fix the 2^nd PTR scheduled to be heard on 8 January 2018 to a date no later than 8 weeks before the re-fixed New Trial with 30 minutes reserved;

(e)   Ps shall, if so desired, make arrangements to attend before the Listing Clerk within 14 days from the Time Hearing to expedite and again re-fix the New Trial (now with 2 days reserved) before any judge on the earliest possible trial dates before 15 March 2018 (time to run during summer vacation) with accommodation for the diary of Ps’ counsel but without accommodation for the diary of Ds’ counsel;

(f)   at the same time as re-fixing the New Trial pursuant to (e) above, Ps shall also re-fix a date for the 2^nd PTR with 30 minutes reserved no later than 8 weeks before the re-fixed New Trial;

(g)   costs of and occasioned by the Time Summons be paid by Ds to Ps to be summarily assessed and paid forthwith;

(h)   Ps shall within 7 days after the Time Hearing lodge with court and serve statement of costs not exceeding 1 page pursuant to Practice Direction 14.3;

(i)   leave be granted to Ds to lodge with court and serve within 7 days thereafter succinct summary of objections of not more than 1 page in respect of Ps’ statement of costs;

(j)   summary assessment of costs will be by paper disposal (unless otherwise directed).

14.  On 2 August 2017, pursuant to paragraph 13(d)-(f) above, the New Trial was re-fixed to be heard on 24 January 2018 with 2 days reserved, and the 2^nd PTR was re-fixed to be heard on 16 November 2017.

.  Ds’ AFFIRMATION EVIDENCE

15.  By the D2 3^rd Aff, Ds sought to persuade the court that due to their financial constraints, they presently had insufficient funds and were thus unable to comply with the Condition within the prescribed time, but if given another 6 months or so their financial status would improve and they would have the means to pay the Unless Sum into court. In the D2 4^th Aff, D2 claimed Ds’ default was due to present impecuniosity, and hence it was not intentional and/or contumelious.  

16.  In respect of Ds’ financial constraints, the D2 3^rd Aff deposed that (i) as at 3 July 2017 D2’s bank account with Bank of China in Hong Kong (“BOCHK”) only had HK$4,974.78, and (ii) as at 31 May and 30 June 2017 D1’s 3 bank accounts with BOCHK only had HK$43,242.66, HK$48,456.24 and US$16,388.87 (approximately HK$220,000). It was only in the D2 4^th  Aff that D2 disclosed the following:

(a)   There were further bank accounts in Cambodia that were subject to the judgment for temporary forfeiture (暫時沒收裁定書) issued by the Cambodian court on 15 August 2016 (see paragraph 44(f) of the Reasons, “Cambodian Order”). According to bank confirmations/statements as at March to May 2017, the balances of such accounts in the names of Swift Rubber Limited (6 accounts), Swift Resources (Cambodia) Limited (2 accounts) and D2 (4 accounts) held with Bank of China and Acleda Bank Plc ranged from US$14.29 to US$5,094.

(b)   Swift Resources (Cambodia) Limited ran a rubber plantation business, and due to its operational needs D2 applied to the Cambodian court to remove a bank account in the name of Swift Resources (Cambodia) Limited held with Acleda Bank Plc from the ambit of the Cambodian Order (“Defrozen Account”). According to the May and June 2017 bank statements, the balance of the Defrozen Account as at 31 May and 30 June 2017 was respectively US$29,894.81 and US$127,398.42.

(c)   D1 had other US$ and HK$ bank accounts held with The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) which were not active (and hence not mentioned in the D2 3^rd Aff). The former was overdrawn by US$90.85 as at 30 June 2017, and the latter balance was HK$0 as at 31 October 2016.

17.  As to Ds’ future means, D2 claimed that by 15 January 2018 Ds would be able to raise the Unless Sum in the following manner:

(a)   D2 exhibited a share purchase agreement dated 30 November 2015 (“Agreement”) between D1 (as seller), Swift Rubber (Singapore) Pte Ltd (“Swift Singapore”), Siat NV (a Belgian company, “Buyer”) and D2 and Wong (“Guarantors”) whereby D1 agreed to sell and Swift Singapore / Buyer agreed to purchase the issued and paid up share capital of Swift Rubber Limited (“Company”) for the consideration of US$18,000,000 (ie the First Closing Consideration of US$16,200,000 and the Second Closing Consideration of US$1,800,0000). For convenience, “clause(s)” below refer to clause(s) in the Agreement. D2 explained that the true buyer was Swift Singapore, and the Buyer was to hold some of the Company’s shares for Swift Singapore. D2 further exhibited 5 variation agreements dated 29 February, 25 March, 26 May, 1 July and 1 July 2016 respectively that provided for inter alia postponement of the First Closing Sunset Date.

D2 claimed the Buyer directly settled (by deduction from the consideration payable under the Agreement) the indebtedness due to Bank of China (about US$10,710,000 – no bank statement) and HSBC (about US$1,100,000 – with bank statement) and suppliers in relation to the rubber plantation in Ratanakiri province. Out of the remaining balance of the consideration, 6 payments were made to D1 from 31 August 2016 to 17 June 2017 in the total sum of US$2,012,594.65,[1] and 2 payments were made to D2 in 2016 in the total sum of US$1,067,072.71.[2] D2 claimed the aforesaid payments to Ds were used for paying suppliers and daily operation expenses (including employees’ wages) of the rubber plantation in Snoul province. D2 claimed that after taking into account all debts and payables (including “De-registration of Hypothec cost” of US$17,075 and “Tay Seng Dispute” of US$300,000 – see clause 5.2(3)(b)), the Buyer still owed D1 US$1,500,000 ie the Retention Amount under the Agreement.

D2 claimed “事實上, 在跟[Buyer]收取出售款項的事宜上也不太順利及不太愉快, 我需要不時向[Buyer]追討, 才出現[Buyer]階段式地向[D1]繳付資金”.

D2 claimed she would discuss with the Buyer’s representatives about payment of the Retention Amount (US$1,500,000) to D1 upon their visit to Cambodia on 7 July 2017, and in this respect she exhibited a chain of emails between D1 and the Buyer between 21 and 29 June 2017 (“Emails”).

D2 further claimed the meeting with the Buyer’s representatives took place on 8 July 2017, and after negotiations D1 (who needed funds urgently) agreed to accept reduction of the Retention Amount to US$1,300,000 in full and final settlement of the consideration under the Agreement. D2 also claimed that according to such oral agreement between D1 and the Buyer, the Buyer would in principle pay US$450,000 to D1 by end of August 2017, and pay the remaining balance of US$850,000 after discharge of the Cambodian Order in the Cambodian Proceedings.

(b)   D2 claimed D1 still carried on rubber plantation business with estimated production of 400 tons/month and expected profit (at US$350 to US$400 per ton) of US$140,000 to US$160,000 per month from July to September 2017, but such profits were expected to increase to US$175,000 to US$240,000 per month from October 2017 to February 2018 being the high season for rubber production.

(c)   D2 claimed she did not own any landed property in Hong Kong apart from 2 carparks 18-18A on Lower Ground Floor, Wing Po Mansion, No 33 Fort Street, Hong Kong (“Carparks”), but she was unable to arrange any mortgage of the Carparks before 4 July 2017 for payment of the Unless Sum into court.

(d)   In the D2 3^rd Aff, D2 claimed D1 owned a hotel in Cambodia (“Hotel”) that was subject to the Cambodian Order. D2 claimed to have been advised by her Cambodian lawyers that the hearing of the Cambodian Proceedings would be concluded by end of July 2017, and judgment would be handed down in August 2017. Although D2 expected she would succeed in her defence in the Cambodian Proceedings (and claimed the Hotel could be mortgaged upon lifting of the Cambodian Order after the conclusion of the Cambodian Proceedings), she noted the hearing of the Cambodian Proceedings had been adjourned several times and further confessed to be unsure whether (i) the Cambodian Proceedings would actually be concluded in 2 months’ time and (ii) Ds would actually be able to forthwith arrange mortgage of the Hotel.

In the D2 4^th Aff, D2 claimed she held the Hotel on behalf of D1 because under the laws of Cambodia a foreign enterprise could not own the land on which the Hotel stood (“Hotel Land”), but D2 could do so as she had a Cambodian identity card. D2 further claimed the Hotel owed the bank US$300,000, and it ceased operations after the Cambodian Order was imposed.

18.  In the D2 4^th Aff, D2 claimed Ds had no assets other than referred to above. D2 said Ds had to borrow substantially from banks to maintain the rubber plantation, especially at the beginning when it was not profitable, and assets sold by Ds had been used to repay indebtedness due to the bank and to pay operation expenses of the rubber plantation. In relation to D1’s business operations, depending on the contracting party or business needs, D1 would pay business receivables into the Defrozen Account or its account with BOCHK.

19.  But apart from various bank accounts and Hotel / Hotel Land, the Cambodian Order did not appear to freeze or temporarily forfeit other assets of D1 (see exhibit “MMY‑7” to the D2 1^st Aff). This was also borne out by (a) the fact D1 was still in the process of selling its assets in Cambodia, ie the issued and paid up share capital of the Company that was incorporated and existing under the laws of Cambodia with registered office also in Cambodia,[3] and (b) D2 claimed that D1’s profits from its rubber plantation business in Cambodia could be used for part payment of the Unless Sum.

20.  In the D2 4^th Aff, D2 claimed Ds paid the Assessed Costs from the balance at D1’s bank accounts with BOCHK. Although Ds only had small balance at their accounts with BOCHK, it was evident from the bank statements of D1’s accounts with BOCHK that “因為橡膠園營運的關係, 那些中國銀行戶口不時也會有金額存入及提取, 只是橡膠園的開支龐大, 這些金額並不能在銀行戶口積存”.

IV.  LEGAL PRINCIPLES

21.  I explained the factors outlined in Order 2 rule 5(1) of the RHC for relief against sanction and the relevant legal principles as to (a) the nature of an “unless order” and (b) the exercise of discretion to grant or refuse relief against sanction in Lee Sai Nam v Li Shu Chung & anor,[4] which I adopt but will not repeat here.

V.  DISCUSSION

22.  It was true Ds made prompt application (albeit initially by a wrong route) for relief against sanction. It was also clear that if relief against sanction were not granted, the Sanction would have taken effect automatically, and Ds would not be able to adduce witness evidence at the New Trial (then scheduled to be heard in March 2018) against Ps’ substantial claim against them, which would have adverse impact on their Defences.

23.  Essentially, Ds argued they had no present means to pay the Unless Sum, but given time they would be able to raise such sum to comply with the Condition. On such basis, it was said the default was not intentional. On the other hand, Mr Hon argued that Ds’ failure to comply with the Condition was intentional and contumelious. But it is important to remember that, as explained in Top One International (China) Property Group Co Ltd v Top One Property Group Ltd,[5] the exercise of discretion to refuse an extension of time to comply with a peremptory order or to relieve a party from sanction is not limited to cases of intentional and contumelious default.

(a) Rationale for the Sanction / Unless Order

24.  Before I embark to discuss D2’s various contentions, it is important to understand the nature/rationale for Sanction / Unless Order. As explained below, the application made in the Time Summons was actually contrary to the underlying rationale for the Sanction and the Adjournment Order as set out in the Reasons.

25.  It all began with the Summons that sought an adjournment of the Trial. It was a patently late application, and this court found there was no good reason for the delay. This court also found that even though the Defences depended on D2’s oral evidence, (a) Ds overstated the complexity of the present action, and (b) D2 could reasonably have given evidence via videolink. Not only did Ds failed to provide clear/cogent evidence to show suitable videolink facilities were not available in Phnom Penh, there was no prohibition against her going there to give evidence via videolink. I also found that since the trial issues were less complex than what Ds would have this court believe, it would have been appropriate to receive D2’s evidence via videolink. It was Ds’ delay in taking out the Summons when they had known of such need for some time (and hence Ds were the author of such delay) that made it impossible to arrange videolink facilities in time for receiving D2’s evidence at the Trial.

26.  This regrettably led to unsatisfactory alternatives of either refusing to adjourn the Trial in which case Ds would have no witness (since D2 could not leave Cambodia and videolink facilities could not be properly set up in time) or vacating/adjourning the Trial in which case Ps through no fault of their own would be postponed from judgment (if they were to succeed at the end of the day) with increased risk of diminished enforcement and recovery.

27.  It was in such context that the court considered the balance of justice between the parties, and came to the view that the interests of justice would be served by affording Ds the opportunity to call D2 as their witness at a new trial either in person or via videolink but only if (a) the new trial would be fixed as soon as practicable and (b) Ps’ exposure to financial risks due to deferral of the trial would be covered. The consideration in (a) above was manifested by the orders in paragraphs 1(b)-(d) above, which made clear Ds could only expect to have a circumscribed opportunity to call D2 to give evidence at the New Trial if they could, but they could not hope for an indefinite adjournment until when D2 would definitely be available. The consideration in (b) above was manifested by the orders in paragraphs 1(e)-(f) above (ie the Unless Order and Cost Order) which represented protection afforded to Ps as part of the balance of justice in face of Ds’ tactical move in deferring issuance of the Summons which led to the adjournment. I also explained in the Reasons that the Unless Sum was in broad terms equivalent to Ps’ claim for interest over a period of 6 months, ie the period for which the trial was likely to be postponed, and particularly held that the Condition was the only appropriate sanction to protect Ps for the adjournment of the Trial.

28.  Ds now sought leave to defer payment of the Unless Sum into court for about 6 months. The practical effect of such proposal (if allowed) would mean that Ds gained an adjournment of the Trial without having to give balancing protection for Ps that was crucial to the balancing exercise in the interest of fairness and justice that led to the Adjournment Order. Mr Hui emphasised that D2 was Ds’ key witness, so if relief against sanction was not granted Ds would be substantially prejudiced by having no witness evidence to support the Defences at the New Trial. But this very factor had been taken into account in arriving at the Sanction / Unless Order after balancing the interests of justice between the parties when application was made to adjourn the Trial, and this court had already concluded that such adjournment to give Ds an opportunity (not assurance) to call D2 to give evidence (if they could) would only be justified by the countervailing protection for Ps (who were completely innocent of any default) by way of the Unless Order. The result was that Ps would either be immediately assured there was financial cover for the delay caused by the adjournment of the Trial (through Ds’ unwarranted delay and no fault on Ps’ part), or they would be put in the position as if there was no adjournment, ie D2 would be unable to give evidence at the Trial. This court would not have granted an adjournment if there was no balancing protection for Ps for the delayed trial caused by the adjournment, and in such circumstances the Trial would have proceeded without D2 giving evidence. The Sanction was therefore a necessary feature of the balance of justice in arriving at a fair solution.

29.  Upon proper understanding of the rationale for the Unless Order, Ds’ present proposal by the Time Summons was plainly unfair and prejudicial to Ps. As Mr Hon submitted, the Sanction was important because once effective it would have been open to Ps to explore other avenues for earlier determination of the present action. Ps could consider applying to court to expedite the New Trial if the estimated length of trial was shortened should D2 be debarred from giving evidence. This was what happened after I granted the order at the Time Hearing (see paragraphs 13-14 above). In my view, overall fairness (and the less than cogent evidence as to Ds’ present and future means as discussed below) led inexorably to the conclusion that Ds’ application by the Time Summons should be dismissed.

(b)  Ds’ present means

30.  In seeking relief against the Sanction on the ground of present impecuniosity, it was incumbent on Ds to be frank and forthcoming about the entirety of their present means. But D2’s affirmation evidence left much to be desired:

(a)   D2 suggested D1’s rubber plantation business was expected to earn profits of US$140,000 to US$160,000 per month up to September 2017. Since D2 claimed such profits could be used for the Unless Sum, such expected profits must have been net and not gross profits. Further, the logical view from D2’s assertions (and she did not say otherwise) was that D1’s rubber plantation business is currently profitable. There was no suggestion that such business had not been profitable but would somehow became immediately profitable up to US$140,000 to US$160,000 per month. That being the case, D2’s affirmation evidence was conspicuously silent as to where the accumulated net profits were parked, and why such accumulated net profits could not have been used to contribute to the payment of the Unless Sum into court.

(b)   In the D2 4^th Aff, D2 claimed that every now and then trade receivables would be deposited into and withdrawn from the Defrozen Account or the account with BOCHK due to business operation of D1’s rubber plantation, but there was no significant balance due to “huge expenses” of the rubber plantation business. The effect of such assertion was that as a result of the need to pay “huge expenses” of the rubber plantation out of business income/turnover, there was little money left in the Defrozen Account or the account with BOCHK for payment of the Unless Sum. But it also meant the rubber plantation business was able to afford payment of “huge expenses” from its business income/turnover (as indeed it must in order to generate net profits). It begged the question why D1’s business income/turnover (that was sufficient to cover “huge expenses”) was not used to pay the Unless Sum. Quite irrespective of any net profits, in considering compliance with a peremptory order, it would not be open for Ds to cry impecuniosity but at the same time withhold available funds (eg working capital, cashflow, cash in hand and/or cash at bank) for other purposes, eg for its business operations.

(c)   According to D2, the Buyer made 6 payments to D1 during the period from 31 August 2016 to 17 June 2017 (when the Cambodian Order was effective). The 6 payments were not paltry sums (see footnote 1 above), and one would have expected such sums to have been deposited in bank account(s). At least there was no suggestion otherwise from D2. However, the June 2017 bank statement of the Defrozen Account (being the only bank account of D1 in Cambodia that could be used) as disclosed by D2 showed the Buyer’s last payment on 17 June 2017 (US$250,000) was not deposited into the Defrozen Account, and D2 was silent as to the whereabouts of such sum. Further, Ds did not disclose the bank statements of the Defrozen Account for August and October 2016 and February, March and April 2017, and D2 did not say anything about the whereabouts of the Buyer’s 5 payments of US$150,000, US$165,000, US$300,000, US$500,000 and US$647,594.65 (except that they had been disbursed for business expenses). These 6 payments that totalled US$2,012,594.65 were more than the Unless Sum.

(d)   For the Hotel business (if owned by D1 as D2 alleged), there was no explanation in the D2 3^rd Aff as to why revenue, cashflow and/or working capital (ie funds of any sort) of such business as distinct from real property rights could not have been used to pay the Unless Sum. The only response offered in the D2 4^th Aff was that the Hotel owed the bank US$300,000, and it ceased operations after the Cambodian Order was imposed. But apart from such bare assertions, Ds did not adduce any documents to show either the Hotel’s indebtedness to the bank or it had ceased operations. Since the information was plainly within Ds’ and not Ps’ knowledge, and it was Ds who came to court for indulgence, one would have expected Ds to place cogent objective evidence before the court to support their assertions. But despite Ps’ complaint, Ds fell short in this regard.

(e)   As seen below, the Email from the Buyer dated 29 June 2017 referred to “USD300,000 recently sent” (my emphasis). But the D2 3^rd Aff was totally silent on when (ie how recently) such sum was received by D1 (as seller), and why such sum could not have been used for partial payment of the Unless Sum. I note from the D2 4^th Aff that D1 received a sum of US$300,000 from the Buyer on 24 February 2017, but that could hardly be “the US$300,000 recently sent” being “the last one in terms of advanced before receiving the needed documents” (see Email dated 29 June 2017 referred to in paragraph 32 below) when the Buyer paid further sums of US$500,000, US$647,594.65 and US$250,000 on 22 March, 21 April and 17 June 2017 after the payment of US$300,000 on 24 February 2017. Question immediately arose as to whether there was another sum of US$300,000, and if so its whereabouts. Again, Ds were silent on this.

(c)  Agreement

31.  D2 suggested she would pursue payment of the Retention Amount of US$1,500,000 under the Agreement (now allegedly compromised to be US$1,300,000) which could be used as part payment of the Unless Sum.

32.  The Email from Teav Sophea for D1 to Philippe Monnin for the Buyer dated 21 June 2017 concerned payments for “final environmental certification” and “final tax certificate”. This was followed by another Email from Teav Sophea to Phillippe Monnin requesting the Buyer to settle their payment for the “final environmental certification” first “because we need to pay some thing need to settle very urgent”. According to the earlier email, the Buyer agreed to pay US$27,500 for the “final environmental certification”. Philippe Monnin replied by Email dated 29 June 2017 that whilst “the cost for Environmental approval and for the taxes certificate” were agreed, “as it was stated before, the USD300,000 recently sent, are the last one in terms of advanced before receiving the needed documents. Mr Pierre Vandebeeck will be coming in Cambodia the 7^th of July and it will be the opportunity to discuss with him about the final payment” (my emphasis).

33.  D2 claimed she had discussed with the Buyer about the Retention Amount on 8 July 2017, and it was alleged they reached agreement that the Buyer would pay a sum of US$1,300,000 in full and final settlement with US$450,000 to be paid by end of August 2017 and US$850,000 to be paid after discharge of the Cambodian Order. There was, however, no objective evidence in support of such assertion.

34.  The Email dated 29 June 2017 from Philippe Monnin for the Buyer reflected reluctance for further advance “before receiving the needed documents”, but there was no evidence when the “final environmental certificate” and “final tax certificate” would be or had been available, which cast doubt on whether agreement had really been reached with the Buyer over the Retention Amount on the terms set out above.

35.  Also, D2 had not explained why the alleged agreement was not reduced into writing given her admission that “事實上, 在跟[Buyer]收取出售款項的事宜上也不太順利及不太愉快, 我需要不時向[Buyer]追討, 才出現[Buyer]階段式地向[D1]繳付資金”. In the face of such historical difficulties, at the very least one would have expected D1 to have forthwith sent an email to the Buyer to confirm the terms of the agreement reached, especially when the Emails showed that email communication was an usual liaison channel between D1 and the Buyer.

36.  Mr Hon raised legitimate concern that given the various postponements since 2016 by the 5 variations to the Agreement and D1’s difficulty in prying consideration money out of the Buyer, there was no telling when exactly the Retention Amount would be forthcoming.

37.  Still further, there was no comfortable assurance that the reduced Retention Amount (even if it were forthcoming) would be fully dedicated for partial payment of the Unless Sum and not be used for any other purpose, especially when the affirmation evidence revealed D1 was not above prioritising payment of rubber plantation operation expenses over payment of the Unless Sum into court. I note the First Closing Consideration of US$16,200,000 comprised Prepayment of US$5,100,000 (for third party creditors and costs of the transaction), Secured Party Payout (for bank), First Closing Balance and Retention Amount as adjusted under clause 5.2. The Prepayment out of the First Closing Consideration was paid to the Escrow Agent for direct payment to Third Party Creditors by the Escrow Agent on behalf of D1 and/or the Company (clause 5.2(1)). No similar proposal was forthcoming in respect of the reduced Retention Amount for dedicated payment of the Unless Sum into court.

38.  In all the circumstances, I am not satisfied Ds had provided clear/cogent evidence that the reduced Retention Amount (US$1,300,000) would be assuredly forthcoming in the near future for part payment of the Unless Sum.

(d) Rubber plantation business

39.  D2 claimed the accumulated profits of D1’s rubber plantation business of US$140,000 to US$160,000 per month or US$175,000 to US$240,000 per month during the high season would enable Ds to raise sufficient funds by mid-January 2018. But there was nothing to substantiate such bare allegations. D2 did not produce any profit and loss accounts, ledgers, balance sheets or other accounting documents to show D1’s rubber plantation business would be able to generate such alleged level of profits. If such documents were in Cambodia, then surely D2 as director of D1 would have been able to exhibit them to the D2 3^rd Aff or D2 4^th Aff. If such documents were in Hong Kong, Wong could have produced them by affirmation. Such documents would also show D1’s true financial status, and inform the court as to the veracity of D2’s allegation of financial difficulties.

(e)  Carparks

40.  D2 claimed she was unable to mortgage the Carparks in time to raise funds to comply with the Condition. Even though D2 was in Cambodia, there was no reason why a power of attorney could not have been given to her husband Wong to arrange mortgage of the Carparks. Given that D2 had both Cambodian and Hong Kong lawyers, and further given the ease with which D2 was able to prepare her affirmations and have them properly legalised/notarised, there was no reason why D2 could not have given such power of attorney to set in train the mortgage application. Further, the Carparks were bought for HK$170,000 in 1990, but there was no evidence of the present value of the Carparks or their present monetary significance vis-à-vis the Unless Sum.

(f)  Hotel

41.  The Chinese translation of the land search record of the Hotel Land exhibited to the D2 3^rd Aff gave the reference A_IV0127, which matched the description of the land that was subject to the Cambodian Order. It also showed D2 was the owner of the Hotel Land, and D2 (not D1) acquired the Hotel Land on 19 February 2014 and mortgaged such land to a bank on 1 July 2014. Importantly, there was no evidence at all as to the indebtedness due to the mortgagee bank over the Hotel Land. D2 claimed the Hotel owed the bank US$300,000, but it was unclear whether it was banking facilities for the Hotel business or mortgage debt due to the bank in respect of the Hotel Land. Be that as it may, there was, quite simply, no objective evidence to show there would be any significant equity over the Hotel Land irrespective of the Cambodian Order.

42.  D2 claimed the Hotel Land could be mortgaged after conclusion of the Cambodian Proceedings. It was unclear whether landed property could be further mortgaged or re-mortgaged in Cambodia. In any event, apart from a bare assertion by D2’s Cambodian lawyers in their certificate dated 3 July 2017 that they had high confidence of success in the Cambodian Proceedings and that D2 would consequently be released, there was little to support such assertion. Whilst Mr Hui previously submitted I should not delve into the merits of the Cambodian Proceedings for the purpose of determining the Summons, different considerations apply to the Time Summons as Ds sought to urge this court to accept they would be able to pay the Unless Sum in about half year’s time. It was telling that the Cambodian lawyers did not condescend into the merits of the Cambodian Proceedings, and despite expressed confidence that D2 would be released upon conclusion of the Cambodian Proceedings, they were silent on whether and when the Cambodian Order would be lifted and/or whether and when D2 would be able to deal with the Hotel Land after conclusion of the Cambodian Proceedings. Further, the Cambodian lawyers also did not say whether Chen could appeal even if D2 succeeded in her defence, and if so the impact of any appeal on the Cambodian Order (if at all). Given D2’s self-confessed uncertainty over (a) when the Cambodian Proceedings would truly conclude and (b) the effect of conclusion of the Cambodian proceedings on the Cambodian Order, and the paucity of objective evidence as to the existing mortgage over the Hotel Land, there must be concern as to whether the Hotel Land could be further mortgaged or re-mortgaged if at all.

(g)  Summary on Ds’ financial means

43.  To seek relief against the Sanction, it was incumbent on Ds to adduce clear/cogent evidence to persuade the court to exercise discretion in their favour. But in light of the above analysis, Ds had not been forthcoming in assuring the court they had little assets in Hong Kong and/or elsewhere, and their claims of having access to further funds/assets to meet the Condition in the near future were uncertain and unreliable. In my view, Ds’ evidence in this respect was less than desirable.

44.  I am reminded of the guidance by Fok J in Top One International (China) Property Group Co Ltd at pp 618-619 as follows:

“41. In my view, the passage quoted above from Hytec is entirely consistent with the more pro-active case-management approach encouraged by the CJR and, in my view, the CJR has had the effect that the Hytec approach now reflects the approach that should be applied in this jurisdiction. That is to say, although intentional and contumelious disregard of a court’s peremptory order may be the most usual circumstance leading to the refusal of an extension of time to comply with a peremptory order, the exercise of the discretion to refuse an extension or to relieve a party from sanctions is not limited to cases of intentional and contumelious default. As directed by RHC O.2 r.5, the court should consider all the individual circumstances including those listed in r.5(1) at sub-paragraphs (a) to (j). Depending on the circumstances, failure to comply with one or a number of orders through negligence, incompetence or sheer indolence may be such as to lead the court to conclude there is an existence and degree of fault which warrants a refusal of an extension of time, so that relief from a sanction for non-compliance specified in a peremptory order (including an order striking out a pleading) should not be granted. Any other conclusion would, in my opinion, be to ignore the positive duty placed on parties to assist the court to further the underlying objectives of CJR (RHC O.1A r.3) and on the court to do so by actively managing cases (RHC O.1A r.4(1)).” (my emphasis)

45.  Up to the Time Hearing, there was no evidence of any attempt by Ds to at least partly comply with the Unless Order by paying cash from business income/turnover into court, or any effort by D2 to give a power of attorney to Wong to mortgage the Carparks. I am not persuaded Ds made serious effort to comply with the Condition in good faith but had been unsuccessful through bad luck or incompetence (when they had Hong Kong and Cambodian lawyers) or circumstances outside their control (as explained above and despite the Cambodian Order).

46.  For all of the above reasons, I granted the order set out in paragraph 13 above at the Time Hearing.

VI.  SUMMARY ASSESSMENT OF COSTS

47.  For the summary assessment of costs in paragraph 13(g) and (j) above, Ps lodged their Statement of Costs on 21 July 2017, and Ds lodged their List of Objections on 28 July 2017. Having carefully considered the items of costs and objections, and noting that (a) the Time Hearing took 1½ hours and (b) Ps had to deal with not just the D2 3^rd Aff but also the last-minute D2 4^th Aff, Ps’ costs on their Statement of Costs are assessed at HK$75,000. I therefore order that Ds shall forthwith pay costs in the sum of HK$75,000 to Ps.

HCA 1278 /2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1278 OF 2014

____________

____________

________________________________________________

DECISION ON SUMMARY ASSESSMENT ON COSTS

________________________________________________

1.  On 13 June 2017, pursuant to a summons filed by the 1^st and 2^nd defendants (collectively, “Ds”) on 31 May 2017 (“Summons”), I granted Ds’ application to vacate the trial of the present action scheduled to be heard on 21 June 2017 (“Trial”) on terms. I also granted an order that Ds do pay the 1^st and 2^nd plaintiffs (collectively, “Ps”) costs of and occasioned by the Summons (including costs of the hearing on 13 June 2017) and costs of and occasioned by and also thrown away by vacating and adjourning the Trial all on indemnity basis, such costs to be summarily assessed and paid forthwith (“Cost Order”).

2.  I have reserved my reasons for decision, and on 19 June 2017 handed down my reasons for decision (“Reasons”). For convenience, I shall adopt the abbreviations in the Reasons.

3.  On 26 June 2017, Ps lodged their Statement of Costs. On 3 July 2017, Ds lodged their List of Objections.

4.  I bear in mind that the costs under the Cost Order were to be assessed on indemnity basis so that all costs shall be allowed except insofar as they were of an unreasonable amount or had been unreasonably incurred, and any doubt shall be resolved in favour of the receiving party (see Order 62 rule 28(4A) of the Rules of the High Court).

5.  In Re Wing Fai Construction Co Ltd (Costs: Taxation) (2012) 15 HKCFAR 657, Chan PJ held that an award of costs on an indemnity basis was intended to allow for payment of costs on a more generous level as compared to the case of costs awarded on a party and party or common fund basis.  The object of such an order was to reimburse the receiving party “all (his) costs” and to give him “a complete indemnity” and “everything”, “shorn only of” or “except the unreasonable” or “anything that was seen to be unreasonable”.  Hence, the receiving party was prima facie entitled to be paid all his costs, provided that they were “costs of and incidental to the proceedings”, subject only to the qualification that any particular item which had been unreasonably incurred or any particular amount which was unreasonable must be excluded.  The receiving party did not have to show that his costs had been reasonably incurred or were of a reasonable amount, only that they were not unreasonable. 

6.  In particular, Chan PJ said “…… if the court, for good reasons, saw fit to award him his costs on a more generous basis (ie on an indemnity basis), [Chan PJ] did not think it should be regarded as unreasonable to allow him to recover more than the normal average fees so long as they are not clearly excessive or …… absurd or extravagant” (p 670), and “…… on an indemnity taxation, it would not be considered unreasonable for the receiving party to have engaged solicitors who charged more than the average hourly rates unless they are clearly excessive.  What is clearly excessive depends on the circumstances of each case” (p 672).

7.  In my view, these principles are also applicable to summary assessment of costs on indemnity basis.  At the same time, I am mindful of the proper approach to summary assessment of costs that had been laid down by the Court of Appeal in Poon Shu Fan v Wong Tin Yan [2012] 5 HKLRD 512, ie that the final figures assessed should not be disproportionate and/or unreasonable having regard to the nature and circumstances of the application or matter. 

8.  Here, Ps sought a total sum of $337,025 comprising solicitors’ profit costs and disbursements of $140,275 and counsel’s fees of $196,750. Ds sought total deductions of $120,325, thus proposing that costs be awarded to Ps in the sum of $216,700.

9.  For the purpose of the summary assessment herein, I shall adopt a broad-brush approach pursuant to Practice Direction 14.3 as it would be inappropriate to carry out any mini-taxation.

10.  In Ds’ List of Objections, they raised objection on 10 matters. I make the following general observations.

11.  First, the hourly rate of the handling solicitor of Ps’ solicitors (admitted in 2002) was $4,500. Ds suggested such rate exceeded the amount stipulated in Circular 08-213 published by the Law Society of Hong Kong, and proposed that an hourly rate of $4,000 be allowed. I disagree. Here, the relevant solicitor fee-earner had 15 years of post‑qualification experience, and bearing in mind the guidance in Re Wing Fai Construction Co Ltd (Costs: Taxation) (see paragraphs 5-6 above), I am unconvinced an hourly rate of $4,500 was in all the circumstances unreasonable, excessive or extravagant.

12.  Secondly, in respect of Item B1, Ps claimed for photocopying charges of 800 pages at $800. Ds suggested only $100 should be allowed as Ps did not file any affirmation and Ds prepared the hearing bundle for the Hearing. However, since costs were to be assessed on indemnity basis, it would not be unreasonable for Ps to provide the clients with copies of the Summons and supporting affirmations as and when they were served as well as the eventual hearing bundle so as to take proper instructions and/or to inform the clients, and to provide another set of these documents for counsel to seek his advice and for his use at the Hearing. There would also be correspondence with clients, counsel and Ds’ solicitors. In my view, $100 would not properly reflect the photocopy charges incurred. I am prepared to award $600 for Item B1.

13.  Thirdly, in respect of Item B2, Ps claimed attendance by litigation clerk for 6 times at $600. I note here that Ps’ claim was made on the standard party-and-party rate of $100 per attendance rather than on the litigation clerk’s time cost. Nevertheless, Ds raised objection and proposed allowance of $100 on the ground that the litigation clerk was only required to re-lodge the PTR bundle for the 2^nd PTR. However, since costs were to be assessed on indemnity basis, there would be deliveries of affirmations and hearing bundles to counsel and clients. I particularly note Ds served Yeung’s affirmation and the Wong Aff on Ps’ solicitors only on the day before the Hearing, and I could envisage the need for urgent delivery of copies to the clients and counsel. Ps also had to submit to court draft orders for approval and to file/serve sealed copy orders in relation to the Summons. I allow $600 in full for Item B2.

14.  Fourthly, in respect of item C1, Ps claimed 7 hours for attendance on the clients at $31,500. Ds suggested allowance of 1 hour. I bear in mind that apart from costs in relation to the Summons the Cost Order also allowed costs occasioned by and thrown away by vacating and adjourning the Trial. I also take note that leave was granted for such adjournment just a week before the Trial by which time preparations for the imminent Trial would have been underway. Briefing the clients/witness on what to expect at the imminent Trial and making preparations for trial (including usual pre-trial conference) would have taken place. Necessary liaison with and report to the clients for the 2^nd PTR were also wasted by the adjournment. In my view, allowing 1 hour would be unrealistic, but 7 hours would be excessive. I award 5 hours in the sum of $22,500 under Item C1.

15.  Fifthly, in respect of Item C2, Ps claimed 2 hours for attendance on other side (and court) at $9,000. Ds suggested allowance of 0.5 hour. Bearing in mind the necessary liaison with the court over approving relevant court orders and re-fixing of the trial dates, dealing with the matters set out in paragraphs 90-91 of the Reasons as well as having necessary liaison with Ds’ solicitors, I am not persuaded 2 hours were excessive. I allow $9,000 under Item C2.

16.  Sixthly, in respect of Item C3, Ps claimed 2.5 hours for attendance on counsel at $11,250. Ds argued such claim was excessive and only 0.5 hour should be allowed. As seen in the discussion in relation to Item E2 below, out of the 2.5 hours claimed 1.5 hours were for attending conference with counsel. Ds suggested (a) the conference with counsel was unnecessary and (b) there was overlap between Items C3 and E2. In my view, the latter point was easily dispelled because Item C3 was for solicitor’s fees and Item E2 was for counsel’s fees for attending the conference. There was no duplication at all.

17.  I disagree the conference with counsel was unnecessary. Given the lateness of the Summons and the uncertainty of its outcome until the Hearing only a week before the Trial, it was only to be expected that usual pre-trial conference would have been arranged. Further, the last-minute Summons had potentially serious implications for Ps as it might entail an adjournment of the Trial (which outcome did eventuate). It could not be said to be excessive, extravagant or unreasonable for Ps to have conference with counsel to discuss both litigation strategy and substantive preparation for the Trial in case it was not adjourned. I find such conference reasonable. As for the remaining 1 hour, it would have been taken up by preparing instructions and/or brief to counsel, and there would have been further communications with counsel given the late affirmations served by Ds only on the day before the Hearing. I allow $11,250 under Item C3.

18.  Seventhly, in respect of Item D1, Ps claimed 3.5 hours for preparation of documents at $15,750. Ds disagreed by pointing out that no documents were prepared by Ps’ solicitors for the Summons and/or Trial (which could not be re-used at the adjourned trial), and suggested allowing 0.5 hour by a litigation clerk at $1,000/hour. Other than court orders, I am unable to see what documents required preparation. However, in view of the terms of the order granted at the Hearing, which required speedy follow up for re‑fixing the Trial, I find it was reasonable (when costs were to be assessed on indemnity basis) for the solicitor fee-earner to attend to the drawing up of the relevant orders for approval. However, 3.5 hours would be excessive and I allow 1 hour at $4,500 under Item D1.

19.  Eighthly, in respect of Item D2, Ps claimed 8 hours for perusal of documents at $36,000. Ds contended that only perusal of the affirmations filed by Ds and the parties’ written submissions should be allowed, and suggested allowing 1.5 hours. I disagree. Surely Ps’ solicitors must be allowed to peruse the Summons too. Further, Ds had to bear costs thrown away by vacating/adjourning the Trial on indemnity basis. Since the Trial was only vacated a week before its commencement, preparations for the Trial must have been underway by then, so it would not have been unreasonable for the solicitor fee-earner to re-fresh himself with documents and materials in this case for the purpose of attending the pre-trial conference with counsel and also the then imminent Trial. Such efforts were wasted as the same exercise had to be re-done for the adjourned trial. But that said, counsel was involved and it would not be reasonable for the solicitor fee-earner to have deep review of the documents and materials in the course of pre-trial preparations. In all the circumstances, I find it reasonable and appropriate to allow 5 hours at $22,500 for Item D2.

20.  Ninthly, in respect of Item D3, Ps claimed 5 hours for preparation for the Hearing and 2^nd PTR at $22,500. Ds claimed this was excessive and a legal clerk or paralegal spending 0.5 hour at $1,000/hour would suffice. I do not understand the nature of such objection. Since Ds had no objection to Item D4 (ie attendance at the Hearing and 2^nd PTR by Ps’ solicitor fee-earner), such solicitor fee-earner rather than any legal clerk or paralegal should be the one who had to prepare for such hearings. That said, given the allowances above for attendance on counsel (including conference with counsel) and perusal of documents, and further given the involvement of counsel for the Hearing and 2^nd PTR, even on a generous indemnity basis, I am unconvinced the solicitor fee-earner would have to spend much time for preparation for the hearings. I allow 1.5 hours at $6,750 for Item D3.

21.  Tenthly, in respect of Item E2, Ps claimed counsel’s fees for conference for 1.5 hours in the sum of $6,750, which translated to an hourly rate of $4,500. I find such rate reasonable for counsel of 20 years’ experience. As explained in paragraph 16 above, there was no duplicate between this item and Item C3. For the reasons explained in paragraphs 16-17 above, I allow counsel’s fees at $6,750 for Item E2.

22.  Taking into account all of the above matters, having considered the nature and scope of the present action and the Summons, the affirmations filed in support of such summons, the skeleton submissions and list of authorities, what transpired at the Hearing and 2^nd PTR, the involvement of counsel, and considering all circumstances, I am satisfied the claim for costs in Ps’ Statement of Costs (save for the items I have adjusted down) was not unreasonable or disproportionate. Ps’ total costs on their Statement of Costs are assessed at $287,325 (being $600 (B1) + $600 (B2) + $22,500 (C1) + $9,000 (C2) + $11,250 (C3) + $4,500 (D1) + $22,500 (D2) + $6,750 (D3) + $12,375 (D4) + $6,750 (E2) + $30,000 (E3) + $135,000 (E4) + $25,000 (E5) + $500 (F)). I therefore order that Ds shall forthwith pay costs in the sum of $287,325 to Ps.

HCA 1278 /2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1278 OF 2014

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REASONS FOR DECISION

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I. INTRODUCTION

1.  The 1^st plaintiff Skyrun Light Industry (Hong Kong) Company Limited (“P1”) was/is a Hong Kong company, and the 2^nd plaintiff Guo Ming Fu (“P2”) was/is its director. The 1^st defendant Swift Resources Limited (“D1”) was/is a Hong Kong company, and the 2^nd defendant Ma Muk Ying (“D2”) and her husband Wong Yiu Ming (“Wong”) were/are its directors and ultimate owners.

2.  P1 and P2 (collectively, “Ps”) claimed (but D1 and D2 (collectively, “Ds”) did not admit) D1 owned/controlled a number of overseas companies. But there was no dispute D1 wholly owned and/or was in control of 2 Cambodian companies known as Swift Resources (Cambodia) Limited and Swift Rubber Limited (collectively, “Cambodian Companies”).

3.  In the present action, Ps sued Ds for breach of contract, undertaking and/or guarantee in the sum US$17,918,769.33 and interest at the rate of US$9,928.78/day from 20 November 2014 until full payment or at such rate/period as the court deemed fit.

4.  The trial of the present action was scheduled to be tried and heard before DHCJ Saunders on 21 June 2017 with 5 days reserved (“Trial”).

5.  On 31 May 2017, Ds filed a summons (“Summons”) pursuant to Order 25 rule 1B(2)-(3) of the Rules of the High Court (“RHC”) for leave to vacate the Trial and adjourn the case to a date (in consultation with counsel’s diaries) for a 2^ndpre-trial review (“PTR”) hearing with 30 minutes reserved for Ds to report on progress as to certain criminal proceedings regarding D2 in Cambodia (“Cambodian Proceedings”) with costs reserved (save that costs of the Summons be to Ps).

6.  On the same day, Ds filed D2’s affirmation in support of the Summons (“D2 1^st Aff”) to the effect that (a) D2 as Ds’ sole/key witness was not allowed to leave Cambodia to attend the Trial due to the ongoing Cambodian Proceedings and the prohibition order that restrained her from leaving Cambodia (“Prohibition Order”), which matters D2 claimed were beyond her control, and (b) she had considered giving evidence by videolink but took the view it was inappropriate means to do so, and further claimed it could not be arranged in any event.

7.  Ps did not file any affirmation, but opposed the Summons. Mr Hon, counsel for Ps, submitted Ps had reservations as to the truthfulness of the allegations in the D2 1^st Aff, and Ps should not be taken to have admitted the same.

8.  The Summons was returnable on 13 June 2017 (Tuesday) before me (“Hearing”). Mr Hui (and Ms Chung with him), counsel for Ds, lodged his written submissions on 8 June 2017 (Thursday). Mr Hon lodged his on 9 June 2017 (Friday). On 12 June 2017 (Monday), ie the day before the Hearing and immediately after the intervening weekend, Ds filed the 2^nd affirmation of their solicitor Yeung Adrian Ho Yi (“Yeung”) exhibiting a draft 2^nd affirmation of D2 (undated and unsigned) (“D2 2^nd Draft Aff”) and an affirmation by Wong (“Wong Aff”) that purported to address some points made in Mr Hon’s written submissions.

9.  Yeung claimed D2 undertook she would file the notarised D2 2^nd Draft Aff as soon as practicable. It was plain that on/after 8 June 2017 Ds’ solicitors were (a) in communication with D2 in order to prepare the D2 2^nd Draft Aff and (b) able to receive documents by email, fax, courier or other means from Cambodia as evident from the certificate dated 9 June 2017 by D2’s Cambodian lawyers exhibited to the D2 2^nd Draft Aff. No explanation was forthcoming as to why D2 did not give her personal confirmation under her own hand/signature that she agreed to the contents of the D2 2^nd Draft Aff. It was unsurprising that Ps had reservations about the same.

10.  At the Hearing, notwithstanding the terms of the Summons referred to in paragraph 5 above, and assuming the Trial was to be adjourned Mr Hui conceded as follows:

(a) The Summons proposed to adjourn the present action for a 2^nd PTR on a date to be fixed in consultation with counsel’s diaries, which in practical terms meant there was no firm time period proposed for such 2^nd PTR and there were no trial dates to be fixed as yet (presumably because it was unknown whether and when D2 would be able to return to Hong Kong). Mr Hui conceded, as he must, the present action had been ready for trial for quite some time, so it was rather pointless to have another PTR without scheduled trial dates. At the Hearing, Mr Hui toyed with the idea of scheduling a case management conference (“CMC”) instead of the PTR, but could not explain why it would be fair and just for Ps who through no fault of their own would thereby suffer regression of the present litigation from an imminent trial back to a PTR or (even worse) a CMC with no rescheduled trial dates in sight. In the end, Mr Hui conceded that if the Trial was to be adjourned to give Ds an opportunity to have D2 attend trial as witness (if they could), then to be fair to the “innocent” Ps who would be turned away from the doors of the trial court at the 11^th hour, the trial should be re-fixed as soon as practicable.

(b) The Summons proposed that if the Trial was to be adjourned Ps should have costs of the Summons but all other costs be reserved. At the Hearing, Mr Hui readily conceded Ps should have costs thrown away by the adjournment of the Trial on indemnity basis. Mr Hui also sensibly conceded Ps’ costs of the Summons should include costs of the Hearing. After all, Ds still filed/served affirmations in support of the Summons on the day before the Hearing, and Ps plainly had a right to be heard on the same. At one stage, Mr Hui suggested Ps’ costs of the Summons should be on party and party basis, but it was not easy to see the logic why only the “consequence” (costs thrown away by adjournment of the Trial) but not the “cause” of such consequence (costs of the Summons that sought such adjournment) should be on indemnity basis. In the end, Mr Hui conceded all costs were payable on indemnity basis.

11.  At the Hearing, after hearing submissions from Mr Hui and Mr Hon, I granted the following orders:

(a) the Trial scheduled to be tried and heard by DHCJ Saunders on 21 June 2017 at 10:00am with 5 days reserved be vacated and adjourned;

(b) Ps shall arrange to attend before the Listing Clerk within 14 days from today to re-fix the Trial with 5 days reserved before any judge at the earliest possible dates (and time to run during summer vacation) without accommodating counsel’s diaries or D2’s availability or otherwise for the re-fixed trial dates;

(c) at the same time as re-fixing the trial dates pursuant to (b) above, Ps shall also fix a date for the 2^nd PTR with 30 minutes reserved no later than 8 weeks before the re-fixed trial;

(d) the re-fixed trial once fixed and scheduled by the Listing Clerk pursuant to (b) above shall proceed as scheduled irrespective of any unavailability of D2 to attend such re-fixed trial due to legal proceedings and/or Prohibition Order involving her in Cambodia and/or any inability by D2 to depart/leave Cambodia;

(e) unless Ds do on or before 4:00pm on 4 July 2017 pay into court a sum of US$1,800,000 (or its equivalent in HK$ at the time of payment into court), D2 shall be debarred from giving oral evidence and Ds shall be debarred from adducing D2’s witness statements as hearsay evidence at the re-fixed trial;

(f) Ds shall pay Ps costs of and occasioned by the Summons (including costs of the Hearing) and costs of and occasioned and thrown away by vacating and adjourning the Trial all on indemnity basis, such costs to be summarily assessed and paid forthwith;

(g) Ps shall within 7 days after the Hearing lodge with court and serve statement of costs not exceeding 1 page pursuant to Practice Direction 14.3;

(h) leave to Ds to lodge and serve within 7 days thereafter succinct summary of objections of not more than 1 page in respect of Ps’ statement of costs;

(i) the summary assessment of costs will be by paper disposal (unless otherwise directed).

I have reserved my reasons for decision which I now give.

II.  PARTIES’ RESPECTIVE CLAIMS

12.  Ps’ case  Ps claimed that since the end of 2009 D1 (through the Cambodian Companies) negotiated with Ps to acquire/invest in a rubber plantation in Cambodia (“Plantation”), and as a result P1 and D1 entered into an agreement dated 26 January 2010 (“26/1/10 Agreement”) whereby it was agreed each party would invest/pay US$9,000,000. The 26/1/10 Agreement was subsequently varied so P1 was only required to invest/pay US$5,508,000 (which sum was paid between 3 February and 26 October 2010). On 30 July 2010, P2 and D1 agreed to allow P2 to jointly manage the Plantation’s business (“30/7/10 Agreement”). Pursuant to the 30/7/10 Agreement, P2 sent P1’s/his staff to station and work at the Plantation.

13.  Subsequently, disputes arose between Ps and Ds as a result of (a) Ds’ misrepresentation over the size of the Plantation as warranted under the 26/1/10 Agreement, (b) D1’s failure to perform its contractual duties under the 30/7/10 Agreement, and (c) D1’s breach of the 30/7/10 Agreement by demanding P1’s withdrawal from the management of the Plantation. To fully settle such disputes and to vary the terms of the 26/1/10 Agreement, 30/7/10 Agreement and another agreement dated 27 June 2011 between Ps and Ds (“27/6/11 Agreement”), (i) Ps and Ds entered into a written agreement dated 8 August 2011 (“8/8/11 Agreement”), (ii) Ds gave a written undertaking dated 8 August 2011 in favour of Ps (“Undertaking”), and (iii) D2 gave a written guarantee dated 8 August 2011 in favour of Ps (“Guarantee”).

14.  Under the 8/8/11 Agreement, Ds jointly/severally agreed inter alia (a) to pay Ps a total sum of US$12,000,000 by 5 instalments,[1] and (b) in the event of default in paying any instalment or part thereof D1 agreed to pay P1 interest at a daily rate of 0.1% (ie 36.5% pa) on all outstanding amounts. Ps claimed all parties under the 8/8/11 Agreement confirmed D1’s payment of the sum of US$12,000,000 to P1 was:

(a) to refund US$5,508,000 being the total sum invested/paid by P1 to D1;

(b) to pay investment return of US$5,508,000 equivalent to 100% of all monies P1 invested in the Plantation;

(c) to settle the parties’ disputes and/or Ps’ intended claims for loss/damage as a result of, arising from and/or caused by D1’s
breaches of the 26/1/10, 30/7/10 and/or 27/6/11 Agreements;

(d) consideration for Ps’ withdrawal from management of the Plantation.

15.  The Undertaking provided inter alia (a) Ds shall jointly/ severally and unconditionally guarantee their timely payment to be made to Ps’ prescribed bank account pursuant to the 8/8/11 Agreement, (b) in the event of Ds’ default they shall bear legal responsibility arising therefrom and pay Ps interest at a daily rate of 0.1% (ie 36.5% pa) on all outstanding amounts.

16.  The Guarantee provided inter alia that upon default in payment under the 8/8/11 Agreement, D2 shall bear Ds’ legal responsibilities and guarantee the same out of her own personal assets.

17.  Up to 20 November 2014, D1 paid Ps a total sum of US$2,071,222.67 under the 8/8/11 Agreement, but Ds in breach of the 8/8/11 Agreement and Undertaking and D2 in breach of the Guarantee failed to pay the balance of US$9,928,777.33 and outstanding interest of US$7,989,992 totalling US$17,918,769.33 with continuing interest on the sum of US$9,928,777.23 at the rate of US$9,928.78/day.

18.  Ps therefore claimed against Ds for US$17,918,769.33 for breach of the 8/8/11 Agreement and/or Undertaking with interest at the rate of US$9,928.78/day from 20 November 2014 until full payment (or alternatively at such rate and for such period as the court deemed fit). Ps also claimed against D2 for the same reliefs for breach of the Guarantee.

19.  Ds’ case  Ds admitted that on/about 26 January 2010 P1 and D1 entered into the 26/1/10 Agreement (ie a business venture to invest in the 3,200-hectares Plantation) whereby each of P1 and D1 was required to invest US$9,000,000, and D1 began to perform its duties under such agreement. Ds denied the 26/1/10 Agreement was subsequently varied and/or P1 was only required to contribute US$5,508,000 for the Plantation. Rather, Ds alleged Ps repudiated the 26/1/10 Agreement due to their failure to pay the balance of US$3,492,000 for investing in the Plantation.

20.  Ds (a) admitted (i) P2 and D2 signed the 30/7/10 Agreement for establishing 廣通有限公司, (ii) P2 sent his representative to be stationed at the Plantation and (iii) the parties had disputes over the management of the Plantation, (b) denied D2 misrepresented the size of the Plantation (which was 3,200 hectares) and (c) claimed there was never any representation/warranty that all rubber trees within the Plantation would be productive. For the 27/6/11 Agreement made by Ps and Ds, Ds denied they misrepresented to Ps about the productivity of the Plantation.

21.  Ds claimed (a) the 30/7/10 and 27/6/11 Agreements were signed on the understanding Ps would make up the outstanding investment sum of US$3,492,000, and (b) Ps and Ds made the 8/8/11 Agreement, Ds gave the Undertaking to Ps and D2 gave the Guarantee in favour of Ps, but (c) the 8/8/11 Agreement was not for settling disputes between the parties and/or for resolving matters arising from the 26/1/10, 30/7/10 and 27/6/11 Agreements.

22.  Ds claimed (a) the payment of US$12,000,000 under the 8/8/11 Agreement was subject to conditions that (i) Ps shall fully pay their share of investment in the Plantation under the 26/1/10 Agreement and (ii) the Plantation business “got listed successfully” (collectively, “Conditions”), which Conditions had not been fulfilled (“Unfulfilled Conditions Defence”), and (b) the sole purpose of signing the 8/8/11 Agreement was to comfort Ps’ “joint investors” but the parties did not mean to enforce such agreement until the Conditions were satisfied (“Non‑enforceability Defence”). As a result, Ds averred (1) P1 had/has no ownership/control over the Plantation business, (2) P1 did not provide or adequately provide consideration for the alleged obligation to pay US$12,000,000 under the 8/8/11 Agreement, and (3) Ds did not owe Ps any money (including the sum of US$12,000,000 and/or interest as alleged) under the 8/8/11 Agreement.

23.  Even though the Undertaking and Guarantee contained the terms as set out in paragraphs 15-16 above, Ds claimed they had been discharged for reasons set out above, and Ds were not liable to Ps under the 8/8/11 Agreement.

24.  Ds claimed that in view of Ps’ repudiatory breach of the 26/1/10 Agreement, their position with respect to the 8/8/11 Agreement, Undertaking and Guarantee was as follows:

(a) for the 8/8/11 Agreement, Ds denied they were liable to pay Ps US$12,000,000 with interest as alleged since Ps had not satisfied the Conditions;

(b) for the Undertaking, Ds claimed they were neither jointly nor jointly/severally liable to Ps under the 8/8/11 Agreement, and in any event the Undertaking had been discharged;

(c) for the Guarantee, Ds averred D2’s payment obligation under the 8/8/11 Agreement had not been triggered, and in any event the Guarantee had been discharged.

25.  D1 denied its payment of US$2,071,222.67 to Ps on/before 20 November 2014 was made pursuant to the 8/8/11 Agreement, and claimed it was made under the following circumstances:

(a) US$790,000 was partial payment for settling part of the present action against Ds in relation to 3 other loans owed to P1, and consequently P1 discontinued its claims in relation to these 3 other loans;

(b) upon the request of P2 who claimed to be in financial difficulties at the material time, the remaining balance was an advancement to P2 as deduction of the investment money Ps had paid for the Plantation.

26.  Ps’ reply  Ps denied they repudiated the 26/1/10 Agreement as a result of their failure to invest US$3,492,000 in the Plantation business, and further averred that (a) under the 26/1/10 Agreement P1 was required to pay half of 10% of the total investment sum (ie which investment sum was equivalent to the purchase price of the Plantation) as deposit by end of January 2010, (b) upon signing the 26/1/10 Agreement Ds represented the total investment sum was US$17,600,000 so P1 had to (and did on/before 3 February 2010) pay US$880,000 (US$17,600,000 x 10% x ½) as deposit, (c) in/about February/March 2010 P1 indicated it was considering to withdraw from the 26/1/10 Agreement and let the paid sum of US$880,000 be forfeited but P1 eventually agreed to continue with the 26/1/10 Agreement, (d) in/about early 2011 Ps discovered from the vendor the Plantation’s actual sale price (ie the investment sum) was US$9,189,000 (not US$17,600,000 as Ds previously misrepresented), (e) Ds denied such misrepresentation when confronted but could not produce evidence of payment of US$17,600,000 to the vendor, (f) the profit generated by the Plantation business was not distributed to Ps, (g) Ps eventually paid a total sum of US$5,508,000 which exceeded their 50% contribution for the actual investment sum under the 26/1/10 Agreement, and (h) despite repeated demands Ds failed/refused to refund to Ps such excess payment.

27.  Ps denied (a) the 30/7/10 and 27/6/11 Agreements were signed on the understanding Ps would make up any outstanding sum of US$3,492,000, (b) the payment of US$12,000,000 was conditional upon any matter under the 8/8/11 Agreement, and (c) the Undertaking and/or Guarantee were discharged as Ds alleged. Further, even if Ps repudiated the 26/1/10, 30/7/10 and 27/6/11 Agreements, all disputes arising therefrom were settled/resolved by the 8/8/11 Agreement, Undertaking and Guarantee.

28.  Ps claimed Ds paid US$2,071,222.67 in partial settlement of the sum of US$12,000,000 with interest accrued thereon under the 8/8/11 Agreement, Undertaking and Guarantee so there was partial performance by Ds: (a) the 1^st payment of US$90,138.67 was made on/about 21 July 2011 pursuant to the 27/6/11 Agreement, and (b) subsequent payments totalling US$1,981,084 were made by Ds in partial payment of the sum of US$12,000,000 with interest accrued thereon.

III.  ISSUES

29.  Mr Hui distilled the following issues from the parties’ pleadings for the purpose of the Trial:

(a) whether the 26/1/10 Agreement was varied so P1 was only required to invest/pay US$5,508,000;

(b) whether P2 was allowed to jointly manage the Plantation business;

(c) whether P1 had repudiated the 26/1/10 Agreement;

(d) whether Ds had made any misrepresentation to Ps;

(e) whether D1 had breached the 30/7/10 Agreement;

(f) whether the 8/8/11 Agreement was in nature a settlement agreement to settle the parties’ disputes or an agreement for Ds to pay Ps a sum of US$12,000,000 subject to the Conditions (and if so, whether Ps had duly satisfied the Conditions);

(g) whether the Undertaking and/or Guarantee had been discharged;

(h) whether the sum of US$2,071,222.67 D1 paid to Ps was made pursuant to 8/8/11 Agreement as a settlement agreement as Ps alleged.

But Mr Hon took the view that only (f)-(h) above were relevant to the Trial.

30.  At the Hearing, Mr Hui confirmed it was common ground that there were previous disputes between the parties, and Ds did make the 8/8/11 Agreement, Undertaking and Guarantee that Ps relied for their claims. On such basis, Ds carried the burden to raise/establish the Unfulfilled Conditions Defence and Non-enforceability Defence (collectively, “Defences”) to resist Ps’ claims on the 8/8/11 Agreement (and for that purpose Ds possibly also had to cross the hurdle of the parol evidence rule). Further, Mr Hui agreed Ds’ denial of liability under the Undertaking and Guarantee on the basis that they had been discharged rested on the vitality of the Defences that Ds had to establish. Still further, since (a) Ds accepted D1 did pay US$2,071,222,67 to P1 even though Ps were allegedly in breach of the 26/1/10 Agreement and (b) Ds claimed the payment obligation under the 8/8/11 Agreement, Undertaking and Guarantee had not been triggered given the Defences, it was Ds’ case that they did not owe Ps any monies under the 26/1/10 and 8/8/11 Agreements, Undertaking and/or Guarantee. In my view, it was for Ds to demonstrate such payment was for other unrelated purpose as they alleged.

IV.  PROCEDURAL HISTORY

31.  On 15 April and 3 May 2016, Ps and Ds respectively made P2’s witness statement and D2’s witness statement.

32.  On 30 June 2016, Registrar Lung granted leave for P1 to set the case down for trial before a judge alone in the fixture list with 5 days reserved. On 3 August 2016, P1 filed Notice of Setting a Case Down for Trial and Application to Set a Case Down for Trial. As explained above, the Trial was scheduled to be heard on 21 June 2017 with 5 days reserved.

33.  On 23 February 2017, L Chan J granted leave for P1 to add P2 as a co-plaintiff and for consequent amendment of the parties’ pleadings. At the PTR on 22 March 2017, L Chan J gave usual case management directions for preparation of English translations of documents, trial bundles and opening submissions.

34.  On 22 May 2017, the parties filed a Consent Summons for exchanging supplemental witness statement(s) as to fact on the amended pleadings on or before 31 May 2017. On 24 May 2017, DHCJ Saunders granted order in terms accordingly.    On 31 May 2017, Ds filed D2’s supplemental witness statement and Ps filed P2’s 1^st supplemental witness statement. On the same day, Ds filed the Summons and D2 1^st Aff.

V.  LEGAL PRINCIPLES

35.  As Mr Hui accepted, the Trial was a milestone date. Order 25 rule 1B(2)-(3) of the RHC provides that a party may apply to vary a milestone date, but the court shall not grant such application unless there are exceptional circumstances justifying the variation.

36.  The leading authority on the exercise of discretion under Order 25 rule 1B(2)-(3) of the RHC is Arko Ship Leasing Ltd v Winsmart International Shipping Ltd in which G Lam J set out the factors for consideration as follows:[2]

(a) What is the nature of the proceedings? What is at stake to the parties, in particular to the party who seeks the adjournment? (“Factor A”)

(b) Would the relevant witnesses definitely not be available to give evidence in any manner – for example, if a witness is unable to come to Hong Kong, is it possible nevertheless to receive his evidence via videolink? (“Factor B”)

(c) What is the nature of the difficulty preventing the witnesses from attending, and is the applicant responsible for creating that difficulty and if so to what extent? (“Factor C”)

(d) What is the nature of the evidence each relevant witness is intended to be called to give? Is he the only possible source of such evidence? (“Factor D”)

(e) Has the party seeking the adjournment made efforts to locate other persons who may be able to stand in to give similar evidence? (“Factor E”)

(f) Will the adjournment be likely to address the problem faced by the applicant? (“Factor F”)

(g) What is the risk of prejudice or other disadvantage to other parties if the adjournment is granted? (“Factor G”)

(h) The application must also be viewed in terms of the wider implications on the administration of justice, including the public interest in the efficient dispatch of the court’s business, and the effect on the interests of future litigants of vacating a hearing close to the date and possibly leaving the court empty, and in this context the court should take into account the timing of the application for adjournment. (“Factor H”)

37.  In Arko Ship Leasing Ltd, 4 out of 5 of the plaintiff’s intended witnesses had been arrested in Mainland China for matters unrelated to the action, and they were prevented from giving evidence in any manner in Hong Kong including via videolink. The learned judge considered there were exceptional circumstances which engaged the court’s discretion, and upon balancing the various factors decided “albeit with reluctance” to grant the adjournment sought.[3] It was, as the learned judge said, ultimately “a balancing exercise, a choice between unattractive options and a balance between the underlying objectives”.[4] Noting that the application was nevertheless a late one, which necessarily invited criticism from the court, the learned judge in that case held the delay should be reflected in an appropriate order for costs, ie that the plaintiff do pay the defendant costs of the application and costs thrown away by the adjournment on indemnity and forthwith basis, but no order as to costs for the hearing of the summons.

38.  In Velatel Global Communications Inc & anor v Chinacomm Limited & ors,[5] not cited by Mr Hui or Mr Hon, the 6^th defendant (who alleged he was charged with fraud and detained in Mainland China but documentary evidence to such effect was thin) applied in mid‑February 2016 to vacate the trial scheduled in mid-May 2016. The application was heard at the PTR in late February 2016 but had to be adjourned for proper evidence to be filed. At the 2^nd PTR in late March 2016, Au-Yeung J dismissed the summons with costs to the plaintiff.

39.  The learned judge was unimpressed by the 6^th defendant’s delay in informing his Hong Kong lawyers that he was detained since late October 2015 and charged in mid-January 2016. Au-Yeung J considered the factors mentioned in Arko Ship Leasing Ltd. She accepted it was a substantial claim and although the 6^th defendant was a crucial witness, there was little credible proof of his unavailability, and no attempt was made to apply for giving evidence by videolink or letter of request. Further, there was no credible evidence the adjournment would address the problem he faced since he could attend trial if acquitted but could be sentenced for a long period if convicted. In that case, the prejudice to the plaintiff was considered to be severe as the 6^th defendant appeared to be evading judgment with minimum security afforded by the Mareva injunction.

VI.  DISCUSSION

40.  Mr Hui submitted but Mr Hon disagreed the Trial should be vacated/adjourned. Both counsel addressed the factors outlined in Arko Ship Leasing Ltd to which I now turn.

(a) Factor A

41.  Both parties accepted Ps’ claim being a contractual claim for US$17,918,769.33 with daily interest at US$9,928.78 from 20 November 2014 until payment was a substantial claim.

42.  Mr Hui submitted the parties’ respective case was factually different so the determination of whether or not Ds had to pay the claimed sums essentially turned on witnesses’ oral evidence and their credibility, and it would be vitally important for D2 as Ds’ sole factual witness to testify/demonstrate her demeanour/credibility in the courtroom to facilitate the court in resolving the underlying factual disputes and issues of mixed fact and law. Mr Hui submitted it would not be in the interest of justice for the Trial to proceed without allowing Ds to present their most accurate, reliable and helpful evidence via D2 testifying in the courtroom.

43.  In my view, Mr Hui overstated the complexity of the present action. Even though Mr Hon in exemplary fairness did not seek to challenge the disputed issues were fact-sensitive in the sense the court’s findings on the Defences would have a bearing on the final outcome, as explained in paragraph 30 above, Ps based their claims on the written 8/8/11 Agreement, Undertaking and Guarantee that Ds accepted they made/signed, so it was for Ds to raise/establish the Defences. The certificate of estimated length of trial signed by Ms Chung and filed on 28 June 2016 was given on the premise that D2’s witness statement shall stand as evidence-in-chief. On such basis, D2 would have adopted at the Trial her statement evidence in relation to the contextual background and the Defences. Any complexity would fall on Ps who would have to deconstruct such evidence by cross‑examination (if they were able), a task which Mr Hon submitted Ps were ready to take on whether D2 gave evidence in the courtroom or via videolink. I also bear in mind that given the common ground that Ds did sign the various agreements, undertaking and guarantee, and that D1 did make various payments to P1, any complexity arising from documentary evidence on these matters would be reduced.

(b) Factors B, C and H

44.  Mr Hui submitted there was sufficient/adequate evidence showing D2 was prohibited from leaving Cambodia and would be unable to give evidence in the Hong Kong courtroom if the Trial were to take place as scheduled. According to the D2 1^st Aff,

(a) D2 was/is in Cambodia facing criminal Cambodian Proceedings against her on a charge concerning “董事特別背信”. Such charge essentially concerned a complaint by a Chen Chu Zhuang (陳楚壯, “Chen”) that D2 as director of Swift Resources (Cambodia) Limited defrauded him of a sum of US$28,000,000 by not paying him his share of sale proceeds in relation to certain rubber plantation business in Cambodia.

(b) On 8 July 2016, a Cambodian court (東埔寨特本克蒙省法院) formally accepted (正式受理) the Cambodian Proceedings. On 11 July 2016, a Cambodian prosecutor (柬埔寨特本克蒙省檢察官) considered that D2 was a foreigner and there was insufficient evidence to secure a conviction, so the Cambodian Proceedings were transferred to “國家警察總署司法警察中央局長”. On the same day, Chen’s lawyers applied to the Cambodian “司法部長” for “特本克蒙省初級法院檢察院” to hear the Cambodian Proceedings, setting out Chen’s accusations against D2, ie that D2 tricked Chen into investing US$28,000,000 in Cambodia by purchasing 2 state rubber plantations totalling 8,000 hectares, but after D2 sold about 4,000 hectares of such rubber plantations she avoided Chen and did not pay him his share of the sale proceeds.

(c) D2 denied such allegations, and claimed part of the sale proceeds in the total sum of US$14,700,000 were used to repay bank loans, suppliers’ debts and outstanding salaries for plantation workers, which sums were deducted by the plantation’s purchaser from the sale proceeds before the remaining balance of US$690,000 was given to D2 who then deposited US$128,000 and US$150,000 into Chen’s designated bank accounts. D2 claimed she would defend the Cambodian Proceedings on the basis there was no fraud and she had duly paid Chen his share of the sale proceeds after discharging existing bank/trade debts of the rubber plantation business.

(d) On 28 July 2016, “司法部長” wrote to allow “特本克蒙省檢察官” to investigate/handle the Cambodian Proceedings in accordance with legal procedure. On 30 July 2016, Cambodian Presiding Judge Loch Lao (調查法官, “Presiding Judge”) issued a warrant of arrest (拘留令) and detained D2 in prison. On 2 August 2016, the Presiding Judge granted an order to restrain D2 and Wong from transferring their shares in the Cambodian Companies to third parties.

(e) On 10 August 2016, D2 pledged with the court the title deeds in respect of 2,000 hectares of rubber plantation owned by Swift Resources (Cambodia) Limited, so the Presiding Judge made an order that D2 be temporarily released from prison (暫時釋放獄外之指令). On the same day, the Presiding Judge also granted the Prohibition Order (將被告置於法院調查程序之指令) that prohibited D2 from leaving Cambodia without leave of the Presiding Judge. Further, D2 was mandated to report to the Presiding Judge of the Cambodian Tbaung Khmun Provincial Court of First Instance on the 10^th day of each month.

(f) On 15 August 2016, “三洲府省初級法院主審法官” issued a judgment for temporary forfeiture (暫時沒收裁定書), “決定暫時充公湖邊酒店所在的土地所具有的不動產權狀, 及暫時凍結[D2] 、Swift Resources (Cambodia) Limited公司及Swift Rubber Limited公司(下稱「被執行人」)在中國銀行的賬戶, 禁止被執行人收集債權或進行其他處理, 及禁止中國銀行償還被執行人的債務”. On 16 August 2016, “特本克蒙省初級法院Chhit Vinea法官根據上述的暫時沒收裁定書出具保存執行法院之沒收裁定書, 凍結被執行人於中國銀行的不同貨幣賬戶”.

(g) Since the date of the Prohibition Order, D2 could not and did not leave Cambodia. In fact, on 5 January 2017, the Presiding Judge rejected D2’s oral application to leave Cambodia for Hong Kong.

(h) At the request of Chen’s representative, in/about mid‑December 2016, D2 applied to “特本克蒙省初級法院 …… 把被禁止買賣的百份之十的橡膠園股份進行解封, 好讓[D2]可以進行股份買賣。而[Chen]指[D2]提出解封申請及並曾要求離開柬埔寨, 不合理地要求[D2]把2,800萬美元提交法庭作擔保。於2017年1月17日, 柬埔寨的中級法院根據[Chen]一方的要求, 判令[D2]繳交2,800萬美元作擔保。直至2017年2月14日, 上訴法院才把2017年1 日17日的判決撤銷”.

(i) The trial of the Cambodian Proceedings was scheduled to commence on 20 April 2017. But Chen’s lawyers unexpectedly applied for an adjournment so the trial did not commence as scheduled. On 8 May 2017, D2 finally received a summons requiring her to attend trial in the Cambodian Proceedings on 8 June 2017. D2’s Cambodian lawyers advised that the verdict was expected to be handed down about 1 month after commencement of the trial in the Cambodian Proceedings.

(j) The Prohibition Order would remain in force at least until the verdict was handed down in the Cambodian Proceedings, so D2 would not be able to leave Cambodia to attend the Trial in Hong Kong scheduled to commence on 21 June 2017.

45.  According to the unverified D2 2^nd Draft Aff, D2 claimed that on 8 June 2017 Chen’s lawyers again unilaterally applied to adjourn the trial in the Cambodian Proceedings on the basis that Chen could not be located, and succeeded in doing so. D2 had no idea when the trial in the Cambodian Proceedings would take place in future. The certificate by D2’s Cambodian lawyers dated 9 June 2017 asserted that in the meantime D2 could not leave Cambodia.

46.  Mr Hui submitted D2’s inability to come to Hong Kong to give evidence at the Trial was beyond her control. Mr Hon in his written submissions conceded it would be difficult for D2 to attend the Trial in Hong Kong on the scheduled trial dates if the Prohibition Order was genuine, but he complained D2 did not point out which part of the Prohibition Order issued on 10 August 2016 prohibited her from leaving Cambodia.

47.  According to the Chinese translation of the Prohibition Order exhibited to the D2 1^st Aff, it was stated:

“因此, 玆決定

1. 將被告人[D2], 女, 60歲, 中國人(背景如上), 處於法院之調查程序中, 以便要求其完成以下義務:

甲/ 在無調查法官之批准下, 不得離開柬埔寨王國領土;

乙/ 必須響應調查法官指定的所有人之傳喚。

丙/ 必須在每月初的10號在本特克蒙省初級法院調查法官前面出席。

若故意逃避法院之調查義務, 則將被調查法官監禁。”

In the absence of countervailing evidence, I am prepared to deal with the Summons on the basis that D2 was/is subject to the Prohibition Order and could not leave Cambodia without leave of the Presiding Judge, and no such leave had been granted pending trial involving D2 in the Cambodian Proceedings.

48.  By the D2 1^st Aff, D2 went on to claim she had reasonably and duly explored the possibility of giving evidence via videolink from Cambodia but it was not a viable option since (a) no or no reliable videolink facility was accessible to her in Cambodia, and (b) in any event it would not be appropriate to receive her evidence via videolink at trial in the present action.

49.  In relation to D2’s contention that no videolink facility was accessible to her in Cambodia, she explained in D2 1^st Aff as follows:

(a) D2’s current residence at Dirt Road, Sangkat Kracheh, Banlung City, Ratanakiri Province, Cambodia (柬埔寨皇國，拉達那基里省，幫隆市，卡占分區，土路) was in a remote and underdeveloped area 8 hours’ drive away from Phnom Penh (金邊). D2 claimed internet access and electricity supplies were unstable there, and power failure was a common and frequent occurrence. Although D2 had endeavoured to search for videolink facilities nearby, neither the courts nor law firms had such facilities.

(b) D2 also explored the possibility of travelling to more developed cities such as Phnom Penh, but it was not a feasible option since it would take around 8 hours for D2 to travel to Phnom Penh and D2 would also face difficulties in locating suitable places/facilities for giving evidence via videolink there.

On such basis, Ds argued D2 had no reasonable access to any or any reliable videolink facilities in Cambodia.

50.  Although D2 indicated it was not feasible to give evidence via videolink in the area near her residence in Cambodia by citing reasons such as poor internet connection and unstable electricity supply, it was quite evident D2 was not prohibited from travelling within Cambodia. Other than a bare assertion that she would face difficulties in locating suitable places/facilities for giving evidence via videolink in larger and more developed cities such as Phnom Penh (Cambodia’s capital city), D2 had not condescended upon particulars as to what steps she had taken to locate such facilities, whom she contacted, when she did so, and what precisely was the result of her enquiries. The certificate by D2’s Cambodian lawyers dated 19 May 2017 was careful in saying Cambodian courts did not provide videolink facilities, but there was no evidence that other government, voluntary or commercial institutions did not have such facilities. Mr Hon submitted it was inconceivable D2 could not find a suitable venue in Phnom Penh (such as 5-star or even 6-star hotels) that could provide stable internet connection, stable electricity supply and appropriate equipment for giving evidence via videolink. In making the application by the Summons, Ds came to court to seek an indulgence, and it was incumbent upon them to provide clear and cogent evidence to show they had taken all reasonable steps to overcome such difficulty. This, in my view, they had not done, and there was force in Mr Hon’s submission.

51.  But that was not all. Ds suggested giving evidence by videolink facilities in Phnom Penh was not feasible because it would take around 8 hours to travel from her residence. I reject such reason. D2 was not prohibited from travel within Cambodia, and there was no reason why, if videolink facilities were available in Phnom Penh, she could not have travelled to Phnom Penh ahead of the arranged time to give evidence and stayed, say, in a hotel in Phnom Penh for at best 1-2 nights. There was no suggestion that she could not so travel and stay, say, in a hotel in Phnom Penh or she could not afford the cost of such travel and stay.

52.  That left Mr Hui’s other contention that it would not be appropriate to receive D2’s evidence via videolink at trial in the present action. I should note at the outset Mr Hon made clear Ps did not object to D2 giving evidence via videolink, but acknowledged Ps could not force D2 to do so.

53.  Mr Hui submitted that giving evidence outside the courtroom via videolink is an exception rather than the rule, and the present action was not an appropriate one for receiving oral evidence via videolink since D2’s credibility would be the core issue for resolving the factual issues and/or issues of mixed law and fact.

54.  In Re Chow Kam Fai, ex p Rambas Marketing Co LLC, DHCJ To (as he then was) stated as follows:[6]

“28. …… The starting point is the fundamental basis that justice is dispensed by the Court of Justice and as a rule the parties have to come to the court to obtain justice. Secondly, justice is dispensed in open court accessible to the public so that any member of the public can watch the administration of justice in action. Justice has to be openly seen to be done. Within the court building and its precincts, the parties, their witnesses and their legal representatives are protected by law. They are free to prosecute their claim or their defence without fear. On the other hand, witnesses are obliged by law, the solemnity of the court atmosphere and the threat of immediate sanction to give evidence on oath or under affirmation and to tell the truth. They are subject to the sanction of the court if they should refuse to answer questions on oath or disobey an order of the court or otherwise behaves disrespectfully. Likewise, the judge can watch the witnesses giving evidence under the solemnity of the court atmosphere. Without exaggerating the notion of the dignity of the court and its authority, proper administration of justice must be conducted and seen to be conducted by proceedings within the courtroom. Hence, giving evidence outside the courtroom via video link is an exception rather than the rule. It is a privilege and not a right. This is my starting point.”

55.  But Re Chow Kam Fai concerned a judgment debtor against whom a warrant for arrest had been issued after he refused to comply with an order issued under Order 49 of the RHC requiring him to attend court for cross-examination. The judgment creditor subsequently petitioned for his bankruptcy which the judgment debtor opposed. The hearing was the petitioner’s application under Order 38 rule 2(3) of the RHC requiring him to attend court for cross-examination on his affidavits. It was in such context that the judgment debtor suggested giving evidence from overseas by videolink. DHCJ To was unimpressed by the judgment debtor’s reasons for refusing to give evidence in court, and found he was seeking a collateral advantage by asking the court to protect him from the consequence of disobeying the court order which resulted in the warrant of arrest.

56.  On appeal to the Court of Appeal in Re Chow Kam Fai David,[7] Rogers VP said as follows:

“17. In my view the judge was quite correct in this approach. The starting point must be that proceedings are conducted in court ……

18. …… I have no doubt that the atmosphere of a court is highly important as regards the taking of evidence. The solemnity of court proceedings and its atmosphere is something which, I have no doubt, plays an important role in the way justice is administered.

19. There is no doubt that VCF is a highly useful tool. It must be a question of judgment in each case as to whether VCF should be used for the taking of evidence. No doubt, on those occasions when the witness is giving evidence that is technical or purely factual, without important issues as to credibility, a court may be more disposed to allow evidence to be given by the use VCF. Questions of cost and convenience are no doubt also important considerations that the court will have to weigh in deciding whether to allow evidence to be given using VCF. But, first and foremost, it seems to me that the judge was correct in his approach that a party wishing to give evidence using VCF should establish a sound reason why that privilege should be accorded.”

57.  In Mahajan v HCL Technologies (Hong Kong) Ltd, Rogers VP again said as follows:[8]

“7. As far as I am concerned the solemnity of the court is most important. In Hong Kong it is important that the members of the court, both the judges and counsel appearing, are properly attired. It is important that the court proceedings are carried on in court in the way that we do. It does give a solemnity to the occasion. One only has to observe parties and witnesses coming to court to observe their demeanour. It does have an impact. Giving evidence via a television link, in my view, dispels part of that. The place for a judge to sit, for witnesses to give evidence and for submissions to be made, is in court.”

58.  In that case, the defendants sought leave for the 3^rd defendant to give evidence from India via video conferencing facilities on the ground that he was a very busy and successful businessman who was required to attend board meetings and had a medical condition. The trial judge refused the application, and held that giving evidence by videolink was an exception rather than the rule, and it was for the witness to justify why he should be accorded the privilege. I note this is another case in which the applicant’s own reasons for giving evidence by videolink were unattractive.

59.  Similar principles were discussed and adopted in Asia-Pac Infrastructure Development Ltd v Ing Yim Leung Alexander[9] (but this again was a case in which the sole witness for the plaintiff applied to give evidence by videolink because he wished to positively avoid coming to Hong Kong due to an unsatisfied judgment debt against him in unrelated litigation) and in Daimler AG (formerly Mercedes-Benz AG) v Leiduck, Herbert Heinz Horst & anor[10] (another case in which the applicant sought to avoid coming to the courtroom in Hong Kong and to give evidence by videolink). Mr Hui cited the latter case but failed to inform court it was overturned on appeal to the Court of Appeal in Daimler AG v Leiduck (No 2).[11] Barma JA (Fok JA agreeing) accepted but distinguished the earlier authorities, and allowed the applicant to give evidence by videolink from Germany as uncontradicted medical evidence showed it would be life-threatening for the 80-year-old 1^st defendant to travel to Hong Kong.

60.  More recently, Ng J in In the matter of James Henry Ting ex p Akai Holdings Limited,[12] not cited by either Mr Hui or Mr Hon, declined the debtor’s application for leave to be cross-examined on his affidavit evidence by videolink due to alleged ill-health. Although the intention to make such application was alluded to previously, the summons was not issued until 18 days before the hearing of the petition and returnable 7 days before such hearing. Ng J held there was no good reason for the late application, and found force in the petitioner’s criticism that the last minute application was “characteristically tactical”. The learned judge was unconvinced the debtor was unable to come to Hong Kong, and held he failed to make out a valid case it would be just for him to testify by videolink. Ng J referred to the above authorities, and his decision was upheld on appeal by the Court of Appeal:[13]

“4. The judge has certainly not misunderstood the law. Nor, in our view, has this court’s recent decision in Daimler AG v Leiduck (No 2) [2013] 2 HKLRD 822 established anything new in terms of the proper approach to a request for giving evidence via video link. As for its actual decision, like all other decisions, the case was decided on its own facts. All we need say is that the debtor’s alleged condition, even taken into account Dr Chen’s report, is far removed from the condition of the 1^st defendant in Daimler AG, and the facts of these two cases cannot be more dissimilar. The judge made a similar point below.

5. The judge was fully entitled to take into account the factors that he mentioned in his reasons. In particular, he was entitled to take a very dim view, particularly in this post‑CJR era, of the delay involved in the present case and the lack of adequate and satisfactory explanation for the same. This applies …… to the application for taking evidence via video link ……” (my emphasis)

61.  Mr Hui submitted that here D2 was Ds’ only factual witness so it would be in the interests of justice for the trial judge “to hear [her] testimony “live”, and be in a position to see/scrutinise [her] some 10 feet away in the witness box, and not allow [her] to be “shielded” through the medium of a plasma screen”.[14] Even if Ps were satisfied with cross‑examining D2 via videolink, it was said Ds (and the court) had a legitimate interest to see D2 give evidence in the courtroom so she could fully demonstrate her demeanour/credibility to facilitate resolution of the factual issues and/or issues of mixed fact and law that depended on her testimony and credibility. On such basis, Mr Hui argued the present action was unsuitable for receiving D2’s evidence via videolink which in any event should be the exception rather than the rule, and hence it would be necessary to adjourn the Trial in order to secure the fair and just resolution of disputes in accordance with the parties’ substantive rights.

62.  In my view, although traditionally the adjudication of civil disputes usually requires the attendance of witnesses at a trial for adducing their evidence by the conventional mechanism of examination-in-chief and cross-examination, there is in contemporary litigation a greater willingness to receive certain evidence by other media, eg via videolink, in furtherance of the interests of promoting efficiency and expedition and avoiding unnecessary time, costs and complexity. The existence of Practice Direction 29 on Use of the Technology Court speaks of such development.

63.  Indeed, the authorities are clear that in cases where other permitted methods of receiving evidence (eg via videolink) are canvassed, the court is invested with a broad discretion, and such discretion is informed by the court’s assessment of the interests of justice (as between the immediate parties and in the wider sense of the expeditious and efficient management of litigation) in a particular case. This may entitle the court to consider a broad range of factors including the underlying objectives of saving expense and fairness to both parties. Plainly, the court’s approach in coming to an evaluative judgment on such issue (especially when the application is made at the brink of a scheduled trial) is not confined to bilateral inter partes considerations as the court will also be alert to material considerations on the administration of justice, ie the court’s ability to determine any claim in accordance with the interests of justice and fairness to both parties. How that discretion is to be exercised in any particular case will depend on the circumstances of the case as a whole and the court’s assessment of the justice of the matter. Save for the above, there is no defined limit or set of circumstances placed upon the exercise of discretion to permit videolink evidence.

64.  That said, I must emphasise there is nothing inherently unfair in permitting evidence to be given via videolink. In appropriate cases, it is possible for cross-examination to be conducted via videolink with little impairment of effectiveness. In contemporary post-CJR litigation, litigants and courts should not be afraid to embrace positive and, may I say, welcome benefits of technological developments. The relevant consideration is whether the case in question is an appropriate case for receiving evidence in such manner.

65.  I also bear in mind that most of the authorities discussed above concerned applicants who were reluctant to travel to court to give evidence in person and it was their opponents who objected to the applicants’ wish to give evidence via videolink on the basis inter alia that evidence by videolink was not the same as having the witnesses in court, particularly when the applicants’ reasons for not coming to court were unattractive and when it comes to cross-examination in the particular circumstances of those cases its force and effect might be weakened by “the medium of a plasma screen”.

66.  Whilst I accept, as Mr Hon fairly recognised, (a) receiving evidence of a witness via videolink would introduce additional layer of logistics that was less than ideal and would carry some risk of technical glitches of one kind or another, and (b) requiring interpreters meant the process of giving evidence would be more protracted than it might otherwise be, I find Mr Hui overstated the extent to which the appearance of D2 as witness via videolink was likely to prove to be substantial impediment to effective taking of evidence (the bulk of it would be cross‑examination since it was expected D2 would adopt her statement evidence as her evidence-in-chief) or to operate to Ds’ disadvantage.

67.  First, I have found there was insufficient evidence before this court to demonstrate that reliable videolink facilities were unavailable in Phnom Penh, a place where D2 could have travelled to and stayed for 1‑2 days. Secondly, Ps were prepared to bravely take on the “disadvantage” of cross-examination via videolink. Thirdly, I have also found that the issues were less complex than what Mr Hui would have this court believe, and I am not persuaded that in a case of this kind where there was little dispute over the objective evidence of having entered into the written agreements, undertaking and guarantee and having made the various pleaded payments, there was likely to be great difficulty as regards assessment of witness demeanour. In the context of the present action, upon balancing the requirement for fairness to both parties, I find assessment of witness evidence received in such manner would be something that could be left for the trial court to judge and, if necessary, to make allowance for accordingly.      Fourthly, D2 pointed out the trial would be conducted in English, and she would need interpreter service as her mother tongue was Mandarin and she did not know English. D2 expressed concern as to whether or not she and the court interpreter could communicate efficiently, effectively and accurately via videolink given the instability of internet and electricity in Cambodia, which Mr Hui submitted would add to the risk for findings to miscarry. But as pointed out by Mr Hon, interpreter would still be necessary if D2 was to attend court in Hong Kong. And I have found there was insufficient evidence before this court that stable/reliable internet and electricity facilities in Phnom Penh were unavailable.

68.  Here, whilst Ps accepted that in an ideal world every witness would be examined and cross-examined in person in court, for D2 to give evidence via videolink would be a less unattractive option compared to adjourning the Trial. But by the time of the Hearing there was grave concern over whether receiving evidence via videolink would be feasible at all given there was just 1 remaining week until the Trial.

69.  First, as Mr Hon submitted, neither Ps nor the court were in no position to compel D2 to give evidence whether via videolink or otherwise. But the D2 1^st Aff and D2 2^nd Draft Aff indicated D2’s reluctance to give evidence via videolink. Secondly, although Mr Hon boldly stated from the bar table videolink arrangements could be arranged in time, there was no evidence before this court that any available venue with satisfactory quality of videolink had been seriously explored as yet. Thirdly, the availability of the Technology Court for the scheduled trial dates was unknown. Fourthly, application had to be made to the trial judge for case management directions on use of the Technology Court and videolink facilities to receive witness evidence. Fifthly, it was likely the trial judge might have to impose (and see to the implementation of) suitable and proportionate conditions to the videolink evidence order in the interests of fairness to both parties and in order to avert any possible misuse of the court’s process, and such conditions might include, say, (a) requiring D2 to testify under affirmation in an isolated room unaccompanied, (b) requiring D2 to be in communicado from beginning to end of her evidence, (c) allowing Ps to have a legal representative present for oversight of these matters, (d) requiring clean hearing bundle to be placed before D2, and (e) D2 agreeing to be strictly bound by all procedural and practical directions given by the trial judge. In my view, it was wholly unrealistic to say all of the above matters would be resolved and tidily put in place in/about 5 working days.

70.  This nicely brings the discussion to why Ps and the court were left in such procedural quandary. Mr Hon submitted in this respect the court should also take into account the timing of the Summons. Ps complained Ds waited until less than a month before the Trial to inform Ps of the Cambodian Proceedings and Prohibition Order and to file the Summons (with a return day that was just a week before the Trial), and suggested Ds’ real intention and tactic were to adjourn the Trial.

71.  D2 claimed she had a reasonable explanation for the delay in that she thought the Cambodian Proceedings would have an adverse and/or negative impact on the present action, so she was reluctant to and did not disclose the existence of the Cambodian Proceedings to her Hong Kong lawyers. Before D2’s application to leave Cambodia was rejected by the Presiding Judge in January 2017, she thought she would be allowed to leave Cambodia for attending the Trial in Hong Kong so long as she duly made an application to the Cambodian courts, but it turned out her application was rejected by the Cambodian court. Further, the trial of the Cambodian Proceedings was originally scheduled to commence on 20 April 2017 with the verdict expected to be handed down before commencement of the Trial in Hong Kong, so D2 originally thought the Trial would not be affected by the Cambodian Proceedings. But Chen unexpectedly applied to adjourn the trial of the Cambodian Proceedings to 8 June 2017, thus making it impossible for D2 to give evidence in the courtroom in Hong Kong at the Trial.

72.  I must say Ds’ reticence in informing Ps of the developments in Cambodia were, quite simply, unattractive. The Prohibition Order came into existence at about the time when Ps applied to set down the present action for trial in August 2016. D2’s main reason (主要原因) was that she subjectively considered “面對刑事起訴一事並不光彩”, but when viewed objectively (as I must in balancing the interests of both parties) this was necessarily a poor excuse for being silent for about 9 months.

73.  In the post-CJR era, parties are expected to adopt a cards‑on‑the-table approach to litigation. The Prohibition Order was plainly a matter that had potential impact of the Trial, and Ps being immediate parties to the litigation had a right to know of matters that might affect the Trial. Likewise, the Hong Kong courts with their limited resources also expected litigants to be frank about matters that might affect court time, which time should be deployed effectively. D2 claimed she orally applied to the Cambodian court in January 2017 for permission to leave Cambodia and was refused, and even then there was no intimation to her own Hong Kong lawyers let alone Ps and/or the Hong Kong court of the possibility that she might not be able to attend the Trial in Hong Kong. The reason Ds offered for such “non-disclosure” was D2 thought the Cambodian Proceedings would have an adverse and/or negative impact on the present action, which went a long way to show D2 was quite prepared to keep material matters up her sleeve. To make matters worse, Ds remained silent even when parties attended court for amendment of pleadings in February 2017 and, more significantly, for PTR in March 2017 (when the parties must have been expected to apprise the court of any factor that might affect the Trial), and also when parties made a consent summons in May 2017 (less than 10 days before the Summons was filed) for further statement evidence.

74.  Mr Hui submitted it would have been premature for D2 to apply for an adjournment of the Trial before 20 April 2017. But it is not lost on this court that D2 only presented a picture of potential acquittal at the trial of the Cambodian Proceedings, and both she and her Cambodian lawyers were silent as to the potential consequences of a verdict against her, whether in terms of her physical liberty and/or impact on her financial position. In my view, she was duty bound to tell her Hong Kong lawyers, Ps and the Hong Kong court about the Cambodian Proceedings, Prohibition Order and the possible or likely consequences of success or failure in her defence of the Cambodian Proceedings. Indeed, in Velatel Global Communications Inc & anor, the 6^th defendant owned up that sentence upon conviction of the relevant charge in Mainland China would be 10 or more years’ imprisonment. Of course, the 6^th defendant in that case could potentially be acquitted, but the court nevertheless found there was unexplained delay in him telling his Hong Kong lawyers only 4 months after he was detained and a month after he was charged. In my view, there was no good reason/excuse for D2’s delay in informing her own Hong Kong lawyers, Ps and the Hong Kong court of the developments in Cambodia. Had Ps been informed, it would have been open to Ps (if they saw fit) to apply to court for directions on timely and effective alternative arrangements (if D2 was willing) for D2’s evidence to be received via videolink or to apply for earlier re-fixing of the trial dates, so that unnecessary time and costs could have been avoided. I am afraid Ds were the author of the lateness of Summons which made it impossible to arrange videolink facilities for receiving D2’s evidence in the shortness of time to the Trial (assuming D2 was willing to give evidence in such manner).      But that said, the present case was different from Velatel Global Communications Inc & anor in that there was some credible evidence (ie the Prohibition Order) of D2’s unavailability for trial in Hong Kong.

(c)  Factors D and E

75.  Mr Hui submitted D2 was the key/sole witness who could testify for Ds, and it was not feasible to call other persons (eg Wong) to give evidence in her place since most, if not all, matters crucial to Ds’ case could only be dealt with by D2:

(a)  Although Wong was also a director and ultimate owner of D1, it was apparent even from Ps’ case that most if not all of the transactions and/or dealings between Ps and Ds that were relevant to the present action involved D2 acting on D1’s behalf. P2 in his witness statement dated 15 April 2016 stated that “[Wong and the 3^rd defendant]沒有直接參與[D1]與[P1] 之間就該橡膠園的協議。主要是由[D2]代表[D1]及[P2]代表[P1]洽談就該橡膠園的協議”.

(b)  Ds claimed Wong’s involvement was de minimis or even nil. Ds filed the Wong Aff to the effect that as D1’s director he was responsible for “貨運管理”, and D2 was solely responsible for the rubber plantation business that was the subject matter of the present action. Although Wong was aware P2 and D2 signed some agreements and D1 suffered hardship in operating the rubber plantation business since P1 did not pay the full amount of its promised investment, Wong claimed he was not involved in the discussions between P2 and D2 over the rubber plantation business venture or the terms of the agreements. He was not present when the 8/8/11 Agreement, Undertaking and Guarantee were signed, and claimed to be unaware of the oral agreement/discussion between P2 and D2 on that occasion. He further claimed D2 did not discuss with him beforehand.

Mr Hui therefore submitted D2 (and not Wong and/or others) was the one most involved in the transactions/dealings relevant to the present action, and only D2 could present the most relevant, accurate and helpful evidence to the court for resolution of the issues in dispute.

76.  For the present purpose, in light of the Wong Aff that was filed in answer to the complaint in Mr Hon’s written submissions that there was insufficient evidence of efforts to locate other persons (such as Wong) who might stand in to give similar evidence at the Trial, I am prepared to assume for the purpose of the present application that D2 was a key witness with material evidence to give at the trial of the present action.

(d)  Factor F

77.  Mr Hui submitted that although it was uncertain whether or not D2 would be further prevented by the progress and/or outcome of the Cambodian Proceedings from appearing at the adjourned trial in Hong Kong, it was not appropriate for Hong Kong courts to “guess the outcome of the criminal investigation and trial [in Cambodia]”.[15] Mr Hui argued this court should not speculate and/or take into account the merits of D2’s defence to and the possible outcome of the Cambodian Proceedings.

78.  Whilst I accept the court should not speculate on the merits of the Cambodian Proceedings, D2 who had the assistance of Cambodian lawyers was silent on the potential consequences of a verdict against her, and even on whether and when (if at all) the Prohibition Order would be lifted upon acquittal. D2 did not even depose she would be able to return to Hong Kong after verdict is handed down in the Cambodian Proceedings. It is open for this court to note that even if the Trial were to be adjourned, there was no certainty D2 could return to Hong Kong to give evidence within a reasonable time. Mr Hon feared that if D2 were convicted upon conclusion of the Cambodian Proceedings, she could be incarcerated and unable to give evidence via videolink. But there was simply no evidence before this court of the likely penalties upon conviction of the charge in the Cambodian Proceedings although I accept the outcome of such proceedings was plainly uncertain.

(e)  Factors G and H

79.  Mr Hui submitted Ps did not put forward any specific factual circumstances to suggest their witness P2 would become unwilling or unavailable to testify at the adjourned trial.[16] Mr Hui reminded that as in Arko Ship Leasing Ltd[17] delay in taking out an adjournment application would not be fatal and could be reflected in an appropriate order for costs. It was said Ps would be appropriately compensated by costs orders in their favour in relation to (a) the aborted trial if the Trial was vacated and adjourned and (b) the Summons (including costs of the Hearing).

80.  Mr Hon complained that Ps commenced the present action 3 years ago in 2014, and their claim for breach of contract at the end of November 2014 amounted to nearly US$18,000,000 with interest accruing at US$9,928.78/day. Even with inevitable provision against Ds for costs thrown away and costs of the Summons (which Ds conceded at the Hearing), such costs paled into insignificance when compared with the amounts claimed by Ps (including outstanding interest) in the present action. Ps claimed there was also the worrying circumstance that D2 was facing lawsuit in Cambodia, and further delay might diminish Ps’ likelihood in securing the fruits of their claims in the present litigation.

81.  In my view, there was some force in Mr Hon’s submissions. Whilst appropriate costs orders might compensate Ps for having incurred unnecessary costs, such costs orders would not offer any protection for the financial risks of postponing the present litigation. This is particularly so here when the burden largely fell on Ds to establish the Defences and when D2 faced another lawsuit involving a significant claim. It was not a situation in which it could be said Ds had a robust stance. Moreover, not only was this state of affairs not of Ps’ making, Ds by delaying proper notice to their Hong Kong lawyers, Ps and the Hong Kong court had contributed to this unfortunate state of not being able to attend court in person and not having sufficient time and opportunity to arrange videolink facilities for receiving evidence by other means.

82.  On a wider consideration, vacating a trial is also undesirable in wasting the court’s time, and it is especially so in this case when the Summons was filed so late that the possibility of leaving the court empty and unable to provide service to other litigants was quite real.

(f)  Summary

83.  Here, the court had to face imperfect or, more correctly, unsatisfactory alternatives. The choice in reality was between, on one hand, refusing to adjourn the Trial in which case Ds would have no witness (since D2 could not leave Cambodia and videolink facilities could not be properly set up in time) and would not be able to raise the Defences to Ps’ claim, and on the other, vacating and adjourning the Trial in which case Ps through no fault of their own would be postponed from judgment (if they were to succeed at the end of the day) with increased risk of diminished enforcement and recovery.

84.  The dominant consideration would be the interests of justice as between both parties. In my view, the interests of justice would be better served by adopting the latter course for the former course spelled certain failure for Ds in the present litigation as there was no prospect of D2 giving evidence in any manner at the Trial. If the latter course was adopted, Ds would be afforded an opportunity to call D2 as their witness at the re‑fixed trial either in person at the courtroom or (if D2 would agree) by receiving her evidence via videolink, and measures could be put in place for Ps’ protection (a) to ensure the trial would be re-fixed as soon as practicable (see paragraph 11 (b)-(d) above) and (b) to cover Ps’ exposure to financial risks due to deferral of the Trial (see paragraph 11(e)-(i) above). I agree with Mr Hon that in the exercise of my discretion to vacate and adjourn the Trial on the basis of exceptional circumstances in the present context, it would be appropriate and even necessary to impose conditions as part of the balancing exercise. Indeed, Mr Hui accepted this court has power to impose conditions upon granting an order to vacate/adjourn the Trial, and to specify the consequences of the failure to comply with the order or a condition.[18]

85.  I come to the above conclusion with the greatest reluctance, and must emphasise that based on the circumstances of the present action Ds could not hope or expect they would be entitled to an indefinite adjournment until D2 would be available. The measures in paragraph 11(b)-(d) above were put in place to reflect a balance approach to afford Ds a chance to call D2 as witness by traditional or alternative means, and to be fair to Ps who were innocent of any fault by ensuring the derailed trial would be rescheduled as soon as practicable.

86.  Ds conceded costs in paragraph 11(f)-(i) above and, in my view, they could hardly complain about the protective measure for Ps under paragraph 11(e) above. I have found D2 was the author of the late Summons that put Ps in the unenviable position of losing the Trial scheduled next week even when they were prepared to cross-examine D2 via videolink. Arko Ship Leasing Ltd was quite different in that it was clear the witnesses detained in Mainland China could not give evidence in any manner in Hong Kong including via videolink. But here I was not satisfied that videolink facilities were unavailable in Phnom Penh, that D2 could not stay for a day or so in Phnom Penh to give evidence in such manner, and that the present case was not amenable to receiving D2’s evidence via videolink. D2’s reticence until a late stage had the signs of a tactical move and must therefore draw censure from the court. It is only fair that condition be imposed to protect Ps as part of the balancing exercise, and that the consequences of failure to comply with such condition be specified.

87.  That said, I do not agree with Mr Hon’s proposal that Ds shall pay into Court an amount of US$13,600,000[19] as security on/before 3:00pm on 19 June 2017, failing which judgment shall be entered against Ds with costs of this action be to Ps to be taxed if not agreed. I do not see why Ps should have security of such payment in advance of the trial of the present action nor do I see any justification for Ps entering default judgment on failure of the condition. After all, if the Trial were to proceed on 21 June 2017 and D2 did not give evidence, Ps would still have to prove their case to the satisfaction of the trial judge.

88.  Both Mr Hui and Mr Hon accepted that in light of the court diaries it would be overly optimistic to believe the trial could be re-fixed within 6 months even if the earliest dates were to be given. That being the case, I do not see why condition should not be imposed for Ds to make payment into court a sum in the broad range of the additional interest on the principal amount claimed by Ps for a 6-month period that would not have been incurred but for the adjournment of the Trial. In broad terms, Ps’ claim for interest over a period of 6 months would be US$9,928.78/day x 365 days ÷ 2 = US$1,812,002.35. In doing so, I also bear in mind the nature of Ds’ defence, which could not be said to be one of the more robust ones seen by this court, and the fact D2’s inability to leave Cambodia should have been canvassed with Ps and the Hong Kong court at a much earlier stage in these proceedings. Whilst it would be disproportionate on the ground of delay alone to refuse adjournment of the Trial in the particular context of the present case, such delay had forced the court’s hand to adjourn the Trial before compliance of the proposed condition could be ascertained. It was therefore appropriate to specify the consequences of non-compliance, and the only appropriate sanction in the circumstances was the one set out in paragraph 11(e) above.

VII.  CONCLUSION

89.  For all of the above reasons, I granted the orders at paragraph 11 above at the Hearing. I should add as a final caveat that these reasons for decision should serve as a reminder to all litigants and practitioners that courts take a dim view of late applications to move milestone dates. In the post-CJR culture, parties and their lawyers should be frank and upfront on any matter that may potentially affect milestone events so that the court seized of the matter can evaluate the situation and decide how best to balance the parties’ interests as well the deployment of court’s resources. The prism is triangular, and it is not for a party to dictate the outcome by withholding information. In future, litigants should not expect the courts to smile with like kindness as in the present case, and they may have to suffer the consequences of their own tactical manoeuvres. In a slightly different context (but also in the exercise of the court’s broad discretion on case management, Ng J (as approved by the Court of Appeal) in In the matter of James Henry Ting made clear unsatisfactory and tactical delay is a material factor that may sway the exercise of discretion against the applicant.

VIII. POSTSCRIPT

90.  On 16 June 2017, Ps’ solicitors wrote to the court to request inter alia for (a) the trial to be re-fixed in consultation with the diary of Ps’ existing counsel, and (b) extension of time to submit Ps’ statement of costs. It was said that if it is possible to re-fix the trial in consultation with the diary of Ps’ existing counsel, then some costs thrown away may be saved. In my view, this proposal would not cause Ds any prejudice since (i) it would be Ps who may suffer some delay if the re-fixed trial is to accommodate the diary of Ps’ existing counsel, and (ii) saving some costs thrown away will only benefit Ds who are liable to pay such costs. It is also appropriate to extend time for Ps to lodge their statement of costs since they cannot prepare their statement of costs until it is known whether Ps are able to retain their existing counsel upon re-fixing the trial and thereby save some costs.

91.  In the circumstances, on 16 June 2017, I granted the following directions on paper as follows:

(a)   the order in paragraph 11(b) above be varied to the extent that the words “without accommodating counsel’s diaries or” with “in consultation with the diary of Ps’ existing counsel only and without accommodating the diary of Ds’ counsel and/or”;

(b)   there be extension of time until 27 June 2017 for Ps to comply with the order in paragraph 11(g) above.

HCA 1278/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1278 OF 2014

____________

____________

_________________________________

REASONS FOR DECISION

_________________________________

1.  This is an application by the plaintiff (“Skyrun”) by a summons issued on 31 August 2016 for:-

(1)  leave to join Mr Guo Ming Fu (“Mr Guo”) as a co-plaintiff in this action; and

(2)  leave to amend the statement of claim (“SoC”) as per the draft amended SoC annexed to the summons.

2.  Skyrun in the original SoC pleaded that the defendants owed it money under a 1st USD Agreement and a guarantee both dated 8 August 2011, a 2nd USD Agreement, a 1st RMB Agreement and a 2nd RMB Agreement. 

3.  Skyrun’s summons also asked for the abandonment of the claims pursuant to the 2nd USD Agreement, 1st RMB Agreement and 2nd RMB Agreement and discontinuation of the action as against D3 and D4.  The abandonments and discontinuation were effected by a consent order dated 26th February 2016 leaving the joinder and amendments to be argued out. 

4.  After the consent order, the action is now for US$12 million as against the 1st and 2nd defendants (“the defendants”) pursuant to the 1st USD Agreement and as against the 2nd defendant (“Ms Ma”) pursuant to the Guarantee.

5.  Skyrun has filed an affirmation of Mr Tang Tsz Pun, the handling solicitor of this action for Skyrun, dated 23^rd September 2016 in support of the application.  The defendants filed an affirmation of Mr Adrian Yeung, the handling solicitor of the action for the defendants dated 13^th December 2016 in opposition (the action against D3 and D4 has been discontinued).  Skyrun then filed a 2nd affirmation of Mr Tang dated 10^th January 2017 in reply.

Skyrun’s original case

6.  The original SoC pleaded that the 1st USD Agreement was a debt repayment agreement.  It pleaded the agreement as follows:

“2.    On about 8^th August 2011, SLIHK (P) and SRL (D1) and Ms. Ma (D2) entered into an agreement that SRL (D1) and Ms. Ma (D2) agreed to repay to SLIHK (P) a debt of US$12 million by instalments in the following manner (“1^st USD Agreement”):

(a)  A sum of US$1,200,000 would be repaid on 30^th December 2011;

(b)  A sum of US$4,000,000 would be repaid on 30^th June 2012;

(c)  A sum of US$1,500,000 would be repaid on 30^th September 2012;

(d)  A sum of US$2,300,000 would be repaid on 30^th December 2012; and

(e)  A sum of US$3,000,000 would be repaid on 26^th October 2013.”

7.  It further pleaded to the guarantee given by D2 as follows:

“On about 8^th August 2011, Ms. Ma (D2) provided SLIHK (P) with a personal guarantee and/or warranty that in the event SRL (D1) and Ms. Ma (D2) failed to fully repay the said debt of US$12 million, Ms. Ma (D2) shall be personally liable to repay the interest accrued on the said debt of US$12 million at daily rate of 1/1000 (i.e. roughly 36.5% p.a.) from the due dates up to the date of full payment.”

The terms and parties of the 1st USD Agreement

8.  However, the terms of the 1st USD Agreement show that it is not a debt repayment agreement.  The English translation of its preamble says:

“Concerning a cooperation between the Party A and Party B on trees hewing, processing and export in respect of a rubber plantation of 3,200 hectare in Cambodia.

Since the commencement of the project, Party B turned down the proposal and request made by the Party A to retain 6-8 persons from the Mainland (composing of professional technicians and managerial personnel) to form a management team. As a result, there were no professional technicians, who were of practical skill, competent, experienced, of good quality, trustworthy and responsible, to build a possessing factory of the rubber plantation. This led to purchase of lagging and poor facilities and building of improper kiln, thus led to a consequence of serious wastage. Accordingly, it was impossible to manufacture and produce rubber plants of proper standard. Also, Party B did not try her best endeavour to effectively operate the project, thus there was slow progress of the project, which fell short of the Parties’ agreed estimate on the time to put into production. Meanwhile, there has been serious difference of position on rebuilding the existing factory, change of choices in facilities, production scale, business management, retaining technician and managerial personnel, sale channel, incorporation of companies, setting up books of accounts, distribution of funds and etc. Parties tried their best endeavour to resolve the difference but could hardly reach an agreement. For the sake of faster, better and more efficient proceedings of the project for cooperation and to conform to Party B’s request for public listing of the project, the Parties have reached this agreement after Parties’ serious consideration and amicable negotiation.” (emphasis supplied)

9.  The preamble shows that the 1st USD Agreement is an agreement that settled the differences of the parties over their joint venture in the working of a rubber plantation in Cambodia.

10.  Furthermore, the agreement states that the parties thereto are:

“Party A: Skyrun Light Industry (Hong Kong) Company Limited (P) & Mr. Guo Ming Fu

Party B:   Swift Resources Limited & Madam Ma Muk Ying (D2)”

Both Skyrun and the 1st defendant (“SRL”) applied their chop marks at the bottom of the agreement.  Mr Guo also signed in his own capacity at the bottom under Party A whilst Ms Ma signed both on behalf of SRL and in her own capacity under Party B. Hence, both Skyrun and Mr Guo constitute Party A and both SRL and Ms Ma constitute Party B to the agreement.

Purposes of the proposed amendments

11.  Skyrun by this application seeks to join Mr Gou as the 2nd plaintiff as he is a member of Party A in the agreement. 

12.  Skyrun also wants to rectify the error of describing the 1st USD Agreement as a debt repayment agreement.  It seeks to describe the nature of the agreement and the associated undertaking and guarantee all dated 8 August 2011 by pleading new paragraphs 1(g), (h), (i) and (j) in the SoC as follows: 

“(g) Since the end of 2009, SRL (via the 2 Cambodia Companies), SLIHK (P) and Mr. Guo had negotiated to jointly acquire and invest in a rubber plantation named Rattanak Kiri Plantation (“Rubber Plantation”); as a result, SLIHK (P) and SRL (“the Parties”) had entered into an agreement dated 26^th January 2010 (“Joint Acquisition Agreement”). Under the Joint Acquisition Agreement, it was agreed that each side would pay US$9 million. The Joint Acquisition Agreement was subsequently varied by the Parties that SLIHK (P) was only required to invest and pay US$5,508,000, the full amount of which was already paid to SRL during the period from 3^rd February to 26^th October 2010. It was further agreed by Mr. Guo and SRL on 30^th July 2010 that Mr. Guo was allowed to jointly manage the business of the Rubber Plantation (“30072010 Agreement”). Pursuant to 30072010 Agreement, Mr. Guo sent his and SLIHK’s (P’s) staff to station and work at the Rubber Plantation. Subsequently, various disputes between SLIHK (P), Mr. Guo, SRL and Ms. Ma arose from the facts that SRL and Ms. Ma made a serious misrepresentation as to the size of the Rubber Plantation as warranted under the Joint Acquisition Agreement; and that SRL failed to perform its contractual duties under the 30072010 Agreement; and that SRL demanded SLIHK (P) to withdraw its management of the Rubber Plantation, in various breaches of 30072010 Agreement (“Disputes”). To fully settle the Disputes and to vary all relevant matters and terms under the Joint Acquisition Agreement, the 30072010 Agreement and an agreement dated 27^th June 2011 made between SLIHK (P) and Mr. Guo on one side and SRL and Ms. Ma on the other side (“27062011 Agreement”) respectively, SLIHK (P), Mr. Guo, SRL and Ms. Ma entered into the following agreements:-

(h) A written agreement dated 8^th August 2011 (numbered SKSW20110808HR) made between SLIHK (P) and Mr. Guo of one side and SRL and Ms. Ma of the other side (“Settlement Agreement”);

(i) A written undertaking dated 8^th August 2011 made by SRL and Ms. Ma of one side in favour of SLIHK (P) and Mr. Guo of the other side (“the Undertaking”); and

(j) A written guarantee dated 8^th August 2011 made by Ms. Ma in favour of SLIHK (P) and Mr. Guo (“the Guarantee”)”

13.  Skyrun seeks to re-name the 1st USD Agreement in the proposed amendments as Settlement Agreement. 

14.  The guarantee referred to in the proposed new paragraph 1(j) is the same guarantee pleaded in paragraph 3 of the original SoC.

15.  In addition, Skyrun also seeks to provide in the amendments the particulars of the part payments by the defendants, the outstanding sums and interests accrued and due from the defendants.  These have been set forth in the witness statement of Mr Guo made for Skyrun in this action.

The defendants’ existing case

16.  The defendants dealt with the 1st USD Agreement and Ms Ma’s guarantee in their existing defence as follows:

“I. THE ALLEGED US$12 MILLION LOAN

5. Save it is admitted that Skyrun and Mr. Guo Ming Fu (“Mr. Guo”), the 1^st Defendant and the 2^nd Defendant entered into an agreement on 8 August, 2011 concerning a conditional payment of US$ 12 million (the “US$ 12 Million Agreement”) (as addressed in paragraph 9 below), paragraph 2 is denied. It is specifically denied that the 1^st Defendant and 2^nd Defendant agreed to repay Skyrun a debt of US$ 12 million in the circumstances as pleaded in that paragraph or at all. The Defendants will rely on the matters pleaded below.

(A) Rubber plantation business

6. On or about 26 January 2010, Skyrun and the 1^st Defendant entered into a business venture (the “Joint Acquisition Agreement”) in order to invest in a 3,200-hectare rubber plantation in Cambodia (the “Rubber Plantation”). The Joint Acquisition Agreement contains, inter alia, the following salient terms:

甲方：开元轻工(香港)有限公司

乙方：兆业能源有限公司

甲乙双方经认真友好协议，決定投资收购柬埔寨3200公顷旧橡胶园的橡胶木砍伐、加工、出口业务，预计总投资额约为1800万美元。 卖方要求， 预交10%订金， 合计180万美元， 余款于2010 年3月27日前到位。 根据双方合作比例各占50%份额规定，甲、乙双方需各出资 90万美元作为该项目订金，期限为2010年1月底前到位，此据！

7. Since the Joint Acquisition Agreement was executed, the 1^st Defendant began to perform its duties thereunder. It is averred that the Joint Acquisition Agreement, however, was repudiated by Skyrun as a result of its failure in investing the requisite amount in the Rubber Plantation business.

8. In the premises, Skyrun had and/or has no ownership and control over the Rubber Plantation business. It is averred that Skyrun provided no and/or inadequate consideration to the alleged payment pursuant to the US$12 Million Agreement.

9. Further or alternatively, it is also agreed by Mr. Guo and the 2^nd Defendant that the US$12 Million Agreement shall be subject to the conditions that (i) Skyrun shall repay its share of investment in the Rubber Plantation as stipulated in the Joint Acquisition Agreement and (ii) the Rubber Plantation business got listed successfully. In other words, the payment obligation of the 1^st Defendant and the 2^nd Defendant under the US$12 Agreement, which is denied, will not be accrued before satisfying the two aforesaid conditions.

10. By reason of terms pleaded in paragraph 9 above, it is averred that the 1^st Defendant and 2^nd Defendant do not owe any money to Skyrun in respect of the US$ 12 Million Agreement.

11. As to paragraph 3,

(a) It is admitted that the 2^nd Defendant, as one of the guarantors, signed a guarantee agreement to provide a guarantee in respect of the US$12 Million Agreement on or about 8 August 2011.

(b) By reason of the facts and matters pleaded in paragraphs 5 to 10 hereinabove, it is denied that the 2^nd Defendant is liable to Skyrun for the repayment of the US$ 12 million and the interest rate in the terms as pleaded in that paragraph.

Save as the aforesaid, paragraph 3 is not admitted.”

17.  The defence shows that the defendants have not misapprehended the nature of the 1st USD Agreement.  They did not regard it as a debt repayment agreement but dealt with it as an agreement that related to the joint venture of the parties in the working of a rubber plantation in Cambodia.  They also pleaded that it was a conditional agreement that was subject to the fulfilment of two conditions specified in §9 of the defence.

Skyrun’s witness statement

18.  The parties exchanged witness statements on 3 May 2016.  Skyrun produced only one witness statement which was made by Mr Guo. 

19.  Though Skyrun had not set out the correct nature of the 1st USD Agreement in the original SoC, Mr Guo did not commit the same error in his witness statement. He dealt with the agreement in the same way as in Skyrun’s proposed amendments.  Thus the case now presented by Skyrun in the proposed amendments to the SoC has already been set out in Mr Guo’s witness statement.  In addition, Mr Guo’s statement has set out two schedules of interests accrued on the outstanding sums.  The schedules of interests are also contained in the proposed amendments.

20.  I therefore anticipated that Skyrun would not need to file any further witness statement to support its proposed amendments if leave to amend should be granted.  Indeed, Mr Hon, counsel for Skyrun, confirmed to me at the hearing that Skyrun’s proposed amendments to the SoC would not necessitate any further witness statement by Skyrun.  The witness statement of Mr Guo already exchanged with the defendants is sufficient.

The defendants’ Case in opposition to the application for joinder and amendments

21.  Mr Adrian Yeung, the handling solicitor for the defendants, took a number of points in his affirmation.  The first is that Mr Guo should not be joined as the 2nd plaintiff. He referred to §5 of Skyrun’s reply which states that Mr Guo is not a party to the 1st USD Agreement.  He said it was Skyrun’s conscious decision to elect to sue by itself alone.  §5 of Skyrun’s reply states:

“It is averred that Mr. Guo and the 2^nd Defendant were and are not parties to the 1^st US$ Agreement nor to the Joint Acquisition Agreement; thus any conversation and/or agreement made between Mr. Guo and the 2^nd Defendant did not form any part of the agreement made between the Plaintiff and the 1^st Defendant, and do and did not bind the Plaintiff and the 1^st Defendant.” (emphasis added)

22.  Mr Yeung also said that if Skyrun and Mr Guo intend to be one and the same party, there is an issue of redundancy in case Skyrun should be able to establish its claim against the defendants.

23.  Mr Hui, counsel for the defendants, also referred to the beginning of Mr Guo’s witness statement where he stated:

“Skyrun 董事會已經授權本人代表Skyrun在此案作出供詞。”

(English translation - Skyrun has authorized me to represent it to give evidence in this case)

24.  Mr Hui submitted that there is an inherent inconsistency for Mr Guo to say that he is a party to the 1st USD Agreement on the one hand and to say that he is an authorized representative of Skyrun on the other.

25.  Mr Yeung also said that the defendants maintained that there was never any misrepresentation made to the Plaintiff and/or Mr Guo as to the size of the Rubber Plantation.  He said that Skyrun had re-characterised the “1st US$ Agreement” as a “Settlement Agreement” and broadened the ambit of its case.  By the amendments, Skyrun was also seeking to add a new dimension to the Settlement Agreement.

26.  He said from the defendants’ point of view, the proposed amendments opened up a new dimension of factual disputes between the parties.  The defendants had to adduce more evidence on the genesis of the business dealings between the parties and whether the Settlement Agreement relied on by Skyrun was in truth a real settlement agreement. 

27.  Mr Hui further submitted that if the 1st USD Agreement was indeed a settlement agreement as asserted by Skyrun in the proposed amendments, then Mr Guo could not justify his claim of US$12 million pursuant to the 1^st USD Agreement in his personal capacity.  He pointed out that the Joint Acquisition Agreement dated 26th January 2010 was made between Skyrun and SRL.  Mr Guo had deposed in §§4 to 11 of his witness statement to the dealings between Skyrun and SRL relating to the entering of the Joint Acquisition Agreement and the 1st USD Agreement.  Such evidence made it clear that the investments pursuant to the Joint Acquisition Agreement were made by Skyrun and not by Mr Guo himself.  Mr Guo has thus failed to provide consideration for the 1st USD Agreement.

28.  Mr Yeung also said that since Skyrun and Mr Guo wanted to rely on additional documents to substantiate their claim, namely the “undertaking” and “guarantee” both dated 8 August 2011, the defendants also had to adduce additional evidence covering the “undertaking” and the “guarantee” and the reasons why the defendants are not liable thereunder.

29.  Finally, Mr Yeung also said that the proposed amendments in paragraph 7 and Schedules 1 and 2 that set out the amounts paid by the defendants and interests accrued have been covered in Mr Guo’s witness statement and that renders the amendments unnecessary. 

30.  Therefore, the defendants say that on the facts and evidence now presented, Skyrun has failed to justify the joinder of Mr Guo.  The joinder of Mr Guo should not be allowed.

Analyses and decision

31.  Skyrun’s explanation for making the amendments is that the pleading in §5 of its reply is factually incorrect and Mr Guo is indeed a party to the 1st USD Agreement.  Skyrun and Mr Guo intend to amend the reply including §5 if the proposed amendments to the So C are allowed.  That is a natural consequence of amending the SoC.  The defendants cannot rely upon the plea in §5 of its reply which is factually wrong. 

32.  In the proposed amendments, Skyrun and Mr Guo are suing jointly against the defendants jointly.  The 1st USD Agreement does say that Skyrun and Mr Guo together form Party A and the defendants together form Party B.  Skyrun and Mr Guo are now proposing to sue jointly against the defendants also jointly.  Skyrun has also not put forward any alternative claim in its own right to the exclusion of Mr Guo. 

33.  I also refer to Order 15 rule 4 of the Rules of the High Court; Cap. 4A which provides:

“Where the plaintiff in any action claims any relief to which any other person is entitled jointly with him, all persons so entitled must, subject to the provisions of any written law and unless the Court gives leave to the contrary, be parties to the action and any of them who does not consent to being joined as a plaintiff must, subject to any order made by the Court on an application for leave under this paragraph, be made a defendant.”

34.  Since Skyrun and Mr Guo together constitute Party A in the 1st USD Agreement and thus jointly entitled to the benefits therein,I can see no reason why Mr Guo should not be joined as a plaintiff in this action as well.

35.  I also do not understand what redundancy Mr Yeung is referring to.  Furthermore, even if the trial judge should find that Skyrun alone is entitled to the payments under the 1st USD Agreement, that would simply mean that Mr Guo would not be given any judgment.  There is no question of any redundancy.

36.  I also think that Mr Hui’s argument of inherent inconsistency is wrong.  Skyrun is a limited company and can only speak through a representative authorized by its board.  Though Mr Guo and Skyrun together constitute Party A to the 1st USD Agreement, it does not mean that he cannot be Skyrun’s authorized representative to give evidence for Skyrun in this case.  I cannot see any inconsistency.

37.  In the premises, I am of the view that Mr Guo should be joined as the 2nd plaintiff in this action.

38.  I now deal with the merits of the proposed amendments.  I do not think that the naming of the agreement dated 8 August 2011 as the 1st USD Agreement or as a Settlement Agreement would in itself create any issue in the action or produce any prejudice to the defendants.  The court is not going to decide the dispute by looking at the label or abbreviation applied to the agreement. 

39.  I also do not think the re-naming of the agreement would broaden the ambit of this case.  It is not necessary to go into the history which has led to the making of the 1st USD Agreement.  Skyrun and Mr Guo say that all the previous disputes (including the dispute on size of the rubber plantation) have been resolved and settled by the 1st USD Agreement or Settlement Agreement or whatever name or label one may affix to this agreement.  There is no need to revive them for the court to consider who was right and who was wrong.  They have been laid to rest by this agreement.  This is also what is stated in the preamble of the agreement. 

40.  For the defendants, the proposed amendments also would not create the need for them to go into the history or previous disputes that led to the making of this agreement.  The reason being that they have spelt out already their defence to this agreement in §§5 to 10 of their existing defence as cited above.  The grounds of the defence are that Skyrun had provided no and/or inadequate consideration to the payment pursuant to the 1st USD Agreement or Settlement Agreement (§8) and/or this agreement was subject to two conditions (§9) which did not materialize.     

41.  Ms Ma has also set forth her evidence in line with the defence in §§5 to 25 of her witness statement.  The defendants have thus gone into all the evidence that they need to. 

42.  In so far as the previous disputes that are relevant to the defence, they have been set forth in both the defence and in Ms Ma’s witness statement.  If the defendants should consider that they have not done enough and would like to elaborate on these matters, this need is not generated by the proposed amendments but by the defendants’ own inadequacies in the preparation of the defence and evidence in opposition. 

43.  Furthermore, neither Mr Yeung in his affirmation nor Mr Hui in his written submissions has suggested that the amendments will necessitate a change of the grounds of defence.  I cannot see how the proposed amendments will necessitate the canvassing of the previous disputes between the parties beyond those that have been dealt with in the defence and Ms Ma witness statement.  

44.  On the whole, I am of the view that the application for amendments and deletion of claims under other documents as a whole can make the case much less elaborate, simple, clear and straightforward.

45.  Regarding Mr Hui’s ground that the investments pursuant to the Joint Acquisition Agreement were made by Skyrun and not by Mr Guo himself.  Hence, if there was any settlement, it was only between the investors; namely Skyrun and SRL.  It had nothing to do with Mr Guo who therefore had failed to provide any consideration for the agreement. 

46.  This argument was only made in Mr Hui’s written submissions which were filed after all the affirmations and Mr Hon’s submissions have been filed.  Nevertheless, one cannot overlook the fact that Skyrun could have provided consideration for the agreement by agreeing to enter into the Settlement Agreement subject to including Mr Guo as a party to the agreement. Mr Guo could also have provided consideration by procuring Skyrun to enter into the agreement.

47.  The defendants also say that Skyrun and Mr Guo are relying on additional documents namely the guarantee and undertaking. Hence, they have to adduce additional documents to say why they are not liable under these two documents. 

48.  The guarantee pleaded in §1(j) of the proposed amendment is the same guarantee that has been pleaded already in §3 of the original SoC.  Ms Ma was required by the 1st USD Agreement to give it.  Ms Ma has set forth her defence to it in §11 of the defence.  Hence, there is nothing new in the guarantee.

49.  Regarding the undertaking, the defendants were required by the 1st USD Agreement to give it.  Skyrun and Ms Ma were aware of it when they dealt with the agreement.  The undertaking required the defendants as Party B to the 1st USD Agreement to pay into Skyrun’s designated bank account the amounts due under the agreement and failing which to pay Skyrun the interest agreed in the agreement.  The undertaking, hence, only requires Skyrun and Ms Ma to do what they have agreed to in the 1st USD Agreement.  It does not add anything new to the defendants’ obligations or liability under the 1st USD Agreement.  I cannot see what new evidence the defendants have to adduce in defence of their liability pursuant to the undertaking which they have not yet adduced. 

50.  Neither Mr Yeung in his affirmation nor Mr Hui in his submissions has given any clue to what new evidence or additional documents that the defendants will have to produce to say why they are not liable.  The defendants have only made a general statement without condescending on particulars of what new documents will be made relevant by the bringing in of the guarantee and/or undertaking.  Such general statement is most unhelpful at all. 

51.  Mr Yeung has also said that the schedules of interests have been set forth already in Mr Guo’s witness statement and they need not be pleaded in the SoC.  However, to plead the interest in the two schedules in the SoC is to particularize the liquidated damages.  This completes the pleaded claim against the defendants.  I see no objection in that.

52.  The above disposes of all the defendants’ objections to the merits of the proposed joinder and amendments.

Delay

53.  The application was taken out in late August 2016.  The defendants have been served with the draft Amended SoC on 31st August 2016.  That was about 10 months before the trial.

54.  Mr Hon also pointed out that the joinder of Mr Guo did not per se affect the nature of the claim.  In insofar as the determination of the issues is concerned, the added party does not strengthen the case of either party.  Mr Guo is also a witness in the action.  His joinder only gave him the additional status of being a party.

55.  Mr Yeung intimated in his affirmation that to allow the application may cause an adjournment of the trial.  He accused Skyrun of attempting to move the litigation goal post at a very late stage after all evidence has surfaced.  He said that this was utterly unfair to the 1^st and 2^nd Defendants as the costs and efforts spent have been wasted and the defendants cannot envisage what kind of case that they are meeting.  However, from my discussion above on the merits of the amendments, it is clear that such complaints have no merit whatsoever. They are boastful exaggerations. 

56.  Regarding the schedules of interests which have already been disclosed in Mr Guo’s witness statement exchanged on 3 May 2016, Mr Yeung alleged that the defendants have to respond to the calculations individually and it is inevitable that more evidence is adduced in support on this.  But he has not said a word on what undisclosed evidence or document will have to be produced.  Such generalized complaint is useless.  I also do not see how the checking of the schedules will take a lot of time.  If such checking is necessary, and I think it is, it should have been done soon after 3 May 2016 and would have been concluded a long time ago.  I cannot see how the trial dates may be affected by the pleading of the schedules. 

57.  Mr Yeung also alleged that it was possible that interlocutory applications would be taken out by the parties.  But again this is a generalized and useless complaint.  He did not say what kind of application would be taken out by whom and for what reason. 

58.  Mr Yeung also alleged that the joinder and amendments will in effect cause the entire proceedings to start afresh.  I disagree.  The application of joinder is to put matters right on the entitlement to sue.  I have also said that the amendments and deletion of claims have made the case clear, simple and straightforward. 

59.  Mr Hui also said in his written submissions that there is a real risk that the trial dates will be jeopardised.  Though he said the action was commenced on 8 July 2014, he acknowledged that this application was issued on 31^st August 2016. 

60.  He referred to Skyrun’s argument that the new case in the amendments is based on the same documentary evidence which has been available to the defendants all along.  He, however, argued that Skyrun is seeking to plead a fundamentally different nature for the 1^st USD Agreement and the defendants have been taken by surprise.  He also envisaged that change of Skyrun’s case (which is somewhat inconsistent with the originally pleaded case) will lead to substantial amendments on pleadings and witness statements by both parties.  But he did not say what kind of amendment to pleadings or evidence will be introduced by the parties.  I say again that such generalized and boastful complaints are useless.  There must be particulars and concrete particulars to make the complaints meaningful.  Furthermore, in the light of my discussion on the merits of the amendments and in particular §§5 to 11 of the defence, this argument has no merit.

61.  In the premises, I allowed the application.  I also order costs of the application and of and occasioned by the amendments be paid by Skyrun to the defendants.  But I ordered the defendants to pay the costs of the argument on the application to Skyrun as the defendants have lost their opposition.