Dynamic Wise Trading Ltd v. Chung Chi Kwong
Read the full judgment text of DCCJ 167/2004 on BabelCite. This District Court judgment.
1. This is an application by the Defendant to strike out the Plaintiff’s claim for want of prosecution and on the ground of abuse of process.
Cites 4 cases
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DCCJ167/2004 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 167 OF 2004 ----------------------
---------------------- Coram: H H District Judge Marlene Ng in Chambers (open to the public) Date of Hearing: 9th March, 2009 Date of Handing Down Decision: 12th March, 2009 ---------------------- DECISION ---------------------- I. Introduction 1. This is an application by the Defendant to strike out the Plaintiff’s claim for want of prosecution and on the ground of abuse of process. 2. By his Amended Summons dated 28th January 2008 (“Amended Summons”) the Defendant sought the following reliefs :
3. I am informed by Mr Yip, counsel for the Defendant, that the Defendant would no longer pursue the reliefs referred to in paragraph 2(a)(i) and (iii) above. Without no objection from Mr Cheng, counsel for the Plaintiff, I granted leave to the Defendant to withdraw the applications set out in paragraph 2(a)(i) and (iii) above. 4. The court-imposed deadline for the Plaintiff to file and serve affirmation in opposition to the Amended Summons expired on 31st January 2009, but the Plaintiff only filed the affirmation of Chan Man Lai Monique (“Madam Chan”) on 3rd March 2009 (“Chan’s 2nd Affirmation”). With no objection from Mr Yip, I granted leave to the Plaintiff to file and serve such affirmation out of time. I also directed there be no order as to costs of such time application. 5. Although the Amended Summons was the Defendant’s application, it was Mr Cheng who first lodged his written submissions with the court on Friday 6th March 2009. Subsequently, Mr Yip faxed his written submissions to the court at 6:02pm on the same day (“Mr Yip’s 1st Submissions”). Mr Yip’s 1st Submissions largely dealt with the strike out on the Birkett v James ground of inordinate and inexcusable delay and substantial prejudice, and only briefly alluded to the grounds of abuse of process and Order 25 rule 1(4) of the RDC. At the hearing before me, Mr Yip formally abandoned reliance on Order 25 rule 1(4) of the RDC. 6. Just before the hearing on Monday 9th March 2009, Mr Yip lodged his supplemental written submissions (“Mr Yip’s 2nd Submissions”), which essentially dealt with the issue of prejudice and the strike out on the ground of abuse of process. It transpired that Mr Yip’s 2nd Submissions were provided to Mr Cheng on Saturday 7th March 2009, and Mr Cheng fairly informed me he would be prepared to deal with the arguments therein. 7. However, there was another twist. At the hearing before me, Mr Yip submitted that the Defendant would rely on Order 34 rule 2 of the RDC as a ground for the strike out. This naturally came as a surprise to Mr Cheng as it was not mentioned in either the Amended Summons or in Mr Yip’s 1st and 2nd Submissions. After the case was stood down for Mr Cheng to consider the Plaintiff’s position, Mr Cheng informed me that the Plaintiff objected to any proposed re-amendment of the Amended Summons to include this new ground by virtue of its lateness and the unfair surprise to the Plaintiff, but if I were to allow such application, he would be ready to deal with such argument without adjournment of the hearing. 8. There was no doubt that the Defendant’s application to re-amend the Amended Summons to rely on Order 34 rule 2 of the RDC was late, and that there was no good reason for the lateness, especially when the striking out summons was issued more than a year ago on 10th January 2008. But I was unable to discern any prejudice to the Plaintiff that could not be compensated by time for Mr Cheng to consider the matter and by costs. 9. So at the hearing I granted leave to the Defendant to re-amend the Amended Summons by adding the reference to Order 34 rule 2 of the RDC at the margin, and directed filing/service of the Re-Amended Summons within 7 days from the date thereof. I further ordered that costs of and occasioned by the application to re-amend the Amended Summons be paid by the Defendant to the Plaintiff to be taxed if not agreed with certificate for counsel. For the benefit of the taxing master, I apportioned 45 minutes of hearing time for such application. 10. Still further, during Mr Yip’s oral submissions in reply at the hearing, he sought to rely on the Birkett v James ground of intentional and contumelious default, which did not feature in Mr Yip’s 1st and 2nd Submissions or in his initial oral submissions. More importantly, it did not feature in the Re-Amended Summons for striking out the Plaintiff’s claim (even though Mr Yip only applied for re-amendment at the beginning of the hearing) or in the Defendant’s affirmation filed on 3rd January 2009 in support of the Amended Summons (“Chung’s 2nd Affirmation”). Unsurprisingly, Mr Cheng vigorously objected to such submission. I find myself in agreement with Mr Cheng’s observation that the Defendant’s case on the striking out application had been a moving feast. I was unconvinced that it would be procedurally fair to allow Mr Yip to raise this new dimension beyond the eleventh hour after perusing and hearing Mr Cheng’s written and oral submissions and when Mr Cheng did not have the opportunity to deal with it in his submissions. I therefore declined to hear such argument from Mr Yip at the hearing. However, such ruling does not in any way constrict Mr Yip’s contention that the Plaintiff’s conduct amounted to abuse of process of the court. II. Plaintiff’s claim 11. The Plaintiff claimed it was the tenant of premises known as All That Shop No.1 on 1st Floor of No.22 Russell Street (“Premises”), and pursuant to a written tenancy agreement dated 30th November 2002 (“Sub-tenancy Agreement”) it sub-let the Premises to PAL (“Sub-tenant”) for a period of 2 years from 1st December 2002 to 30th November 2004 (“Sub-tenancy”). 12. The Sub-tenancy Agreement provided inter alia that :
13. The Sub-tenancy Agreement also contained provisions for payment by the Sub-tenant of costs and expenses that might be incurred by the Plaintiff in demanding rent and other charges, in enforcing the Plaintiff’s rights/remedies, in taking legal action/proceeding against the Sub-tenant accordingly, and of interest on outstanding rent or other sums payable by the Sub-tenant to the Plaintiff. 14. The Plaintiff claimed the Sub-tenant failed/refused to pay arrears of rent since April 2003, and thereby repudiated the Sub-tenancy Agreement. By the LT Order, the Plaintiff obtained judgment against the Sub-tenant for possession of the Premises as well as arrears of rent from 1st April to 28th August 2003, mesne profits from 29th August to 4th September 2003 and costs in the total sum of HK$175,334.34. On 4th September 2003, the Sub-tenant delivered vacant possession of the Premises to the Plaintiff. On 29th September 2003, the Sub-tenant paid the Plaintiff a sum of HK$73,334.34. 15. The Plaintiff managed to re-let Premises for a period of 1 year and 10 months (ie from 5th November 2003 to 13th September 2005) with rent-free period from 5th November to 4th December 2003. After taking into account the payment of the sum of HK$73,334.34 by the Sub-tenant, the aforesaid re-letting, and the set-off against the Deposit of HK$102,000.00, the Plaintiff claimed it suffered loss and damages in the total sum of HK$175,869.50 being (a) outstanding balance of rent/mesne profits under the LT Order, (b) loss of rental income for the unexpired portion of the Sub-tenancy Agreement from 5th September to 30th November 2004, (c) Government rates paid/payable for the period from 1st October to 4th November 2003, and (d) stamp duty paid by the Plaintiff for re-letting the Premises. 16. The Plaintiff claimed that by the Guarantee made between the Plaintiff and the Defendant, the Defendant irrevocably and unconditionally guaranteed to the Plaintiff the due and punctual payment by the Sub-tenant of the rent or any part thereof and the performance/ observance by the Sub-tenant of all other terms/conditions of the Sub-tenancy Agreement, so the Defendant was/is liable to the Plaintiff for all arrears of rent with interest and all loss and damages as a result of the Sub-tenant’s breach of the Sub-tenancy Agreement. III. Defendant’s defence 17. By its Amended Defence, the Defendant put the Plaintiff to strict proof of its claim. However, I was informed by Mr Yip that the Defendant would not dispute the following :
18. By its Defence, the Defendant averred that the Plaintiff forfeited the Sub-tenancy on/about 28th August 2003 (“Forfeiture Argument”). 19. Since the Sub-tenant paid the Plaintiff the sum of HK$73,334.34 and was entitled to have the Deposit set-off against the sums due under the LT Order, the Defendant claimed the Sub-tenant had fully satisfied the LT Order. Consequently the Plaintiff’s entire rights, claims and/or causes of action against the Sub-tenant under the Sub-tenancy Agreement had been fully settled and extinguished. In the circumstances, the Plaintiff had no further causes of action, rights and/or claims against the Sub-tenant under the Sub-tenancy Agreement and/or against the Defendant under the Guarantee (“Extinguishment Argument”). 20. Further or alternatively, the Defendant claimed that with (a) the Plaintiff having failed to include his claim for loss and damages (which in substance was a claim based exclusively on its alleged entitlement against the Sub-tenant for damages (if any) for the alleged unexpired portion of the Sub-tenancy) in the LT Case, (b) the LT Case having been concluded without any award for such damages in favour of the Plaintiff, and (c) the Defendant’s liability under the Guarantee only extending to the Sub-tenant’s liability under the LT Order which had been fully satisfied, the Plaintiff was not entitled to claim such damages from the Sub-tenant, and consequently from the Defendant (“No Liability Argument”). 21. Even if the Plaintiff were entitled to claim such further damages (which the Defendant denied), the Defendant claimed that the Plaintiff’s failure to claim such damages in the LT Case against the Sub-tenant discharged the Defendant’s liability (if any) under the Guarantee in respect of such damages since the Defendant would be prejudiced and jeopardised in its claim for recovery against the Sub-tenant for such damages (“Release Argument”). IV. Chronology of events 22. The chronology of events has been set out in the Chung’s and Chan’s 2nd Affirmations. It is useful to set out some of the key events :
V. Defendant’s affirmation evidence 23. The Defendant claimed that since 22nd March 2005 the Plaintiff had completely lost interest in and stopped further prosecution of the present proceedings. Even after the Plaintiff served Notice of Change of Solicitors, it failed to take any further steps to prosecute its claim. The Defendant further claimed that the Plaintiff’s substantial delay caused him irreparable prejudice in that the respective memories of all concerned parties, including those for the Defendant, in relation to the disputed issues inevitably suffered from inaccuracy and diminution due to passage of time. VI. Plaintiff’s affirmation evidence 24. Madam Chan claimed that since the Defendant was granted unconditional leave to defend on 22nd March 2005, the Plaintiff “entrusted the matter to its legal advisor to handle as appropriate”. Madam Chan was also a director of other companies, and she did not closely monitor the development of this case. In the latter part of 2007, the Plaintiff was informed that its handling solicitor had left or was leaving (Madam Chan could not recall precisely) the solicitors’ firm formerly acting for the Plaintiff. There was then dispute between the Plaintiff and its former solicitors that led to a change of solicitors. The Plaintiff filed Notice of Change of Solicitors, but did not actively pursue further progress of this case pending the prosecution and final disposal of the Defendant’s striking out application, which application was taken out prior to the Plaintiff filing Notice of Change of Solicitors. Indeed, the Defendant did not file Chung’s 2nd Affirmation until 11 months after initially taking out the Summons (with the consent of the Plaintiff). 25. Madam Chan claimed the Defendant did not suffer any prejudice (even if the delay were inexcusable) since the disputes in the present proceedings turned on legal issues and not on factual matters. 26. Madam Chan further claimed there was no reason for the Plaintiff not to pursue its meritorious claim against the Defendant. On the contrary, it had every reason to pursue such claim against the Defendant, and would instruct its solicitors to diligently prosecute such claim upon disposal of the Defendant’s striking out application. VII. Legal principles 27. I now turn to the law. The Re-Amended Summons concerned a strike out under Order 18 rule 19 and Order 34 rule 2 of the RDC. It is trite that such summary power must only be used in plain and obvious cases, and it is for the party seeking to strike out a pleading to demonstrate that the case is plainly and obviously fit to be struck out (see Hong Kong Civil Procedure 2009 Vol.1 para.18/19/4 at pp.350-351). 28. The basic rule is that an action may be struck out where the court is satisfied that (a) there is inordinate and inexcusable delay on the part of the plaintiff and his legal representatives, and (b) 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 have caused serious prejudice to the defendants either as between themselves and the plaintiff or between each other or a third party (see Birkett v James [1978] AC 297). The burden of proof is on the defendant. 29. “Inordinate” means materially longer than the time usually regarded by the profession and courts as an acceptable period (see Hong Kong Civil Procedure 2009 Vol.1 para.25/L/5 at p.504). What is or is not inordinate delay must depend on the facts of each particular case. But delay which is inordinate is prima facie inexcusable, and it is for the plaintiff to make out a credible excuse (see Hongkong & Shanghai Banking Corp Ltd v Juan Tao Sheng & ors [1998] 1 HKC 438, 443-444). 30. Further, this ought to be looked at from the defendant’s point of view or, at least, objectively (see Hong Kong Civil Procedure 2009 Vol.1 para.25/L/6 at p.504 and Ho Hip Lik & anor v Kwan Man Ho & ors [1996] 2 HKLR 184, 186). To illustrate this, Lord Diplock said as follows at p.324 in Birkett v James :
31. The prejudice that a defendant relies on is a matter of fact and degree, but must be more than minimal and can take different form. In many cases the lapse of time will impair the memory of witnesses. In other cases, the witnesses may die or move away or become untraceable. “Their importance depends on the circumstances, the issues and the other evidence that can be given. Thus the lapse of time may be very prejudicial if the circumstances of an accident or oral contracts or representations are in issue, but is of much less importance in a heavy, well-documented commercial action” (see Hong Kong Civil Procedure 2009 Vol.1 para.25/L/7 ar pp.504-505). 32. 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. The court will consider the periods of inordinate and inexcusable delay for which the plaintiff or his advisers are responsible and will then ask itself whether this delay caused or is likely to cause serious prejudice, or whether there is a substantial risk that because of this delay it is not possible to have a fair trial of the issues in the action. The prejudice must be caused by the delay. 33. The above summary of principles was approved by the Court of Appeal in Hong Kong & Shanghai Banking Corp Ltd at pp.443-445 and applied in Team Glory Development Limited v So Luen Fai and all other occupiers of “Lot No. 2030A in D.D. 95, Ku Tung, N.T.” CACV231/2008 (unreported, 12th February 2009). But satisfaction of the general conditions only means that the court may exercise its discretion to strike out, and it does not follow that the court must do so (see Kerry Foodstuffs Co Ltd v Phulsawat Navy Co Ltd [1999] 3 HKC 523, 527-528). 34. In Hong Kong & Shanghai Banking Corp Ltd at p.444, the Court of Appeal held that save in exceptional cases an action will not be struck out for want of prosecution before the expiry of the relevant limitation period. Mortimer VP at pp.446-447 cited the ratio in Lord Diplock’s speech in Birkett v James at p.332 as follows :
35. Mortimer VP went on to say as follows :
36. Here, the Defendant also sought to invoke Grovit v. Doctor [1997] 1 WLR 640, which has been examined by our Court of Appeal in New China Hong Kong Group Ltd v AIG Asian Infrastructure Fund LP [2005] 1 HKLRD 383. 37. In Grovit v Doctor, the House of Lords pointed out that there was a further category of cases where the delay amounted to an abuse of process to ground striking out applications. Lord Woolf explained at pp.647-648 as follows :
38. In New China Hong Kong Group Ltd, Woo VP at pp.392-393 held that this was a significant inroad into the principles of striking out endorsed by Birkett v James in that (a) the requirement to prove likely prejudice suffered by the defendant under the second limb had become unnecessary but might be regarded as an identification of a facet of abuse of process, and (b) the consequences of inordinate delay to other litigants and to the courts were an increasingly significant consideration. 39. Woo VP at pp.393-394 went on to hold that mere delay without more will not amount to an abuse of process. Disobedience of a court order is capable of being regarded as contumelious conduct. Where there is no disobedience of any court order, before inordinate and inexcusable delay in complete disregard of the rules of the court can properly be regarded as contumelious or abuse of process, there has to be full awareness of the consequences. In addition, after being satisfied that the plaintiff’s conduct amounted to an abuse, the court still has to consider whether it is fair to strike out the action. 40. In agreeing with Woo VP, Stone J at p.406 warned that considerable caution must be exercised before acceding to a Grovit v Doctor striking out application. Such jurisdiction is of an exceptional nature and confined to patent abuse of process, otherwise there is a danger that the established Birkett v James doctrine – in terms of inordinate and inexcusable delay coupled with substantial prejudice – will be emasculated by the back door, leading to inference of intention to prosecute the action no further, and hence characterisation as an abuse of process, will be sufficient to get home on a strike out in the absence of the required element of prejudice. Stone J said at pp.406-407 as follows :
41. The above principles have been applied in Chevalier (E&M Contracting) Ltd v Rotegear Development Ltd & ors [2005] 4 HKLRD 30, a case relied on by both Mr Cheng and Mr Yip. VIII. Discussion (a) Order 34 rule 2 of the RDC 42. Mr Yip referred to Order 23A rule 5(1) of the RDC and submitted that apart from mutual discovery which had been completed in December 2004, there was no further progress in this case with respect to witness statements and expert reports (if any), and, more significantly, the Plaintiff failed to apply for a pre-trial review under Order 34 of the RDC within 3 months after the time for inspection of documents. Mr Yip submitted that in such circumstances the Plaintiff’s claim ought to be struck out under Order 34 rule 2 of the RDC. 43. Order 23A rule 5(1) of the RDC provides inter alia as follows :
44. Order 34 rule 2 of the RDC provides inter alia as follows :
45. In the present case, there were no agreed directions pursuant to Order 23A rule 4 of the RDC and no summons for directions, so I accept that Order 23A rule 5(1) of the RDC should be applicable. Whilst it is correct to say that no witness statements have been filed/served to date, I doubt whether expert evidence is required at all. Neither counsel referred to any such need. 46. I agree with Mr Cheng that Order 23A rule 5(1) of the RDC places a mutual obligation on both parties rather than just on the Plaintiff to comply with the provision as to service of witness statements. There is no evidence before me that the Defendant is ready with his witness statement(s), so the default in compliance with Order 23A rule 5(1)(c) of the RDC is that of both parties. In coming to this view, I do not lose sight of the fact that the Plaintiff has carriage of the claim. 47. Mr Cheng fairly accepted that the obligation to comply with Order 23A rule 5(1)(f) of the RDC falls squarely on the Plaintiff, and the Plaintiff having failed to comply with such obligation, it is open to the Defendant to apply under Order 34 rule 2 of the RDC for a pre-trial review or for dismissal of the action for want of prosecution. 48. According to annotation B34/2/1 in District Court Handbook 2002 Civil Practice, the sanctions under Order 34 rule 2 of the RDC for failure to apply for a pre-trial review within the prescribed time are similar to those for failure to apply to set the action down for trial under Order 34 rule 2(2) of the Rules of the High Court (“RHC”). According to Hong Kong Civil Procedure 2009 Vol.1 para.34/3/4 at p.619, the relevant principles for exercising the discretion under Order 34 rule 2(2) of the RHC are those set out in Chevalier (E & M Contracting) Ltd, and the jurisdiction will be exercised if it is shown that there has been inordinate and inexcusable delay on the part of the plaintiff, which gives rise to prejudice to the defendant so that there is substantial risk that it would no longer be possible to have a fair trial. 49. In such circumstances, it is only appropriate that I turn to the Birkett v James ground of inordinate and inexcusable delay and substantial prejudice to resolve the application for striking out under Order 34 rule 2 of the RDC and also for want of prosecution. (b) Delay 50. To put the matter baldly, between 22nd March 2005 and 30th December 2008 (ie for more than 3½ years), the Plaintiff did not initiate any step in the present proceedings to pursue its claim. 51. It was the Defendant (who upon re-assignment of solicitors on 28th February 2007) who took the initiative to file Notice of Change of Solicitors and Notice of Intention to Proceed in September 2007, file the Amended Defence on 22nd November 2007 and take out the striking out summons on 10th January 2008. 52. Even on the Plaintiff’s own case, Madam Chan confessed she did not closely monitor developments in the present case and she left the Plaintiff’s former solicitors to “handle as appropriate”. It turned out that the Plaintiff’s former solicitors did nothing to progress the case. As explained in paragraph 30 above, it made no difference whether the delay was caused by the Plaintiff or by its former solicitors. 53. In my view, there is no acceptable justification for the Plaintiff’s inaction from 22nd March 2005 to 10th January 2008. The delay during this period is plainly inordinate and inexcusable. 54. The Defendant filed the Amended Defence and issued the striking out summons in January 2008. There is dispute between the parties whether the period after 10th January 2008 amounts to inordinate and inexcusable delay. 55. Mr Yip submitted that there were no court rules prohibiting the Plaintiff from issuing (a) a summons for directions for exchange of witness statements or for seeking other case management directions, or (b) an application for a pre-trial review returnable at the same time as the Amended Summons or to be heard immediately after the hearing of the Amended Summons, yet the Plaintiff did not take any such step. Mr Yip further complained that Madam Chan offered no concrete evidence to support her contention that the Plaintiff was willing to proceed with the case diligently upon conclusion of the striking out application. 56. Mr Cheng, on the other hand, submitted this was not a case of complete inaction by the Plaintiff in face of the Defendant’s striking out summons. In fact, the Plaintiff attended the initial hearing of the striking out summons before Master R Lai on 25th January 2008. At such hearing, Master R Lai (a) granted leave to the Defendant to amend the striking out summons, (b) set a timetable for the parties to file affirmations in support, in opposition and in reply with respect to the Amended Summons, and (c) gave directions for the parties to fix a hearing date for argument of the Amended Summons before a District Judge with 3 hours reserved. The court-imposed timetable required the Defendant to go first with filing his affirmation in support of the Amended Summons within 21 days before the Plaintiff was called upon to file any affirmation in opposition within 21 days thereafter. However, through no fault of the Plaintiff, the Defendant did not ready Chung’s 2nd Affirmation until 10th December 2008. Mr Cheng submitted that when the Defendant sought leave to file such affirmation out of time, the Plaintiff actively responded by endorsing a Consent Summons dated 30th December 2008 that specified a new timeline for filing affirmation evidence with respect to the Amended Summons. It was pursuant to such Consent Summons (approved by Master R Lai on the following day) that the Defendant filed Chung’s 2nd Affirmation 11 months after issuing the striking out summons. 57. In my view, the striking out summons for inter alia want of prosecution is clear notice to the Plaintiff of the Defendant’s complaint of delay in progressing the case. Whilst it is correct to say there are no express rules of the court prohibiting the Plaintiff from preparing and proposing exchange of witness statements or taking out summons for directions or making application for pre-trial review, the test is not what the Plaintiff theoretically could have done but whether there is any acceptable excuse for the inaction. 58. I bear in mind that in the Amended Summons the Defendant not only complained of delay and prejudice, he also applied to the strike out the Plaintiff’s claim for disclosing no reasonable cause of action and for insufficient material facts being pleaded in the Amended Statement of Claim to support a claim for alleged loss and damages beyond the scope of the LT Order. I bear in mind that the Defendant did not abandon such application until the hearing before me. 59. In my view, the situation is not one in which the Defendant can let “sleeping dogs lie” in the hope that the case can die a natural death. Since the Defendant initiated the attack by way of the Amended Summons, he had carriage of the matter to bring it to a conclusion. Until there is a resolution of such application, the Plaintiff will be hard put to determine the permissible scope of its claim that can progress to trial, and consequently to ascertain the parameters of witness evidence and the ambit of disputed issues. Even if, as suggested by Mr Yip, the Plaintiff had taken steps to issue a summons for directions or an application for a pre-trial review at an earlier stage, such summons or application will logically be heard after the disposal of the Amended Summons. Plainly, there has been procrastination (and indeed even breach of express court order) on the part of the Defendant (which is unexplained) in filing his affirmation in support of the Amended Summons, and I find that such procrastination also contributed to the delay during this subsequent period. 60. Hong Kong Civil Procedure 2009 Vol.1 para.25/L/14 at p.507 suggests that the court should look at the conduct of both parties and if the defendant has considerably contributed to the delay he will seldom obtain dismissal of the action. I am not persuaded that the period after 10th January 2008 amounts to inordinate and inexcusable delay. But I still find the initial period of inaction by the Plaintiff from March 2005 to January 2008 inordinate and inexcusable. (c) Prejudice 61. Mr Yip submitted that there was (a) substantial risk that as a result of the inordinate and inexcusable delay it would not be possible to have a fair trial of the issues in the present proceedings, and (b) serious prejudice to the Defendant in defending the claim. He argued that if the matter proceeded to trial, the Defendant would be cross-examined on matters set out in Chung’s 1st Affirmation, and the delay would impair his recollection of the details of the events set out therein. 62. What has to be decided is whether it had been sufficiently established that prejudice in the Birkett v James sense of risk of no fair trial or prejudice to the Defendant was caused by the delay. 63. It has been suggested that Roebuck v Mungovin [1994] 2 AC 224, 234 supports the proposition that positive evidence of prejudice is not necessary :
However, careful reading of the above passage shows that Lord Browne-Wilkinson did not say that prejudice could be inferred simply from inordinate delay. In that case, he was dealing with the allocation of prejudice to two separate periods of delay and commenting on the artificial nature of the allocation. It is obvious common sense that if prejudice is caused by the first period of delay, such prejudice will be aggravated by a subsequent period of delay. However, it still begs the question as to whether prejudice is shown for the initial period of delay. 64. In Lui Chun Kwong v Kier Hong Kong Ltd & ors [1995] 1 HKC 695, the Court of Appeal held that mere assertion of prejudice was not enough, and full and proper evidence of the prejudice suffered or why a fair trial of any particular issue was not possible or likely not possible was required. Waung J at p.704 said : “…… I do not read either from the above-cited passage of Lord Browne-Wilkinson or from the arguments of counsel in the report of Roebuck v Mungovin as suggesting that Hornagold v Fairclough Building Ltd had been overruled by the House of Lords. On that basis therefore, I will continue to regard as being good law that evidence of specified prejudice on specified issue is required for an application to dismiss for want of prosecution” (see also Chevalier (E & M Contracting) Ltd at pp.37-39). 65. Likewise, in Lee Hung Chiu Philip v Becton Dickinson Asia Ltd HCA2830/2000 (unreported, 5th July 2007), Mr Recorder McCoy SC referred to Shtun v Zalejska [1996] 1 WLR 1270 as authority for the proposition that it was possible in an appropriate case for the court to infer prejudice from overall delay so that the impairment of witnesses’ recollections was a valid conclusion that might be reached even where not affirmatively stated by anyone to plainly exist. But the learned judge was not prepared to extrapolate from Shtun a possible modification of the Birkett v James test, and he maintained that the proper approach was as set out in Birkett v James and in Chevalier (E & M Contracting) Ltd (which was not dissonant with the judgments in Shtun) :
66. In Hunter v Skingley [1997] 1 WLR 1466, cited with approval in Lee Kin Yan trading as Kin Shing Engineering Company v Honeywell Limited CACV35/2000 (unreported, 19th May 2000) and Hymer v Mass Transit Railway Corp & ors [2000] 2 HKLRD 589, it is said that the dimming of memories is essentially a function of time. The initial period is always the more important as that would be the time when memory would be freshest and when full statements can and should have been taken from the witness by the defendant’s solicitors. In Lee Kin Yan and Hymer, the Court of Appeal commented that there is no good reason why the defendant should refrain from taking statements from witnesses when the action started. It is a matter of common sense for a party on receipt of a legal claim to use reasonable diligence to review his position, secure any evidence that may be relevant and to seek advice if necessary. Such defendant can reasonably be regarded as equally aware as anyone else that time is likely to undermine recollections, and thus should take basic steps to preserve relevant evidence. 67. Turning to the present case, the Defendant did not identify any witness for the defence other than himself. He is available and he has Chung’s 1st Affirmation to assist him to refresh his memory if it becomes necessary for him to give evidence at trial. There is no suggestion that there are any other relevant factual matters apart from those deposed in Chung’s 1st Affirmation. As Mr Yip accepted, there is also no indication in Chung’s 2nd Affirmation of any specific prejudice on any specified issue other than dimming of memory generally due to function of time. 68. In any event, I am not persuaded that the claim and defence in the present proceedings as presently framed are fact-sensitive. I agree with Mr Cheng that this case depends largely on documentary evidence. 69. First, given that H H Judge H C Wong on 22nd March 2005 declined to grant leave to the Defendant to amend his Defence to plead the arguments in paragraphs 10-16 of Chung’s 1st Affirmation, those factual matters are irrelevant for the purpose of considering whether there is any prejudice arising from the dimming of the Defendant’s memory. 70. Secondly, with the general consensus between the parties with respect to a number of factual matters (see paragraph 17 above) and Mr Yip’s assurance to the court that the Defendant would not dispute the series of correspondence in 2003 between the Plaintiff and/or its solicitors on one hand and the Sub-tenant’s solicitors and the Defendant on the other hand, I am not persuaded that the present proceedings turn on substantial factual disputes :
71. Mr Yip suggested that the Plaintiff seemed to contend that even if the Sub-tenant were not liable to pay any loss and damages to the Plaintiff as a result of the LT Order, the Defendant was still liable to pay such loss and damages under the Guarantee pursuant to clauses (b) and (c) thereof. Mr Cheng submitted that he would not expressly abandon such point, but it was irrelevant to the present application. I agree. No Reply has been filed in the present proceedings, and there is no such plea by the Plaintiff. In fact, the Plaintiff’s pleaded case is that it suffered loss and damages as a result of the Sub-tenant’s repudiation of the Sub-tenancy Agreement, and the Defendant failed to “indemnify the Plaintiff against its claim as particularised above against the Sub-tenant”. It appears that the Plaintiff is asserting it has a viable claim against the Sub-tenant. 72. Whilst I have no quarrel with the proposition by Chung J in paragraph 33 of his judgment in Lam Yiu Cho & anor v Asialand Limited & ors HCA463/2006 and HCA2339/2007 (unreported, 16th December 2008) that construction of documents may involve consideration of the relevant factual and legal background, it still behoves the Defendant in the present case to condescend on the specific matters within the factual background that require detailed witness evidence. This he has not done. 73. In the end, Mr Yip conceded that the issue of prejudice was not the Defendant’s strongest argument and that a substantial part of the dispute in the present case turned on matters of law. I find that the degree of prejudice shown is far from convincing, and I come to the same conclusion as Stone J in Prosperfield Ventures Ltd v Tripole Ltd & ors [2002] 4 HKC 447, 456 that there is at least an impression of a certain amount of “reaching” for the purpose of this application. 74. I now turn to the exercise of discretion. Mr Cheng submitted that as of now the limitation period for the Plaintiff’s cause of action against the Defendant has not expired. Taking the best case for the Defendant, if the cause of action accrued on the Sub-tenant’s failure to pay rent (ie April 2003), the six-year limitation period will only expire in April 2009. Mr Yip did not contend otherwise. 75. In light of the discussions in paragraphs 34-35 above, this poses a major hurdle facing the Defendant. Although there may be “exceptional” circumstances where the plaintiff’s conduct is such that if the first action is struck out the second action brought within the limitation period ought to be stayed because of his conduct, I endorse the rationale adopted by Deputy High Court Judge A Cheung (as he then was) in South-East Asia Finance Company Limited v Tsui Luen On HCA1997/2000 (unreported, 16th December 2002), a case not cited by Mr Yip or Mr Cheng, as follows :
76. Having borne all the above matters in mind, I am not persuaded that I should exercise my discretion to strike out the Amended Statement of Claim and dismiss the action on the ground of delay and prejudice. (d) Abuse of process 77. Hong Kong Civil Procedure 2009 Vol.1 para.18/19/10 at p.354 explained that “abuse of process” connotes that the process of the court must be used bona fide and properly and must not be abused. The court will prevent improper use of its machinery, and will, in a proper case, summarily prevent its machinery from being used as a means of vexation and oppression in the process of litigation. As recognised in Grovit v Doctor, to continue with litigation with no intention to bring it to a conclusion can amount to abuse of process. 78. It is useful to start by considering some illustrations of improper motive for delay from some authorities which Mr Yip and Mr Cheng did not refer to. 79. In Adavita Enterprises v Seafast Marine Transport Inc & ors HCCL241/1995 and HCL158/1996, Chung J (unreported, 24th November 2001), the delay was over 4 years after close of pleadings, and the limitation period has expired. The suggested reasons for the delay were changes of solicitors and the existence of “parallel” legal proceedings by the plaintiff against its insurers in Hong Kong as well as without prejudice negotiations with the insurers to settle the claim, but the court did not regard them as valid reasons for the delay. Chung J concluded that the length of the delay and the aforesaid excuses given for the delay justified an inference to be drawn that the writs were “protective” in nature. Further, the suggestion that it was common for an insured to issue “protective” claim to protect the insurer’s interest and then put such litigation “on hold” whilst pursuing other litigation(s) or negotiating for settlement only reinforced the court’s conclusion that the delay was due to a conscious decision to “warehouse” proceedings and a wholesale failure to comply with the RHC amounting to an abuse of process. Chung J at para.14 held that this type of practice was objectionable :
80. The objection to warehousing of proceedings was also referred to in Arbuthnot Latham Bank Ltd & ors v Trafalgar Holdings Ltd & ors [1998] 1 WLR 1426, 1437 where Lord Woolf MR held that it would no longer be the practice for a party to warehouse proceedings until it was convenient to pursue them, and such practice could amount to an abuse of process. It is said that such practice :
81. Mr Yip submitted that the Plaintiff never had any genuine intention to bring the present proceedings to a conclusion. The thrust of Mr Yip’s submission is the inordinate and inexcusable delay. I accept there has been a period of inactivity from March 2005 to January 2008, and it appeared that the action went to sleep after the conclusion of the summary judgment application. I have also found that the delay over this period was inordinate and inexcusable. But on the evidence, I find that such delay could not be elevated to a conscious and definite intention never to bring the present action to trial. 82. Under the abuse of process argument, the court is entitled and should look at all the circumstances and not view the matter solely from the defendant’s perspective (see Advaita Enterprises at para.15). Here, the court should take into consideration that the delay over this period was, according to Madam Chan, largely caused by the Plaintiff’s legal advisors to whom the Plaintiff entrusted the handling of the case although I acknowledge that Madam Chan accepted she also did not closely monitor developments in the litigation. 83. As explained in paragraph 39 above, mere delay without more would not amount to an abuse of process. For the period up to January 2008, there was no evidence of objective conduct that the Plaintiff had no intention to bring the present proceedings to a conclusion. There was no breach or disobedience of any court order. The fact that the Plaintiff had failed to secure summary judgment could not be equated with an intention not to continue with the litigation. Indeed, Mr Yip did not make any such suggestion. Woo VP in New China Hong Kong Group Ltd at p.398 put it succinctly as follows :
In my view, for the period up to January 2008, the present case was at most one that had gone to sleep but not one that was dead in the water, a distinction drawn by Deputy High Court Judge A Cheung (as he then was) in South-East Asia Finance Co Ltd at paras.33-34. 84. In late 2007 and early 2008, the Defendant filed Notice of Intention to Proceed and took out the striking out summons respectively. However, notwithstanding Master R Lai’s order dated 25th January 2008 setting the timetable for affirmation evidence for the Amended Summons, Chung’s 2nd Affirmation was only filed 11 months later. 85. Mr Yip argued that whilst the filing of the Notice of Intention to Proceed was not a step in the proceedings, such notice as well as the striking out summons would clearly bring home to the Plaintiff the consequences of not taking steps to pursue the claim (eg issuing a summons for directions, applying for a pre-trial review or requesting exchange of witness statements). Since the Plaintiff did not offer any reasonable explanation for the subsequent inaction and continued its wholesale disregard of the rules, especially when there was no impediment to prosecution of the proceedings and no need to await the outcome of the striking out summons before proceeding with the case, Mr Yip argued that such inactivity reinforced by the absence of valid explanation entitled the court to infer that the Plaintiff had no genuine intention to progress the case to trial and as constituting abuse of process. 86. The authorities suggest that a flaunting of the court rules with full awareness of the consequences and/or deliberate warehousing of claims to deal with when convenient entitles the court to draw the inference that the delay was due to an improper motive and therefore there was an abuse of process. However, this is not a necessary or ipso facto inference, and the court has to look at all the circumstances to determine each case on its own facts. 87. For the post-January 2008 period, there is still no disobedience of any court order by the Plaintiff. Rather it was the Defendant who failed to comply with order of Master R Lai of 25th January 2008, ie he was 11 months late in filing Chung’s 2nd Affirmation. Although the Plaintiff still has not issued any summons for directions, proposed to exchange witness statements or applied for a pre-trial review during this period, I am again not persuaded it is indicative of any improper motive. The Plaintiff did actively attend the hearing before Master R Lai on 25th January 2008 when a timetable was set to deal with the Amended Summons. Such timetable included a direction for the Plaintiff to file affirmation in opposition to the Amended Summons but only after the Defendant had filed his. In my view, this shows that the Plaintiff must have in mind an intention to oppose the Amended Summons, ie it disagreed that its claim disclosed no reasonable cause of action or that there was any serious delay/prejudice that justified dismissal of the claim, and as a corollary thereto it must have in mind the possibility of continuing with the claim. Indeed, Madam Chan adverted to such intention in Chan’s 2nd Affirmation. 88. Further, the order of Master R Lai of 25th January 2008 made it abundantly clear that it was for the Defendant to kick start the court-imposed timetable for the Amended Summons by first filing the supporting affirmation. Since the ball was squarely in the Defendant’s side of the court, I find it difficult to accept that in such situation where the Defendant was in breach of a court order whilst the Plaintiff was not and when the striking out summons was still pending and unresolved due to the Defendant’s failure to file his supporting affirmation the Plaintiff’s inaction pending service of such supporting affirmation can be perceived as abuse of process on its part. I bear in mind that the Plaintiff has not only attended the hearing before Master R Lai on 25th January 2008, it also readily consented to a new timeline for filing affidavit evidence for the Amended Summons on 30th December 2008. 89. This is a far cry from the situation in Chevalier (E & M Contracting) Ltd where the plaintiff commenced proceedings against the 5th defendant guarantor in 1990. The 5th defendant unsuccessfully sought to strike out the plaintiff’s claim in 1993/4 and the judge set aside an order for summary judgment entered in the plaintiff’s favour. Apart from a hearing on costs arising from the summary judgment proceedings in 1994, no further steps were taken for another 8 years. In September 2002, the solicitors for the 5th defendant wrote to the plaintiff’s solicitors inviting them to discontinue failing which application would be made to strike out the claim for abuse of process and want of prosecution. Nothing was done (except to serve a written request under the guarantee to found a new cause of action) until January 2005 when the 5th defendant made the striking out application, which application quickly progressed to hearing. 90. In that case, the ball was plainly in the plaintiff’s side of the court during the period from September 2002 to January 2005. A warning of the consequences of delay was sounded by the 5th defendant, yet the plaintiff did not do anything to ward off a striking out application. It is no wonder that the learned judge in that case found it demonstrated beyond peradventure that the plaintiff had no real intention of prosecuting to trial the action as constituted (which claim was already statute-barred). 91. Here, since the Defendant did not file the supporting affirmation for the striking out summons in a timely fashion, the Plaintiff could not have responded to the Amended Summons by filing affirmation in opposition. Insofar as the Amended Summons is concerned, the ball is squarely in the Defendant’s court for the whole of 2008. I also refer to and reiterate the analysis in paragraphs 57-60 above. Looking at all these matters in the round, I am not persuaded that the inactivity in the post-January 2008 period leads to an inference that the Plaintiff intended to warehouse the claim or not pursue it to trial as amounting to abuse of process. 92. Even if I were wrong and a case for abuse of process had been made out, Lord Woolf MR in Grovit v Doctor at p.647 said that a dismissal is made “if justice so requires”, hence there remains a residual discretion in determining whether to strike out the claim (see also South-East Asia Finance Co Ltd at para.35). Under such scenario, the fact that a plaintiff has abused the court’s process by maintaining an action which he has no intention to progress to trial is a weighty factor in favour of dismissal of the action. But in New China Hong Kong Group Ltd, it was held that in considering whether it was fair to dismiss the action for abuse of process, weight should be given to the significant fact that the limitation period had not yet expired, which would have enabled the plaintiffs in that case to bring a fresh action in case the subject action was struck out (pp.400-404). Woo VP considered this factor militated heavily against the exercise of the discretion to strike out the action, and rendered it unjust or unfair. 93. So even on the basis that I were wrong and there was an abuse of process, in the exercise of my discretion, bearing in mind all relevant factors including those for exercise of discretion under the inordinate and inexcusable delay ground discussed above, I would still refuse to strike out the action herein. 94. I have considered the cases of Pacific Century Insurance Company Limited v Li Wai Chung DCCJ5708/204, H H Judge H C Wong (unreported, 8th August 2005) and DBS Bank (Hong Kong) Limited v Gary K W Tam trading as Gary K W Tam & Co HCA2987/2003, Yam J (unreported, 7th November 2008) cited by Mr Yip, but I do not think they carried the principles referred to above much further. IX. Conclusion 95. The upshot is that I will not strike out the Amended Statement of Claim or dismiss the action. The Re-Amended Summons is dismissed. 96. However, given my finding of inordinate and inexcusable delay on the part of the Plaintiff over the period from March 2005 to January 2008, it is clear that the Plaintiff was substantially responsible for the present unfortunate state of affairs even though I have found that the evidence is insufficient to support a dismissal of the claim. I consider that the normal order for costs (ie costs follow event) should be displaced. I therefore make a costs order nisi that costs of the striking out application (including all costs reserved if any) be costs in the cause with certificate for counsel. There be legal aid taxation of the Defendant’s own costs in respect of all the costs orders that I have made in this Decision and at the hearing on 9th March 2009. 97. It is plain that given the history of this matter and with the imminent advent of the Civil Justice Reform, the court should seize of the matter and set a tight timetable for steps to be taken right up to the stage of trial. I therefore direct that the parties to attend a directions hearing before Master R Lai at Court No. 44 in chambers (open to the public) at 11:00am on 30th March 2009 with 15 minutes reserved. Such directions hearing shall be treated as a summons for directions, and both parties are expected to propose (on agreed basis if possible) a tight and detailed case management timetable for progressing this case up to setting down for trial. Since this case is essentially non-fact sensitive, both parties and the learned Master should give consideration as to whether any affirmation or part thereof filed in the present proceedings can stand as witness statements, and whether any exhibits to such affirmations can stand as mutual discovery. If there is any further discovery to be made, given that discovery is a continuing obligation, both parties must file and serve all supplemental List of Documents prior to the aforesaid directions hearing. Further, all outstanding interlocutory applications must be issued prior to the aforesaid directions hearing, and unless there is an earlier hearing date, must be made returnable to Master R Lai at the aforesaid directions hearing. The court sets its face against any further delay, and the trial date or (where necessary) a pre-trial review date, which will be short-scheduled, will be given at the aforesaid directions hearing.
Representation: Mr Alfred Cheng instructed by Messrs Winnie Leung & Co for the Plaintiff. Mr Simon Yip instructed by Messrs Yu & Associates for the Defendant. |
Cases cited in this judgment
Further hearings and rulings under DCCJ 167/2004