Bank of China (Hong Kong) Ltd v. Simon Siu, Wong, Lam & Chan (A Firm)

HCA1905/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1905 OF 2002

---------------------

BETWEEN

---------------------

Before : Deputy High Court Judge Poon in Chambers

Dates of Hearing : 19 and 20 July 2006

Date of Decision : 29 September 2006

-----------------------

D E C I S I O N

-----------------------

I. Introduction

1.In this Decision, I will refer to the plaintiff as the Bank and the defendant as the Solicitors.

2.The Solicitors seek to dismiss the Bank’s action for want of prosecution (applying Birkett v. James [1978] AC 297) and/or on the ground of abuse of process (applying Grovit v. Doctor [1997] 1 WLR 640).  The background leading to this application may be summarized as follows.

II.      Background

A.      The Mortgages

3.The present action is related to HCMP1586/1999 (“the Mortgage Action”).  Both actions arose out of two mortgages (“the 1^st Mortgage” and “the 2^nd Mortgage” respectively and “the Mortgages” collectively) in respect of two properties in Happy Valley, Hong Kong (“the 1^st Property” and “the 2^nd Property” respectively).

4.By a letter of instructions dated 28 September 1994, the Bank instructed the Solicitors to prepare the Mortgages, which they did.  The mortgagors then executed the Mortgages at the Solicitors’ office on 22 October 1994.

5.For both Mortgages, the Bank was the mortgagee and Grantime Holdings Limited (“Grantime”, the 1^st defendant in the Mortgage Action), the borrower.  Under the 1^st Mortgage (in respect of the 1^st Property), the mortgagors were the 2^nd and 3^rd defendants in the Mortgage Action (“the 2^nd defendant” and “the 3^rd defendant” respectively).  Under the 2^nd Mortgage (in respect of the 2^nd Property), the mortgagors were the 4^th to 6^th defendants in the Mortgage Action (“the 4^th defendant”, “the 5^th defendant” and “the 6^th defendant” respectively).

6.Pursuant to the 1^st Mortgage, the Bank extended to Grantime banking facilities which as at 22 January 1999 stood at HK$34,864,733.04.  Under the 2^nd Mortgage, the Bank advanced to Grantime and the 4^th to 6^th defendants a real estate loan of HK$4,000,000.00.

B.      The Mortgage Action

7.Grantime and the mortgagors subsequently defaulted.

8.On 16 March 1999, the Bank commenced the Mortgage Action by way of originating summons under Order 88, Rules of the High Court.

9.On 25 May 1999, the 3^rd, 5^th and 6^th defendants filed their affirmations in the Mortgage Action.  They alleged that they signed the Mortgages because of undue influence, misrepresentations or duress exerted on them by the 2^nd and 4^th defendant, of which the Bank had constructive notice.  They also alleged that the Solicitors had not advised them of the contents or effect of the Mortgages or that they should seek independent legal advice before signing.

10.On 28 May 1999, the former solicitors of the Bank, Koo & Partners (“KP”) notified the Solicitors that the enforceability of the Mortgages was disputed.

11.On 8 June 1999, Mr Simon Siu (“Mr Siu”) and Mr Margot Ma (“Mr Ma”) of the Solicitors filed affirmations on behalf of the Bank disputing the mortgagors’ allegations regarding the execution of the Mortgages.  Further affirmations were then filed by the 3^rd and 6^th defendants and the Bank.

12.At the hearing of the originating summons on 15 October 1999, the master entered monetary judgment against the Grantime, the 2^nd and 4^th defendants; and ordered that the proceedings to continue against the 3^rd, 5^th and 6^th defendants as if begun by writ.

13.On 1 November 1999, the 4^th defendant was made bankrupt.

14.Between November 1999 and May 2000, the Mortgage Action proceeded in the usual manner with pleadings filed and discovery made.

15.On 28 August 2000, the 2^nd defendant was made bankrupt.  So was the 5^th defendant on 3 January 2001.  On 25 April 2001, Grantime was wound-up.

16.It is the Bank’s case that sometime in 2001, negotiations with the mortgagors for settlement began.

17.On the other hand, the Bank continued to prosecute the Mortgage Action.  On 20 March 2001, KP sent draft witness statements relating to the preparation and execution of the Mortgages to Mr Siu and Mr Ma for their consideration.  On 24 March 2001, KP asked to inspect the Solicitors’ file relating to the preparation and execution of the Mortgages.  But no inspection took place.

18.On 4 May 2001, the Bank applied for (a) an order for delivery of possession of the 1^st and 2^nd Property against the 2^nd and 4^th defendants; (b) leave to proceed with the Mortgage Action notwithstanding the bankruptcy of the 2^nd, 4^th and 5^th defendants; and (c) leave to amend its Reply and Defence to Counterclaim.  But apparently, the Bank did not pursue the application there and then.

19.On 14 May 2001, Mr Siu and Mr Ma amended their witness statements on a without prejudice basis.  Since then, the Bank had not taken any further step in the Mortgage Action.  On 18 May 2002, the Bank filed a notice of intention to proceed.  (The Bank commenced the present action on the very same day.)

20.On the other hand, the negotiations for settlement brought about some fruitful results.  On 17 April 2002, the Bank, the 2^nd and 3^rd defendants entered into a deed of forbearance whereby the 2^nd and 3^rd defendants agreed to surrender the 1^st Property to the Bank in return for the Bank dropping the claim against them.  The 2^nd and 3^rd defendants surrendered the 1^st Property to the Bank on 16 July 2002.  On 17 July 2002, a consent order was made for the stay of the Mortgage Action against the 3^rd defendant.

21.Thus, as at 17 July 2002, the Bank’s claims against Grantime under the Mortgages, the 2^nd and 3^rd defendants under the 1^st Mortgage and its monetary claim against the 4^th defendant under the 2^nd Mortgage had all been disposed of.  What has since been outstanding to date is its claim under the 2^nd Mortgage against :

(a)      the 4^th to 6^th defendants for possession of the 2^nd Property, and

(b)     the 5^th and 6^th defendants for the outstanding indebtedness.

C.      The present action

22.On 24 April 2002, KP repeated the request to inspect the Solicitors’ file relating to the preparation and execution of the Mortgages, commented on the draft witness statements amended by Mr Siu and Mr Ma and reserved the Bank’s right to claim against the Solicitors if the Mortgages were found to be unenforceable by reason of the Solicitors’ breach of duty to the Bank.

23.On 18 May 2002, the Bank commenced the present proceedings.  In the statement of claim filed on 29 May 2002, the Bank denied the allegations raised by the 3^rd, 5^th and 6^th defendants in the Mortgage Action.  But it went on to plead that in the event that those allegations were accepted by the court, the Solicitors would have been in breach of the duties to the Bank.

24.The Solicitors acknowledged service on 10 June 2002 and filed the defence on 11 July 2002, denying liability.  On 15 August 2002, the Bank filed the reply and requested for further and better particulars of the defence.  The pleadings were closed on 29 August 2002.

25.On 12 September 2002, the Solicitors provided further and better particulars of the defence.  Dissatisfied, the Bank issued a summons on 1 November 2002.  The Bank’s application was dismissed by the master on 28 November 2002 (“the 28/11/02 Hearing”).

26.Then the Bank did not take any further step in the present action.

D.      Further attempts to settle the Mortgage Action

27.The Bank had not been active in the Mortgage Action either since the filing of the notice of intention to proceed on 18 May 2002.  The only step that it had taken was entering the consent order dated 17 July 2002.

28.It is the Bank’s case that in 2003, it made further attempts to settle the Mortgage Action with the remaining mortgagors.  But as it turned out, the attempts were unsuccessful when the negotiations broke down in May 2004.

E.      Steps taken since July 2003

29.On 9 July 2003, the Bank sought consent of the remaining defendants in the Mortgage Action and the Solicitors to consolidate the two actions.  The Solicitors gave their consent on 31 July 2003 and the 6^th defendant, his on 25 September 2003.

30.On 26 November 2003, the Bank and the Official Receiver applied to the Bankruptcy Master for leave to the Bank to continue the Mortgage Action against the 4^th and 5^th defendants.  On 8 July 2004, the Bankruptcy Master advised the Bank that the 4^th defendant has been discharged from bankruptcy since 1 November 2003.  On 15 July 2004, the Bank obtained an order to proceed against the 5^th defendant (who had not been discharged from bankruptcy then) in the Mortgage Action, which was necessary for the purpose of consolidation.  The Bank then invited the remaining mortgagors to deal with the Bank’s outstanding application to amend its Reply and Defence to Counterclaim in the Mortgage Action for the purpose of consolidation.  (See para. 18 above.)

31.On 29 September 2004, the Bank filed the notice of intention to proceed in the present action.

32.On 7 October 2004, the 6^th defendant applied for legal aid.  The Mortgage Action was accordingly stayed for 42 days pursuant to the Legal Aid Ordinance.  His application for legal aid was successful when he was issued a legal aid certificate on 18 January 2005.

33.On 3 February 2005, the Bank issued a new summons to amend its Reply and Defence to Counterclaim filed in the Mortgage Action.  Leave to amend was granted on 28 February 2005.

34.On 5 August 2005, the Bank issued a summons for directions in the present action.

35.By letter dated 11 August 2005, the Solicitors accused the Bank of delay and threatened to strike out the present action.  By letter dated 17 August 2005, the Bank refuted the Solicitors’ allegations of delay.  The Solicitors then took out the present summons on 8 September 2005.

36.Since then further steps have been taken in the Mortgage Action including filing of witness statements and further discovery.

III.     Striking out for want of prosecution

A.      The principles

37.The Solicitors first seek to strike out the present action for want of prosecution.  They rely on the principles derived from Birkett v. James, which can be summarised as follows.

38.The court has inherent jurisdiction to dismiss an action or want of prosecution.  The jurisdiction will be exercised only where the court is satisfied either :

(1)     that the default has been intentional and contumelious, e.g. disobedience to a preemptory order of the court or conduct amounting to an abuse of process of the court; or

(2)     (a)      that there has been inordinate and inexcusable delay on the part of the plaintiff or his lawyers, and

(b)     that such delay will give rise to a substantial risk that it is not possible to have a fair trial of the issues in the action or is such as is likely to cause or to have caused serious prejudice to the defendants either as between themselves and the plaintiff or between each other or between them and a third party.

See Birkett v. James, per Lord Diplock at p.318E-G.

39.As I understand the submissions of Mr Bartlett, counsel appearing for the Solicitors, he is essentially relying on the second limb.  In Trill v. Sacher [1993] 1 WLR 1379, Neill LJ summarized the principles concerning the second limb at pp.1398A-1400B.  Those which are more pertinent to this application are extracted below :

“(2)    The general burden of proof on an application to strike out for want of prosecution is on the defendant.

(3)     Inordinate delay cannot be precisely defined.  ‘What is or is not inordinate delay must depend upon the facts of each particular case:’ Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229, 268F.  It is clear, however, (a) that for delay to be inordinate it must exceed, and probably by a substantial margin, the times prescribed by the rules of court for the taking of steps in the action; and (b) that delay in issuing the writ cannot be classified as ‘inordinate’ provided the writ is issued within the relevant period of limitation.

(4)     Delay which is inordinate is prima facie inexcusable: see Allen’s  case at p. 268F.  It is for the plaintiff to make out a credible excuse.  For example, difficulties with regard to obtaining legal aid may provide such an excuse.

(5)     Where a plaintiff delays issuing proceedings until towards the end of the period of limitation he is then under an obligation to proceed with the case with reasonable diligence: Birkett v. James [1978] A.C. 297, 323D.  Accordingly, a court is likely to look strictly at any subsequent delay which is in excess of the period allowed by rules of court for taking the relevant step, and may regard such subsequent delay as inordinate even though a similar lapse of time might have been treated less strictly had the action been started earlier.

(6)     A defendant cannot rely on a period of delay for which he has himself been responsible.

…

(8)     Save in exceptional cases an action will not be struck out for want of prosecution before the expiry of the relevant limitation period: Birkett v. James [1978] A.C. 297, 321D.  It is not altogether clear how this rule is best explained.  It may be that before the limitation period has expired the delay cannot properly be regarded as ‘inordinate:’ cf. Birkett’s case, at p. 321DE Alternatively, it may be that, though the delay is both inordinate and inexcusable, the court would not in the ordinary case exercise its discretion to strike the action out if a fresh writ could be issued at once.  To do so would only delay the trial.

(9)     Once the limitation period has expired the court is entitled to take account of all the earlier periods of inexcusable delay since the issue of the writ.  These periods can include: (a) periods of delay occurring before the expiry of the limitation period which at an earlier stage could not be treated as ‘inordinate’ (see (8) above) …

(10)   A defendant cannot rely on any prejudice caused to him by the late issue of a writ.  Thus such prejudice is not due to delay which can be characterized as inordinate or inexcusable.  Some additional prejudice after the issue of the writ must be shown.  The additional prejudice need not be great compared with that which may have been already caused by the time elapsed before the writ was issued,’ but it ‘must be more than minimal; and the delay in taking a step in the action if it is to qualify as inordinate as well as prejudicial must exceed the period allowed by rules of court for taking that step:’ Birkett v. James [1978] A.C. 297, 323.

(11)   Prejudice to the defendant may take different forms.  In many cases the lapse of time will impair the memory of witnesses.  In other cases witnesses may die or move away and become untraceable.

(12)   The prejudicial effect of delay may depend in large measure on the nature of the issues in the case.  Thus the evidence of an eyewitnesses or of a witness who will testify to the words used when an oral representation was made is likely to be much more seriously impaired by the lapse of time than the evidence of someone who can rely on contemporary documents.  A defendant may also suffer some prejudice from prolonged delay in an action which involves imputations against his reputation, though this factor by itself is unlikely to provide a ground for striking out.

(13)   When considering the question of prejudice and, if it is raised, the question whether there is a substantial risk that it will not be possible to have a fair trial of the issues in the action, the court will look at all the circumstances.  It will look at the periods of inordinate and inexcusable delay for which the plaintiff or his advisers are responsible and will then seek to answer the questions: has this delay caused, or is it likely to cause, serious prejudice, or is there a substantial risk that because of this delay it is not possible to have a fair trial of the issues in the action?  As Slade L.J. stressed in Rath v. C. S. Lawrence & Partners [1991] 1 W.L.R. 399, 410: ‘a causal link must be proved between the delay and the inability to have a fair trial or other prejudice, as the case may be.’

…”

40.With these principles in mind, I will consider if the Bank is guilty of any inordinate and inexcusable delay.  I will then look at the question of prejudice.

B.      Inordinate and inexcusable delay

(1)     Pre-writ delay

41.The Bank had notice of the mortgagors’ allegations against the Solicitors on 25 May 1999.  For present purposes, the parties accept that the limitation period for commencing the present action is 3 years from 25 May 1999 : see section 31(4)(b) of the Limitation Ordinance, Cap. 347.  The plaintiff issued the writ in the present action on 18 May 2002, that is, one week before the expiry of the limitation period.

42.There is no doubt considerable delay in commencing the present action.  On pre-writ delay, Lord Diplock said in Birkett v. James at p.322F-H :

“… the time elapsed before the issue of a writ within the limitation period cannot of itself constitute inordinate delay however much the defendant may already been prejudiced by the consequent lack of notice of the claim against him, the fading recollections of his potential witnesses, their death or their untraceability.  To justify dismissal of an action for want of prosecution the delay relied upon must relate to time which the plaintiff allows to lapse unnecessarily after the writ has been issued.  A late start makes it the more incumbent upon the plaintiff to proceed with all due speed and a pace which might have been excusable if the action had been started sooner may be inexcusable in the light of the time that has already passed before the writ was issued.”

43.The pre-writ delay here, though considerable, of itself does not constitute inordinate delay.  But it makes more incumbent on the Bank to prosecute the present action with diligence and expedience.

(2)     Post-writ delay

44.The pleadings were closed on 29 August 2002.  The parties then engaged in request and supply of further and better particulars, which resulted in the 28/11/02 Hearing.  There is no delay up to this point.

45.Mr Bartlett submitted that since then the Bank had not taken any further step in the present proceedings until the issue of summons for directions on 5 August 2005.  Neither the notice of change of solicitors filed on 19 December 2003 nor the notice of intention to proceed filed on 24 September 2004 constituted a step in these proceedings.  In fact, they did not progress the action at all.  Thus there was a lapse of about 33 months of inactivity between 28 November 2002 and 5 August 2005 (“the Period”).  Ms Wong, SC, counsel for the Bank, submitted that the Period is not a period of inactivity as such.  At least 20 months of the Period can be properly accounted for.  She placed much reliance on the point that the present action is not free-standing.  The charge of breach of duty against the Solicitors is expressly pleaded as dependent upon the Mortgages being found in the Mortgage Action to be unenforceable.  The present action cannot proceed in isolation from the Mortgage Action.  It is accordingly necessary to consolidate the Mortgage Action and the present action.  And steps have to be taken to properly prepare the actions for consolidation.

46.In my view, although consolidation is necessary, it does not exonerate the Bank entirely from the delay in the Period.  I first note that the KP first suggested consolidation soon after the issue of the writ : see the letter dated 4 July 2002 from Richards Butler (“RB”) for the Solicitors to KP (“the 4/7/02 Letter”).  But it was not followed up until KP sought consent from the Solicitors and the 6^th defendant in July 2003.  At the very latest, after the 28/11/02 Hearing, the Bank ought to have applied for consolidation and consequential directions.  The time lapse between then and July 2003 is inordinate.  It would appear that the Bank was then actively negotiating settlement with the defendants in the Mortgage Action.  But that does not amount to any excuse for delay in the Mortgage Action (see Fort Sterling Ltd and Another v. South Atlantic Cargo Shipping NV and Others (The “Finnrose”) [1994] 1 Lloyds Rep. 559, per Rex J at p.564), let alone delay in the present action.  I find the inordinate delay of about 7 months between November 2002 and July 2003 inexcusable.

47.Ms Wong referred to the fact that the Solicitors gave their consent for consolidation on 31 July 2003 and the 6^th defendant, who was then the only solvent defendant in the Mortgage, gave his on 25 September 2003.  Thus there can be no delay between 9 July and 25 September 2003.  Ms Wong further submitted that the Bank (together with the Official Receiver) made the application to the Bankruptcy Master for leave to the Bank to continue the Mortgage Action against the 4^th and 5^th defendants in November 2003.  But it was not until 8 July 2004 that the Master advised the Bank that the 4^th defendant had already been discharged from bankruptcy and 15 July 2004 that the Master granted leave to the Bank to proceed against the 5^th defendant in the Mortgage Action.  The Bank cannot be blamed for the time lapse.  Likewise, the Bank could not be blamed for the delay caused by the 6^th defendant’s application for legal aid in September 2004, which was only granted in January 2005.  The Bank then sought to tighten the loose ends in the Mortgage Action so that it could be consolidated with the Action.

48.Mr Bartlett submitted that the steps taken in the Mortgage Action could be taken as steps in the present action.  They cannot justify any delay here.  In principle, I agree that the steps taken in another set of proceedings do not justify any delay in a related action.  But the need for consolidation in the special circumstances of the present case may create an exception.  That said, I cannot fully accept Ms Wong’s submissions above.  First, I fail to see any justification why the Bank did not take out the application for leave before the Bankruptcy Master at the same time when it sought consent from the Solicitors and the 6^th defendant in July 2003.  Second, on the evidence before me, it is not clear why the Bankruptcy Master took so long to dispose of the Bank’s application.  Equally, there is no evidence to show that the Bank had followed the matter up with the Master when the application had been pending for such a long time.  In the absence of the evidence, I am left with the impression that the Bank might not have pursued the application with sufficient expedience.  That is not acceptable given the very late start of the present action.  Third, there is no reason why the Bank did not proceed with consolidation after the Master gave leave in July 2004.  Fourth, the proceedings were interrupted by the 6^th defendant’s legal aid application.  I accept that the Bank is not responsible for the resultant delay.  But I fail to see why the Bank did not then issue a summons for directions for the purpose of consolidation and consequential directions after the grant of the legal aid certificate in January 2005.  According to Ms Wong, the Bank was then tidying up the loose ends in the Mortgage Action for the purpose of consolidation.  But as rightly submitted by Mr Bartlett, it is not necessary to synchronize the two actions before consolidation.  Finally, the loose ends in the Mortgage Action were tidied up by the end of February 2005.  But the Bank did not take out the summons for directions in the present action until 5 August 2005.  The 5 months’ delay is inordinate and inexcusable. 

49.In sum, the Bank is guilty of inordinate and inexcusable delay for (a) the 7 months between November 2002 and July 2003; (b) a substantial part between July 2003 and February 2005, which cannot be quantified exactly; and (c) the 5 months between February and August 2005.

50.For completeness, I just wish to point out that in the course of submissions, counsel debated whether the present action is a contingence action, whether the Bank will be put to election at the trial which version of events it would adopt as to what happened at the meeting on 22 October 1994 and whether the Bank can still continue to rely on its claim on the 1^st Mortgage against the Solicitors in light of the settlement.  For present purposes, I do not think it is necessary for me to make any determination or express any view on them.

51.I now turn to the question of prejudice.

C.      Resultant prejudice

52.Delay alone is not sufficient to justify striking out on the inordinate and inexcusable limb : see Wing Ming Garment Factory Limited v. The Incorporated Owners of Wing Ming Industrial Center, HCA8805/2001, unreported, 22 April 2005, per A. Cheung J at pp.28-29, para. 75.  The court must be satisfied that there is a substantial risk that it is not possible to have a fair trial of the issues in the action; or that the defendant has been or is likely to be seriously prejudiced.  There must exist a causal link between the delay and the inability to have a fair trial or other prejudice, as the case may be : Rath v. CS Lawrence and Partners [1991] 1 WLR 319, per Slade LJ at 410.

53.The Solicitors complain that a fair trial is no longer possible and that they have suffered various forms of prejudice.  I would like to preface my discussion with one observation before proceeding further.  RB for the Solicitors proposed in the 4/7/02 Letter to the Bank before service of their defence to stay this action pending the conclusion of the Mortgage Action.  Ms Wong submitted that before so proposing, the Solicitors must have weighed the prejudice that they might in the meantime suffer but decided that it was something that they could live with.  I agree and will look at the Solicitors’ complaints with this in mind.

(1)     Risk that a fair trial is not possible

54.I first look at the complaint that there is a risk that it is not possible to have a fair trial.  In essence, the Solicitors’ case is that the memory of their key witnesses, Mr Siu and Mr Ma, had been impaired through the long lapse of time, which renders a fair trial impossible.

55.In evaluating such a risk, the court must examine the nature of the disputes and issues involved and the content and relevance of the witnesses : see Wing Ming Garment Factory Limited v. The Incorporated Owners of Wing Ming Industrial Center, per A. Cheung J at para. 27 at p.10.  Mr Bartlett set out an elaborate list of issues that he submitted need to be determined at trial.  I will not repeat the issues here but will put them in two board categories.  The first relates to the Solicitors’ scope of duty.  The second concerns what happened at the Solicitors’ office on 22 October 1994 when the Mortgages were executed.

56.On the scope of duty, as the pleadings now stand, the Bank’s express instructions to the Solicitors were contained in the letter of instructions dated 28 September 1994.  Neither party has referred to any other instructions or communications between the Bank and the Solicitors.  In other words, the scope of duty can be ascertained and determined by reference to documentary evidence and the relevant law.  It does not depend on the memory of Mr Siu or Mr Ma.  Mr Bartlett further referred to the issue concerning the Solicitors’ knowledge as to the Mortgagors’ inter-relationship.  The Solicitors deny that they had any such knowledge.  And there is nothing to suggest that either the Mortgagors or the Bank allege that they did.  I do not think the memory of Mr Siu or Mr Ma would have any bearing on this issue.

57.I accept Ms Wong’s submission that despite the elaborate list by Mr Bartlett, stripped to its bare bones, the only matter dependent on the testimony of the Solicitors’ witnesses is what happened on 21 October 1994 when the Mortgages were executed.  This brings me to the second category of issues identified by Mr Bartlett.

58.Mr Bartlett in effect contended that the witnesses for the Solicitors would be cross-examined in detail on what happened at the said meeting.  It should be noted that the key witness on what transpired at the meeting is Mr Ma.  For it is Mr Siu’s case, apparently not disputed by the Bank or the mortgagors, that he did not step into the meeting until after Mr Ma had finished explaining the terms of the Mortgages to the mortgagors and signified to Mr Siu that they were ready to sign the documents.  Ms Wong submitted that the contrast between the accounts given by the mortgagors and Mr Ma is stark and clear.  On the one hand, the mortgagors said that the Solicitors gave no explanation whatsoever of the documents that they were asked to sign.  The 5^th defendant went so far as saying that she was simply passed the documents to sign and that the documents had been turned to the execution clause.  In his affirmation filed in the Mortgage Action, Mr Ma said that he did explain the Mortgages and advised them to seek independent legal advice.  I accept Ms Wong’s submission that it is wrong to assume, as Mr Bartlett did, that the Solicitors’ witnesses would be required to recall the minute points of detail about what happened at the meeting on 21 October 1994.

59.I fully accept that Mr Ma’s loss of recollection of the meeting, due to long lapse of time, is inevitable.  After all, the meeting took place some 12 years ago.  And that must result in some prejudice to the Solicitors.  But the prejudice is mitigated by two factors.  First, Mr Ma had made an affirmation in the Mortgage Action in 1999 and a draft witness statement in May 2001, in which he gave an account on what transpired at the meeting.  He said in clear terms that he had explained the contents of the Mortgages to the mortgagors present, the effect of the personal covenant to repay, the contents of the facility letters and had advised the mortgagors to seek independent legal advice if they needed to do so.  Mr Ma can certainly refer to the affirmation and draft witness statement to refresh his memory and to rely on them at trial if necessary.  Second, the loss of memory on any reasonable view is by no means unexpected.  There is nothing to suggest that Mr Ma, who must have handled numerous similar transactions before, should retain any specific memory of the meeting in the absence of contemporaneous record; or that there is some special feature which made the meeting a particularly memorable one.

60.Accordingly, I am not satisfied that a there is a substantial risk that a fair trial is impossible because of impairment of memory of the Solicitors’ witnesses.

61.I turn to other forms of prejudice.

(2)     Other forms of prejudice

62.The Solicitors complain that the present action has caused a blight on their professional reputation.  And they have recently lost a client as a result of this action.

63.A defendant may suffer prejudice from prolonged delay in an action which involves his imputations.  But that is not by itself a factor to provide a ground for striking out : Trill v. Sacher, per Neill LJ at p.1299F-G.  Mr Bartlett relied on Can-Asia Capital Co. Ltd v. Kwok Yee William [1995] 1 HKC 521 and contended that where there are serious allegations of fraud or professional negligence, that may amount to a weight factor for striking out : see Godfrey JA’s speech at pp.525G-526C.  But as rightly submitted by Ms Wong, termination of the present action will not put an end to the question raised as to the Solicitors’ conduct in handling the execution of the Mortgages.  For the same allegations against them remain on foot in the Mortgage Action.  The Solicitors will still have to answer the allegations and seek to clear their name there.  In the circumstances, I do not think the Solicitors can derive much assistance from the Can-Asia case.

64.As to the loss of a particular client, the Solicitors have not given full evidence on the extent their practice has been adversely affected.  I do not think the prejudice is of itself serious enough to warrant striking out the action.

65.The Solicitors next complain that there is financial prejudice on the effect of the interest component of the claim.  In my view, the court can deal address such prejudice by making an appropriate order on interest.  So the prejudice does not of itself justify striking out the action.

66.The Solicitors also complain that there is the impact on their professional indemnity insurance arrangement and the inability to top-up professional indemnity insurance.  I note that the evidence on these matters is quite scanty.  It is not sufficient to satisfy me that the Solicitors have suffered substantial prejudice as contended.  In any event, I do not think some prejudice arising from these matters is serious enough to justify striking out the action.

67.For completeness, I would add that the various forms of prejudice, even taken together, do not justify striking out the action. 

D.      Conclusion

68.For the above reasons, I rule that the Solicitors have failed to make out a case for striking out for want of prosecution on the second limb of Birkett v. James.

IV.     abuse of process

69.I next turn to the alternative limb of abuse of process.  Here the Solicitors pray in aid the principles derived from Grovit v. Doctor.  Grovit v. Doctor has been recently considered by the Court of Appeal in New China Hong Kong Group Ltd & Another v. AID Asian Infrastructure Fund LP & Others [2005] 1 HKLRD 383.  For present purposes, it will be sufficient for me to quote the following speeches of the Court of Appeal.  Woo VP said at paras.10-16 at pp.392F-394E thus :

“10.   In Grovit v Doctor [1997] 1 WLR 640, which was a defamation action, Lord Woolf, with his speech the other Law Lords agreed, expressly stated at p.644G that the appeal before the House was ‘not an appropriate vehicle for making significant inroads on the principles endorsed by Lord Diplock in Birkett v James.’  The conclusion that Lord Woolf reached can be found at pp.647G-648A, as follows:

‘…, I am satisfied that both the Deputy Judge and the Court of Appeal were entitled to come to the conclusion which they did as to the reason for the appellant’s inactivity in the libel action for a period of over two years.  This conduct on the part of the appellant constituted an abuse of process.  The courts exist to enable parties to have their disputes resolved.  To commence and to continue litigation which you have no intention to bring to conclusion can amount to an abuse of process.  Where this is the situation the party against whom the proceedings is brought is entitled to apply to have the action struck out and if justice so requires (which will frequently be the case) the courts will dismiss the action.  The evidence which was relied upon to establish the abuse of process may be the plaintiff’s inactivity.  The same evidence will then no doubt be capable of supporting an application to dismiss for want of prosecution.  However, if there is an abuse of process, it is not strictly necessary to establish want of prosecution under either of the limbs identified by Lord Diplock in Birkett v James [1978] A.C. 297.  In this case once the conclusion was reached that the reason for the delay was one which involved abusing the processing of the court in maintaining proceedings when there was no intention of carrying the case to trial the court was entitled to dismiss the proceedings.’  (Emphasis added)

11.     It can be seen, therefore, that the ratio decidendi of Grovit v Doctor [1997] 1 WLR 640 is that maintaining an action when there is no intention of carrying it to trial is an abuse of process rendering the action liable to be struck out.  Athough Lord Woolf intimated that this was not a significant inroad upon the principles endorsed by Birkett v James [1978] AC 297, it in fact was, in the sense that the requirement to prove likely prejudice suffered by the defendant under the second limb of Birkett v James has been rendered unnecessary.  This may, however, be regarded as an identification of a facet of abuse of process.

12.     Another significant inroad on the Birkett v James principles may be considered as having been made in the case of Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426, CA, where Lord Woolf warned at p.1436E-F:

‘In Birkett v. James [1978] A.C. 297the consequence to other litigants and to the courts of inordinate delay was not a consideration which was in issue.  From now on it is going to be a consideration of increasing significance.  Litigants and their legal advisers, must therefore recognise that any delay which occurs from now on will be assessed not only from the point of view of the prejudice caused to the particular litigants whose case it is, but also in relation to the effect it can have on other litigants who are wishing to have their cases heard and the prejudice which is caused to the due administration of civil justice.  The existing rules do contain time limits which are designed to achieve the disposal of litigation within a reasonable time scale.  Those rules should be observed.’  (Emphasis added)

13.     While inordinate delay was to be viewed more seriously by the courts thenceforth, as is apparent from Lord Woolf’s warning, it does not mean that mere delay, without more, would amount to abuse of process.  This was recognised by Lord Woolf, who referred to two decisions to that effect, see Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426 at pp.1432H-1433E.  In Barclays Bank Plc v Maling& Another [1997] EWCA Civ 1480 (23 April 1997), following Teale v McKay [1994] PIQR 508, Aldous LJ stated:

‘That case is a clear indication that mere delay, whether or not caused by incompetence, cannot amount to an abuse of process which will enable an action to be struck out.  What is needed is disregard of the court’s orders.  It may be that deliberate as opposed to negligent disregard may not be required (see Hytec Information Systems Ltd. v. Coventry City Council [1997] 1 W.L.R. 1666).’ (Emphasis added)

14.     The other case to which Lord Woolf referred is Culbert v Stephen G Westwell & Co. Ltd [1993] PIQR 54, where Parker LJ said at pp.65-66:

‘… An action may also be struck out for contumelious conduct, or abuse of the process of the court or because a fair trial in action is no longer possible.  Conduct is in the ordinary way only regarded as contumelious where there is a deliberate failure to comply with a specific order of the court.  In my view however a series of separate inordinate and inexcusable delays in complete disregard of the rules of the court and with full awareness of the consequences can also properly be regarded as contumelious conduct or, if not that, to an abuse of the process of the court.’  (Emphasis added)

15.     This passage of Parker LJ’s judgment was followed in Choraria Sethia [1998] CLC 625 where Nourse LJ, after referring to Birkett v James [1978] AC 297 and Grovit v Doctor [1997] 1 WLR 640, stated at 630F:

‘The law … may therefore be stated thus.  Although inordinate and inexcusable delay alone, however great, does not amount to an abuse of process, delay which involves complete, total or wholesale disregard, put it how you will, of the rules of court with full awareness of the consequencesis capable of amounting to such an abuse, so that, if it is fair to do so, the action will be struck out or dismissed on that ground…’  (Emphasis added)

16.     Again, as I see it, Parker LJ was identifying another way of constituting an abuse of process or contumelious conduct, which is a series of inordinate and inexcusable delays in complete disregard of the rules of the court and with full awareness of the consequences.  Despite the court being satisfied that the plaintiff’s conduct amounts to an abuse in the manner described, as Nourse LJ observed, it is still necessary for the court to consider whether it is fair to strike out the action.”

Woo VP continued at para. 32 at pp.397I-498A :

“32.   It is clear from what was said by Aldous LJ in Barclays Bank v Maling [1997] EWCA Civ 1480, Parker LJ in Culbert v Stephen G. Westwell & Co Ltd & Another [1993] PIQR 54and Nourse LJ in Choraria v Sethia [1998] CLC 625 that long inordinate and inexcusable delay does not amount to an abuse of process unless there is contumelious conduct or abuse of process.  Disobedience of a court order, albeit non-peremptory, is capable of being regarded as contumelious conduct.  On the other hand, inordinate and inexcusable delay in complete disregard of the rules of the court, without disobedience of any court order, can only amount to an abuse of process if and insofar as that delay or default was committed with the full awareness of the consequences.”

Stone J also had this to say at paras. 68-70 at pp.406E-407A :

“68.   During the course of this appeal a number of modern English cases in this area have been cited to this court.  Whilst these cases are all obviously fact-sensitive, with each case being decided in terms of its own factual matrix, what is noticeable within this emerging doctrine is the differing emphases in the articulation of applicable principle.

69.     In my judgment the appropriate approach to strike out applications of this nature is that adumbrated by Auld LJ in Miles v. McGregor (unrep., Court of Appeal, 23 January 1998) wherein the learned judge stated:

‘The emphatic articulation and the application by the court in Choraria [Choraria v. Sethia, [1998] CLC 625, CA] of this quite separate power to strike out proceedings for wholesale disregard of procedural rules because it constitutes an abuse of process of this court should not, however, be taken as a ready alternative to the court’s power to strike out an action for inordinate and inexcusable delay.  The abuse of process route is for cases of an exceptional nature where the conduct of the party in default amounts to an affront to the court and to its rules.’  (Emphasis added)

70.     Whilst it is right to record that this approach of Auld LJ, with its emphasis on ‘cases of an exceptional nature’, was not wholeheartedly embraced by the court in Lace Coordinates v NEM Insurance Co Ltd (unrep., Court of Appeal, 19 November 1998). — Hirst LJ observing that in his view all that Auld LJ was doing was ‘no more than sounding a note of caution that Arbuthnot Latham [Arbuthnot Latham v. Trafalgar Holdings [1998] 1 WLR 1426] should not be applied too readily and that, as that case itself makes clear, something significantly more is needed than inordinate and inexcusable delay’ — it is probable that the clear requirement for a significant further element within the factual equation before the ‘abuse of process route’ can succeed in any given case is likely to elevate that case to something sufficiently out of the ordinary so as to merit the epithet ‘exceptional’.”

70.Mr Bartlett submitted that there has been a wholesale disregard by the Bank in complying with the rules of court, which clearly amount to contumelious default and abuse of process.  Ms Wong submitted that mere non-compliance with the rules of court, without more, cannot amount to wholesale disregard of the rules by the Bank.  If it were otherwise, mere inaction and delay per se would be sufficient to justify the dismissal of an action based on abuse of process : the New China case, per Woo VP at para. 33 at p.398A-D.  I agree.  Ms Wong further submitted that the disregard must be committed with full awareness of consequences of delay.  There is no evidence to enable the court to find the necessary awareness on the part of the Bank.  I also agree.  I therefore reject Mr Bartlett’s contention.

71.Mr Bartlett next argued that the writ was protective in nature and the action was to be warehoused by the Bank pending any settlement or outcome in the Mortgage Action.  He relied on a number of cases including Arbuthnot Lathan Bank Ltd v. Trafalgar Holdings Ltd [1998] 1 WLR 1426, Choraria v. Sethia [198] CLC 625 and Advaita Enterprises v. Seafast Marine Transporting Inc, HCCL241/1995, unreported, Chung J, 24 November 2001.

72.I do not think it is necessary for me to deal with the cases cited by Mr Bartlett in detail.  Each case is, after all, to be decided in terms of its own factual matrix.  I will apply the principles to the present case to see if there is an abuse of process on the part of the Bank as alleged.

73.On the evidence before me, I agree with Ms Wong’s submission that it is reasonable to infer that the Bank has the intention to carry on with the present action.  The Banks’ claim against the Solicitors is sizable and not illusory.  The writ is not protective as such.  Otherwise, the Bank could have withheld service of the writ or accepted the Solicitors’ offer to stay pending the outcome of the Mortgage Action.  In July and September 2003, the Bank did obtain the respective consent of the Solicitors and the 6^th defendant for consolidation.  The Bank took steps to tidy up the loose ends in the Mortgage Action with a view to preparing that action for consolidation with the present action.  Synchronizing the two actions is, as I have observed, unnecessary for consolidation.  But it clearly demonstrates the Bank’s intention to carry on with both actions.  I am therefore not satisfied that the Bank has warehoused the action with no intention to bring it to an end.

74.For the above reasons, the Solicitors have failed to make good their application on the ground of abuse of process.

V.      order and costs

75.I will dismiss the Solicitors’ application and make an order nisi that the Bank shall have the costs, to be taxed if not agreed.

Ms Eve Sit, instructed by Messrs Gallant Y.T. Ho & Co., for the Plaintiff

Mr Jeremy Bartlett, instructed by Messrs Richards Butler, for the Defendant