NEWBOND PROPERTIES LTD v. MATCH POWER INVESTMENT LTD

DCCJ 127/2007
DCCJ 128/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NOS. 127 & 128 OF 2007

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D E C I S I O N

1. In January 2007, Newbond commenced these two actions against Match Power for damages and contractual interest for delayed completion of the sale and purchase of two residential properties. This January, Match Power applied to have these actions struck out for want of prosecution. The applications were heard together on 11 June 2010. On 14 June 2010, I handed down my written decision whereby I granted the orders sought by Match Power in both actions (“the Decision”).

2.  Now New Bond seeks leave to appeal against the Decision.

3.  Leave to appeal shall not be granted unless there is a reasonable prospect of success in the intended appeal or there are issues that should in the interest of justice be heard by the Court of Appeal: see section 63A(2) of the District Court Ordinance.

The Decision

4.  The background was set out in paras.3 to 11 of the Decision.  It suffices for me to repeat that since discovery of documents (by Newbond in August 2007 and by Match Power in October 2007), no further step had been taken in these actions until Newbond filed the notice of intention to proceed in September 2009 and the case management summons some 3 months later this January.  The delay straddled between the pre-CJR and post-CJR times.

5.  I concluded that the delay was inordinate and inexcusable; and I was satisfied that the conduct of litigation by Newbond amounted to an abuse of the legal process as explained in Grovit v Doctor [1997] 1 WLR 640 (see paras.24-29 of the Decision).

6.  Applying the principles in Birkett v James [1978] AC 297, I was also satisfied that the delay has caused substantial risk that it is likely to cause or to have caused serious prejudice to Match Power in defending the claim (see paras.30-38 of the Decision).

7.  In view of the above conclusion, I also took the view that the underlying objective under O.1A, r.1(b) of the new Rules of the District Court would only operate against Newbond (see paras.39-41 of the Decision).

The intended appeal

8.  I take that Newbond does not seek to reverse this court’s finding that the delay was inordinate and inexcusable.  The chance of reversing that finding would have been dim in any event.

9.  The 4 grounds of appeal in the draft notice of appeal may be grouped into the following broad challenges against the Decision:

(1)  This court erred in finding that Newbond was guilty of abuse of process (Ground No.1).

(2)  This court erred in finding that substantial prejudice has been caused to Match Power as a result of Newbond’s delay (Ground No.3).

(3)  This court erred in exercising the discretion to strike out the claim and to dismiss the action (Ground Nos.2 and 4).

10.  For the purpose of the intended appeal, Newbond intends to apply for leave from the Court of Appeal to adduce an affirmation of those instructing him dated subsequent to the Decision.  But Mr Hung made clear that the intended appeal ought to succeed even without the evidence sought to be adduced.

Abuse of process

11.  Mr Hung for Match Power submitted that what the House of Lords referred to as ‘warehousing’ of litigation in Grovit v Doctor [1997] WLR 640 was the lack of intention on the part of the claiming party to bring the case to a conclusion at all. He submitted that in the present case, his client’s intention to proceed was evinced by the initiative to file the notice of intention to proceed and the case management summons before Match Power filed its summonses to strike out.

12.  Mr Hung’s limited reading of ‘warehousing’ of litigation is unjustified.  If such reading is accepted, a litigant who has consciously shelved the litigation could nevertheless escape criticism, provided that he revived the litigation some day after taking his time and liberty.  As Mr Man submitted, the essence of the abuse lies in the ‘warehousing’ of the claim during the period of delay.  It is no answer to say that after the ‘warehousing’, the litigant now wants to proceed.  Otherwise, no application on the ground of delay and abuse will ever succeed.

13.  For reference, I drew counsel’s attention to the recent case of Kuok Luen (Macau) Agente de Programs Televisivos Limitada & Ors v Tidetime Sun (Group) Limited & Ors HCA 1456/2006 (29 July 2010), which is a decision of Master Ng subsequent to the Decision.  The learned Master carried out a comprehensive study of the authorities and principles in the context of striking out for want of prosecution.  The learned Master (at paras.52-53) also summarised the principle that the act of commencing and then ‘warehousing’ proceedings until it is convenient time for a party to pursue them has been held to constitute an abuse of process.

14.  As explained in the Decision (at paras.25-26), the abusive feature lies in Newbond’s conduct of litigation that was more than mere delay.  Unlike what the claiming party did in most, if not all, of the authorities (including Super Worth Contracting Company Limited v Top Glory Holding Company Limited & Ors, HCA 3754/2000 & HCA 6734/2000 (22 April 2009) that Mr Hung relied on), Newbond did not care to explain the delay, its circumstances or its intention with respect to the action at any given time during the entire period of delay.

15.  Mr Hung submitted that there was no point referring too much to the underlying objective because the rule requires no specific act to be done; and Newbond was not alleged to have been in breach of any particular rule.  He submitted that this court has given undue weight to O.1A, r.1(b) of the Rules.

16.  This is not a fair reading of the Decision (at paras.39-41).  It was in view of the conclusion that the claim is liable to be struck out in accordance with the case law that this court added the observation that it is unlikely that Newbond’s conduct of litigation would be favourably viewed against the underlying objective of the new Rules.

Prejudice to Match Power

17.  It is argued that this court erred in finding that the delay has prejudiced Match Power.  Any prejudice is not caused by the delay but the lapse of time between the breach and the commencement of the present actions.

18.  I did express my doubt about the extent of the likely prejudice to Match Power due to the lapse of memory of witnesses (at paras.34-35 of the Decision).  But the concern about the alleged breach of the non-particularised conditions of the Conditions of Sale on the part of Match Power should not be under-estimated (paras.36-37 of the Decision).

19.  As mentioned above, Newbond came to court without any intention to explain the delay.  Now it criticised Match Power for failing to pinpoint the prejudice thereby caused to its defence of the claim that was vaguely pleaded by Newbond in the first place.  There was no indication of any concession in respect of this non-particularised part of the pleaded claim by Newbond at any time including the last hearing.  By acknowledging the lapse of time between the alleged breach and the commencement of the present actions, Newbond should have expedited the proceedings.  It has done the contrary.  Prejudice can legitimately be inferred in the circumstances: see Nanjing Iron & Steel v STX Pan Ocean, HCAJ 177/2006 (7 September 2009) at paras.17-19.

Fair to strike out or not

20.  This court acknowledged that if an action is liable to be dismissed for want of prosecution but the plaintiff could still have commenced a fresh action within the unexpired limitation period, then it may not be just and fair to dismiss the action (paras.27-28 of the Decision).

21.  It is argued on behalf of Newbond that this court ought to have considered that when the applications to strike out were taken out, Newbond’s right of action has yet to be time-barred.  It is argued that Newbond ought not to suffer from its inability to control when the applications would be heard by the court.

22.  I disagree.  When discussing the relevance of the time limitation in the exercise of the discretion to strike out for want of prosecution, the appellate courts in England and Hong Kong did not appear to attach the sort of significance to the time of the filing of the applications to strike out as now suggested by Newbond: see Birkett v James (at 319H-320C; 322D); New China Hong Kong Group Ltd & Anor v AIG Asian Infrastructure Fund LP & Ors [2005] 1 HKLRD 383 at 400H-402G.

23.  It is also argued that this court ought to have considered the merits of Newbond’s claim.  Before this court were, and still are, the pleadings and lists of documents of the parties only.  I wonder how far this court would have been able to go by considering the merits of the claim on the basis of those materials.

24.  In his written submission, Mr Hung pointed out that Match Power has disclosed no document to substantiate its defence.  In court, Mr Hung submitted that due consideration ought to be given to his client’s subjective belief in the merits of the claim.  Neither submission is valid.  It also defies understanding that a litigant believes that he has a strong case on the one hand and decides to shelf the same for 2 years on the other hand.

25.  It is also argued that even assuming that Match Power has been prejudiced in dealing with the non-particularised part of the claim, this could have been overcome by measures other than the drastic order of striking out the entire claim.  I do not agree.  There is no segregation of the claim for the purpose of striking out, if the court is satisfied that the conduct of litigation is an abuse of process.

Affirmation for the intended appeal

26.  Whether to allow the affirmation to be adduced for the purpose of the intended appeal is a matter of the Court of Appeal’s discretion under O.59, r.10 of the Rules of the High Court.  Mr Man referred to the conditions to be satisfied for the granting of such leave set out in Ladd v Marshall [1954] 1 WLR 1489.  But he was prepared to accept that if the decision being appealed against is not one after trial or hearing on the merits, those conditions do not apply.  Nevertheless, an important factor taken into account in exercising the discretion is the reason why the evidence was not adduced in the court below: see Po Kwong Marble Factory Ltd v Wah Yee Decoration Co Ltd [1997] HKLRD 1341.

27.  In the affirmation sought to be filed for the intended appeal, those instructing Mr Hung are seeking to explain that they had formed the view that affidavit evidence was not necessary.  Upon second thought, they admit that that was a mistaken view.

28.  The fact was that the Master had given leave to Newbond to file affidavit in opposition to the applications to strike out.  At the hearing, this court also pointed out the problem with Newbond’s stance in deciding not to adduce any evidence to explain its circumstances.  None of those seemed to have caused Newbond’s solicitors to think twice.  No request for adjournment for adducing evidence was made.  The second thought apparently came only after the Decision adverse to Newbond.

29.  Oddly, Mr Hung was not yet prepared to accept that the prospect of the intended appeal hinges upon whether leave to adduce the evidence will be granted.  He still argued that the intended appeal ought to succeed even without such evidence.

30.  Would the evidence sought to be adduced have helped Newbond?  I think not.  The affirmation confirms that it was the conscious decision of Newbond upon legal advice to shelf the actions in order to “wait for the outcome of the trial of HCA 1829/05 as a “test case”, before making the decision on how to press ahead with its claims in the Actions with the view to save costs.”  Such decision to shelf the present actions is totally unjustified.

31.  First, as summarised in the Decision (at paras.32-33), there were preliminary issues regarding whether 6 of the 7 plaintiffs in HCA 1829/2005 had already compromised or waived their respective right of claim against Match Power.  There is no such issue of compromise or settlement between Newbond and Match Power in the present actions.

32.  Secondly, even assuming that a test case approach might be desirable in view of certain similar factual background in HCA 1829/2005 and the present cases, this did not justify Newbond’s default in complying with the directions made by the Master in 2007 and the unilateral ‘warehousing’ of the litigation since then.  No court will accept that as the so-called test case approach.

Other reasons

33.  It is argued that the appellate court’s guidance is required as to how the principles in Grovit v Doctor and Birkett v James should be applied in the post-CJR era; and hence the need for the intended appeal.  In my view, the Court of Appeal has done that in Re Wing Fai Construction Company Limited CACV 273/2009 (30 April 2010) (at paras.9-12).

34.  Master Ng in the case of Kuok Luen (above) did not seek to differ from that (at paras.57-69; 74).  Pre-CJR delay has to be considered in the context in which it occurred with reference to the principles applicable at the relevant time.  For any post-CJR delay, the parties are acting under a different regime so the court should not be constrained to make the same sort of decision as it would have to make under the old rules when exercising the discretion whether to strike out. With respect, I agree with the learned Master.

35.  This was effectively what this court has done in arriving at the conclusion now being challenged.  There is no issue of whether the CJR and the underlying objectives of the new rules have changed the applicability or application of the classic principles in relation to pre-CJR delay.  The change, I would have thought, would be that of the litigation culture so that delay and abuse of process like that in the present actions will be even less condoned.

Conclusion

36.  For the above reasons, I am not satisfied that there is any reasonable prospect of success in the intended appeal or that the matter should go further for any other reason.  I refuse leave to appeal and dismiss the applications for leave to appeal with costs to Match Power.  Costs shall be taxed, if not agreed, with certificate for counsel.