Hong Kong Metropolitan Bank Ltd v. Sun Sun Garments Factory and Others

HCA002670/1975

H.C.A. 1975 No. 2670

Practice and procedure - application to dismiss action for want of prosecution rejected - inordinate and inexcusable delay established but justice could be done despite the delay - however "unless" order would be made - Registrar should have followed accepted practice and required affidavit explaining nearly 4 years delay in complying with order to file list of documents.

1975, No. 2670

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: Fuad, J.

Date: 17 March 1982

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JUDGMENT

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1. Two matters are before me: an appeal from a decision of the Registrar which allowed the plaintiff an extension of time to file and serve a list of documents and its verifying affidavit, and a first application to dismiss the action for want of prosecution.

2. The plaintiff is a bank, ("the Bank",) among whose customers was the 1st defendant firm. The 2nd defendant is one of the partners of the firm and the 3rd defendant is the wife of another partner. The writ, accompanied by a statement of claim, was issued on the 30th October 1975 and the plaintiff's claim arises out of various banking facilities granted to the 1st defendant. It is averred that the 1st defendant is indebted to the Bank is the sum of $3,230,373 with agreed interest accruing at the rate of $1,084 per day from the 1st October 1975. To date the interest due would be in the region of $2.5m. The claim against the 2nd defendant arises out of two guarantees which it is said bind him to pay the Bank a total of $1m. Interest at the rate of 12% per annum from the 10th October 1975 is also claimed, which would add approximately $750,000. The plaintiff also claimed against the 3rd defendant under a mortgage and another guarantee and on the 2nd November 1976 judgment was entered against her in default of filing a defence for $1,450,367, a judgment which remains unsatisfied.

3. The statement of claim also alleges that a certain Pang Kan Ying (who was not joined in the action for reasons which will appear) signed four guarantees relevant to the indebtedness of the 1st defendant two jointly and severally with the 2nd defendant and two on his own.

4. The 1st and 2nd defendants filed a defence to the following effect. They admit that the 1st defendant opened with the Bank one of the two accounts sued upon, but deny any connection with the second. As regards the first account they say that at the time it was opened, the 2nd defendant orally informed the person in charge of the Bank's current account department that he would be the only authorised signatory for cheques drawn on the account. They deny that the 1st defendant was involved as principal in the mortgage of the 3rd defendant's property in favour of the Bank. They deny that the 1st defendant was party, as principal, to a further charge signed by Pang Kan Ying. In relation to the two guarantees which involve the 2nd defendant it is pleaded that "he signed [them] under a total mistake as to its nature and contents and in the bona fide belief that he was executing an instrument of a wholly different kind, namely, that they were application forms for letter of credit facilities". The defendants admit that no part of the sums claimed by the Bank have been paid and say that they are not liable.

5. As regards the chronology of events relevant to the application to dismiss the action for want of prosecution, I think I can do no better than set out the Schedule to the affirmation of Miss Claire Ng filed on behalf of the defendants on the 27th February 1982 in support of it -

6. Counsel agreed before me that the limitation periods had expired in respect of the claims against the 1st defendant and the 2nd defendant - in May and October 1981, respectively. And it is as well, right from the start, to recall the words of Diplock L.J. in Allen v. Sir Alfred McAlpine & Sons Ltd., [1968] 2 Q.B. 229, at p. 259: "It is then a Draconian order and will not lightly be made."

7. Counsel cited the leading authorities to me and referred me to paragraphs 25/1/3A to 25/1/3D of The Supreme Court Practice. They were agreed as to the principles applicable; they are now so well established (and have been firmly applied in several recent decisions of this Court) so I need not set them out. Mr. Lester Kwok contended that there had plainly been inordinate and inexcusanle delay of a kind that gave rise to a substantial risk that a fair trial would not be possible and serious prejudice to the defendants was likely to be caused. For the Bank, Miss Audrey Eu submitted that in all the circumstances such delay as there had been was excusable and that in any event the defendants had not shown that they might suffer serious prejudice in the conduct of their case.

8. The affidavit of Mr. Oldham, the partner of the Bank's Solicitors who had conduct of the proceedings, explains that there were two main problems during the initial period between late 1975 and the end of 1977. A lot of correspondence was exchanged with the Official Receiver regarding the bankruptcy of Mr. Pang Kan Ying (who it will be recalled signed two of the guarantees). Thought was given as to whether he should be joined after his bankruptcy as an additional defendant. The other cause for delay was that Counsel had been instructed to draft a Reply if one was considered to be necessary. The first Counsel instructed did not respond and a second, and later a third, member of the Bar had to be approached. It was only on the 12th December 1977 that Counsel eventually advised that a Reply was not necessary. Four days later, one month's notice of Intention to Proceed was given. On expiry of that notice, the summons for directions which had been adjourned several times, was restored.

9. Regarding the subsequent period, the main concern was that it was at one time doubted whether it was worth pursuing the claims again the 1st and 2nd defendants. The intention at first had been to proceed, and levy execution, against the 3rd defendant who had been served in June 1976 and who had filed no defence. On the 3rd August 1976 the Bank applied for judgment against her and this had been one of the reasons why the summons for directions had been adjourned. After several hearings, judgment was recovered against her on the 2nd November 1976 for $1.4m.

10. The affidavit continues that attempts to levy execution against the 3rd defendant proved fruitless and since it was doubted whether it was worth pressing the claim against the other defendants, fresh enquiries had to be made, and in the meantime Notices of Intention to Proceed were filed. In late 1981 it was decided to resume the action against the 1st and 2nd defendants. The documents were gathered and the list was ready by December 1981. A request for the consent of the other side to file the list of documents out of time met with no response for two months and was then refused. It was therefore on the 16th February 1982 that the Bank had taken out the summons seeking leave to file the list out of time, a summons which was heard three days later. Despite the defendants' opposition, the Registrar granted the application and the list was duly filed on the same day. It will have been seen that the defendants took out their summons to dismiss the action for want of prosecution on the 19th February, about half an hour before the Bank's summons was due to be heard. I would remark in passing that the parties later agreed that the appeal against the Registrar's order and the application for the dismissal of the action should be heard at the same time by the Judge in Chambers - in the circumstances, an eminently sensible course.

11. About the prejudice likely to be caused to the defendants by the "inordinate and inexecusable delay", Miss Ng has this to say in her affirmation -

"The delay as aforesaid gives rise to substantial risk that it will not be possible to have a fair trial of the issues of this action as the Plaintiff's claims against the 1st and 2nd Defendants are based on alleged transactions, the majority of which took place back in 1973 which is almost 9 years ago. The defence will turn upon the reliability of the 1st and 2nd Defendants and their witness' account of the said transactions and the circumstances surrounding them and their memories and recollections are bound to have been affected and faded by this long lapse of time and thus serious prejudice is likely to be caused to the 1st and 2nd Defendants."

12. I am bound to say that although this is clearly not a case in which the plaintiff's solicitors have let the action entirely to go to sleep, and one can readily understand why they thought they were justified in proceeding so slowly, they did run a grave risk by so doing. Having regard, as I must, to the totality of the delay, I might well have granted the application on the grounds of inordinate and inexcusable delay if I felt it gave rise to a substantial risk that a fair trial would not be possible or that serious prejudice would be caused to the defendants. As Edmund-Davies L.J. pointed out in Austin Securities Ltd. v. Northgate & English Stores Ltd. [1969] 1 W.L.R. 529, at p. 534, after quoting from the judgment of Denning M.R. in Allen v. Sir Alfred McAlpine & Sons Ltd.:

"so the overriding consideration is whether or not justice can be done despite the delay" [his emphasis].

13. In the forefront of Mr. Kwok's submission was the contention that after all this delay it was inevitable that the recollection of the defendants and their witnesses would be affected. On this point I would quote from the speech of Lord Salmon in Birkett v. James [1978] A.C. 297 which was a case, it will be remembered, where the claim was based on oral agreements to pay $1m, made nearly six years before the application to dismiss for want of prosecution was filed. At p. 327 Lord Salmon had this to say -

"When cases (as they often do) depend predominantly on the recollection of witnesses delay can often be most prejudicial to defendants and to plaintiffs also. Witnesses' recollections grow dim with the passage of time and the evidence of honest men differs sharply on the revelant facts. In some cases it is sometimes impossible for justice to be done because of the extreme difficulty in deciding which version of the facts is to be preferred; but this is not such a case for its result must depend chiefly upon the view which the court takes of the integrity rather than the memory of the plaintiff and the defendant. As far, however, as I can discern from the judgments of the learned judge and the Court of Appeal, no consideration seems to have been given to the fact that the outcome of this case depends upon who is lying and who is speaking the truth. After all, a promise to pay $1,000,000 (if it was made) is hardly likely to slip the memory of the promissor or the promisee even after the passage of years. I do not under-stand how such delay as there has been could prejudice the defendant or for that matter, the plaintiff, when the judge comes to make up his mind which of them is speaking the truth and which of them is lying."

14. I think much the same can be said about this case, and I would add that there is no suggestion here that material witnesses are no longer available due to death or disappearance, or that revelant documents have been lost or destroyed. It seems to me that the trial Court will not be presented with any extra difficulties created by the delay, in deciding where the truth lies. While I feel it must be acknowledged that on the pleadings (and the documents said to be in the possession of the Bank) the defendants will perhaps face formidable difficulties in opposing the claims, these difficulties, in my judgment, are not appreciably enhanced by the passage of time. I would also add that if the claims are found to be valid, the amounts due can still be ascertained very easily.

15. Mr. Kwok also urges me to find prejudice in the fact that interest has been running for so long against the defendants if they are found liable on the debts. Other considerations apart, in my view this does not amount to prejudice. In Allen's case both Diplock L.J. (at p. 257) and Salmon L.J. (at p.268) remarked that a defendant who is liable to pay on a judgment debt enjoys the use of his money while the action is allowed to hang fire. Of course this is little solace to some-one who has no money to enjoy.

16. As the cases show, when prejudice cannot be directly proved, it is sometimes possible properly to draw an inference of prejudice from the extent of the delay itself. I do not think that this is such a case.

17. It will have been seen that I have accepted Miss Eu's main submission but there was one subsidiary contention, not put forward with great conviction perhaps, which cannot be regarded as valid. It was that the Bank could have waited until just before the limitation periods expired. A similar argument was advanced in Allen's case and disposed of by Salmon L.J., at p.p. 275 - 276, as follows -

"Mr. Eveleigh sought to rely on the fact that in this case the writ was issued shortly after the causes of action are supposed to have arisen, whereas the period of limitation is six years. He says that the writ might not have been issued until some time in 1965 or 1966 and presumably that it need not have been served for one year thereafter. Accordingly, so the argument runs, the defendants are no worse off now than they would have been then, and, therefore, the action should not be dismissed for want of prosecution. I hope that I am doing the argument no injustice when I say that it appears to come to this - providing a writ is issued promptly, the palintiff and his advisers should be allowed to carry on the action as dilatorily as they like, or at any rate in a case such as the present, the first five or six years' delay should not count for the purpose of considering whether it is inordinate or inexcusable. This argument does not attract me."

18. In considering the defendants' application I bear in mind that they have had the case hanging over their heads for all too long, but taking all the circumstances of the case into account I am not satisfied that justice cannot be done despite the delay; rather, on balance I think justice demands that the action be allowed to continue.

19. While rejecting the application to dismiss the action for want of prosecution, I have no doubt that this is a proper case in which to make an "unless" order in favour of the defendant, described in Pryer v. Smith [1977] 1 W.L.R. 425 as a "useful and salutary" power. I will order that the Bank must set down the action within a set number of days; in default it shall stand dismissed. This will probably meet the need here, but I am willing to consider any further time limits that should be imposed in any necessary steps to be taken by the plaintiff in the further conduct of the action, time limits which would be enforceable by the same sanction.

20. In view of my decision on the main application, the appeal against the Registrar's order is rendered somewhat academic. But it must be said that the learned Registrar did not follow the accepted practice by not requiring an affidavit to explain the delay by the Bank until the 16th February 1982, in failing to comply with an order to file the list of documents within 14 days made on the 25th July 1978. It does not appear that the Registrar had material before him upon which he could exercise his discretion to extend the time.

Representation:

Miss Audrey Eu instructed by Philip K.H. Wong & Co. for Plaintiff

Mr. Lester Kwok instructed by Ng & Lee for 1st and 2nd Defendants