PACIFIC CENTURY INSURANCE CO LTD v. LI WAI CHUNG

DCCJ5708/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5708 OF 2004

D E C I S I O N

1.  The defendant applies to strike out the plaintiff’s Statement of Claim filed on 29 October 2004.  The defendant’s application is based on the abuse of process and want of prosecution of the plaintiff.  The defendant’s application was made some three weeks after the plaintiff filed an Order 14 application for summary judgment against the defendant on 29 April 2005. 

2.  The plaintiff’s action against the defendant first commenced when it took out an action in the High Court against the defendant with a Statement of Claim filed on 28 August 1998.  The defendant filed an Acknowledgement of Service (“the writ”) on 11 September 1998 and filed a defence of one paragraph on 25 September 1998.  Thereafter the case was put to sleep, except for a Notice of Change of Solicitors filed on 9 April 2001 by the plaintiff and a Notice to Act in Person filed by the defendant  on 15 November 2001.

3.  The plaintiff changed solicitors again, almost three years later, on 28 February 2004.  On the same day, the plaintiff filed a Notice of Intention to Proceed.  Eight months later, on 13 October 2004, the plaintiff changed solicitors yet again, who, at the same time, applied to transfer the case to the District Court and sought an order to amend the Statement of Claim.  The applications were allowed by Master Levy in the High Court and the case was transferred to the District Court at the end of 2004.

4.  On 4 December 2004 the defendant engaged new solicitors acting for him who filed a Notice to Act on the defendant’s behalf in the District Court.  On 29 April 2005, the plaintiff filed an application for summary judgment against the defendant and the defendant applied on 19 May to strike out the plaintiff’s claim.

5.  Mr Sher, counsel for the defendant, submitted that the plaintiff is guilty of inordinate and inexcusable delay and that the delay was due to an intentional and contumelious default.  He relies on Order 25/L/1-5 of the Hong Kong Civil Procedure.  Practice Notes 25/L/1 in the Hong Kong Civil Procedure 2004 stated:

“Dismissal for want of prosecution

General 

Paragraph 4 of Order 25 rule 1 expressly empowers the court to dismiss any action for want of prosecution if the plaintiff does not issue its summons for directions within the proper time.  There are similar expressed provisions elsewhere in the Rules of the High Court, for example, in Order 19 rule 1, Order 24 rule 16.1, Order 34 rule 2.  These are, respectively, default in service of statement of claim;  default in discovery; default in setting down.  When in addition to these express provisions the court has inherent jurisdiction to dismiss an action for want of prosecution if there has been default in complying with the Rules or excessive delay in the prosecution of the action.  Generally speaking, the same principles are applied whether the court is acting under its express power or under its inherent jurisdiction.” 

Practice Notes 25/L/2 of the Hong Kong Civil Procedure 2004 further stated :

“There are two distinct though related circumstances in which an action may be dismissed for want of prosecution, namely;

(a) when a party has been guilty of intentional and contumelious default, and

(b) where there has been inordinate and inexcusable delay in the prosecution of the action.”

The question here today is whether the delay was due to an intentional and contumelious default or whether the party has been inordinate and inexcusable delay in the prosecution of the action.

6.  Practice Notes 25/L/3 of the Hong Kong Civil Procedure set out what constituted contumelious default:

“By this is meant deliberate default in compliance with a peremptory order of the court or conduct amounting to an abuse of the process of the court.”

The following paragraph in the White Book, it further stated:

“A peremptory order is one which makes clear to the other party, either from its terms or from the circumstances in which it was made, that exact compliance with no further argument, is required by the court within a stated time and indicating expressly or by implication, that default will incur serious consequences.”

7.  The Hong Kong Civil Procedure 2004 further set out, in the same paragraph, recent decisions in Hong Kong courts on the striking-out for failure to comply with peremptory orders.   It is apparent from that paragraph that the rule or principle that “orders are made to be complied with and not ignored” is not as harsh as might be first thought, because, as quoted from 25/L/3, it was explained by Roskill LJ in Samuels v Linzi Dresses Limited [1981] QB 115 and Janov v Morris [1981] 1 WLR 1389 as:

“(a) mere failure to comply with a rule is not regarded as sufficient for its exercise, there must be disobedience of an express peremptory order;

(b) it is unusual to make a peremptory order on the first occasion that the matter is before the court;

(c) if the defaulter has any reasonable explanation he may obtain an extension of time even (though rarely) after the time has expired;

(d) generally speaking, a defaulter can cure his default at any time before the order before dismissal is made (or, postponed) takes effect.”

8.  One then has to look further to see whether there has been any abuse of process of court; under Practice Notes 25/L/3, the last two paragraphs stated:

“To commence and continue litigation with no intention to bring the same to a conclusion could amount to an abuse of process.  An abuse of process, if established, was a ground for striking out under the court’s inherent jurisdiction irrespective and independent of any question of delay (Grovit v Doctor [1997] 1 WLR 640). 

Plaintiff’s failure to give coherent instructions to its solicitors amounted to an affront to the court, plaintiffs held to have acted in wholesale disregard of norms of conducting litigation, proceedings were struck out for abuse of process.  See Habib Bank Ltd v Jaffer & Anor [2000] C.P.L.R. 438, CA.”

9.  It is, at this stage, not possible to establish, without further investigation, if the plaintiff had failed to give instructions to its solicitors throughout these years.  All we know is that the amended Statement of Claim filed in October 2004 contained much more information than the original Statement of Claim of two pages filed in 1998.  As to whether there has been inordinate and inexcusable delay, I refer to Practice Notes 25/L/4 on the law and practice:

“Inordinate and inexcusable delay.  The requirements are:

(a) that there has been inordinate 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: Birkett v James [1978] AC 297 at 318. 

But what is serious ‘prejudice’ depends on the facts.  If the plaintiff has already added to the defendant’s difficulties by taking full advantage of the delay permitted by the Limitation Ordinance, any further prejudice beyond a minimal may be ‘serious’. 

It should be noted that requirement (b) set out above envisages two distinct situations in that an establishment of either suffices, see Pursey v British Aerospace Plc unreported, May 2, 1984 CA.  It is, however, essential that the inordinate and inexcusable delay established must be causative of either situation before the jurisdiction to strike out hereunder can arise, see Purcell Meats and Scott Limited v Intervention Board for Agriculture and Produce (1997) The Times June 5. 

There have been a considerable number of decisions of the Hong Kong courts on applications to strike out for inordinate and inexcusable delay....In all cases, since Birkett v James was decided, the Hong Kong courts have cited and followed Birkett v James.  The following decisions demonstrate the court’s approach towards the applications in specific circumstances: 

(1) where a plaintiff has obtained an interlocutory injunction, it is incumbent upon the plaintiff to proceed with the action with due diligence;

(2) although the plaintiff’s delay was inordinate the court refused to exercise its discretion to strike out as there was condonation and acquiescence by the defendant as the defendant has agreed to all 10 consent applications the plaintiff’s proposed for extension of time to take steps in the proceedings, delay was held not to be inexcusable;

(3) the plaintiff’s delay was held to be plainly inordinate and inexcusable but the defendants was estopped from relying on the delay as their conduct had induced the plaintiff to incur further costs in the belief that the defendant would pursue the action notwithstanding the plaintiff’s delay .... ;

(4) the principle of striking out for inordinate and inexcusable delay applies when the plaintiff, who has obtained the default judgment for damages to be assessed for his personal injuries claim, did not proceed with the assessment of damages until 11 years later, despite his legal advisers reminders, it was held that where there is no Ordinance to set the time limit, the issue is to be resolved by reference to widely accepted principles.  The court drew analogy to the limitation period for personal injuries, i.e. three years, for taking the last step. 

(5) For examples of inordinate and inexcusable delay and the defendant suffering prejudice as a result of the delay: see Can-Asia Capital Co. Ltd v Kwok Yee William & Ors; Lui Chun Kwong v Kier Hong Kong Ltd & Ors, etc)...”

Under 25/L/5:

“Inordinate delay:

Time which has elapsed before the issue of the writ within the limitation period cannot of itself come within these words.  Only delay after the issue of the writ is relevant but the later the plaintiff starts his action the higher his duty to prosecute it with diligence (Birkett v James).  Thus, although time elapsed before the issue of writ within the limitation period cannot of itself constitute inordinate delay such as the justify dismissal of the action, once a writ has been issued the plaintiff is bound to observe the RHC and to proceed with reasonable diligence; accordingly inordinate delay by a plaintiff within the limitation period can be relied upon to support a defendant’s application to strike out after the expiry of the limitation period.... 

Where a long delay before the issue of the writ causes the defendant prejudice, he has to show only something more than minimal additional prejudice as a result of any post-writ delay to justify the action being struck out..  “Inordinate” means “materially longer than the time usually regarded by the profession and courts as an accepted period”.  It is easier to recognise than to define.”

Under 25/L/6:

“Inexcusable delay:

This ought to be looked at primarily from the defendant’s point of view or, at least, objectively; some reasonable allowance, for illness and accidents may, be made. But the best excuse is usually the agreement of the defendant or difficulties created by him.”

10.  I have no doubt the plaintiff’s delay in this case was  inordinate.  The defendant’s counsel, Mr Sher, has pointed out, there are two periods of delay, namely the first being the period after the close of pleading at the end of 1998.  The defence was filed on 25 September 1998.  It is then incumbent upon the plaintiff to take out the summons for directions soon after pleadings were closed in 1998, but none was taken out and nothing was done by the plaintiff or the defendant for about two and a half years.  The next thing the court has any notice of is in 2001, on April 9, when the plaintiff filed a Notice of Change of Solicitors.  About six months later, in 2001, 3 October, the plaintiff served a statutory demand on the defendant.  The service of a statutory demand can in no way be considered as a step in the prosecution of the litigation of this action.

11.  The parties then engaged in negotiations of settlement in November 2001.  Negotiations failed in early 2002.  Nothing further was done until 28 February 2004, when the plaintiff filed a Notice of Intention to Proceed.  It was not until towards the end of that year, in October 2004, that an application was made to transfer the action to the District Court and the Statement of Claim amended by the plaintiff with leave.

12.  The second period of delay is, therefore, between 2001 and 2004.  Even if one takes into account the service of a statutory demand on the defendant as a step in the plaintiff’s claim against the defendant, in actual fact, it is not a step taken in the prosecution of this action.  In view of the history of the action taken by the plaintiff, or rather, the inaction of the plaintiff, I have to conclude that there is clearly strong evidence for want of prosecution by the plaintiff, as observed by Cheung J in the Court of Appeal, “Negotiation for settlement is not an excuse for the delay in the prosecution of the action.”

13.  Miss Lau, counsel for the plaintiff, submitted that the defendant had failed to specify what prejudice is faced by the defendant at the trial; and, in particular, what are the witnesses he had intended to call,  whether they have any difficulties in coming to court to give evidence, and if there were any difficulties for them to recall the incidents that happened 10 years ago.

14.  So far as prejudice to the defendant is concerned, 25/L/7 of the Hong Kong Civil Procedure has this to say:

“This is a matter of fact and degree and has been discussed in Allen v McAlpine [1968] 2 QB 229 and in a large number of reported cases.  The fact of the lapse of time on the memory of witnesses or in the course of such time of their death or disappearance are the most usual factors.  Their importance depends upon the circumstances, the issues and the evidence that can be given.  Thus the lapse of time may be very prejudicial if the circumstances of an accident or oral contracts or oral representation are in issue, but is of much less importance in a heavy, well-documented commercial action.  In a case of prolonged culpable delay following long delays in serving of proceedings, the court may readily infer that memories and reliability of witnesses has further deteriorated in the period of culpable delay (Benoit v Hackney LBC unreported, February 11 1991, CA Transcript No. 91/0116).”

15.  It is clearly sufficient for the defendant to show there had been a long lapse of time since the event took place in 1993 - 1994 and it would create a lot of prejudice for him at the trial because of the lapse of time and memory.  The defendant further claimed that, firstly, he had no documents from his own record of the activities in 1993 and 1994, whether they be his own transactions or those of his down-line agents, and, secondly, he can no longer recall the details of the time, there being a lapse of over 10 years, and, thirdly, he is not sure he could locate those four agents named by the plaintiff, working under him.  In fact, he claimed he had over 20 agents under him.  He would require all their transaction records and accounts to prepare his defence. 

16.  It is certainly true that in his defence, he claimed the commission earned by his down-line agent was not as specified by the plaintiff.  So far as the plaintiff is concerned, if one has to rely solely on the plaintiff’s documents, then the defendant would be at a disadvantage not having a full set of records and not having been able to locate and obtain records from all of his then down-line agents.

17.  Based on the background and the long period of delay, I am satisfied that the delay caused was inordinate and inexcusable.  There was no explanation as to why the claim took four years to commence in the High Court, and six years for the Statement of Claim to be amended.  It has been over 10 years since the cause of action arose.  It is impossible for the defendant, or any of the witnesses he intended to call, to recollect the facts and figures that took place 10 years ago.

18.  This is the type of cases, because of long culpable delay, that the court may readily infer that memories and reliability of witnesses has further deteriorated in the period of culpable delay.  Of course, if the plaintiff had pursued and prosecuted this action as soon as it commenced action in 1998, there was then only a four-year lapse, which could be redeemable by strong and full records kept by the plaintiff and the defendant would still be able to locate his down-line agents and obtain records kept by them whether it is for three years, four years or seven years.  However, after a 10 years’ lapse since the defendant left the plaintiff’s company, it is inconceivable the defendant would have a clear memory without assistance of records for a fair trial to be conducted.

19.  For the aforesaid reasons, I allow the defendant’s application to strike out the plaintiff’s claim in this action. 

(Discussion re costs)

20.  The plaintiff’s Order 14 application is dismissed with costs, to be taxed if not agreed. 

21.  Costs of the defendant’s application to strike out and today’s hearing be to the defendant with certificate for counsel, to be taxed if not agreed.