ONG EE CHANG v. LI TUNG LOK AND ANOTHER

CACV 194/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 194 OF 1999

(ON APPEAL FROM HCA 2541 OF 1993)

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J U D G M E N T

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Mayo, J.A.:

1. This is an appeal from a judgment of Keith, J. (as he then was). He had in turn been hearing an appeal from Deputy Master Bennett who had declined to dismiss the Plaintiff's claim for want of prosecution.

2. The facts are all set out in Keith, J's judgment.

3. The Plaintiff's claim is based upon a promise he alleges was made by D1 presumably on the authority of D2 to allot him up to 5% of the shares in a company which was to be formed to manufacture semi-conductors. The alleged promise was made in October or November 1988 and was confirmed in a memo dated 21st August 1989 which stated that the percentage would be 3%. The consideration for the promise was that the Plaintiff would leave his employment with Swire's and assist in setting up the company. The Plaintiff did leave his employment and assist in setting up the company. He continued working for it until May 1992. He claimed that it was not until then that he realised that the promised allotment of shares had not been implemented.

4. The action was commenced on 26th March 1993.

5. It is evident that almost from the outset of the litigation there were problems relating to the case being pleaded by the Plaintiff.

6. Mr. Barlow who represents the Defendants has prepared an analysis of the problems which he annexed to the helpful skeleton argument he prepared.

7. What is evident is that the Statement of Claim was substantially amended on three occasions. There were also two applications for further and better particulars. In the original Statement of Claim conversion was pleaded against D1 and a company called QPL International Holdings Ltd. Fraudulent misrepresentation was also alleged against these parties and breach of the oral agreement was pleaded against D1.

8. By the amendment dated 7th September 1993 the action against the company was discontinued and D2 was substituted for it. The claim for conversion was maintained against both Defendants and the claim for fraudulent misrepresentation and breach of contract was only made against D1.

9. A re-amended Statement of Claim was filed on the 24th February 1997. The plea of conversion against both Defendants was abandoned. A new averment of deceit was made against both Defendants. There was also a new alternative plea of negligent misrepresentation against both Defendants and a claim for breach of contract against the Defendants in the alternative.

10. These amendments took over four years to develop. It is the Defendants' case that what all of this demonstrates is an inability of the Plaintiff or those advising him to formulate a convincing case against them.

11. The Judge after considering the whole situation did not think that a large measure of blame could be attached to the Plaintiff. He characterised the amendments as arising out of the natural dynamics of the litigation.

12. At first sight this assessment of the situation would appear to be rather surprising. Indeed Mr. Barlow characterised it as being plainly wrong and such as to justify us in interfering with the discretion which was being exercised by the Judge.

13. It is however necessary to consider this matter at rather greater depth. It is apparent from a perusal of the chronology prepared by Mr. Booth a solicitor who had been representing the Plaintiff that it was by no means the case that all or even the greater part of the delay which occurred at this time was attributable to the default of the Plaintiff. It is apparent that a number of interlocutory applications were made and that some of these were keenly contested. It is also apparent that on several occasions the Defendants were themselves tardy in dealing with the applications and that each party has to bear part of the blame for the delay which occurred.

14. Mr. Barlow submitted that as it was a late start case it was all the more incumbent upon the Plaintiff to proceed with the case expeditiously.

15. In this connection the fact that the case was a late start case was not entirely the fault of the Plaintiff.

16. When the alleged promise was made to him in late 1988 he would not have had any reason to suppose that it would not be honoured. It has to be borne in mind that he was working as an employee of the company and it is not surprising that he did not commence proceedings until after his employment ended.

17. The writ was issued in March 1993 which in all the circumstances was not unduly delayed.

18. So far as the delays relating to the amendments were concerned the Judge was satisfied that while the amendments were extensive the essential claim being made by the Plaintiff remained comparatively constant. There was certainly no basis to conclude that the Plaintiff had radically changed the case he was presenting.

19. I am by no means satisfied that it can be said that in all of the circumstances of this case that the Judge was plainly wrong to reach the conclusion he did in relation to the amendments.

20. The Judge was however satisfied that the Plaintiff was guilty of inexcusable delay for the period from 1st September 1997 to 1st August 1998. This mainly related to the preparation of witness statements. The Judge did not consider the delay could be excused by virtue of the fact that the Plaintiff had been travelling during this period and had been unable to attend to the litigation while he was away.

21. At the commencement of the hearing before us Mr. Barlow accepted that the appeal which had been heard by the Judge had involved an exercise of the Judge's discretion. This being the case the scope for our intervention was closely circumscribed. We therefore invited him to outline to us how the Judge had been in error in the exercise of his discretion.

22. Mr. Barlow submitted that the Judge had erred in law in holding that he could not infer prejudice from the 11 years or more delay from the date when the alleged promise was made to the time when it could reasonably be expected that the case would be tried.

23. In this connection he referred to the Judge's analysis of the law at pages 15 to 17 of his judgment.

"The consequences of the delay

The power to dismiss an action for want of prosecution only arises where the inordinate and inexcusable delay on the part of the plaintiff or his lawyers

' ... 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 ...': Birkett v. James, p.318F-G.

However, where the defendant relies on the second limb of this principle, i.e. the likelihood of serious prejudice, he cannot rely only on prejudice which arose as a result of the late issue of the proceedings:

'To justify dismissal of an action for want of prosecution some prejudice to the defendant additional to that inevitably flowing from the plaintiff's tardiness in issuing his writ must be shown to have resulted from his subsequent delay (beyond the period allowed by rules of court) in proceeding promptly with the successive steps in the action. The additional prejudice need not to be great compared with that which may have been already caused by the time elapsed before the writ was issued; but it must be more than minimal ...': Birkett v. James, p.323F-G.

The same presumably applies to cases in which the defendant is relying on the first limb of the principle, i.e. a substantial risk that a fair trial is not possible. The additional risk does not need to be great compared with that which may already have been created by the lapse of time before the issue of the writ, though it too must be more than minimal.

The principles governing the application of these classic statements of the law have been worked out in a number of subsequent cases. Thus, one of the principles summarised in Trill v. Sacher at p.l399F-H was:

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

Where there has been some divergence of opinion is over what evidence is sufficient to establish that that part of the delay which is found to be inordinate and inexcusable has created the substantial risk that a fair trial will not be possible or the likelihood of substantial prejudice to the defendant. For example, different views were expressed by the two judges who constituted the court in Hornagold v. Fairclough Building Ltd. (27th May 1993, Court of Appeal (Civil Division), Transcript No. 634 of 1993). One of them thought that some evidence had to be produced of risk or prejudice, while the other thought that in an appropriate case the necessary degree of risk or prejudice could be inferred. In Roebuck v. Mungovin [1994] 2 AC 224, the House of Lords agreed with the latter view: see p.234E-F per Lord Browne-Wilkinson.

The Defendants' case is that such inordinate and inexcusable delay on the part of the Plaintiff is likely to have caused serious prejudice to the Defendants. The prejudice is said to have taken two forms - evidential and financial - and I must deal with each in turn.

As for evidential prejudice, it is said that I should infer, in a case such as this which turns so much on the recollection of the witnesses, that their recollection of the events will now be dimmer than it otherwise would have been. I cannot go along with this argument. I am not convinced that this is a case which is as dependent on the recollection of witnesses as the Defendants suggest, but even if it is, the fact remains that the culpable delay of eleven months began nine years after the alleged promise was made and eight years after it was allegedly confirmed. I simply cannot infer that the recollection of the actual and potential witnesses (the 1st Defendant himself, Peter Dixon, Henry Cheng, Winnie Ng and George Ng) of what had occurred in 1988 and 1989 would have been any different at all if the trial had taken place when it would have done but for the culpable delay.

There are echoes of thinking along those lines in the cases. Thus, in Union V-Tex Shirt Factory Ltd. v. Union V-Tex Realty Ltd. (CA 48/93), Huggins V.-P. said:

'I suppose it may be true that the curve of loss of memory against time is steepest at some point a few months after the events, though much must depend upon the individual and upon the nature of the events. Usually the curve does not then stop rising and, indeed, it may never flatten out. Three years' delay may not be so serious, if it starts seven years after the events, as if it starts immediately after them, but it is not to be ignored.'

And in Electricity Supply Nominess Ltd. v. Longstaff and Shaw Ltd. [1987] 3 Const. L.J. 183, Mustill L.J. (as he then was) said at p.187:

'It is plain that the quality of the oral evidence on both sides is likely to fall away very much more rapidly in the earliest months and years than at a later stage.'

(I should interpose that that placed Mustill L.J. in something of a dilemma. He added:

'Thus it is precisely in those cases where the case is most scandalously stale and therefore most apt for peremptory dismissal, that the defendant will be most hard pressed to show that the only delay of which he is entitled to complain has done him any further appreciable harm.'

... )"

24. Mr. Barlow contended that the Judge had himself fallen into the trap referred to by Mustill, L.J.

25. He had failed to take cognisance of the fact that the House of Lords in Roebuck v. Mungovin [1994] 2 AC 224 had resolved this dilemma. In particular he referred to a passage at p.234 of the report.

"The numerous appeals to which the 'estoppel' has given rise suggest that the law is not soundly based. The refinement that the defendant has to show further, post-estoppel, prejudice caused by further post-estoppel delay by the plaintiff introduces into another sector of the law of striking out one of the least satisfactory elements of the decision in Birkett v. James [1978] A.C. 297. In the ordinary case the prejudice suffered by a defendant caused by the plaintiff's delay is the dimming of witnesses' memories. Where there are two periods of delay, how can it be shown that a witness has forgotten during the later, rather than the earlier, period? We were referred to an unreported decision of the Court of Appeal, Hornagold v. Fairclough Building Ltd. (unreported), 27 May 1993; Court of Appeal (Civil Division) Transcript No. 634 of 1993, where there was a difference of opinion as to whether in such a case it was necessary to adduce specific evidence that the prejudice flowed from the loss of memory in the alter period. I have no doubt that such evidence is not necessary and that a judge can infer that any substantial delay at whatever period leads to a further loss of recollection. But even so the attempt to allocate prejudice to one rather than another period of delay is artificial and unsatisfactory."

26. The question which then has to be considered is whether the Judge did indeed misapprehend the law.

27. Mr. Barlow argued that it was apparent from the reasoning of the Judge at p.18 of his judgment that he considered that at law he was precluded from taking cognisance of all the delay as a whole.

28. The relevant passage reads:

"In addition to contending that prejudice to the Defendants can in the circumstances be inferred (which I reject), the Defendants contend that there is direct evidence which establishes specific areas of evidential prejudice. The Defendants wish to adduce evidence to challenge the authenticity of (a) the memo. of 21st August 1989, and (b) the notarisation of a statement purporting to have been signed by Mr. Batinovitch in April 1992. They contend that the Plaintiff's delay has prevented them from doing so. I cannot go along with this complaint. So far as the memo. is concerned, the enquiries for evidence relating to its authenticity were commenced in 1996, i.e. before the period of culpable delay began. Even then, the person who the Defendants' solicitors wanted to interview, i.e. Ms. Shirley Hung who had been Mr. Batinovitch's secretary at the time and who presumably would have typed the memo. if it had been genuine, could not be found. The problem which the Defendants now have about challenging the authenticity of the memo., therefore, has not arisen as a result of the culpable delay. It had arisen before the culpable delay began."

29. In my view it is clear that what the Judge was referring to in this passage was his assessment of the evidence as a whole. It was on the basis of the facts as he found them that he was not prepared to take into account the earlier delay which he considered the Defendants to be to a large extent responsible.

30. The other main complaint made by Mr. Barlow was that the Judge had given insufficient reasons in his judgment for rejecting the claim that the Plaintiff's conduct of the litigation had constituted an abuse of process.

31. The short answer to this is that there was no need for him to do so. There was no direct evidence available from which an inference could legitimately be drawn that the Plaintiff's motive for the litigation was a desire to extract some form of settlement from the Defendants.

32. It may possibly be the case that all parties to the litigation may have their own agendas and indeed have good reason not to want the case to be brought to an expeditious conclusion. There is however no direct evidence that the Plaintiff has been guilty of an abuse of process.

33. What emerges from an examination of the court file is that there have been numerous contested interlocutory applications and that these have taken a considerable amount of time to be disposed of.

34. There are a plethora of cases on the subject of striking out claims for want of prosecution and the factual background of all of these cases will vary enormously. A measure of caution is required in attempting to apply the relevant principles in any particular case.

35. I do not consider that Mr. Barlow has been able to demonstrate that the Judge wrongly exercised the discretion reposed in him and in my view this appeal should be dismissed.

Rogers, J.A.:

36. I have had the advantage of reading in draft the judgment prepared by Mayo, J.A. and also that prepared by Godfrey, J.A. and I agree with both.

Godfrey, J.A.:

37. I have had the advantage of reading in draft the judgment prepared by Mayo, J.A. I agree with it, and would add only that, as it seems to me, the rejection by the judge below of the contention "that prejudice to the defendants can in the circumstances be inferred" was based on the judge's assessment of the history of this particular case, not (as Mr. Barlow for the defendants submitted) on a mistaken view of the law to the effect that prejudice must be proved by direct evidence and can never be inferred.

38. The court being unanimous, the appeal is dismissed. The defendants must pay the plaintiff's costs of the appeal, to be taxed, if not agreed.