PATRICK HUNG HING YU v. HO YIN MAN AND OTHERS

HCA 92/2007

[2024] HKCFI 3186

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 92 OF 2007

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BETWEEN

AND BETWEEN

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REASONS FOR DECISION

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1.  This is the appeal of Madam Huang Kai Chiun Dorothy (“Madam Huang”), the executrix of the estate of the plaintiff (“P”), against a Master’s decision made on 14 June 2024 ordering P’s claim against the 4^th defendant (“D4”) in these proceedings be struck out and dismissed for want of prosecution. At the conclusion of the hearing, I allowed P’s appeal, dismissed D4’s strike out application, and indicated that my reasons would be handed down in due course. Here are the reasons for my decision.

A. THE RELEVANT BACKGROUND

2.  According to the agreed chronology:

(1) Fook Tai Investment Co Ltd (“D3”) was the developer of a project to redevelop 4 plots of land at Leung Fai Terrace near Caine Road (“the Redevelopment”).

(2) In 1991, D3 (a) appointed Stereo Ltd, the 2^nd defendant (“D2”), as consultant to (i) negotiate with the landowners to procure their consent to redevelop, and (ii) procure the necessary approval of the Building Authority for the Redevelopment and (b) agreed to pay D2 5,000 sq ft of the buildable floor area of the new building known as Scenic Rise as consultancy fee.

(3) In 1994, it was confirmed by D3 to D2 that the consultancy fee would comprise as follows: (a) HK$12,543,440 representing 3,583.84 sq ft of the 5,000 sq ft of the buildable floor area of the new building (which was paid by D3 to D2 on 11 May 1994), and (b) upon completion of the Redevelopment, D3 would assign Flats 36A and 36B (subsequently changed to 36D) with gross floor area of 1,416.16 sq ft to D2 provided that D2 would bear the agreed construction costs.

(4) The Redevelopment commenced in December 1992 and was completed in early 1999.

3.  It is common ground that D2 was under the control and majority ownership of Ho Ying Man, the 1^st defendant (“D1”), at all material times.

4.  According to P’s pleaded case:

(1) In 1986, P initiated the idea of the Redevelopment and procured the assistance of D1 to provide finance and manpower for the project. D4 was assigned by D1 to assist P.

(2) In 1991, P and D1 reached an agreement, with the knowledge of D4, to share the consultancy fee to be paid by D3, and D2 was designated by P and D1 as the vehicle for the purpose of receiving the consultancy fee.

(3) In 1994, D1 and D4 approached Mr Lai Hou (“Mr Lai”) for the purpose of selling the right to the consultancy fee.

(4) In 1995, D4 entered into an oral agreement to transfer Flat 36D to Mr Lai. Wealthy Channel Ltd, the 5^th defendant (“D5”), is a company representing the interest of Mr Lai.

(5) In March 1999, D4 commenced proceedings in HCA 3890/1999 against, inter alia, D2 and D3 alleging that D2 was a mere agent of D4 and that D2 held that the benefit of the consultancy fee (including Flats 36A and 36D) on trust for D4. P was not a party to that action but was assured by D1, D2 and D4 that once the action was resolved, P would receive his share of the consultancy fee.

(6) In late 2006, P came to know that in March 2006, the parties settled the action in HCA 3890/1999 by a Tomlin Order (“the 2006 Tomlin Order”), whereby Flats 36A and 36D were to be sold and the sale proceeds were to be divided between D2 and D4.

5.  On 16 January 2007, P commenced these proceedings against D1 to D4. In his Statement of Claim filed on 10 April 2007, P sought against D4 a declaration that D4 has no interest in Flats 36A and 36D.

6.  Later in 2007, D2 and D4 applied to strike out P’s claim. In particular, D4 sought to strike out on the ground that P’s claim disclosed no reasonable cause of action against him. On 13 August 2007, Suffiad J handed down a decision dismissing both applications to strike out on the part of D2 and D4.

7.  In 2012, P passed away. On 14 December 2012, Madam Huang obtained the order to carry on these proceedings for P’s estate.

8.  In 2014, there were amendments to the pleadings of P and D4.

9.  In March 2015, timetabling questionnaires were filed by, inter alia, P and D4. Lists of documents were filed by the parties in April, October and November 2015, and in December 2016.

10.  Madam Huang filed her witness statement on behalf of P in November 2015. D4 filed his witness statements in May 2016 and January 2018.

11.  On 29 October 2015, P obtained a default judgment against D1.

12.  On 20 January 2017, Mr Registrar Lung allowed an application taken out by P pursuant to RHC Order 38 rule 2 for various affirmations to be read out at trial which concerned D4 and D5, and adduced as hearsay evidence. The learned Registrar’s reasons can be seen from his decision dated 20 January 2017.

13.  On 12 July 2017, D1 took out a summons to set aside the default judgment obtained against him.

14.  On 3 November 2017, the 5^th Case Management Conference (“CMC”) took place before Mr Registrar Lung. The learned Registrar, inter alia, ordered that P should fix the return date for the 6^th CMC within 14 days after the disposal of D1’s application for setting aside the default judgment.

15.  On 18 January 2018, D1’s summons was adjourned by DHCJ Sakhrani to a date to be fixed. That application came before DHCJ R Ismail SC on 24 and 25 April 2018, and was dismissed by a decision handed down on 11 May 2018.

16.  In 2022, Madam Huang made an application for legal aid but subsequently withdrew it.

17.  On 16 May 2023, Madam Huang made another application for legal aid. On 21 August 2023, Madam Huang’s current solicitors were assigned to act for her in these proceedings.

18.  In the meantime, the Director of Legal Aid issued a Notice of Assignment of counsel for D4 on 15 September 2023 and issued a Notice of Amendment of Legal Aid Certificate to cover D4’s application to strike out P’s claim herein.

19.  On 7 February 2024, D4 took out a summons to strike out P’s Re-Amended Statement of Claim for want of prosecution and/or on the ground that it may prejudice, embarrass or delay the fair trial of the action and/or it is otherwise an abuse of process of the court.

20.  D4’s striking out application was heard before a Master on 14 June 2024, who, ordered that (1) P’s claim against D4 in these proceedings be struck out and dismissed for want of prosecution and on the grounds that it may prejudice, embarrass or delay the fair trial of the action and/or it is otherwise an abuse of process of the court and (2) costs of this action and D4’s application be paid by P to D4 to be taxed if not agreed with a certificate for counsel.

21.  By a notice of appeal dated 26 June 2024, P sought to appeal against the Master’s order.

B. THE RELEVANT LEGAL PRINCIPLES

22.  In exercising my discretion in the present case to determine whether or not P’s claim should be struck out for want of prosecution, I paid full regard to the principles set out in Ma CJ’s judgment in Wing Fai Construction Co Ltd v Yip Kwong Robert (2011) 14 HKCFAR 935 at §§64-80, and in particular, the following principles:

(1) Striking out should only be used in plain and obvious cases and as a last resort: it must be plain and obvious that by reason of his delay, a plaintiff should be deprived of the opportunity to go to trial for the resolution of his dispute with the defendant (§§65, 73 & 75(1)).

(2) The foundation for the jurisdiction to strike out for inordinate and inexcusable delay must be predicated on an abuse of the process of the court by the plaintiff; mere delay is not sufficient to justify an order to strike out (§§66, 68, 75(2) & 75(5)).

(3) Prejudice to the defendant is a factor relevant to the overall justice of the case (§75(7)).

(4) Where all parties to the proceedings have the obligation to prosecute proceedings and assist the court in furthering the underlying objectives, it is relevant to consider the parties’ conduct and any failure on their part for the purpose of considering the question of abuse and the overall justice of the case (§75(8)).

23.  As far as the question of prejudice is concerned (in the context of a strike out application for want of prosecution), I had also borne in mind the following principles which I gratefully adopted from G Lam J’s decision in Tsang Foo Keung v Chu Ji Mi Jimmy (unreported, HCA 7140/1995, 12 July 2013) at §80:

“(1) The burden lies on the defendant to show prejudice or impossibility of a fair trial.

(2) The discharge of that burden will normally require evidence specifying the particular disadvantage suffered or anticipated by the defendant, though in appropriate cases inferences may be drawn by the judge …

(3) The court has to look at all the circumstances when considering whether there is prejudice or whether it will not be possible to have a fair trial …

(4) The prejudicial effect of delay on a defendant and the effect of delay on the possibility of a fair trial depend in large measure on the nature of the issues in the case, in particular whether the evidence is predominantly in documentary form or whether the crucial evidence may be largely oral ….

(5) Where the prejudice relied on is the dimming of witnesses’ memories due to the lapse of time, a generalised assertion that memories must have grown fainter will generally not be sufficient ... However, it is not essential in every case that there should be evidence of particular respects in which potential witnesses’ memories have faded. So long as there are primary facts from which inferences can properly be drawn, there is nothing wrong with doing so ...

(6) The defendant must also show that there is prejudice or inability to have a fair trial, as the case may be, caused by the delay in the action. The defendant cannot therefore merely rely on prejudice caused by the delay of the plaintiff in issuing the writ ...

(7) The court may take into account what the defendant could reasonably be expected to have done which could have avoided or mitigated the prejudice he suffers or anticipates. If, for example, the defendant relies on the dimming of witnesses’ memories through the passing of time, the court will usually want to know what steps the defendant has taken in locating and proofing the potential witnesses…”

C. PLAINTIFF’S DELAY

24.  In my view, the relevant period of inaction on the part of P was from 2018 to 2023. I considered P’s inactivity during this period to be inordinate and inexcusable.

(1) D4 submitted that there were 2 periods of delay on the part of P: (a) between 2007 and July 2011 and (b) between 2018 and 2023.

(2) As to the period between 2007 and July 2011, I noted that there were in fact activities in these proceedings in 2007 (see paragraphs 5 and 6 above). In any event, after P’s death and after Madam Huang obtained the order to carry on in 2012, the parties picked up their momentum in these proceedings from 2014 to 2018. I therefore considered that much less weight should be placed on the period of inactivity between 2007 and 2011.

(3) Madam Huang has admitted in her affirmation that there has been no substantive action on her part in these proceedings between 2018 and 2023. There was, however, a mediation session arranged between P and D4 in November 2018.

(4) Madam Huang further explained in her affirmation as follows.

(1) She is now 78 years old and has been a housewife without any income.

(2) In 2018, her former solicitors asked her to make a deposit as costs on account. However, she was unable to make payment due to her financial difficulties. She produced a copy of the relevant pages of her bank passbook showing the level of her cash deposits from 2018. As her former solicitors did not make any further request, she was left with the impression that the amount of money that she had paid so far (which was more than HK$500,000) was still sufficient.

(3) Since then until 2020, Madam Huang made regular attempts to follow up the progress of the case but her former solicitor handling the case was not contactable.

(4) In March 2020, Madam Huang travelled to Kuala Lumpur to visit her relatives and was only able to return to Hong Kong in December 2020 due to the COVID-19 pandemic and the subsequent quarantine and travel restriction in Malaysia and Hong Kong. She was unable to contact her former solicitor over long-distance calls who was handling the case. Further, she was never informed by her former solicitors of her obligations under Mr Registrar Lung’s order to fix the return date for the 6^th CMC within 14 days after the disposal of D1’s application for setting aside the default judgment. According to her, she was only so informed in August 2023.

(5) After her return to Hong Kong in December 2020, Madam Huang had to attend hospitals and clinics on a regular basis from October 2021 to January 2022. She exhibited copies of her medical records, consultation summaries and appointment/discharge slips to her affirmation.

(6) It was only in early 2022 when Madam Huang managed to get in touch with another employee of her former solicitors and was told to apply for legal aid if she could not afford the legal fees. Although she did apply for legal aid, she was unable to withstand the stress and subsequently withdrew the application upon medical advice.

(7) In May 2023, Madam Huang’s health slightly improved and she applied for legal aid again. On 21 August 2023, she was granted the Legal Aid Certificate. A meeting was held with her current solicitors in October 2023 after all the relevant documents were received. In early December 2023, she was assigned counsel by the Director of Legal Aid.

(5) It seemed to me that the relevant period of inactivity was from November 2018 (when the mediation took place) to May 2023 (when Madam Huang reapplied legal aid). I considered the period to be inordinate and inexcusable (despite the explanations given by Madam Huang in her affirmation).

25.  Nonetheless, I did not think Madam Huang’s conduct during the period from November 2018 to May 2023 could properly be described as an abuse of the process of the court. I was prepared to give Madam Huang the benefit of the doubt when she said on oath that she was never made aware at any material time of her obligations under Mr Registrar Lung’s order to fix the return date for the 6^th CMC within 14 days after the disposal of D1’s application for setting aside the default judgment. I was unable to accept D4’s submission that P’s non-compliance of the learned Registrar’s order amounted to a “flagrant disregard for court orders, sufficient to warrant a finding of abuse of process”.

D. PREJUDICE TO 4^TH DEFENDANT

26.  D4 relied on the following matters as constituting significant prejudice to him to such an extent that a fair trial might not be possible.

(1) Much of the disputed factual events took place in the 1980s and 1990s.

(2) Key witnesses are of an advanced age: D4 is 84 years old and another witness, one Mr Leung, is in his mid-80s.

(3) P has passed away and can no longer be cross-examined.

(4) D4 has been experiencing anxiety since proceedings started in this action 17 years ago.

(5) D4 has been prevented from enforcing the 2006 Tomlin Order.

27.  In my view, it is important to focus on the prejudice to a defendant which has been caused by the plaintiff’s inordinate and inexcusable delay. In the context of the present case, it is necessary to examine the extent of any prejudice which D4 claimed to have suffered as a result of Madam Huang’s inactivity in these proceedings from 2018 to 2023.

(1) Whilst D4 was correct to point out that some of the disputed events took place many years ago, I considered it material that D4 had already prepared and filed his witness statements in these proceedings in May 2016 and January 2018. This happened before the period of inordinate and inexcusable delay on the part of P. One would have expected D4 to have included the entirety of his relevant evidence in his two witness statements which were filed before the inactivity period.

(2) As to D4’s advanced age, an affirmation has been filed on his behalf by his solicitor to say that D4 is in decent health condition and maintains a normal lifestyle for his age. As to anxiety experienced by D4, this was described by D4’s solicitor in an affirmation as having started when these proceedings commenced 17 years ago. Therefore, such anxiety does not appear to have been caused by Madam Huang’s inactivity in these proceedings from 2018 to 2023. In this connection, solicitors are once again reminded that it is only in exceptional circumstances where solicitors should give factual evidence in an affidavit on behalf of his/her client: Hong Kong Civil Procedure 2024 Note 41/5/4.

(3) As to the suggestion that D4’s potential witness, Mr Leung, is unlikely to clearly remember or be able to articulate the details of events that took place in the 1980s, I noted that D4 has not adduced any cogent evidence before the court to support such a suggestion. Further, I noted that D4 did not seek to file a witness statement from Mr Leung in 2016 or 2018 in this action as an attempt to preserve his evidence. In these circumstances, I was unable to attach any weight to D4’s concerns in relation to Mr Leung.

(4) D4 was correct to submit that P’s demise in 2012 meant that P can no longer be cross-examined at the trial on the veracity of the statements previously made by P. However, this is simply a fact of life. I did not think that D4’s inability to cross-examine P was caused by Madam Huang’s inactivity in these proceedings from 2018 to 2023.

(5) Finally, I did not believe that D4’s inability to enforce the 2006 Tomlin Order was caused by Madam Huang’s inactivity in these proceedings from 2018 to 2023. As pointed out by Mr Yuen (P’s counsel), even if P’s claim against D4 were struck out, P would still have other claims subsisting against the other defendants who were parties to the 2006 Tomlin Order. This would still have resulted in D4 not being able to enforce the 2006 Tomlin Order.

28.  In assessing the overall justice of the case, I had also taken into account the D4’s conduct in the proceedings, and in particular, his apparent failure to prosecute the proceedings from 2018 to 2023.

E. TIME BAR

29.  As an alternative ground, D4 relied on time bar to seek to strike out the entirety of P’s claim herein. In particular, D4 argued that (1) P’s cause of action in dishonest assistance against D4 began to accrue in December 1996 when D1 and D2 agreed to transfer Flat 36D to Mr Lai and the action was therefore time-barred in December 2002, and alternatively (2) by the time the occupation permit was issued on 24 March 1999, P would be entitled to the consultancy fee, and P’s cause of action in dishonest assistance against D4 would be complete on 24 March 1999 and became time-barred on 24 March 2005. Mr Yung (D4’s counsel) accepted his arguments were premised on P having only one pleaded cause of action against D4, namely dishonest assistance.

30.  Apart from dishonest assistance, Mr Yuen submitted that P has pleaded another cause of action based on estoppel against D4. He relied on the facts pleaded in the Re-Amended Statement concerning (1) D4’s assurance that P would receive his share of the consultancy fee once the dispute in HCA 3890/1999 had been resolved, (2) P’s reliance on D4’s assurance and (3) P’s resulting detriment. I was just about able to see these matters pleaded in paragraphs 18, 19 and 20 of the Re-Amended Statement of Claim. I also noted that back in August 2007, Suffiad J dismissed D4’s application to strike out for want of reasonable cause of action despite the fact that P had not yet pleaded dishonest assistance in his Statement of Claim against D4 (see paragraph 6 above). At paragraph 52 of his Ruling, his Lordship said that “In the case of the 4th defendant his interest in Flats A and D arises from his claim to the consultancy fee or that part of it as represented by Flats A and D under the Tomlin Order in HCA 3890 of 1999”.

31.  For these reasons, even assuming the two arguments of D4 to be correct, it appeared to me to be just about arguable that P has pleaded another cause of action against D4 based on estoppel. I did not think that it was plain and obvious that all of P’s claims against D4 are now time barred so that they should be struck out.

32.  In any event, as pointed out by Mr Yuen, D4 has only pleaded in his Amended Defence the time bar defence by relying on the date of the occupation permit. In other words, D4 has only pleaded the limitation defence in paragraph 29(2) above, but not that in paragraph 29(1). It seemed to me that the court should not entertain an unpleaded limitation defence in a strike-out application.

(1) In Hong Kong Civil Procedure 2024, it is stated in Note 18/8/26 that “the Court will not entertain an application to strike out on the basis of expiry of the limitation period until limitation has been pleaded”, citing Ronex Properties Ltd v John Laing Construction Ltd [1983] QB 398 as authority for the proposition.

(2) Mr Yung accepted the correctness of the proposition. However, he submitted that the limitation defence mentioned in paragraph 29(1) above should be treated as part of D4’s general limitation defence and should thus be regarded as having been pleaded. I was unable to agree with this submission. D4’s limitation defence is pleaded at paragraph 36 of D4’s Amended Defence. On the face of that paragraph, I considered it quite clear that the only limitation defence pleaded by D4 was the one mentioned in paragraph 29(2) above: D4 has not pleaded that P’s claim first accrued in December 1996.

33.  Accordingly, I refused to strike out P’s claim against D4 on the ground of time bar.

F. DISPOSITION

34.  For the above reasons, I believed that the overall justice of the case would be for the case to proceed to trial. In the exercise of my discretion, I therefore allowed P’s appeal and dismissed D4’s application to strike out. I also set aside the Master’s orders made on 14 June 2024.

35.  As to costs, I indicated to the parties that in view of the inordinate and inexcusable delay on P’s part, as well as both parties’ conduct from 2018 to 2023, I was minded to make no order as to costs even though D4’s strike out application was dismissed and P succeeded in his appeal against the Master’s decision. A similar costs order was made by G Lam J in Tsang Foo Keung v Chu Ji Mi Jimmy (unreported, HCA 7140/1995, 12 July 2013) at §122. Having received no submissions to the contrary from the parties, I ordered that there be no order as to costs in P’s appeal and in D4’s strike out application. I also ordered that the own costs of P and D4 are to be taxed in accordance with the Legal Aid Regulations.

36.  Finally, counsel for P and D4 both agreed that the matter should proceed to trial as expeditiously as possible. In that connection, Mr Yuen gave an undertaking to the court to make an appointment with all the defendants to fix a date for the 6^th CMC within 14 days.