WING FAI CONSTRUCTION CO LTD (IN LIQUIDATION) v. FITZROYA FINANCE CO LTD

HCA 2570/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2570 OF 2003

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J U D G M E N T

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1.  These are applications by summonses dated 5 June 2012 by the same defendant in both actions, Fitzroya Finance Company Ltd (“Fitzroya”) to strike out or dismiss the actions by the plaintiffs being Wing Fai Construction Co Ltd (In Liquidation) (“Wing Fai”) in HCA 2570 of 2003 and Wai Shun Construction Co Ltd (In Liquidation) (“Wai Shun”) in HCA 2051 of 2004 for want of prosecution under the inherent jurisdiction of the High Court and under Order 18 Rule 19 (c) and (d) of the Rules of High Court.

2.  In HCA 2570 of 2003, Wing Fai claims from Fitzroya a sum of HK$34,074,300.00 plus interest whereas in HCA 2051 of 2004, Wai Shun claims from Fitzroya a sum of HK$2,968,268 plus interest.

3.  In both cases, Fitzroya’s grounds for the striking out applications are that

(a) Wing Fai and Wai Shun had caused inordinate delays;

(b) The inordinate delays were inexcusable;

(c) Fitzroya had been or is likely to be seriously prejudiced by such inordinate delays; and

(d) The delays by Wing Fai and Wai Shun respectively constituted an abuse of the Court’s process.

BACKGROUND

4.  Wing Fai and Wai Shun are two of three construction companies (“the Construction Group”) being subsidiaries of Benefit Holdings Ltd (“Benefit”) who in turn was a subsidiary of China Rich Holdings Limited. (“China Rich”).

5.  China Rich, a Bermudan company listed on the Main Board of the Hong Kong Stock Exchange has a number of subsidiaries, collectively called the China Rich Group, one of which is Benefit.

6.  Fitzroya is a wholly owned subsidiary of Benefit.

7.  Until 22 April 2002, the China Rich Group, through Benefit, also held the Construction Group which comprised Wing Fai and Wai Shun, both of which were wholly owned by Benefit, and another construction company by the name of Zhukuan Wing Fai Construction Company Limited which was a subsidiary of and 51% owned by Benefit.

8.  Wing Fai and Wai Shun are now in liquidation with Mr Nicholas Hill remaining as the sole liquidator of both, although originally three liquidators were appointed in respect of both Wing Fai and Wai Shun respectively.

9.  Benefit and Fitzroya carried out treasury functions for the China Rich Group.  Prior to 22 April 2002, Fitzroya also performed a second function of lending money to the Construction Group’s sub‑contractors. In order to fund this activity, funds were transferred by the Construction Group to Fitzroya, whilst at the same time, funds were also made available by Benefit.

10.  On or about 22 April 2002, Benefit sold its interest in the Construction Group (“the Sale”) to Sino Glister International Investments Limited.

11.  After the Sale, various winding-up proceedings were commenced by creditors to the Construction Group, against the Construction Group companies, including Wing Fai and Wai Shun and both were in Compulsory Liquidation with liquidators appointed.

12.  A winding up petition was presented by the liquidators for and on behalf of Wing Fai against China Rich in the Supreme Court of Bermuda on 12 July 2002 (Companies (Winding-Up) No 255 of 2002).

13.  Similarly, the liquidators of Wing Fai filed a winding-up petition against China Rich on 15 July 2002 in HCCW 785 of 2002 in Hong Kong in which Wing Fai prayed for an order, inter alia, that China Rich be wound up.

14.  Moreover, by a winding-up petition in HCCW 253 of 2003, instituted by the Joint and Several Liquidators of Wai Shun against Fitzroya on 28 February 2003, Wai Shun prayed that Fitzroya be wound up on the alleged ground that Fitzroya was indebted to Wai Shun in the sum of HK$2,968,268 as at 22 April 2002.

15.  As a result of the aforesaid winding-up petitions issued against China Rich and Fitzroya, which caused serious adverse impact on China Rich as it was listed on the Main Board of the Hong Kong Stock Exchange, the trading of shares in China Rich on the Hong Kong Stock Exchange was suspended.

16.  To resolve that matter, China Rich negotiated with the liquidators of Wing Fai and eventually reached an agreement, as evidenced by a letter dated 14 July 2002 from Messrs Victor Ng & Co (solicitors for China Rich) to Messrs Clifford Chance (solicitors for the liquidators of Wing Fai), with them as follows (“the Agreement”):

(a)   China Rich would provide security to Wing Fai in the form of a bank guarantee for the amount of HK$12,500,000 in favour of the provisional liquidators of Wing Fai for any judgment that might be obtained by the provisional liquidators of Wing Fai within 1 year from the date of the Agreement, namely, 14 July 2002; and

(b)   Wing Fai would withdraw the winding-up proceedings against China Rich both in Bermuda and in Hong Kong.

17.  Pursuant to the Agreement, China Rich provided bank guarantee of HK$12,500,000 to Messrs Clifford Chance acting as stakeholders for Wing Fai and Wing Fai consented to the dismissal of the winding-up petitions both in Bermuda and in Hong Kong and both actions were dismissed.

18.  Wing Fai then commenced HCA 2570 of 2003 against Fitzroya and another action, HCA 810 of 2005 in which Fitzroya is not a defendant.

19.  In HCA 2570 of 2003 Wing Fai claimed a sum of HK$34,074,300 based on “inter-company transactions” as being owed to it by Fitzroya in 2001 and 2002.  The claim was originally for about HK$151 million with an alternative claim of about HK$149 million, but was later amended to the sum now claimed.

20.  In like manner, to resolve the winding up petition issued by Wai Shun against Fitzroya, China Rich negotiated with the liquidators of Wai Shun and came to an agreement that Wai Shun was to have the winding up petition in HCCW 253 of 2003 dismissed upon Fitzroya depositing a sum of HK$2,968,268 into an interest bearing client’s account in the name of its then solicitors, Barlow Lyde & Gilbert as escrow agent.  Meanwhile Wai Shun would issue separate proceedings to claim the said sum plus interest.  That agreement was evidenced by the Escrow Agreement dated 8 September 2003 (“the Escrow Agreement”) made between Fitzroya, Wai Shun and Barlow Lyde & Gilbert.

21.  Pursuant to the Escrow Agreement, Fitzroya deposited the sum of HK$2,968,268 with Barlow Lyde & Gilbert and Wai Shun consented to the dismissal of the winding-up petition which was dismissed.  Wai Shun then commenced HCA 2051 of 2004.

22.  When Fitzroya changed its solicitors, a Novation Agreement dated 7 May 2007 was entered into between Wai Shun, Fitzroya, its former and current solicitors pursuant to which the sum held by Barlow Lyde & Gilbert as escrow agent was transferred to Lily Fenn & Partners being the current solicitors of Fitzroya.

CHRONOLOGY IN HCA 2570 OF 2003

23.  The Writ was issued in July 2003.

24.  Amended Statement of Claim.

25.  Fitzroya filed its defence to the Amended Statement of Claim on 11 May 2004.

26.  A Reply was filed on 1 June 2004.

27.  Fitzroya applied for an order for security for costs (HK$1,200,000) on 14 June 2004 which was granted.

28.  Wing Fai appealed against the order as to the mode for the giving of the security (from payment into court to the provision of a bank guarantee for the same amount).  That appeal by Wing Fai was allowed by Deputy High Court Judge Saunders (as he then was) and the order on appeal was dated 10 January 2006.  Wing Fai did provide the bank guarantee.

29.  On 31 July 2007 Fitzroya filed a Notice of Intention to Proceed.

30.  On 20 October 2009 Wing Fai filed a Notice of Intention to Proceed.

CHRONOLOGY IN HCA 2051 OF 2004

31.  The Statement of Claim was served in September 2004.

32.  Fitzroya filed a Defence on 15 October 2004.

33.  No Reply was filed by Wai Shun and pleadings closed on 29 October 2004.

34.  On 29 June 2005, at a directions hearing, Registrar Chan ordered discovery and inspection of documents, exchange of witness statements and gave directions for setting down the action for trial.

35.  Thereafter, seemingly no further steps were taken.

36.  On 27 February 2007, Fitzroya applied for security for costs and on 13 July 2007, Recorder Fung ordered the sum of HK$350,000 to be paid into Court within 21 days by Wai Shun as security for the Fitzroya’s costs and that all further proceedings be stayed until such security was given.

37.  Wai Shun did comply with this order of Recorder Fung but that the time taken was outside the 21 day period ordered.

DEREGISTRATION AND REINSTATEMENT OF FITZROYA

38.  On 8 May 2007, Mr Kam Shing, (who had resigned as a director of Fitzroya in October 2006), applied on behalf of Fitzroya to the Companies Registry for Fitzroya’s deregistration under section 291AA of the Companies Ordinance on the grounds that Fitzroya had ceased operation for more than 3 months immediately before the application.  That application was approved and Fitzroya deregistered on 14 September 2007 by the Companies Registry.

39.  The application to deregister was made without notice to the Court and seemingly without notice to the solicitors for the parties both in HCA 2570 of 2003 and HCA 2051 of 2004.

40.  It would appear that prior to 12 January 2010 when the solicitors for both parties took out Case Management Summons, neither had knowledge of the deregistration of Fitzroya.

41.  When the solicitors acting for both Wing Fai and Wai Shun finally came to know of the deregistration of Fitzroya, an Originating Summons (HCMP 1047 of 2010) was issued to restore Fitzroya to the register of the Companies Registry.  By an order of the court dated 18 November 2010, Fitzroya was reinstated pursuant to section 291AB(2) of the Companies Ordinance.  Pursuant to this same order, the liquidators of Wing Fai and Wai Shun were required to report in writing to the Registrar of Companies of the progress of the proceedings instituted on a half-yearly basis.

FITZROYA’S APPLICATION AND GROUNDS FOR STRIKING OUT

(a)   The delays

42.  Fitzroya says that there has been no less than 6 years delay in these two actions by Wing Fai and Wai Shun and that since the decision by Deputy Judge Saunders in January 2006, no further steps have been taken by both plaintiffs up to the present summonses issued for the striking out.

43.  Fitzroya also points to the concession made by the solicitor acting for both Wing Fai and Wai Shun (in para 27 of the 1^st Affidavit of Kevin Richard Bowers) that the periods of inactivity where Court filings are concerned were from the end of July 2007 until October 2009 (2 years and 3 months) and also from 18 November 2010 until 5 June 2012 (a further one and a half years) which delays are accepted to be lengthy.

44.  Fitzroya further says that there can be no excuse for such inordinate delays which amount to an abuse of the court’s process.

(b)   Prejudice to Fitzroya

45.  Firstly, Fitzroya says that in both actions three of its key witnesses is no longer available to Fitzroya for the following reasons:-

(i)   Mr Kam Shing (“Kam”), a former director of Fitzroya, has been suffering from Alzheimer’s disease since 2006.  A medical report of Dr. Gerald Wong dated 29 August 2008 stated that there was a 1 year history of memory loss and that in general conversation Kam appeared coherent but when it came to detailed questioning about past events he became somewhat muddled at times.  A medical note given by Dr Jason Fong dated 17 September 2008 stated that there was a progressive loss of memory for 2 years with impaired abstract thinking which were suggestive of Alzheimer’s disease.  A full medical report given by Dr Paul Shea dated 12 April 2010 stated that Kam scored 19 out of 30 marks in the Mini‑Mental State Examination used for rating of cognitive function, the passing mark of which is 22.  This showed that Kam had mild cognitive impairment.  Dr Shea also said that Kam could be independent in his daily living but required assistance on judgment and abstract thinking and had poor performance in attention, calculation and short term memory which would make it difficult for him to concentrate on reading documents.  Dr Shea concluded that Kam suffered from mild cognitive impairment with anxiety which is likely due to Alzheimer’s disease;

(ii)   Mr Yip Kwong Robert (“Yip”), another former director of Fitzroya, had emigrated to Canada and Fitzroya’s attempts to contact him have been without success;

(iii)   Miss Kelly Cheng Kit Yin (“Kelly”), an ex-director of the China Rich Group but never a shareholder or director of Fitzroya, has now fallen out with the China Rich Group and has adopted a hostile attitude towards it due to a dispute between her and the China Rich Group over indemnity of her legal costs and disbursements under a Deed of Indemnity made between China Rich Holdings Limited and Kelly.

46.  Quite apart from the non-availability of the three key witnesses above, it is also Fitzroya’s case that in or about 2007, due to substantial changes which took place within the China Rich Group, all the former directors and authorized representatives of China Rich in Hong Kong had resigned in July 2007 and that “new” directors were appointed in their place but that these new directors had no knowledge of matters which had taken place before they were appointed as directors and therefore will not be able to give any relevant evidence in relation to the disputed matters in the present two actions.

47.  It was also submitted by Fitzroya that due to the lack of finality to the two present actions, potential investors were not confident to invest in the China Rich Group being worried about the potential liabilities which could arise from these two claims.  The delays have therefore deprived the China Rich Group of opportunities in attracting new capital from new investors thereby causing prejudice.

48.  It was also submitted that in HCA 2051 of 2004, HK$2,968,268 has been stakeheld since the Novation Agreement by Fitzroya’s solicitors, Lily Fenn & Partners, for about 5 years during which time Fitzroya has had no opportunity to use or invest that sum, thus causing it prejudice.

(c)    Breaches of court orders

49.  Fitzroya submitted that Wai Shun had failed to take further steps to comply with the Order for discovery made on 29 June 2005 by Registrar Chan in HCA 2051 of 2004 which was an order for discovery and inspection of documents, exchange of witness statements and for setting down HCA 2570 of 2003.

50.  The defendant further relies on the fact that after the order for security was made by Recorder Fung on 13 July 2007 ordering Wai Shun to pay into Court within 21 days the sum of $350,000 in a form and manner to the satisfaction of the Registrar of the High Court as security for Fitzroya’s costs in HCA 2051 of 2004 and that all further proceedings would be stayed until such security was given, Wai Shun, in breach of that order, failed to pay such security before the expiry of the 21 day period.

51.  Fitzroya further submitted that the Court having ordered the liquidators of the Wing Fai to report in writing to the Registrar of Companies, about the progress of any legal proceedings instituted or to be instituted by the plaintiff against and/or in connection with the plaintiff, on a half yearly basis, seemingly, the available evidence does not show that the liquidators of the plaintiff has complied with such order, thus a further breach of a court order by the liquidators.

(d)   Abuse of Process

52.  It was submitted by Fitzroya that the delays by both Wing Fai and Wai Shun being inordinate and inexcusable, and for which Fitzroya has been and is likely to be seriously prejudiced by such inordinate delay.  That coupled with the breaches of the court orders constitute an abuse of the court’s process for which the actions should be struck out and the claims against Fitzroya dismissed.

(e)    Dismissal of HCA 833 of 2004

53.  Fitzroya also seek to rely on the fact that HCA 833 of 2004, being one of the actions commenced by Wing Fai (by its liquidators) against China Rich Holdings Ltd and others, was struck out and dismissed for want of prosecution by Poon J, which decision was upheld on appeal by the Court of Appeal.

OPPOSITION BY WING FAI AND WAI SHUN

54.  Wing Fai and Wai Shun were represented by Miss Linda Chan, SC at the hearing.

55.  Miss Chan submitted that there was no proper basis for Fitzroya to suggest that Wing Fai was guilty of inordinate and inexcusable delay or that Fitzroya was prejudiced by such delay for the following reasons.

56.  A number of interlocutory applications were filed by the parties in HCA 2570 of 2003 between June 2004 and December 2005.

57.  The last step taken by Wing Fai was its appeal against the order for security for costs which was heard on 10 January 2006.

58.  Thereafter, Wing Fai had filed a Notice of Intention to Proceed on 20 October 2009 and applied to Court in January 2010 for further direction, but was derailed by the belated disclosure by Fitzroya’s solicitors that Fitzroya had been deregistered whereupon Wing Fai had to expand time and costs to restore Fitzroya.

59.  In so far as the deregistration of Fitzroya was concerned, as early as May 2006, two of the then directors of Fitzroya (namely, Yip and Kam) had taken steps for the deregistration of Fitzroya by applying to the IRD in May 2006 for a Notice of No Objection to a Company being Deregistered.  Ultimately, the application for deregistration was made upon the false representation to the Registrar of Companies that Fitzroya had no liabilities and had ceased operation.  Yip and Kam only resigned as directors of Fitzroya on 27 October 2006.

60.  As a result, Fitzroya was deregistered by the Registrar of Companies on 14 September 2007.

61.  Other than filing a Notice of Intention to Proceed on 31 July 2007, no step was taken by Fitzroya to progress the case.

62.  Not only was the deregistration of Fitzroya not made known to the court or to the solicitors for Wing Fai, but that even after the deregistration of Fitzroya, when Fitzroya was no longer in existence, Fitzroya took out an application for security for costs against Wai Shun on 14 November 2007 in HCA 2051 of 2004 and which was supported by an affidavit of Yip in which Yip falsely stated that he was a director of Fitzroya at that time.

63.  It was only in early 2010 that the solicitors for Wing Fai was alerted to the fact that Fitzroya had been deregistered.  Wing Fai then applied in HCMP 1047 of 2010 to have Fitzroya restored to the register of the Companies Registry which was granted by Au J by an order therein dated 18 November 2010.

64.  Similar tactic was used by Yip in October 2008 to apply for the deregistration of Evergreen Club Ltd, the 7^th defendant in HCA 833 of 2004 which led to its dissolution in March 2009.

65.  As a result, Fitzroya was not in existence from September 2007 to November 2010 and it is disingenuous for Fitzroya to brush aside its own fraud and to assert that it is an abuse of process for Wing Fai to “warehouse” this action for more than 6 years.

66.  Moreover, the inactivity in the period between June 2009 and June 2011 can be further explained by the fact that the parties were engaged in settlement negotiations with a view to achieve a global settlement of all the disputes between them and the ex-directors.

67.  The inaction of the plaintiffs in pursuing both actions has to be seen in context.

68.  In 2003 and 2004 the liquidators of the plaintiffs have commenced 13 actions against the China Rich group and related parties.  On the other hand, the China Rich related parties took out 3 proceedings including contempt proceedings against one of the liquidators, all of which were unsuccessful.

69.  This plethora of litigation has generated numerous interlocutory applications and hearing resulting in a number of affidavits having to be filed.  The China Rich related parties have consistently opposed every application by the plaintiffs and their liquidators thereby lengthening the proceedings and exhausting the liquidators’ funds.  This would be followed by applications from the various defendants for security for costs and/or striking out for want of prosecution.

70.  From 2004 to 2012, the plaintiffs and the liquidators were heavily engaged in extensive litigation against the China Rich related parties and which was considered to be relevant to the question whether there had been inordinate and inexcusable delay on the part of the liquidators by Rogers VP in CACV 273 of 2009, another one such litigation involving Wing Fai.

71.  Similarly, there is no basis to suggest that in HCA 2051 of 2004 Wai Shun was guilty of inordinate and inexcusable delay or that Fitzroya was prejudiced by such delay.

72.  The case commenced in 2004.  Wai Shun did issue summons for direction in 2005.  In 2007 various summonses and affidavits were filed.  In 2009 Wai Shun filed a Notice of Intention to Proceed and timetabling questionnaire, followed by a CMC issued in January 2010 but was confronted by the deregistration of Fitzroya which only came to the knowledge of Wai Shun’s solicitors at around that time.  Fitzroya was only reinstated in November 2010.

73.  As for the dismissal of HCA 833 of 2004, it was submitted by Miss Chan SC that the facts in that case was different from the present case.  In HCA 833 of 2004, that action had been stayed since December 2005 due to Wing Fai’s failure to provide the security for costs ordered by Poon J.  Some 4 years later, Poon J refused Wing Fai’s application for extension of time to provide security on the ground that it was a deliberate commercial decision of Wing Fai not to comply with the order for security and not to continue the action until it was financially able to do so.  This was tantamount to warehousing the action.

74.  In the present case, there is neither a stay nor failure to comply with the court’s order for security.

75.  It was also submitted by Ms Chan SC that Fitzroya’s point about the security being locked up is without merit in that there is no dispute that the cash which had been stakeheld by Fitzroya’s solicitors has always been kept in an interest bearing account and that Fitzroya’s suggestion that it would have made substantial profit from the use of that cash is purely speculative.  The money stakeheld was provided by China Rich and therefore not open to Fitzroya to assert prejudice for the loss of use of it.

76.  Furthermore, when Fitzroya chose to deregister itself, this showed that it was not concerned about losing the funds as security since upon deregistration, since by section 292 of the Companies Ordinance the money stakeheld will be deemed to be bona vacantia.

77.  As to the loss of witnesses point raised by Fitzroya, in the case of Kam, it was submitted that the allegation by Fitzroya that Kam has been suffering from Alzhimers since 2006 is not supported or contradicted by the medical report dated 29 August 2008 which states that Kam has “a 1 year history of memory problems” which is suggestive of early dementia.

78.  In any event, in its Defence and its answers to the Further and Better Particulars, Fitzroya has never relied on Kam’s involvement in the Set-Off Agreement or the Wing Fai Agreement and Wai Shun Agreement.  It should also be noted that the only persons identified by Fitzroya as having taken part in negotiating and making those agreements were Yip and Eric Chim.

79.  Yip, although said to have emigrated to Canada on an unspecified date, had been able to make and file a number of affidavits in the ongoing proceedings when required.

80.  It is not disputed that Kelly is one of the key witness of fact and has filed 5 affidavits in HCA 2570 of 2003 as a director or former director of Fitzroya.  She was also the finance director of China Rich group.  It was only in about October 2012 that it was alleged by Fitzroya for the first time that there was a dispute between Kelly and China Rich group over the indemnity of her legal costs and that she had adopted a hostile attitude towards the China Rich group.

81.  More importantly, nothing has been said by Fitzroya whether it had taken any proof of evidence from witnesses after the commencement of the action, and if so, when and why it would still be prejudiced by the alleged loss of witnesses.

82.  Absent such evidence, there is no valid basis for Fitzroya to say that it has been so prejudiced.

RESPONSE BY FITZROYA

83.  In response thereto Fitzroya says that the “plethora of litigation” and the “fire fighting” put forward by Wing Fai and Wai Shun as excuses for the delays were no more than matters brought by the liquidators of Wing Fai and Wai Shun upon themselves due to the fact that it was the liquidators who had instigated these and other related actions themselves.

84.  As for the deregistration of Fitzroya, it was submitted that not only was Kam suffering from Alzheimers before the application for deregistration was made, but that the solicitors for both parties had no notice of such deregistration.

85.  Furthermore, by the operation of section 291AB (5), once Fitzroya was reinstated, it became immaterial that Fitzroya had been deregistered and cannot absolve the plaintiffs from the delays.

DECISION

86.  In so far as the period of delay is concerned, Fitzroya says there was a period of some 6 years of delay from the time Deputy High Court Judge Saunders gave his order allowing Wing Fai’s appeal as to the form of the security (in 2006) until the summons to strike out was taken out in 2012.

87.  On the other hand, Wing Fai’s solicitors conceded that there were two periods of inaction, one from July 2007 (Fitzroya’s Notice of Intention to Proceed) until October 2009 (Wing Fai’s Notice of Intention to Proceed) and a further period of inaction from November 2010 until June 2012.

88.  At the same time due to the deregistration of Fitzroya, it was not in existence from September 2007 to November 2010, a period of over 3 years which overlapped with the period of delay complained of by Fitzroya.

89.  The deregistration Fitzroya was said to have been kept from the parties’ solicitors as well as the court and only came to be known by the solicitors on both sides some time in early 2010.  Even then it took some 11 months to have Fitzroya reinstated.

90.  While it may be true that the solicitors for the plaintiffs, not being aware of the deregistration of Fitzroya until early 2010, cannot use that as an excuse for their inaction in progressing the case but equally Fitzroya itself cannot be entirely blameless for the six years of delay it now complains of.

91.  It is not disputed that Fitzroya was deregistered and therefore not in existence from September 2007 until its reinstatement by the court in November 2010.

92.  It is also not disputed that it was by its own doing that Fitzroya was deregistered – and at a time after both these actions had been started by Wing Fai and Wai Shun against it.

93.  Nor is it disputed that Fitzroya has kept its deregistration away from the court and from the plaintiffs’ solicitors – and even from Fitzroya’s own solicitors in these proceedings and that Fitzroya’s deregistration only came to be known in these proceedings in early 2010.

94.  Given the above, if Fitzroya was prepared to deregister itself resulting in its non-existence from September 2007 until November 2010, how can it now be heard to complain of delay of some 6 years by Wing Fai and Wai Shun when its own inexistence overlapped those 6 years of inaction complained of.

95.  Even if there were some inaction on the part of Wing Fai and Wai Shun, Fitzroya cannot be itself entirely blameless for those 6 years of inaction.

96.  Moreover, the argument that since the solicitors for Wing Fai and Wai Shun did not know if Fitzroya’s inexistence (until early 2010) cannot excuse their inaction is one which takes a blinkered view of the full circumstances of the case.

97.  Ultimately, the view taken must be that both parties were together responsible for the delay in this matter and neither can be said to be wholly free from blame for the delay.

98.  It is now clear from the restatement of principles by the Court of Final Appeal in the landmark decision in Wing Fai Construction Co Ltd (in liq) v Robert Yip Kwong [2012] 1 HKLRD 589 that abuse of process is the foundation of the jurisdiction to strike out and mere delay will not necessarily amount to an abuse justifying an order to strike out an action.  In the majority of cases for striking out for delay, the prejudice to the defendant will often be extremely relevant and is a factor that may well be relevant to the overall justice of the case.

99.  In the present case, there is no question of warehousing in that there is no intention of bringing the proceedings to conclusion.

100.  It has not been disputed that between June 2009 and June 2011 the parties were engaged in settlement negotiations with a view to achieving a global settlement of all the disputes between them and their ex-directors.  This further explains some of the delay in this matter.

101.  As for the prejudice complained of by Fitzroya, firstly, in so far as loss of witnesses are concerned, I accept the submissions of Ms Chan SC for the plaintiffs that Kam has never been put forward by Fitzroya as a key witness who had taken part in the making of the various agreements now in issue, but rather the key witnesses were Yip and Eric Chum.

102.  Yip, although said to have emigrated to Canada at some time, is shown to have made a number of affidavits for Fitzroya in the ongoing proceedings and no good reason have been advanced as to why, in this day and age of technical advancement, he could not be called as a witness for Fitzroya.

103.  However, more importantly, there has been not a word from Fitzroya as to whether it had taken any proofs of statements from any of the witnesses alleged by Fitzroya to have been lost to it due to the delay, a matter which in the decision of the Court of Final Appeal would be relevant to the consideration by the court as to such alleged prejudice.

104.  As for the alleged prejudice that Fitzroya suffered, being unable to make use of the amount of moneys now stakeheld by the solicitors, Lily Fenn & Co, this is not the kind of prejudice contemplated by the rules since it is not a prejudice which can affect the fair trial of the action between the parties.

105.  Whatever other prejudice which Fitzroya may have suffered from the delay and which would affect the question of a fair trial, is not something which, in the circumstances of this case, can be laid fairly and squarely at the doors of Wing Fai and Wai Shun alone.  Fitzroya must itself bear a part of the blame itself.

106.  As for the breaches of orders relied on by Fitzroya, firstly, it is said that Wai Shun had failed to pay in the amount of the security ordered within the 21 days as ordered by Recorder Fung.  That order for security has in fact been complied with by Wai Shun, except that the payment in was outside of the 21 days ordered.  While a technical breach, it is not a complete non-compliance with the order of the court and can weigh little when considering a strike out application.

107.  The second breach of court order put forth by Fitzroya relates to a purported breach by failing to comply with an order of Au J in HCMP 1047 of 2010 in failing to report to the Registrar of Companies the progress of any legal proceedings instituted.

108.  If there was such a breach, then that was a breach of an order in HCMP 1047 of 2010, and not a breach of a court order in the present cases under consideration.

109.  For the above reasons, I am not persuaded that Fitzroya has made out a case of abuse of court process due to the delay by the plaintiffs in the present proceedings.

110.  As has been said time and again, it is only in clear cases that an action would be struck out for want of prosecution.

111.  This is not such a clear case to warrant striking out of the actions and both applications are therefore dismissed.

COSTS

112.  On general principles that costs should follow the event, there will be a cost order nisi that Fitzroya pays the costs of Wing Fai and Wai Shun to be taxed (if not agreed) and paid forthwith.