KINCHENG BANKING CORPORATION v. TOPTIME INTERNATION TRADING LTD AND OTHERS

DCCJ 9012/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 9012 OF 2001

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DECISION

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1.  This is an application of the 2^nd and 4^th defendants by their summons dated 24 March 2014 (“the Leave to Appeal Summons”) for leave to appeal against my decision handed down on 10 March 2014 (“the Decision”) whereby this court dismissed their summons dated 29 October 2013 (“the Summons”) to strike out the plaintiff’s claim as against them for want of prosecution pursuant to Order 18 r.9 of the Rules of the District Court, Cap.336H (“RDC”).

2.  In this decision, I shall refer to the Decision for the background facts and I shall adopt the abbreviations used therein. For the sake of easy understanding of this decision, I shall give a very brief summary of the Decision as follows.

3.  In this action, BOC sues on the Guarantee whereby MY, FY and MF agreed to be the guarantors of Toptime in respect of its indebtedness to an extent of HK$800,000 and interest to Kincheng, which was merged to BOC in 2001. All of MY, FY and MF allege that the Guarantee should be set aside by reason of the misrepresentations given to them by Mr Lee, Quarry Bay branch manager of Kincheng before their execution of the Guarantee. They further counterclaim for damages for all the mental sufferings and economic loss caused by the wrongful accusations of Kincheng and/or BOC.

4.  The Writ herein was issued on 29 May 2001. Default judgment was entered against MF and Toptime on 16 October 2001. There was a long period of inaction on both sides in these proceedings from 19 March 2002 to 25 April 2013. MY and FY say that it is an abuse of process and they have suffered real prejudice as a result. They allege that there can no longer be a fair trial due to the delay.

5.  In the Decision, I rejected all the arguments of MY and FY. First, I agreed that, as conceded by counsel for BOC, the delay was inordinate and inexcusable. I further observed that the delay was substantial and BOC had warehoused the present action for a long while. I however did not find Kincheng and/or BOC had ever intended to abuse the process of the court and that they had ever refused to bring the present action to a conclusion.

6.  On the other hand, I rejected the allegations that there was loss of material witnesses, memories and documents caused by the delay. These allegations were not borne out by the evidence adduced by MY and FY. I held that a fair trial was still possible despite the delay.

7.  Lastly, I rejected the allegations that MY had suffered health deterioration and loss of reputation because of the delay. On the evidence, I was not convinced that the causal link could be established. In the premises, I dismissed the Summons with costs to BOC (with certificate for counsel).

Applicable principles

8.  At the hearing of the Leave to Appeal Summons, Mr Chan for MY and FY and Mr Ng for BOC agree on the governing principles.    Section 63A of the District Court Ordinance, Cap.336 provides that leave to appeal shall not be granted unless this court is satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice that the appeal should be heard. A reasonable prospect of success means an appeal with prospects that are more than “fanciful” but which do need to be shown to be “probable”: SMSE v KL [2009] 4 HKLRD 125 at §17 per Le Pichon JA.

9.  Further, since the Decision essentially involved an exercise of discretion by this court, Mr Chan accepts the established law that an appellate court will not lightly interfere with a judge’s exercise of discretion unless it is plainly wrong.

Intended grounds of appeal

10.  Mr Chan, by referring to the draft Notice of Appeal annexed to the Leave to Appeal Summons, makes three points. First, he argues that this court should have taken into consideration the length of the delay in order to determine whether there is any actual abuse of process on the part of Kincheng/BOC. He submits that the longer the delay, the stronger the inference that Kincheng/BOC had no intention to bring the litigation to an end.

11.  In the Decision, this court’s disapproval of the substantial delay was plain to see.  However, as accepted by Mr Chan, delay per se is not a sufficient ground for abuse of process. In the absence of cogent evidence indicative of Kincheng/BOC’s actual intention to abuse the process of the court such as its refusal to proceed with this action notwithstanding the requests of MY and FY and/or any contumelious conduct of BOC, I cannot conclude that it is plain and obvious that there was an abuse of process: §39 of the Decision.

12.  Mr Chan stresses that due to the substantial delay, it is only natural that the memories of MY and FY including their witnesses will fade away and thus prejudice should be established. I do not agree with this submission. In the Decision, I have explained why I am not satisfied on the evidence that any of the defence witnesses has clearly suffered loss of memories in regard to the focal events of this action: §§51-54. I stand by those reasons given.

13.  Finally, Mr Chan relies on a recent decision of Mimmie Chan J in Lam Wong Kwan Ying and Anor. v Lam Sik Se Tong, unreported, HCA 1885/1987, 19.3.2014 handed down after the hearing of the Summons where the judge observed that since the CJR, delay has been regarded as sufficient prejudice. Mr Chan also fairly refers me to an earlier decision in the same case handed down by the judge on 21 October 2013.

14.  The observations of the judge have to be understood in the context of the particular facts and the nature of the application in that case. There, the 2^nd plaintiff made an application on 5 November 2012 to carry into effect some terms of a schedule to the Tomlin Order dated 13 April 1992 by reason of the defendant’s non-compliance of one of the terms thereof. The judge refused the application and frowned upon the delay of more than 20 years. After finding the delay inexcusable, the judge went on to point out that delay itself is a ground to refuse relief and is a highly relevant factor to be taken into consideration when the court exercises its power and discretion in the resolution of disputes.            

15.  Whilst I agree that delay can be a ground to deny a party his/her entitlement to relief in appropriate cases, it alone cannot be sufficient to invoke the court’s jurisdiction to strike out a claim, bearing in mind striking out is a remedy of the last resort: §30 of the Decision. The Wing Fai Construction Co Ltd case remains the highest authority setting out the guiding principles relevant to striking out applications. This court should be bound to apply those principles to the application of MY and FY. There is no suggestion that I misunderstood or misapplied them in the Decision.

16.  The second ground is that this court failed to examine the background of and the purported explanation for the delay. Mr Chan submits that the lack of a reasonable explanation for the delay points to the lack of intention to bring this action to a conclusion.

17.  I cannot agree with this submission. First, it should be noted that given the concession by counsel for BOC that the delay was inordinate and inexcusable, I did not find it necessary to dwell on the validity of the explanation proferred by BOC though this court did examine such an explanation and came to the conclusion that it was indefensible: §38 of the Decision. I should mention that this was also the approach adopted by Recorder Yuen, SC in The Agricultural Bank of China v Lau Yuet Wah, unreported, HCA 2804/2000, 15.5.2012 in light of similar concession made by counsel for the plaintiff there.

18.  I do not accept that where a delay is inexcusable, the defaulting party must be taken to have no intention to bring the action to a conclusion and hence an abuse of process is shown. I refuse to take this simplistic approach. If Mr Chan’s contention were right, much of the analysis in the Wing Fai Construction Co Ltd case would be rendered otiose.  

19.  Mr Chan next complains that this court’s finding that BOC warehoused the present action for a long while and the conclusion that there is little evidence of its intention to abuse the process of the court are inconsistent and self-contradictory. Mr Chan says warehousing itself is a kind of abuse which could justify an order for striking out.

20.  I cannot accept the validity of this criticism. In my view, Mr Chan’s submission is based on a misunderstanding of the dicta of the Chief Justice in the Wing Fai Construction Co Ltd case, in particular, §75(4) thereof. The Chief Justice made it very clear that merely for a party to start proceedings and then delay (which will often involve a failure to comply with the applicable rules of the court) will not necessarily amount to an abuse justifying an order to strike out an action.

21.  Mr Chan lastly contends that I erred in my conclusion that there was no contumelious conduct of BOC in the absence of persistent failures to comply with the applicable rules of the court. Indeed, BOC failed to comply with the order of a master dated 23 January 2002 whereby the parties were ordered to file and exchange their witness statements as to facts. 

22.  First, this court was alive to the parties’ failure to file their respective witness statements pursuant to the order: §§16-17 of the Decision. Moreover, as clearly shown in the Wing Fai Construction Co Ltd case, a failure to comply with an order cannot possibly amount to an abuse in support of a striking out order.

23.  In his skeleton submission, Mr Chan asks this court to allow MY and FY to argue against the costs order in the Decision in the Court of Appeal. He submits that given the finding of an inordinate and inexcusable delay on the part of BOC, BOC should not be entitled to a favourable costs order. He refers me to Tsang Foo Keung and Anor. v Chu Jim Mi Jimmy and Ors., unreported, HCA 7140/1995, 12.7.2013where G Lam J made an order nisi that each party was to bear its own costs despite the dismissal of the defendants’ application to strike out the plaintiff’s claim on account of the 13 years of delay.

24.  An application for variation of the costs order nisi should have been made given this contention of the defence. Mr Chan explains that he thought the costs order in the Decision was an order absolute and thus he did not think a variation was an option. This is unfortunate. Order 42 r.5B(3), RDC makes it clear that a costs order made in a written decision to be handed down at a later date is a costs order nisi and is subject to variation. In the absence of an application to vary the costs order nisi within 14 days of the Decision, it has become absolute. An appellant court would apply different considerations in an appeal against a costs order.

25.  That said, I am not convinced that the costs order I made in the Decision would likely to be disturbed for want of a proper exercise of my discretion. It accords with the usual course that costs should follow the event to start with. Moreover, after the Wing Fai Construction Co Ltd case, it should be clear that it requires more than an inordinate and inexcusable delay to justify an order to strike out a claim. I find that MY and FY have failed to meet the threshold by a large margin and hence I make the costs order against them.

Conclusion and Orders

26.  For the foregoing reasons, I am not persuaded that my discretion exercised against an order to strike out the claim of BOC was plainly wrong. I come to the conclusion that the intended appeal has no reasonable prospect of success. Nor is there some other reason in the interests of justice that the appeal should be heard. I therefore dismiss the Leave to Appeal Summons with costs to be borne by MY and FY, to be taxed if not agreed.

27.  Summary assessment of this application is appropriate and I direct that BOC do lodge with this court and serve its statement of costs within 7 days hereof and the defence do lodge with this court and serve their grounds of objection, if any, within 7 days thereafter. The assessment would be carried out by this court on papers.    

28.  Lastly, I thank Mr Ng and Mr Chan for their assistance.