EASTGATE PARTNERS LTD v. SUTHI TEJAVIBULYA AND OTHERS

cacv 289/2005

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 289 of 2005

(on appeal from HCA NO. 17675 of 1998)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  This was an appeal from a judgment of Lunn J given on 13 May 2004.  The matter before the judge was an application to dismiss the action for want of prosecution and abuse of process and also an application on the plaintiff’s part for extension of time to comply with an order for directions given by the Registrar on 30 October 2001.  At the conclusion of the hearing, this court allowed the appeal and dismissed the action ordering that defendants should have their costs of the action and, in addition, in respect of the period from 5 November 1998 the 3^rd, 4^th and 5^th defendants costs should be taxed on an indemnity basis.

2.  This action concerned a claim by the plaintiff in contract against the defendants.  It was commenced by writ issued on 20 October 1998.  The basis of the claim was that there had been a contract made by or on behalf of the defendants whereby the plaintiff would assist them in selling a property in California namely the Monadnock Building.  That property was owned by United Square Corporation, which, in turn, was the sole asset of United Centre (HK) Limited (“United Centre”).  The claim against the defendants was based on the fact that it was alleged that all five defendants were shareholders of United Centre and that the contract had been made by or on their behalf.

3.  The action commenced with an application for a Mareva injunction and that was granted.  One of the undertakings given by the plaintiff when obtaining the injunction was that it would not, without the leave of the court, begin proceedings against the defendant, in any other jurisdiction.  That injunction was very quickly discharged because it was demonstrated that far from the defendants having no assets, to the knowledge of the plaintiff, they had substantial assets.  As part of the discharge application, the plaintiff was made fully aware that the 3^rd to 5^th defendants had ceased to be shareholders of United Centre on 2 June 1998.  Naturally when the injunction was discharged the plaintiff was ordered to pay costs.

4.  The statement of claim was served on 23 December 1998.  In many respects that document was prolix.  Nevertheless the claim was based on 2 matters, first a written exclusive agency agreement which was said to have been entered on or around 23 June 1998 and secondly what was said to be an alternative claim if the exclusive agency agreement had terminated.  The pleading continued;

“...there was a new agreement between the Plaintiff and the Defendants on, into alia, the following terms (the “New Exclusive Agency Agreement”).”

There then followed 5 subparagraphs setting out what were said to have been the terms.  It hardly needs to be emphasised that that pleading is manifestly defective and embarrassing.  There is no indication of how, when, where, between whom and who were the persons present when the alleged “New Exclusive Agency Agreement” was made.  Pleadings then closed in February 1999 after service of the reply and defence to counterclaim.

5.  More than a year later, in March 2000, the plaintiff commenced proceedings against the defendants in California claiming breach of contract and fraud.  Those proceedings had a particularly short life because the court in California quashed service of the proceedings.  Importantly, however, when the defendants sought to challenge the commencement of the proceedings in California, the plaintiff’s attorney submitted to the court:

“While Hong Kong might be suitable for the Defendants’ defensive and ulterior reasons, it is not a fair or suitable forum for Plaintiff, who no longer pursues the litigation it once initiated there because of the inconvenience of presenting California source evidence and because the chances of recovery on a Hong Kong judgment against these Defendants are remote.”

6.  In addition to that Mr Silsby, who was the managing director of the plaintiff and himself an attorney, swore an affidavit in which he said:

“Subsequently, we learned that Defendants had removed any and all funds or net assets from the Hong Kong jurisdiction, which made further pursuit of our claim there fruitless.  I understand that after the turnover of Hong Kong to China on June 30, 1997, all treaties with Hong Kong involving the enforcement of Hong Kong judgments were terminated and no longer in effect.  It is extremely unlikely that we could ever enforce a Hong Kong judgment against these Defendants.”

7.  Nearly another year passed before the plaintiff changed solicitors in Hong Kong and the new firm of solicitors filed a notice of intention to proceed.  On 30 October 2001 the Registrar made an order for directions.  In January 2002 the defendants served their bill of costs in relation to the order made on the discharge of the Mareva injunction.  Those costs were agreed in March 2002.  Nothing further happened in the case until 28 September 2004 when there was again a further change of the plaintiff’s solicitors and another notice of intention to proceed was served by them.  The plaintiff then applied for an extension of time to comply with the order of the Registrar and this was quickly followed by the defendants’ application to strike out the plaintiff’s action for want of prosecution and abuse of process.

8.  One further matter which emerged as a result of the application was that the 1^st defendant, who undoubtedly had to be a prime witness in the case, had suffered health problems since at the latest 2002.  He had heart surgery in September 2002 and was again admitted to hospital in November 2004.  He had been advised to have heart bypass surgery.

9.  The judge hearing the application came to the conclusion that there had been inordinate and inexcusable delay.  That conclusion was not challenged on this appeal.  The judge however came to the conclusion that there may have been prejudice caused to the defendants because of the delay but it was not serious prejudice.  He considered that the 1^st defendant could provide evidence by video link even if his health had deteriorated.  In respect of the other matters the judge considered that there had not been an abuse of process by reason of the commencement of proceedings in California despite the undertaking given when the Mareva injunction was granted.  He also said that the plaintiff had neither waived its right to bring Hong Kong proceedings nor elected not to pursue Hong Kong proceedings when the proceedings were commenced in California.

10.  In my view, the matter goes much further than mere inexcusable or inordinate delay.  The plaintiff deliberately chose not to do anything in Hong Kong for, in effect, 6 years.  In that time there was what might be considered to have been no more than, in Hong Kong, a pretence at proceeding with the case by obtaining directions from the Registrar, but nothing followed that.  In California there was a positive disavowal of the Hong Kong proceedings.

11.  On general principles, the commencement of the proceedings in California in respect of the same subject matter as the Hong Kong action could be considered to have been an abuse of process.  To sue the same parties in two different jurisdictions in respect of the same claim might well be oppressive.  Had that state of affairs, of two actions being in existence in two jurisdictions, continued for any length of time then, if it is shown to be oppressive, it might be restrained either absolutely or on terms.  See Re BCCI SA (No. 9) [1994] 3 All ER 764 at 797j.   No doubt it was to avoid allegations of oppressive and abuse of process that the plaintiff through its attorneys and managing director informed the California court that the Hong Kong action was, in effect, dead and would not be proceeded with.

12.  Two consequences follow from this.  In the first place the delay was a deliberate act on behalf of the plaintiff.  It was not simply idleness which might constitute inexcusable delay.  It was a deliberate decision not to proceed.  Mr Silsby has tried to explain it in his affirmation dated 25 January 2005.  In so far as his affirmation does constitute evidence it is difficult to follow because his explanation for the plaintiff not taking action is that it was informed from time to time that the defendants were in a precarious financial position.  At the same time he is suggesting that the defendants had private banking facilities which were moved from Hong Kong to Singapore.  A person does not have private banking facilities unless there are significant assets to be taken care of.  Moreover, Mr Silsby himself says that “we believe that the defendants were still a major industrial concern in Bangkok”.  Suffice it to say that the explanation proffered does not begin to be satisfactory.

13.  More importantly, however, was the fact that the plaintiff’s inaction coupled with its action in making the statements, even under oath, to the court in California had misled the defendants.  In his third affidavit filed on 3 December 2004 Mr Pierrepont, the person having conduct of the action at the defendants’ solicitors office, stated that the plaintiff’s actions and in particular the statements made by their lawyer during the motion to quash the service in California that:

“Plaintiff believes it would be fruitless to proceed with the litigation in Hong Kong and has selected instead to enforce its rights under the Exclusive Agency Agreement in California….”

and

“It is not accurate for Defendants to claim continually in their pleadings that the Hong Kong proceeding is “ongoing”, since both parties have abandoned it…”

had caused him to take no action to prepare the case by, for example, taking full statements.  In view of the fact that Mr Pierrepont would probably have had to go overseas to obtain any statements, that is not an unreasonable stance.  In coming to the view that the plaintiff’s conduct was such that it demonstrated that it had no intention of proceeding with the Hong Kong action, sight cannot be lost of the fact that nothing was done to remove the 3^rd, 4^th and 5^th defendants as parties to the action.

14.  As the judge acknowledged, the defendants have suffered prejudice.  That prejudice is greater than the judge appreciated.  It is not simply a question of whether the 1^st defendant is in a position to fly to Hong Kong or can give his evidence by video link.  In this case the plaintiff’s case based upon the written documents dated 23 June 1998 would seem doomed to failure.  That contract related to the purchase of the relevant assets by Harvest Fund Partnership, L.P.  The contract provided that should that company not proceed with the acquisition the retainer would be refunded.  It is clear that that contract related to Harvest Fund Partnership, L.P. and no other party.  In those circumstances it would seem that the any claim that the plaintiff could put forward would have to be on the so termed New Exclusive Agency Agreement.  As has already been observed, the pleading in that respect is wanting, to say the very least.  In my view it is highly prejudicial that any defendant is put in a position of having to investigate facts which now go back eight years in respect of an unparticularised allegation of an agreement made otherwise than in writing.  The fact that the 1^st defendant is now suffering from substantial health problems is a matter which the defendants are entitled to rely on as showing prejudice and as grounds for saying that the plaintiff must now be bound by its action in refusing to proceed with the Hong Kong action and in deliberately leading the defendant into the belief that it would not be proceeding with it.  In my view these constitute circumstances where the court can and should strike out the action for want of prosecution.

15.  In those circumstances it is unnecessary to consider the further arguments of the defendants, in particular in relation to abuse of process.  I would simply say that it should not be assumed that an undertaking given not to bring proceedings in an overseas jurisdiction would lapse necessarily on the discharge of the injunction granted when the undertaking was given.  The plaintiff said in the California proceedings:

“…Hong Kong…had little to do with the substance of the transactions.”

That statement has a great deal of validity.  In circumstances when it is apparent that there are other possible jurisdictions where the matter could be litigated, a court which is being asked to grant an extreme remedy such as a Mareva injunction, in entitled to demand of the plaintiff that the litigation will indeed be conducted in Hong Kong.  The imposition of such a condition would be with a view to insuring, that a defendant will not be harassed more then necessary and the court’s jurisdiction is not being invoked on a temporary basis for tactical reasons.

16.  For these reasons, I allowed this appeal.

Hon Le Pichon JA:

17.  I agree.