READY MIXED CONCRETE (HK) LTD v. TONG KEE ENGINEERING LTD

HCCT 9/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 9 OF 2005

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BETWEEN

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JUDGMENT

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1.  This is an application by the plaintiff seeking to strike out the defendant’s counterclaim for want of prosecution. 

2.  The plaintiff started their claim against the defendant in 2001, basically claiming for either liquidated damages or alternatively damages, alleging that the defendant did not, in compliance with the contract, complete the work on time.  The plaintiff’s claim was for some $3 million.

3.  The defendant then of course filed a defence and counterclaim. 

4.  In the defence, the defendant basically said that they completed the work on a day that was eventually agreed by the parties. They also said, inter alia, that the liquidated damages clauses were unenforceable as a matter of law.  They further counterclaimed for something slightly over $1 million for variation work orders that they said the plaintiff had approved but failed to pay.

5.  The plaintiff filed its reply and defence to counterclaim some time in January 2002. 

6.  Since then, it is the plaintiff’s case that there was about a 20 months’ delay since the filing of that before the defendant took out some procedural interlocutory applications and a notice of intention to proceed.

7.  In November 2004, Master Ho gave directions for the parties to file a list of documents for inspection and, at paragraph 4 of that order, the learned master directed clearly that the parties do file and exchange signed witness statements as to fact within 42 days from the date of expiry of the filing and exchange of the list of documents.  That would take it to some time in January 2005 that the parties should file and exchange their signed witness statements. 

8.  It is common ground that both parties did not put in any witness statements as ordered or directed.  It is also common ground that since around that time, ie November 2004, both sides had not taken any active steps in the proceedings until 2011.  So that is, according to Mr Cheung for the plaintiff, a further six years of delay in the proceedings.

9.  Therefore, the plaintiff now say there is an inordinate and certainly an inexcusable delay by the defendant in pursuing their counterclaim against the plaintiff.  It is further the plaintiff’s case that because of the delay, they have suffered serious prejudice of not having a fair trial if the defendant’s counterclaim is allowed to move on.

10.  The plaintiff’s present application is premised upon the second ground, or the second limb of the well-known Birkett v James case for striking out for want of prosecution.  There is no dispute that under the Birkett v James rules, the plaintiff, in order to succeed today, must demonstrate, firstly, inordinate delay, secondly, inexcusable delay and, thirdly, prejudice caused to the plaintiff by the delay and, finally, that there are no other reasons why the court’s discretion should not be so exercised.

11.  These principles for striking out for want of prosecution have very recently been fully reconsidered by the Court of Final Appeal in The Liquidator of Wing Fai Construction Company Limited v Yip Kwong Robert[1], where the learned Chief Justice Ma has revisited and restated how these principles should be applied.

12.  This court has also recently considered these principles as now revisited and restated in the Wing Fai case in Johnson Controls Hong Kong Limited v Associated Engineers Limited[2], another striking out for want of prosecution case.  Insofar as that is concerned, I have quoted the learned Chief Justice’s relevant paragraphs in restating those principles and then summarised them for that purpose at paragraph 22 of the decision in Johnson Controls.  I will not, for convenience, repeat them herein but I will simply adopt in this judgment the same principles I have set out at paragraph 22 of the judgment of the Johnson Controls case.

13.  In the present case, although I understand that Mr Choi, for the defendant, submits that there is no inordinate delay insofar as the first period is concerned, that is the 20 months between the close of pleadings and the notice of intention to proceed filed by the then defendant’s solicitors, I would not accept that.  I think, for the present purpose, I would accept that that amounted to an inordinate delay.  In my view, it is not reasonable for a party not to have taken any steps in its claim for 20 months.  Further, Mr Choi rightly accepted that the six and a half years’ further delay is an inordinate delay. 

14.  So there is proof of inordinate delay in the present case.

15.  I also do not accept Mr Choi’s submissions that there are good excuses for the delay, which are basically to say that the defendant were not in a financially sound position and therefore decided not to press ahead with the counterclaim during that time.  I do not think litigation is at the discretion and mercy of the financial position of the litigating party to decide when he wants to push forward or when he wants to stop.  They must, if they intend to proceed with the case, do it with due diligence, whether they are financially well off so or not.  There is nothing to stop any party to proceed with the claim even without the assistance of legal representatives, and the lack of financial means alone should not generally be regarded as a good excuse for delaying a matter for years.

16.  But that is not the central issue, in my view, in this application.  The most important aspect of it is for the plaintiff to demonstrate that this inordinate and inexcusable delay has caused serious prejudice to the plaintiff, which shows that if the defendant’s counterclaim is allowed to go on despite of the delay, it amounts to any abuse of process by the defendant. 

17.  Mr Cheung for the plaintiff mounted his submissions in relation to the plaintiff’s prejudice by relying on the evidence filed by the plaintiff to show that they are no longer able to locate what they say to be the crucial witnesses, or important witnesses, to prepare for the trial.   Three witnesses have been identified by Madam Ng’s first affirmation as one Mr Ranjit Ratilal, one Mr Henry Chu, and one Mr Jason Wu.  Apparently, all three of them were employees of the plaintiff at the time of the dispute.  In particular Mr Ratilal was the plaintiff’s then operating manager in charge of the subject metalwork and, according to Madam Ng, was the key witness to this action. 

18.  Madam Ng’s evidence insofar as this part of the prejudice is concerned is that these three witnesses all left the plaintiff’s employment some time like seven years ago.  The exact timing of their departure has not been provided, but that would take us back to about late 2004, early 2005.  It is Madam Ng’s evidence that these witnesses are now no longer locatable and therefore the plaintiff will suffer serious prejudice in not having a fair trial if the counterclaim is allowed to move on because a lot of the allegations would all depend very much on the oral evidence of all these witnesses, in particular in relation to the defendant’s allegations that there were variation works approved and confirmed by the plaintiff and that there had been agreements to extend the time of completion.

19.  In my view, the difficulty that Mr Cheung faces today is this.  In looking at this loss of witness prejudice, if I may refer it as such, one of the most important aspects of the evidence that the court would inquire into (as observed in the Wing Fai case) is what are the steps that the plaintiff have taken to, so to speak, preserve or keep the information, including the evidence that could be given by all these important witnesses.

20.  I have looked at the two affirmations filed by Madam Ng.  Nothing has been said as to why the plaintiff had not taken any steps at the time in 2004 and 2005, when they said these witnesses were leaving the company, to remain in contact with these witnesses so that they could obtain their assistance and to prepare the witness statements when needed.  It is particularly so because, as I mentioned earlier, in November 2004, Master Ho already gave directions that witness statements had to be exchanged by January 2005.  So if one takes these chronologies together, it is incumbent upon the plaintiff and those solicitors then acting for them to, at the very least, keep the contact information of these three witnesses (if they were then leaving the company) to enable the plaintiff to prepare the witness statements that were directed to be exchanged and filed in a few months’ time.

21.  The court can only proceed on the basis of the evidence filed so far and, on this evidence, the plaintiff has not said that they have done that and kept the contact information of these witnesses.  There is also nothing on what steps or effort they have taken to try to locate the witnesses at that very time, so as to make sure that these witnesses were within their contact in order to prepare for the witness statements.

22.  There is similarly nothing before me to suggest that the plaintiff had indicated to Master Ho when the directions for filing of the witness statement were granted that they might have any difficulties in locating the potential witnesses.  So one can only assume that when the plaintiff agreed to those directions, or when the Master gave those directions, they saw no difficulty in obtaining evidence from all the relevant witnesses at that time.

23.  As a result, I am not satisfied that the evidence filed in this application has shown that, if by now the plaintiff can no longer contact these three important witnesses, it is caused by the delay of the progress of the counterclaim as suggested.  Because if they did not have the initial contact of these witnesses in 2004 and 2005 at, if I may say so, their own fault or their own failure to preserve the evidence, the “prejudice” was not caused by the subsequent delay of the defendant in relation to the six and a half years’ inaction in progressing with the counterclaim. 

24.  Mr Cheung, doing the best that he could, said what about the 20 months’ delay in the first place? But that had nothing to do with Master Ho’s direction.  As I said, when Master Ho gave those directions, the 20 months’ delay was spent already and the plaintiff never suggested at that time that, because of the said 20 months’ delay, they could not locate their witnesses.  In fact, the evidence shows otherwise because it was only in late 2004 and early 2005 that these three former employees left the plaintiff’s employment. 

25.  The plaintiff therefore have failed to show to this court that the serious prejudice that they say they would suffer is caused by the delay.  They therefore cannot show that there is an abuse of process by the defendant in their delay in pursuing the counterclaim.  On this basis alone, I would not allow the application. 

26.  The plaintiff have also said in the supporting affidavit that, subsequent to certain company restructuring, the plaintiff now are effectively a shell company with no business activities, and somehow this amounts to a form of prejudice suffered by them as well.  I think Mr Cheung fairly and rightly accepts today that he is not pressing ahead with that argument, and I do not need to say anything more on this.

27.  Finally, in the present case, the plaintiff have a claim of $3 million odd compared with the defendant’s $1 million counterclaim.  The plaintiff have equally not pursued their claim for the entire alleged inordinate delay period.  As I have observed in Johnson Controls, supra, at paragraph 46, this must be amounting to condoning or acquiescing the defendant’s own inactivity in pursuing the counterclaim at the same time. 

28.  As the learned Chief Justice has said in Wing Fai, the attitude of “let sleeping dogs lie” is no longer applicable, if it had ever been in place, since the introduction of CJR, and this case is a case, like a number of these cases, also straddles across CJR.  Thus, the plaintiff’s said own inactivity in pursuing its claim and in not taking any interlocutory steps to push the defendant to press ahead with a counterclaim would be seen as a relevant factor by the court in the exercise of discretion as to whether or not to strike out the present counterclaim. 

29.  If I were required to do that, this would be a factor against my exercise of discretion to strike out the counterclaim.

30.  For all the above reasons, I will refuse the present application.