TANG HING KWONG AND ANOTHER v. JOHN DAVID ANDREW IP AND ANOTHER

HCA 7927&7928/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS 7927 & 7928 OF 2000

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J U D G M E N T

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A. BACKGROUND OF THE ACTIONS

1. This is the hearing of the appeals against Master De Souza’s decision to strike out the two actions for want of prosecution.

2. The two actions were issued as part of a trio of actions with different sets of plaintiffs but sharing the same factual background and the same causes of action.  The three actions all concerned a company known as Endenne Development Limited (“Endenne”) and its director, Fung Ping Yan (“Fung”).  Endenne was the developer of the house erected on Lot Nos 36 and 37 Wing Ning Lei, DD no 111, Yuen Long, New Territories.

3. The house was sold by Endenne as three separate flats to the respective sets of plaintiffs in the three actions.  The plaintiffs in HCA 7927 of 2000 purchased the ground floor flat, the plaintiffs in HCA 7928 of 2000 purchased the 1^st floor flat, whereas the plaintiff in HCA 7929 of 2000 (“the 3^rd Action”) purchased the 2^nd floor flat.  The defendants in all three actions (“the Defendant Firm”) were the firm of solicitors representing the vendor and purchasers in each of the three transactions.

4. The 3^rd Action proceeded to trial ahead of the two actions before me.  The trial judge dismissed the plaintiff’s claim.  The plaintiff appealed.  By a judgment dated 30 March 2007 under CACV No 12 of 2006, the Court of Appeal set aside the judgment in that action and remitted the action to the Court of First Instance for retrial.  Retrial was pending at the date of the hearing of these appeals.

5. Fung, a director of the developer Endenne, was at all material times a clerk employed by the Defendant Firm “as an unqualified person to bring in local business for the firm”[1].  All three sets of plaintiffs engaged the Defendant Firm to handle the conveyancing of the flats.  On the other hand, the Defendant Firm also accepted instructions from Fung to act for Endenne as vendor in all three conveyancing transactions.

6. It transpired that in his capacity as Endenne’s director, what Fung handed to the partner of the Defendant Firm, Willis, for the purpose of the conveyancing transactions were not the necessary documents to prove title, but forged documents, or possibly only copies of the forgeries. These included the relevant approval letter from the District Land Office of Yuen Long, the three Certificates of Exemption relating to the building, the site formation and the drainage works, and the “No Objection” letter from the District Land Office.  The forgeries went undetected and the assignment of the three flats went ahead.

7. It was only in April 2000, when the purchaser of the 1^st floor flat attempted to sell the property, that the matter came to light through requisitions raised by the solicitors acting for the prospective purchaser.

8. As remarked by the Court of Appeal in paragraph 10 of its Judgment in Ngo Tai Hong v Ip and Willis CACV No 12 of 2006, it appears to have been accepted by the Defendant Firm that the documents previously relied on in relation to the relevant property were forgeries.

9. The Court of Appeal rejected the Defendant Firm’s reliance on Rule 5C(4) of the Solicitors Practice Rules as exonerating them from acting on behalf of both vendor and purchaser, and held that there was a serious failure to recognize the very strong conflict of interest arising from the fact that in the transaction it was acting also for Fung who was a member of staff generating business for the firm, and to advise the plaintiff in the 3^rd Action of the dangers involved on this conflict.  The Court took the view that the failure amounted not only to negligence but a breach of contractual and fiduciary duty to the purchaser.[2]

10. It would appear from the judgment of the Court of Appeal in CACV 12 of 2006 that the plaintiff in the 3^rd Action also issued an action against the developer Endenne and its two directors, namely, Fung and his wife, which was consolidated with the 3^rd Action against the solicitors.  Neither Endenne nor its directors appeared at the trial, and judgment was entered against them in favour of the plaintiff.  As any judgment against them was likely to remain unsatisfied, the plaintiff in the 3^rd Action pursued the Defendant Firm, as did the plaintiffs in the two actions before me.

B.    HISTORY OF THE TWO ACTIONS

11. The present actions were commenced in August 2000 and had been prosecuted on behalf of the respective plaintiffs by Messrs KY Woo & Co, until a change of solicitors in March 2010.  Pleadings were closed on 25 October 2000.  Discovery was carried out in March 2001, and witness statements were filed by the plaintiffs on 27 April 2001.  Despite the Court’s directions given on 7 February 2001, the Defendant Firm filed no witness statements.

12. On 18 June 2010, the plaintiffs in both actions filed Notices of Change of Solicitors and Notices of Intention to Proceed and served them on the Defendant Firm’s former solicitors, apparently overlooking the fact those solicitors had already come off the record and the Defendant Firm was representing itself.  The Defendant Firm said it only received the notices in February 2011.

13. On 26 May 2011, the Defendant Firm filed summonses to strike out the actions for want of prosecution.  The summonses were heard before Master De Souza on 7 November 2011. The learned master found in favour of the Defendant Firm.

14. There was thus a period of inaction of around 10 years between the last step in the proceedings and the issue of the Notice of Intention to Proceed.  The defendants’ summons to strike out the claim was filed only about 11 months after the Notice of Intention to Proceed was filed, but no other step was taken in the proceedings in the interim period.  The total of period of inaction on the part of the plaintiffs lasted for almost 11 years.

C.    THE DEFENDANTS’ CASE

15. The Defendant Firm relied on two grounds based on which the action should be struck out.  First, it was submitted that there was inordinate and inexcusable delay which had given rise to serious prejudice.  Second, there was an abuse of the process of the court in the sense that there was no intention on the part of the plaintiffs to carry the case to trial.

16. Defence Counsel, Mr Remedios, submitted that the excuse given by the plaintiffs that they were awaiting the outcome of the 3^rd Action as advised by their previous solicitors was not a good excuse.  The delay caused by their solicitors was attributable to them.  If they have suffered loss and damage as a result of the default of their previous solicitors, they ought to pursue the latter for redress.  Mr Remedios further submitted the plaintiffs ought to have sought consent or applied to court to have the 1^st and 2^nd Actions stayed pending the outcome of the 3^rd Action.

17. The Defendant Firm also argued that as a result of the delay, they should suffered serious prejudice in that certain documents were seized and not returned since the matter was reported to the police, other files expected to be in the possession of another firm of solicitors had been lost, and the memories of certain potential witnesses had faded.  It was also pointed out that the limitation period has already passed.

18. Furthermore, the Defendant Firm relied, in particular, on the perceived prejudice arising from the litigation hanging over their heads as professional men for an extended period of time, where the plaintiffs’ allegation was one of professional negligence.

D.    THE PLAINTIFFS’ CASE

19. On behalf of both sets of plaintiffs, it was accepted that the delay involved was inordinate.  However, plaintiffs’ Counsel argued that the delay was not inexcusable.

20. The explanation given by the plaintiffs was that the two actions were not proceeded with as their previous solicitors, KY Woo, advised that since the facts and issues in the three actions were identical, it would help the two sets of plaintiffs save legal costs if the 3^rd Action were allowed to proceed ahead to trial while the plaintiffs, being less affluent than the plaintiff in the 3^rd A ction, awaited to rely on its outcome.

21. Mr Lin for the plaintiffs submitted that it was not unreasonable for the plaintiffs, being laymen of limited financial resources, to rely on the advice of their previous solicitors KY Woo in the circumstances and to decide to wait for the outcome of the 3^rd Action.

22. The plaintiffs argue that there was no serious prejudice to the Defendant Firm, nor was there abuse of process in the plaintiffs’ not having any real intention to bring the matter to trial.  They had complied with all directions given by the Court while the Defendant Firm had not.

E.    APPLICABLE LEGAL PRINCIPLES

23. Counsel for both sides have each cited a number of cases thoroughly addressing the court on the applicable legal principles.  Those of particular relevance to the arguments before me are summarized in the paragraphs below.

24. The jurisdiction whether to accede to an application to strike out for want of prosecution is discretionary, and is rooted in the applicable statutory rules set out in the relevant Rules of Court.  Judicial decisions explaining the Rules and the manner in which the Rules should be given effect should be read as an important guide to the exercise of the discretion, but not as statute replacing the Rules themselves: Liquidator of Wing Fai Construction Co (in Compulsory Liquidation) v Yip Kwong Robert (“Wing Fai”) [2011] 6 HKC 432 at 468B.

25. Prior to the CFA’s decision in Wing Fai, the guiding principles set out in Birkett v James [1977] 3 WLR 38 on striking out for want of prosecution have been followed.  The House of Lords decided that an action should be dismissed for want of prosecution where:-

(1) the plaintiff’s default has been intentional and contumelious,      or

(2) there has been inordinate and inexcusable delay

(a) giving rise to a substantial risk that a fair trial would not be possible or

(b) is such as to likely to cause or have caused serious prejudice of the defendant.

26. The above principles have recently been comprehensively and authoritatively reviewed in the Court of Final Appeal’s judgment given by Ma CJ in Wing Fai.  The re-statements with direct application to the present case include the following:-

(1)  Since the implementation of the CJR, the discretion to be exercised in dealing with an application to strike out for want of prosecution must be exercised with the principles themes of the CJR in mind, and with the circumstances and statutory structure in place at the relevant time, including the armoury of powers available to the court under the CJR. (§§30-32)

(2)  The ultimate sanction of the court may be to strike out an action or defence.  However, in the armoury of the Court’s powers, striking out must be the ultimate weapon, to be used only when it is plainly and obviously the appropriate remedy. There were many orders that could be made before striking out should be considered. (§33) 

(3)  Litigation was not to be treated as a game, but as a serious legal contest.  O1A r3 was of fundamental importance, stating it to be the duty of parties and their legal representatives to assist the court in furthering the underlying objectives.  It was important to recognize, as stated in O1A r2(2) that the primary aim was for the court to “secure the just resolution of disputes in accordance with the substantive rights of the parties”.  The emphasis must be on the word “just”. Rightside Properties Ltd v Gray [1975] Ch 72 referred to (§34).

(4)  Under the pre-CJR system, the progress of an action was left largely in the hands of the parties.  The Court was passive, only being involved when the parties chose to involve it.  The Court would generally bear in mind only the position of the parties.  Considerations such as other litigants, the Court’s resources, procedural economy and general considerations involving the administration of justice were scarcely prominent.  They were seen to be almost irrelevant.  It was within this system considered perfectly proper for a defendant to do little or nothing to progress an action.  This gave rise to litigation tactics on the part of defendants, whereby actions were permitted to go to sleep and an inactive plaintiff would be treated as a “sleeping dog” which should not be awakened, in the hope that when it did, an application to dispose of the whole action could be mounted.  This attitude of “letting sleeping dogs lie” was no longer acceptable post-CJR, where all parties have the obligation to progress an action.  Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229; Birkett v James [1978] AC 297; Grovit v Doctor [1997] 1 WLR 640 considered (§§44-47).

(5)  There appeared to be a growing belief that with the new litigation culture brought about by CJR, applications to strike out for delay would somehow become easier to mount than before.  All that was needed was lengthy delay.  This was not the position at all (§60).

(6)  Striking out should only be used in plain and obvious cases: it must be plain and obvious that by reason of his delay, a plaintiff should be deprived of the opportunity to go to trial (§65).

(7)  The foundation for the jurisdiction to strike out for delay must be predicated on an abuse of the process of the Court by the plaintiff.  This was the common feature which connected the various reasons that had been used as grounds to strike out.  Inordinate and inexcusable delay causing prejudice, contumelious conduct or initiating proceedings without any intention to bring them to a conclusion, were all examples of abuse.

(8)  Abuse can take many forms.  In the context of abuse, merely for a party to start proceedings and then delay (which will often involve a failure to comply with the applicable rules of court) will not necessarily amount to an abuse justifying an order to strike out an action.  The appropriate remedy in such cases may be for the court to exercise some of the powers available, such as the making of peremptory orders, the payment into court of substantial sums etc).  In order for the ‘warehousing’ of claims to justify striking out, it must be clear that the plaintiff is abusing the process of the court. Accordingly, where the “warehousing” of the claim indicates that there was simply no intention to bring proceedings to a conclusion or there is “wholesale disregard” of the rules or court orders, abuse can be found to exist (§75(4)).

(9)  Unlike the post-CJR position, no proceedings should get to the stage where a delay will prompt an application to strike out.  When delays occur, greater use of the Court’s powers can, and should in the majority of cases, be made rather than an application to strike out.

(10)  It was still important that delay be both inordinate and inexcusable, and that abuse be shown.  It had never been the law that mere delay would be sufficient to justify an order to strike out. Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426; A & M Manufacturing & Marketing Ltd v Iu Po Shing [2011] HKCU 1784, (CACV 15/2011, 6 September 2011, unreported); Annoedus Entertainment v Gibson (2 February 2000, unreported) (Ch D) referred to (§75(5)).

(11)  On prejudice, the Court agreed with the proposition that where abuse was clearly demonstrated, proceedings could be struck out even where prejudice to the defendant could not be shown.  For example, where there is contumelious conduct on the part of the plaintiff, no prejudice to the defendant needs necessarily be shown.  It was not correct that post-CJR prejudice would not be relevant at all.  Prejudice to the defendant could still be very much a factor. Purefuture Ltd v Simmons & Simmons [2001] CP Rep 30 referred to (§75(7)).

(12)  Conduct of the parties would remain a relevant consideration.  It was relevant to the question of abuse as well as to the overall justice of the case.  Post-CJR, where all parties had the obligation to prosecute the proceedings and assist the Court in furthering the underlying objectives, it would be highly relevant to consider any failure on the part of the parties.  There is no place anymore for defendants to adopt the attitude of “letting sleeping dogs lie”.  If it was sought to be argued that time has dimmed the memories of witnesses, the Court would usually want to know what steps had been taken to take instructions, or proof or locate witnesses.  The Court would certainly want to know the true nature of the defence, to assess the extent of prejudice.  Hymer v MTR Corporation [2000] 2 HKLRD 589, [2000] HKCU 124 referred to.

(13)     Under CJR it remained the position that the fact delay was caused by legal representatives will not be relevant to the exercise of the Court’s discretion.  For better or worse, acts done or omitted to be done by a party’s legal representative will be attributable to that party.  Birkett v James [1978] AC 297 considered.

27. Delay is inordinate where it is materially longer than the time usually regarded by the profession and the courts as an acceptable period: Hong Kong White Book 2012 Vol 1 paragraph 24/L/5.  Whether or not there has been inexcusable delay should be examined primarily from the defendant’s point of view or at least objectively.  Reasonable allowances may be given to good causes.  Ho Hip Lik & Anor v Kwam Man Ho & Others [1996] 2 HKLR 184 at 186 per Liu JA.

28. Delay which is inordinate is prima facie inexcusable.  It is for the plaintiff to make out a credible excuse for the delay; Trill v Sacher [1993] 1 WLR 1379 at 1397H-1340 A.

29. Delay caused by impecuniosity or lack of finance were not as such excusable.  Even though the court might afford an impecunious plaintiff certain indulgence while he was trying to raise funds or otherwise progress the case, there was likely to come a time when his action had to be struck out: Hymer v Mass Transit Railway Corp & Others [2000] 2 HKLRD 590 at 607-609.

30. Where the delay is inordinate and inexcusable, but a fair trial is still possible, it is still open to the Court to exercise its discretion to dismiss the action for want of prosecution if serious prejudice can be shown: per Godfrey JA in Can-Asia Capital v Kwok Yee William [1995] 1 HKC 521 at 525.

31. While the type of serious prejudice caused to professional men having the action hang over their heads for an extremely long period of time is well-recognised (Biss v Lambeth, Southwark Health Authority [1978] 1 WLR 382), the Court would look into the issue of causation.  Where the serious prejudice would not cease to exist even if the action were struck out, the Court would take that into account in the exercise of its discretion, as indeed it would all other relevant circumstances, such as the defendant’s own conduct: Hymer at 614-615 per Ribeiro JA.

32. As soon as someone, particularly a professional person is told that he is to be sued for negligence, it is a matter of commonsense that he should use all reasonable diligence to review his position, to secure any evidence that may be relevant (by preserving documents and proofing witnesses) and to seek advice if necessary.  Unless these sensible steps are taken, the prejudice that a defendant suffers as a result of fading memory of witnesses for which the plaintiff was responsible would be at most marginal and notably less than the defendant’s contribution: Hymer at 610 per Ribeiro JA, citing Hirst LJ in Hunter v Skingley [1997] 1 WLR 1466.  See also Johnson Controls Hong Kong Ltd v Associated Engineers Ltd HCCT 47/2001 (28 Feb 2012) Judgment of Au J at §§40-43.

33. In order to determine whether a defendant has suffered the necessary prejudice when it is in the form of impairment of witnesses’ recollection as a result of inordinate and inexcusable post-writ delay, the court must examine with care all the circumstances of the case, including both affidavit evidence as well as the issues disclosed in the pleadings.  So long as there are primary facts from which inferences can properly be drawn, there is nothing wrong with doing so: A & M Manufacturing and Marketing Lit v Iu Po Shing CACV 15/2011, Judgment dated 6 September 2011, per Fok JA.

34. With the above principles in mind, I turn now to consider the issues in the appeals.

35. I note that the action was commenced in 2000, at a time before the Civil Justice Reform (“CJR”) was in place.  However, by April 2009, rules implementing the CJR would have come into force, and there became available to the Court and the parties a much wider array of armoury for the purpose of pushing an action ahead, as indeed it would have been the duty of both parties to do so according to the regime and the underlying objectives of the CJR.  That would coincide with the time when the party was awaiting retrial of the 3^rd Action pursuant to the Court of Appeal’s decision.

F.    HAS THERE BEEN INORDINATE AND INEXCUSABLE DELAY?

36. Counsel for the plaintiffs rightly conceded that the delay involved in the two actions was inordinate.  Indeed, that must be the only sensible view to take.

37. It was said, however, that the delay was excusable, in that it was not unreasonable for the plaintiffs to have accepted the advice of their former solicitors, KY Woo, given to them in September 2001.  As stated in the 1^st Affidavit of Chung Siu Ching in HCA 7927/2000 (which part of the evidence was adopted in the 1^st Affirmation of Cheung Chi Wah Ben in HCA 7928/2000), the advice may be summarized as follows:-

(1)   Since all three actions were of identical facts and circumstances, and the plaintiffs in these two actions were not as affluent as the plaintiff in the 3^rd Action, it would save costs for the plaintiffs in the 1^st and 2^nd Actions not to proceed with their actions, while the 3^rd Action proceeded to trial first.  Depending on the outcome of the 3^rd Action, the 1^st and 2^nd Actions could “follow suit”.

(2)   The defendant would not be able to argue that it suffered any prejudice in the two other actions not proceeding, as the 3^rd Action would be going ahead.

38. As the plaintiff in the 3^rd Action had no objection to this course, and the plaintiffs had no reason to doubt the soundness of the above advice, it was decided that the two actions herein be held in abeyance.

39. According to the evidence, the plaintiffs in the two actions did from time to time check with Messrs KY Woo & Co the progress of the 3^rd Action, and was given information on occasions.  Towards the end of 2006, about a year after the judgment of Reyes J in the 3^rd Action was delivered, they were informed of the outcome of the trial and the fact that the decision was under appeal.  They were told to await the outcome of the appeal.  However, while the judgment of the Court of Appeal setting aside the judgment of the trial judge in the 3^rd Action was delivered on 30 March 2007, it was only at some unspecified time in 2009 that they were informed of the outcome of the appeal.  It was not clear if there were enquiries made between April 2007 and 2009 when they spoke with their solicitors at all.  Thereafter, they tried many times to speak to Mr Chung of the firm of Messrs KY Woo & Co with a view to carrying the two actions forward.  They did not receive any meaningful response.  It was not until March 2010 when they decided to cease instructing KY Woo & Co and appointed new solicitors to act on their behalf.

40. In my view, the reliance on the advice of KY Woo by no means exonerated the plaintiffs from blame for the inordinate delay.  Reliance on legal advice by a layman, as such, does not constitute any reasonable excuse for the delay.  If delay caused by lawyers’ inaction would be attributable to the party, as held by the Court of Final Appeal in Wing Fai, the party could hardly be absolved by agreeing to the course proposed by his solicitors that resulted in inordinate delay.

41. Further, it has been pointed out that the right course of action for the plaintiffs to have taken in the circumstances, in view of the advice given, would be to apply to the court, in the absence of any agreement with the Defendant Firm, for the trials of the two actions to be stayed pending the determination of the 3^rd Action, or for the two trials to be heard immediately after the trial of the 3^rd Action.  These would likewise have achieved the cost saving effects intended.

42. I agree that the more prudent course that should have been taken back in 2001 was to attempt to reach agreement or to apply for some appropriate directions from the Court with regard to the intended conduct of these two actions, instead of mere inaction.  However, as matters transpired, if the trial of the two actions had taken place right after the trial of the 3^rd Action, it might not have saved costs, due to the ensuing appeal and the order for retrial.  

43. There was no evidence of the financial resources of the respective plaintiffs in the two actions, apart from a brief statement in the 1^st affidavit of Chung Siu Ching in HCA 7927 of 2000 deposing to limited financial resources to spend on legal fees as a reason for using the developer’s solicitors in the conveyancing transaction.  I do not take “lack of funds” as being seriously argued as an excuse for the delay.  I therefore do not find it necessary to deal with the submission advanced by the defendant in this regard.

44. Taking into account all the evidence and the submissions made on behalf of the respective parties, I conclude that the delay was inexcusable.

G.    WAS SERIOUS PREJUDICE CAUSED TO THE DEFENDANT AS A RESULT OF THE DELAY?

45. As set out in Wing Fai, inordinate and inexcusable delay giving rise to serious prejudice was an example of abuse that might entail the exercise of the court’s discretion to strike out a claim.  One form of serious prejudice would be where a fair trial is no longer possible by reason of the delay.  Another form of prejudice relied on by the Defendant Firm was the well-recognized “Biss”type of prejudice.

G1.     Was a fair trial no longer possible?

46. The factors relied on by the Defendant Firm as would make a fair trial impossible were as follows:-

(1)   A number of unidentified documents relating to the conveyancing transactions in issue were seized by the police, though not for the purpose of investigating any allegations against the Defendant Firm.  These documents have yet to be returned to the Defendant Firm.

(2)   Due to the removal of office of the Defendant Firm and subsequent closure in 2002, some identified items of documents and papers could not be found and were likely to have been lost.

(3)   William & Sin & So, solicitors for the mortgagee bank, could not longer locate their files relating to these transactions.

(4)   CP Lee, the authorized person with whom the Defendant Firm had had dealings, had ceased practice for a long time and was believed to have passed away, and therefore no longer available as a witness.

(5)   Both Mr Ip and Mr Willis’ memories have been impaired over the course of the years.

47. In examining the evidence on the various claims of prejudice, I am to take into account all the factual circumstances, the issues in the actions, the issue of causation, and the conduct of the parties.  In respect of alleged loss of documents and fading of memory of potential witnesses, it would be incumbent on the Defendant Firm to identify the specific issues to which the required evidence relates, what steps have been taken, if any, to preserve such evidence, and if not, why not.

48. In respect of the documents seized by the police, the documents alleged to have been lost through removal of office and cessation of practice, and the documents kept by William Sin & So, it was not made clear in respect of which specific issue they relate to, or in what ways the availability of such documents was important for a fair trial to be conducted, bearing in mind the fact of forgery of the several documents was no longer in dispute, and no allegation has been laid against the Defendant Firm of their complicity in the crime.

49. Even assuming that the seized documents were relevant to any of the issues in the two actions, there was no evidence of any request ever made for their return, or at least for copies to be provided for the record of the Defendant Firm.  It would be hard to imagine that the relevant law enforcement agency would refuse such a request if made, or would reply saying the documents have been lost or destroyed without reference to the Defendant Firm.

50. Likewise, assuming the documents in the files of William Sin & So were relevant and necessary for the fair conduct of the trials, there was no evidence of any previous attempt made to contact them to preserve those documents until months after the summonses for striking out were filed. Plaintiffs’ Counsel described the late request made as “disingenuous”, and there was no other evidence to lead me to a contrary view.

51. Furthermore, assuming the documents were not made available in the trial of the 3^rd Action or the appeal, no issue was raised as to their relevance and absence from the discovered documents.  If they were not needed for the trial or appeal of the 3^rd Action, it is hard to see how they might suddenly become relevant to the trials of the two outstanding actions.

52. For these reasons, I do not find the requisite prejudice has been made out on account of lost documents.

53. As regards the unavailability of CP Lee as a witness, whereas the burden is upon the Defendant Firm to satisfy me that prejudice arose and was serious, there was no attempt to explain what evidence he might be expected to give as would be relevant to any identifiable issue in the trials of the present actions.

54. As the Court of Appeal has pointed out in CACV 12 of 2007, it was not in dispute in the 3^rd Action that the documents relied on in relation to the 2^nd Floor property were forgeries, and the same would necessarily apply to all 3 properties.  The evidence of CP Lee was not adduced at the trial of the 3^rd Action.  The defence has not made out how CP Lee’s evidence on the units being in compliance with the requirements and conditions of the Approval Letter and Certificates would begin to be relevant to any particular issue for the purpose of the trials of the two actions.

55. Even if the evidence of CP Lee were to be of any potential relevance, the Defendant Firm has not explained why no attempt was made to take witness proof from him back in 2001 or before, when directions for the exchange of witness statements were expected to be complied with.  This does not conform with the standard of reasonable conduct expected of a professional man, least of all a lawyer, facing a negligence claim, as Ribeiro JA remarked in Hymer at page 610.

56. The Defendant Firm ended up filing no witness statement.  No explanation has been offered on why the direction was not complied with despite the plaintiffs having filed their witness statements in the two actions.

57. The same remarks may fairly be made with regard to the alleged prejudice arising from the fading of memory of Mr Ip and Mr Willis, as parties to the action.  It would, for a start, be incumbent upon them to each state with specificity the areas of relevant evidence they might be expected to give at trial on which their memory would not serve them well due to the lapse of time.  They have not done so.

58. Further, the defendants, both being experienced solicitors, would have known the importance of having detailed proofs taken of their own evidence on the transactions while their memory was fresh, back in 2000 to 2001.  This they did not do.

59. On the other hand, they appear to have no difficulty setting out the relevant facts to an appropriate degree of detail in their affidavits filed in support of the present actions.  They had gone through the trial in the 3^rd Action and had given evidence.  The Court of Appeal, in ordering a retrial, would have taken the view that a retrial would not be unjust by reason of any significant loss of memory of the witnesses.

60. Last but not least, the memory of the Mr Ip and Mr Willis will once again be refreshed in the retrial of the 3^rd Action.  If the two actions were to survive these appeals, there is no reason why the proceedings of the two actions could not steam ahead under a tight time-table with rigorous case management involved to ensure the trials take place before memories of witnesses lapse again.  I note the submissions by defence Counsel of potential further delay in the trials if pleadings were to be amended and further discovery were to take place.  I take the view that such potential further delay could be kept to a minimum with appropriate case management if the two actions were allowed to proceed.

61. While not specifically raised in the submissions of Defence Counsel, the Affirmation of Chan Yiu Pun Jimmy (“Mr Chan”) deposed to the fact that a notebook he used to keep notes he made when attending to clients could no longer be found.  This is included as an item of “lost documents” in the affidavit evidence of Mr Willis, which would result in serious prejudice.  Mr Chan was at the time of the transactions a legal executive employed by the Defendant Firm.  No evidence was available as to what steps had been taken to preserve his notebook as potential evidence, and if not, why not.

62. The Defendant Firm have given no indication whether they intended to call Mr Chan as a witness in the trial of the two actions, and if so on which particular issue of the case.  There was no evidence as to which particular issue the contents of the notebook would be relevant to.  In so far as there was any intention to call him as a witness, and for him to rely on his notebook for refreshing his memory, the same remark would apply: no reason was given on why it was not seen necessary to take a sufficiently detailed proof of evidence from Mr Chan back in 2000 to 2001 at a time when his memory would have been fresh, and his notebook would still have been available to him.  I note that Mr Chan did not appear to have given evidence in the trial of the 3^rd Action.

63. On the other hand, Mr Chan said he was able to reconstruct his memory of the meetings with clients by reference to the conveyancing file kept by Mr Willis.  Further, if his evidence was not needed in the trial of the 3^rd Action, it has not been made out what evidence he would give that may become relevant in the two actions, the giving of which would be hampered by reason of the notebook having been lost over time.

64. In view of the above, I am not satisfied that a fair trial would no longer be possible by reason of the delay.  The defendants’ unexplained failure to preserve any of the purported relevant evidence made their own conduct at least contributory to the alleged prejudice.  The defendants have failed to make out substantial prejudice was caused by the above, and/or that such prejudice was principally caused by the inordinate delay.

G2.   “Biss” type of prejudice

65. I turn now to consider the other head of prejudice, namely, the Biss type prejudice.

66. It was said by the defendants that the actions, having hung over their heads for 11 years, has caused great anxiety, concern and distress to them as professional men.  It is said that their practice were affected as a result.  I am not without sympathy for them in this regard, but in my exercise of discretion I must take into account all the relevant factors, including causation of the prejudice, and the conduct of the defendants.  Conduct of the parties would remain a consideration relevant to the question of abuse as well as to the overall justice of the case.

67. The Law Society has made repeated enquiries with the Defendant Firm regarding the progress of the 3 cases.  Unspecified banks with which the Defendant Firm had previous connections in mortgage transactions were also interested to know of the outcome of the actions.  According to Mr Ip, banks were unwilling to give the Defendant Firm mortgage business or referrals for as long as the actions remained unresolved, as they were considered to be an “insurance” or “commercial” risk.

68. Mr Ip also said that their professional indemnity insurer had declined to provide professional indemnity insurance to the Defendant Firm regarding the claim in the two actions.  Instructions were withdrawn from Messrs Deacons in 2002.  Thereafter the Defendant Firm represented itself in these actions.  It has not been explained in evidence why their insurers have done so, except it was suggested that the decision related to the separate actions brought by the plaintiffs against Endenne and its directors for fraud or forgery.  In any event, the withdrawal of the insurer’s indemnity in 2002 did not arise out of the actions not having been resolved over a protracted period of time, and therefore can hardly be a factor of prejudice in the context of these appeals.

69. Mr Ip said that the two actions caused disruption and inconvenience to his practice, injury to his professional reputation and standing, and strain on his resources and stress.  In 2010, after the delivery of the decision of the Court of Appeal regarding the 3^rd Action, the Law Society questioned Mr Ip’s fitness to practice by reason of the existence of a property claim against him.  He was required to provide information of his means before his practice certificate was renewed.

70. In considering the effect of all the above, I remind myself that I must not lose sight of the fact that the 3^rd Action went through a trial and an appeal, and the Court of Appeal in fact overturned the decision of the trial judge.  In their judgment the Court of Appeal levelled considerable criticism against the conduct of the Defendant Firm in the subject property transactions.  Further, by reason of the relationship amongst the 3 transactions, those criticisms would inevitably apply with equal force against the Defendant Firm in relation to the transactions the subject of these two actions.  As from the date of the Court of Appeal judgment on 30 March 2007 until the date of the hearing of these appeals, the 3^rd Action was still pending retrial.  Striking out the two actions will not, in the circumstances, put an end to any lingering stigma or uncertainty that may arise from the two actions not having yet been tried.  When the causation of the perceived Biss type of prejudice is looked into, it is impossible to say that the delay in the two present actions was its principal cause, or that the removal of the actions would make any significant difference to the continued existence of such prejudice, apart from some anxiety over the additional liability they could attract.

71. On the other hand, I must also have regard to the defendants’ conduct of the actions.  From the unexplained failure in filing witness statements in the two actions, and the failure to make use of the array of weapons under the new provisions implementing the CJR since April 2009, the Defendant Firm has displayed no anxiety to have the actions tried and determined.  This attitude could well have been the result of a realization that the retrial of the 3^rd Action would in effect make it impossible for the perceived prejudice to cease to have effect even if the two actions were to disappear.

72. I consider that although the Biss type of prejudice did exist by reason of the inordinate delay, in considering all the relevant circumstances, including the issue of causation, the conduct of the defendants, and the overall justice of the case, it is not a case in which the Court should exercise its discretion to strike out the action.

H.    WAS THERE AN ABUSE OF PROCESS IN THE SENSE THAT THE PLAINTIFFS HAD NO INTENTION TO CARRY THE MATTER TO TRIAL?

73. The Defendant Firm argued that the plaintiffs in the two actions had no real intention to carry the matter to trial.  This is sometimes referred to as the “warehousing” argument.  That would in law amount to an abuse of process for which the court could exercise its discretion to strike out.  Where abuse is clearly demonstrated, proceedings could be struck out even where prejudice to the defendant could not be shown.

74. Where the ‘warehousing’ of the claim indicates that there is simply no intention to bring proceedings to a conclusion or there is ‘wholesale disregard’ of the rules or court orders, abuse can be found to exist.

75. Counsel for the defendants rely on this head of abuse of process by reference to the inordinate and inexcusable delay.  However, I was unable to see any matters over and above inaction that might demonstrate a lack of intention to bring the matter to conclusion, or any disregard of court rules of a nature that might infer such an intention.  As has been pointed out by Counsel for the plaintiffs, court directions up to the stage of filing of witness statements were all complied with by the plaintiffs.  It was the defendants who had omitted to file any witness statements in the actions, but have turned around to complain about fading memories of various potential witnesses for the purpose of their applications to strike out.

76. In considering whether there was abuse of process by reason of the delay, inaction on the part of the party complaining is of relevance. In this regard, Counsel for the plaintiffs pointed out that the summonses to strike out the two actions were not issued until almost a year after the Notices of Intention to Proceed were filed. On the part of the Defendant Firm, they said that they did not receive the notice until February 2011.  Even assuming that was so, there was no attempt on the part of the defendants since the Court of Appeal judgment in CACV 12/2006 was delivered in late March 2007 to bring the two actions up to speed with the prospective re-trial of the 3^rd Action ordered by the Court of the Appeal.  Even after the defendants received the Notices of Intention to Proceed, and knowing the retrial of the 3^rd Action was pending but not yet in sight, there was still no evidence of any attempt to bring the two actions up to speed as a way of avoiding the prolongation of the perceived prejudice beyond the retrial of the 3^rd Action.

77. In the circumstances, I am not satisfied that it was a clear case of an abuse of process as would warrant the exercise of the Court’s discretion to strike out the two actions.

I.          CONCLUSION

78. At least since the CJR provisions came were implemented, the Defendants could have been more proactive in pushing the matter ahead if they had chosen to.  As clearly stated in Wing Fai, the attitude of “letting sleeping dogs lie” was no longer acceptable.  Where there are measures that could have been taken by the defendants to avoid the prejudice under complaint and the defendants failed to avail himself of these measures, the Court is entitled to take that into account.  This approach in considering whether there was serious prejudice to the defendants or other forms of abuse of process has been clearly demonstrated in the Court of Appeal’s judgment delivered in 2000 in Hymer, well before the judgement of the CFA in Wing Fai.

79. The defendants have not demonstrated that they suffered serious prejudice caused by the delay, or there was otherwise a clear case of abuse of process on the part of the plaintiffs in their conduct of these two actions. This is therefore far from a plain and obvious case in which the court’s discretion should be exercised in favour of striking out the actions.

80. On the other hand, both parties will be well advised to heighten their awareness of their respective obligations under the current Rules of Court and to press on with the actions.

81. The appeals are therefore allowed and the orders of Master De Souza striking out the two actions are set aside and the two actions restored.

82. I also direct that the plaintiffs in both actions do take out case management summonses within 21 days hereof.

83. I make an order nisi that the costs of the appeals together with the costs below be to the plaintiffs and to be taxed if not agreed.  This order shall be made absolute 14 days from today unless any of the parties applies by summons to vary it.  

84. It remains for me to thank Counsel for the plaintiffs and defendants for their able assistance.