Ko Oon Hin v. Goodyear Estates Ltd and Another
Read the full judgment text of HCA 2915/1980 on BabelCite. This High Court CFI judgment was delivered on 20 January 1982.
1. At the conclusion of the hearing of a summons brought by the first of two defendants to dismiss this action for want of prosecution, I rejected the application and now give my reasons, as I undertook to do.
|
HCA002915/1980 H.C.A. No. 2915 of 1980 Practice and procedure - application to dismiss action for want of prosecution - principles applicable - action filed just within 6 year limitation period - additional prejudice to plaintiff by "Post-writ" delay held to be minimal - application dismissed. High Court Action No. 2915 of 1980 IN THE SUPREME COURT OF HONG KONG HIGH COURT BETWEEN
Coram: Fuad, J. Date: 20 January 1982 _____________________ REASONS FOR ORDER _____________________ 1. At the conclusion of the hearing of a summons brought by the first of two defendants to dismiss this action for want of prosecution, I rejected the application and now give my reasons, as I undertook to do. 2. By his statement of claim the plaintiff claims three amounts of $5 m. each from the first defendant, a Hong Kong Company, Goodyear Estates Ltd. ("Goodyear") and certain other and lesser sums from the Dai-Ichi Kangyo Bank Ltd. which is registered in Japan ("the Japanese bank"). 3. The plaintiff's claim may thus be summarised. At the material time, he had an account with the Overseas Trust Bank and in the middle of June 1974, at a time when Goodyear was in financial difficulties, he drew a cheque for $5 m. in favour of a Mr. Wai who was then Goodyear's managing director and thus advanced the money to them. As will be seen, Mr. Wai was later brought into the action as a Third Party. A scheme, which it is averred would involve a number of sham transactions, was evolved and the parties responsible would incorporate a new company (Ladies Jewellery Ltd.) which they would control. Ladies Jewellery would then enter into an agreement with Goodyear to buy the entire share capital of a private company which owned a large and valuable plot of land in Jordan Road. Substantial payments would need to be made by Ladies Jewellery under the scheme, obligations which it was well understood, and indeed intended, could not and would not be met. It was planned that after some payment had been made, Ladies Jewellery would default in paying further instalments due and Goodyear would then exercise their contractual right to forfeit what had been paid over. Goodyear would thus retain the share capital of the private company and the forfeited money, thus improving their financial position. 4. In pursuance of the scheme, the agreement between Goodyear and Ladies Jewellery was executed on the 29th June 1974 and the first instalment of $5 m. due "on signing" was paid. The plaintiff says that on the day before, he was asked to advance $5 m. to help finance the deal and did so. This is the second amount of $5 m. that he claims. 5. On the 22nd July 1975 the plaintiff opened a "free Yen account with the Japanese bank and deposited various sums into it. He says that without his authority (or negligently) four days later the Japanese bank transferred the equivalent of $US 1 m. from his account to a Hong Kong bank for the account of Pan Pacific Lines (Holding) S.A. and also debitted the transfer charges to him. The amount transferred to Pan Pacific found its way into Goodyear account. This is the third amount of $5 m. claimed from the first defendant. 6. The plaintiff avers that in due course the fraudulent plan was fully carried out. As regards the third $5 m., the plaintiff claims this sum together with the transfer charges from the second defendant the Japanese bank, in the alternative. 7. Goodyear's defence is somewhat easier to state. As regards the first sum of $5 m. claimed, they say the plaintiff made no loan to them; nothing in the nature of such a transaction occurred. As to the second and third sums of $5 m. they say that their agreement with Ladies Jewellery was perfectly genuine and that they are entitled to keep the whole of the $13 m. forfeited under the default clause in that agreement. 8. It is now necessary to set out in some detail a chronology of the steps taken in the action. The writ was issued on the 6th June 1980 and it is common ground that this was just within the relevant limitation period of six years. Appearance was entered by Goodyear on the 10th June 1980 on which date they also issued a Third Party notice against Mr. Wai. After an abortive attempt by Goodyear to obtain particulars of the statement of claim before filing a defence, they filed their defence on the 25th June 1980 and took out a summons for the necessary Third Party directions. Mr. Andrew Li, for Goodyear, makes no complaint in respect of what subsequently occurred up to the 23rd July 1980. During this period Third Party directions were issued and the provision of further particulars of the claim was dealt with. 9. The chronology continues in this way. There was a court vacation from the 11th August to the 11th September 1980. The statement of claim was amended in relation to the claim against the second defendant, the Japanese bank, on the 17th September. On the 13th October an application for issue of the writ against the Japanese bank out of the jurisdiction was taken out, and it was granted on the 28th October. On that day a concurrent writ against the Japanese bank was issued. Notice of the writ had to be translated into Japanese, and nearly two months later, on the 22nd December the request for service out of the jurisdiction was made and notice of the writ to be served was filed. The notice was served on the Japanese bank on the 28th January 1981, who entered conditional appearance on the 17th February. 10. On the 7th March a summons was taken out on behalf of the Japanese bank to set aside service of the writ, and an order to that effect made on the 7th April. The plaintiff filed a notice of appeal against that order on the 11th April, and abandoned the appeal on the 13th April. Between the 28th May and the 7th July there was correspondence between the solicitors for the Japanese bank and for the plaintiff in relation to the costs of the abortive service of the notice of the writ, and another court vacation occurred between the 1st August and the 11th September. The plaintiff took out a summons for directions on the 22nd September. This was opposed by letter dated the 28th September on behalf of the Third Party as being out of time and on the 30th September the plaintiff applied by summons seeking an extension of time for taking out the summons for directions. On the 10th October the summons which is before me was taken out and the supporting affirmation was filed on the 13th October 1981. 11. The principles which govern the exercise of the court's salutory but harsh jurisdiction to strike out a claim for want of prosecution are well settled. It is trite to remark that it is no light matter irrevocably to slam shut the doors of the court in the face of a plaintiff (as would be the case here since the limitation period has expired) without the merits of his claim being adjudicated upon. The facts upon which the court must exercise its discretion will differ widely in each case and a careful balance between the rights of the parties must be struck. 12. If I may say so, the learned authors of the Supreme Court Practice set out the cases and the principles applicable with great detail and clarity and it is not necessary for me to attempt a similar exercise. But the starting point must be the propositions approved by the House of Lords in Birkett v. James(l) in the speech of Lord Diplock. [Where the default has not been intentional and contumelious] to strike out an action for want of prosecution, the court must be satisfied -
13. Since the action was instituted only just before the expiration of a six years' limitation period, I will read two further passages from Lord Diplock's speech -
14. It will be recalled that Mr. Andrew Li bases his complaint, and therefore his application, on the 14 months' delay which occurred between the 23rd July 1980 and the 30th September 1981. He acknowledges that Goodyear did not file their Statement of Claim against the third party until the 29th January 1981 but contends that this step had nothing to do with the plaintiff and that the period from the 23rd July 1980 to the 29th January 1981 should not be ignored. If that submission found no favour with the court, then he was entitled to complain about the 8 months' delay which occurred between the 29th January and the 30th September 1981. 15. In response to the explanation offered that some 5½ months of the delay during the legal year 1980-1981 was taken up in procedural steps pursued on behalf of the plaintiff against the Japanese bank outside the jurisdiction, Mr. Andrew Li submits that this provided no excuse, for such steps did not affect the plaintiff's case against Goodyear and Goodyear were not kept informed as to what was happening. Moreover all these procedures could and should have been followed as long ago as June 1980. If this period of delay were found to be excusable them he had a legitimate complaint about the period that elapsed between mid-April and the end of September 1981. 16. On the matter of prejudice Mr. Andrew Li submitted that this aspect should be approached against the background that very serious allegations were being persisted in against Goodyear, a public listed company, arising out of events that occurred as long ago as mid-1974. Ever since the writ had been issued, reference to the litigation had had to be made in their accounts. The latest reference in the 1979-1980 accounts is in the following terms -
Moreover all this had had to be repeated in a rights issue document prepared in June 1981 and had occasioned the solicitors for the underwriters great concern. It was only after detailed study of the position that they had felt able to commit their clients. 17. Although Mr. Li recognized that the memories of witnesses might be expected to fade as much during six years as in eight, nevertheless this was contended to be a factor that must, in fairness to Goodyear, be borne in mind. 18. Of eight potential witness that Goodyear might call, Mr. Andrew Li accepted that four were still in Hong Kong (as well as the Third Party) and one in Macau and no problems would be encountered in procuring their attendance at the trial. As far as Goodyear knew two other witnesses had left Hong Kong. Goodyear did not know where they could be found but as yet had made no effort to locate either. I was also told that a Mr. Edmund Chan Tak Tai (one of Goodyear's directors who had approved two of the relevant agreements alleged to be part of the sham) had died in August 1981. Mr. Li however was ready to acknowledge that Mr. Char was a non-executive director and merely one of some 10 directors who had given the necessary approval. 19. In summary, therefore, on behalf of Goodyear it was submitted that there had been inordinate and inexcusable delay and that on account of such delay more than minimal "post-writ" prejudice had been suffered, on the grounds that witnesses might not be accessible, and their memories might fade, and the action had been allowed to hang over their heads indefinitely. Mr. Andrew Li also asked the court to consider making an "unless" order, if his main submissions were to fail, on the authority of Pryer v. Smith.(2) 20. Mr. Martin Lee for the plaintiff contended that there had been no inordinate delay; if there had been, it was excusable. In any event Goodyear had not been able to show any prejudice. He pointed out that taken at its worst there had been a delay of some 14 months during which two court vacations had to be taken into account, but the main thrust of his argument on delay as opposed to prejudice was that when 0.25 r.1 is read as a whole the time taken in attempting to serve the other defendant, the Japanese bank, was indeed relevant because the summons for directions was required to be taken out within one month of the close of pleadings in the action as a whole. By virtue of 0.25 r. 1(4) a defendant could only then himself takeout a summons for directions or apply for an order to dismiss the action. Moreover the Third Party proceedings could also not be ignored in so far as they delayed the prosecution of the action in view of the terms of the order made which contained the direction that the question of the liability of the Third Party was to be tried at the time of the action. The Statement of Claim against the third party had not been filed by Goodyear until January 1981 and no defence had yet been filed. Even if this were not so, Mr. Martin Lee contended, it was not possible to argue that the plaintiff could have taken out a summons for directions in respect of his claim against Goodyear until the pleadings had closed between them and the Japanese bank. It therefore followed that the earliest that the summons could have been taken out was the beginning of April when the Japanese bank succeeded in having service of the writ upon them set aside. Thus a delay of only five months (from which a court vacation had to be deducted) was involved. 21. Despite the force of these submissions I think it is as well to bear in mind that apart from the express authority of 0.25 r.l(4) the court has inherent jurisdiction to dismiss an action for want of prosecution in the circumstances discussed in the second paragraph of 25/1/3A of the Supreme Court Practice. 22. I would mention here that Mr. Martin Lee was at pains to emphasise (and Mr. Andrew Li was ready to accept) that the plaintiff's abortive claim against the Japanese bank was made bona fide, and he suggested that it would be a counsel of perfection to insist that the procedural steps relating to the service of the writ outside the jurisdiction upon the Japanese bank should have taken place simultaneously with those taken in relation to the claim against Goodyear. On this aspect of the matter I concluded that proceedings against the Japanese bank could well have been pursued with more expedition and Mr. Andrew Li had a valid ground of complaint on that score. However I dismissed the application because I was far from satisfied that any unjustifiable delay that might have occurred gave rise to any real risk that a fair trial of the issues in the action would not be possible or that serious prejudice to Goodyear was likely. 23. In coming to this decision, while I bore in mind the point made by Lord Denning M.R. in Biss v. Lambeth Health Authority (3) about the prejudice to a defendant in having an action handing over his head indefinitely, I felt it was important to appreciate that the facts there were somewhat unusual and, with due respect, nothing in the case would have justified any attempt by me, sitting at first instance, to whittle down in any way the clear statement of principles enunciated by the House of Lords in Birkett v. James.(1) I accepted Mr. Martin Lee's submissions and was not able to discern additional prejudice that could be fairly described as more than minimal other than that which might well have already been caused by the fact that the action was instituted very shortly before the end of along limitation period. The obvious point that the recollection of a witness who gives evidence eight years after the events he relates took place is not likely to be more imperfect than if he had given evidence two years earlier must be re-stated. There is no suggestion that any relevant documents have been lost or destroyed. Regarding potential witnesses there is no evidence either way about the availability of the two witnesses who have left Hong Kong. The attendance of the witness who is in Macau is not likely to prove difficult to procure. The deceased director was, as has been mentioned, non-executive and he was only one of many other directors who authorised the execution of the agreements even if the relevant period of delay were to be regarded as 14 months, the additional anxiety to Goodyear of having the case hanging over their heads, and the additional embarrassment of having to refer to the litigation in their annual accounts since the writ was issued could not in my view be regarded as more than minimal. As the notes show the directors, on advice, were at all times so confident that their cause was just that they considered it unnecessary to make any provision for a possible award of damages; and the rights issue, in the event, went ahead despite the initial concern of the underwriters. 24. In the result the application failed because, taking a broad view and on balance, I reached the conclusion that it would be fairer to allow the action to continue rather than to stop it. Nor did I feel that an "unless" order would be justified although the plaintiff will now be on notice and would be unwise to allow any further delay that he would be unable positively to justify.
(1) [1978] A.C.297 at p.318 (2) [1977] 1 W.L.R. 425 (3) [1978] 1 W.L.R.382 Representation: Mr. Andrew Li instructed by Ronald Wong & Co. for Applicant/1st Defendant. Mr. Martin Lee Q.C. and Mr. Philip Lee instructed by Chu & Lau for Plaintiff/Respondent. |