CIL HOLDINGS LTD v. KWOK HAN QIAO formerly known as KWOK WAI TAK EDWARD

CACV 90/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 90 OF 2013

(ON APPEAL FROM HCA NO 2725 OF 2001)

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JUDGMENT

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Hon Yuen JA:

1.  This is the defendant’s appeal from a judgment of Chung J given on 11 December 2012 dismissing the defendant’s application to strike out the action on the grounds that there has been (i) intentional and contumelious default on the part of the plaintiff and/or its solicitors; (ii) inordinate and inexcusable delay by the same persons causing serious prejudice to the defendant; and/or (iii) non-compliance with the underlying objectives of Order 1A Rule 1 RHC amounting to abuse of process.

2.  Leave to appeal was refused by the learned judge on 14 March 2013 but was given by the Chief Judge on 25 April 2013.

3.  As the background is fairly complex involving a number of actions with different parties, I shall refer to HCA2725/2001 as “the present action”, the plaintiff as “CIL” and the defendant as “Mr Kwok”.

CIL’s claim in the present action

4.  The present action was commenced on 16 June 2001.

5.1     CIL, a listed company, alleged that Mr Kwok was its shareholder and that he represented CIL in liaising with PRC parties with a view to CIL investing in 2 projects in the PRC, viz a hotel and an aluminium pipe factory. 

5.2     CIL alleged that for the purpose of making those 2 investments, on 12 July 1999 a total sum of $98m was transferred to Mr Kwok and his sister Kwok Wai Ling (“Ms Kwok”) on trust for CIL.

5.3     CIL alleged that in breach of trust, Mr Kwok did not invest the sum in either project and did not return the money.

5.4     The relief sought by CIL was for an account, and payment of such moneys as may be found due upon the taking of the account.

Mr Kwok’s case

6.1  Mr Kwok’s case is more complex.  His case is that in 1997, he operated a business consultancy company called Asia Glory Holdings Ltd (“AG”).

6.2   Through the introduction of James Lau (“Mr Lau”), he met Joseph Szeto (“Mr Szeto”) and Peter Ho (“Mr Ho”), respectively the Chairman and Vice-Chairman of CIL. 

6.3   In due course CIL retained AG’s services to target investment opportunities in the PRC.

-    The CRED Agreement

7.1   Through AG’s introduction, CIL entered into an agreement in 1997 to acquire from China Real Estate Development Group Huadong Properties Co Ltd, a subsidiary of China National Real Estate Development Group Corp (“CRED”) a number of properties to be constructed in Shanghai.  Payment for the properties was made partly in cash and partly by the allotment of CIL shares to CRED.

7.2   As CRED was concerned that CIL shares might diminish in value after the transaction, in mid-1997 Mr Kwok on behalf of AG procured an agreement from Mr Szeto and Mr Ho that they, and other major shareholders of CIL, would not dispose of their shares in CIL until 28 February 1998 (the period between the transaction and this date has been called the “Restriction/Stabilization Period”), and that during this period should the share price fall below the price at which CIL’s shares were allotted to CRED, they would compensate CRED for the difference.  This oral agreement has been referred to as “the CRED Agreement”.  According to Mr Kwok, Mr Lau (who had introduced CIL to AG) was present at the discussions and had knowledge of the CRED Agreement.

-    The Share Deposit Agreement

7.3   Mr Kwok’s case is that, in accordance with prevalent practice in the PRC, AG (as the middleman in the deal) would also be liable to CRED for any losses suffered by CRED should CIL fail to maintain its share price.

7.4   To protect AG against such liability to CRED, shortly after the CRED Agreement, Mr Szeto and Mr Ho agreed to, and did, procure 60m CIL shares to be deposited with AG (“the Share Deposit Agreement”).  It turned out that these shares were owned by a company called Silver Stone Development Ltd (“the Silver Stone shares”).  This company will be referred to later.  

-    Drop in CIL share price

8.  After the allotment of shares to CRED, the price of CIL shares dropped, and the Restriction/Stabilization Period - which would originally have expired on 28 February 1998 - was extended on a number of occasions (first, to 30 March 1999 and later to 1 October 2000).  By early 1999, the drop in price of the shares allotted to CRED had reached about $60m.

9.  Meanwhile, CIL was looking for other investment opportunities and needed funds, and AG was consulted to find opportunities and to procure loans for CIL.

-    The Well Match loan

10.  Through AG’s introduction, on 11 December 1998 a company called Well Match Associates Ltd (“Well Match”) lent $6m to CIL for a term of 2 months at an interest rate of 2% per month and a default rate of 3% per month, as evidenced by a Promissory Note.  

-    The China Gold loan

11.  Further, by an agreement dated 30 April 1999, China Gold Finance Ltd (“China Gold”), a company of Ms Kwok’s husband, agreed to lend CIL a sum of $40m for a term of 3 months at an interest rate of Prime + 3% pa and a default rate of 3% per month.  Mr Szeto and Mr Ho signed the loan agreement on behalf of CIL, and also executed personal guarantees.  The loan was drawndown on 3 May 1999.   

12.  Meanwhile, AG was negotiating on behalf of CIL to acquire interests in the hotel and the aluminium pipe factory in the PRC. 

-    Transfer of $98m

13.  It is common ground that on 12 July 1999, a total sum of $98m was transferred from CIL to Mr Kwok and Ms Kwok. 

14.  CIL’s case is that it was solely for the purpose of investing in the hotel and aluminium pipe factory.

-    Mr Kwok’s allegation of “the Security Agreement”

15.1   Mr Kwok’s case however is that by then (July 1999) he, together with Mr Szeto and Mr Ho (with Mr Lau attending) had estimated that $100m was required for the following purposes:

(1)     CIL and AG had to demonstrate to potential business counterparts the availability of funds for undertaking potential projects;

(2)     to secure AG’s potential liabilities to CRED for the continuous drop in CIL’s share price (at least $60m);

(3)     to secure repayment by CIL of loans from Well Match ($6m plus interest) and China Gold ($40m plus interest), as well as future loans to be procured by AG.

15.2   CIL then came up with the sum of $98m to be used for these purposes.  This oral agreement has been referred to as “the Security Agreement”.

16.  Pausing there, I note the following:

(1)     Mr Kwok’s allegation of the Security Agreement is not inconsistent with the Share Deposit Agreement.  The purpose of the CRED Agreement was to compensate CRED for any diminution in the price of the shares.  Since the shares had fallen in value, the Silver Stone shares deposited under the Share Deposit Agreement would not have offered AG much comfort if CRED made a demand against AG.

(2)     When CIL transferred the sum of $98m to the Kwoks, CIL was already in default of repayment of the Well Match loan of $6m (plus interest) for 5 months and default interest was accruing. CIL was also due to repay China Gold (the company of Ms Kwok’s husband) the sum of $40m (plus interest) the next month.

-    Failure of negotiations for the hotel and pipe factory

17.1   It is common ground that the proposed investments in the hotel and the aluminium pipe factory did not materialize. There is evidence that it became apparent by the end of 1999 that the negotiations for those investments would not be successful. In other words, on CIL’s case, the purpose for which the sum was held by Mr Kwok had failed.    

17.2   It would be noted however that no demand was made by CIL at the time, either to the Kwoks or to AG, for the return of the $98m, notwithstanding that by that time CIL was already defaulting on repayment of the loans from Well Match and China Gold and was incurring default interest. 

-    The Mayson loan

18.  Instead, again through AG’s introduction, on 29 February 2000 a company called Mayson Associates Ltd (“Mayson”) lent $3m to CIL for a term of 1 month at an interest rate of 1.5% per month and a default rate of 2% per month, as evidenced by a Promissory Note.

-    CIL’s letter to solicitors and consequence

19.1   Meanwhile, the CIL group was undergoing an audit andon 7 August 2000, Mr Szeto wrote to CIL’s solicitors referring to the hotel and aluminium pipe factory deals which had fallen through and said that CIL suspected that Mr Kwok “had no intention to repay the money back to CIL”.  Mr Szeto asked for advice as to how to proceed with the case.

19.2   This was followed by a letter dated 14 November 2000 from CIL’s solicitors to Mr Kwok demanding the return of the money.    

19.3   There was no reply to this letter, but CIL’s demand was not followed up. 

-    Mr Kwok’s allegation of “Adjusted Security Agreement”

20.1     According to Mr Kwok, at about this time (late 2000), AG ceased to be CIL’s investment consultant.  He says the parties then met to discuss how the Security Agreement should be adjusted in view of the termination of the relationship between CIL and AG.

20.2   Mr Kwok says Mr Szeto and Mr Ho (on behalf of CIL) orally agreed to vary the Security Agreement – whereby the sum of $98m would continue to be held by AG, but now, only as security for the purposes described at (2) and (3) in para. 15.1 above, i.e. to secure AG’s liability to CRED and to secure repayment of the sums owed to Well Match, China Gold and Mayson, which loans had all been procured by AG (“the Adjusted Security Agreement”).

20.3   According to Mr Kwok, AG had been receiving demands from CRED to compensate it for the drop in CIL’s share value; from October 2000 to the end of 2003, AG paid a total of $70m to CRED in compensation.

The Silver Stone action (HCA2206/2000)

21.1   Meanwhile, Silver Stone, the owner of the 60m CIL shares which had been deposited with AG, had claimed the return of the shares.  In HCA2206/2000 Silver Stone instituted proceedings alleging conversion by (amongst others) Mr Szeto, Mr Ho, Mr Kwok, AG and Mr Lau. Silver Stone claimed that it had only placed the shares in the hands of Mr Ho as he had offered to sell them on its behalf.  However the shares ended up with Mr Kwok and AG, who said the shares had been placed with them pursuant to the Share Deposit Agreement, an arrangement to which Silver Stone said it had not agreed.

21.2   Mr Kwok and AG then issued Third Party proceedings, claiming an indemnity against Mr Szeto and Mr Ho on the basis of the Share Deposit Agreement.

21.3   Judgment was entered in favour of Silver Stone against the defendants in the main action.  Mr Kwok’s appeal, which was based on some technicalities in the law of conversion, was dismissed by this court (Le Pichon and Cheung JJA and Yam J) in CACV 251/2006 on 27 April 2007.

21.4   As for the Third Party proceedings, Mr Szeto settled with Mr Kwok and AG.  It is important to note that Mr Ho did not contest the Third Party proceedings and an order was made against him in favour of Mr Kwok and AG.  Apparently Mr Kwok and AG have instituted bankruptcy proceedings against Mr Ho.

21.5   It is important for present purposes to note that on 9 July 2001, Mr Lau (who identified himself as a director of CIL) made a witness statement in the Silver Stone action, confirming the existence of the CRED Agreement and the Share Deposit Agreement.

The present action

22.  On 16 June 2001, CIL commenced the present action against Mr Kwok. 

Claims against CIL

23.  Within the next couple of weeks,

- Mayson issued a statutory demand against CIL for repayment of its loan of $3m plus interest,

- Well Match issued a statutory demand against CIL for repayment of its loan of $6m plus interest, and

- China Gold issued proceedings in HCA2900/2001 (“the China Gold action”) against CIL for repayment of its loan of $40m plus interest.  Mr Szeto and Mr Ho were also sued under their personal guarantees.

CIL’s claims of set-off

-    Against statutory demands of Mayson and Well Match

24.1  It is important to note that on 24 July 2001, CIL’s solicitors asserted a set-off of the sum of $98m against the statutory demands of Mayson and Well Match. 

24.2  Further, CIL pleaded in its Defence filed on 9 August 2001 in the China Gold action that there was a “global set-off agreement” whereby the sum of $98m owed by Mr Kwok (the subject-matter of the present action) was set-off against the sum of $40m CIL owed China Gold (the subject-matter of the China Gold action).  CIL pleaded:

“9. Further or in the alternative to paragraphs 2 to 6, it was agreed between Edward Kwok for the Plaintiff [China Gold] and his nominees and Mr Szeto the 2^nd Defendant for the 1^st Defendant [CIL] in about April 1999 that all money due from the 1^st Defendant and its subsidiaries (hereinafter collectively called “CIL”) to Edward Kwok and his nominees could be set off with all money due from Edward Kwok and his nominees including the Plaintiff to CIL from time to time (“the Global Set-off Agreement”).

10. The Defendant is now claiming Edward Kwok for payment of a liquidated sum of HK$98,000,000, which had been paid to him and his nominee by bank transfers, together with profits derived therefrom in High Court Action 2725 of 2001 [the present action]. The 1^st Defendant shall rely on the Global Set-off Agreement to set off the money due by Edward Kwok in High Court Action 2725 of 2001 in extinction of the Plaintiff’s claim”.

-    Set-off pleadings in the present action

24.3   Consequently, CIL’s set-off of the $98m was one of the alternative defences pleaded by Mr Kwok in his Defence filed on 24 August 2001 in the present action as follows:

“11. If, which is denied, the Defendant [Mr Kwok] is liable to the Plaintiff [CIL] in any sum whether as alleged or at all, it follows from paragraphs 7 to 9 above that even on the Plaintiff’s own case, the Plaintiff is not entitled to recover the said sum of HK$98 million from the Defendant given that it is the Plaintiff’s case as pleaded in paragraphs 7 to 9 above that sums due from the Plaintiff to China Gold, Well Match and Mayson should be set-off against the said sum of HK$98 million and profits derived therefrom allegedly due from the Defendant to the Plaintiff”.

24.4   On 28 September 2001 CIL pleaded in its Reply to this defence:

“8. Save it was agreed between the Defendant [Edward Kwok] and his nominees andMr Szeto for the Plaintiff [CIL] in about April 1999 that all money due from the Plaintiff and its subsidiaries to the Defendant and his nominees could be set off with all money due from the Defendant and his nominees to the Plaintiff and its subsidiaries from time to time, paragraph 11 is denied”. (Emphasis added).

24.5   In other words, CIL’s position then was consistent with its stand in the China Gold action, viz. there was a “global set-off agreement” which included the $98m claimed from Mr Kwok in the present action. Mr Kwok’s position was that the “global set-off agreement” was only CIL’s verison of the Adjusted Security Agreement, but that even on CIL’s own case, it would still not be entitled to claim $98m from him.      

25.  The last step taken in the present action was in December 2001, when Mr Kwok filed his list of documents.  CIL did not progress the action thereafter.

Winding up proceedings against CIL in 2001 and 2006

26.1   A petition was presented to wind up CIL in HCCW432/2001.  A scheme of arrangement was sanctioned by the court on 2 April 2003 in HCMP2799/2002.  However no further action was taken by CIL in the present action. 

26.2   Another petition was presented against CIL in HCCW702/2005, and on 2 August 2006 it was wound up.  The order was however rescinded on 12 September 2006. 

Notices of Intention to proceed

27.1   Shortly thereafter, on 25 September 2006, CIL filed a Notice of intention to proceed (“the 1^st NIP”) in the present action.  However no steps were taken thereafter. 

27.2   On 24 June 2008, CIL filed another Notice of intention to proceed (“the 2^nd NIP”) in the present action, but again no steps were taken thereafter. 

27.3   On 4 May 2011, CIL filed yet another Notice of intention to proceed (“the 3^rd NIP”) in the present action.  Four months later, it filed a summons for case management directions. This was nearly 10 years after the last step taken in the action in 2001.

28.  It should be noted that soon after the 3^rd NIP, CIL amended its Defence in the China Gold action to delete its previous assertion that there had been a global set-off agreement.

Defendant’s application to strike-out

29.  On 3 March 2012, Mr Kwok applied to strike-out the present action on the grounds that there has been (i) intentional and contumelious default on the part of CIL and/or its solicitors; (ii) inordinate and inexcusable delay by it/them causing serious prejudice to him; and/or (iii) non-compliance with the underlying objectives of Order 1A Rule 1 RHC amounting to abuse of process. 

30.  As noted earlier, no steps had been taken to progress the present action in the nearly 10 years between 2001 and 2011.  Mr Kwok says that he assumed that CIL was no longer pursuing its claim due to the long period of inaction.  Indeed, in CIL’s Annual Report published on 4 September 2003, its auditors reported, in relation to two “receivables” including the sum of $98m, that “there was no sufficient evidence for us to verify and confirm the existence of the balance” (emphasis added).  In subsequent Annual Reports, the auditors reported that no provision for the sum had been made in the financial statements but, apart from the management’s representation, they had been unable to carry out necessary procedures to confirm whether the sum could be recovered.    

31.  Further Mr Kwok says he has suffered prejudice as a result of the delay because two important witnesses have died: Mr Szeto on 30 September 2010 and Mr Lau on 30 December 2011.  He said Mr Szeto had told him that (a) CIL had not even asked him (Mr Szeto) to make a witness statement and (b) CIL would not proceed with the present action.  For that reason Mr Kwok did not ask Mr Szeto or Mr Lau to make witness statements, and in 2007, he no longer retained solicitors in the present action.    

32.1   In opposition to the strike-out application, CIL’s case is that it was not able to progress the action because of lack of funding.   Trading in its shares was suspended between April 2004 and January 2011.  CIL also referred to the winding-up proceedings. 

32.2   However there was no explanation for the lack of action for more than 2 years between December 2001 and April 2004. Even if the first set of winding-up proceedings are taken into account, there was no action taken after the scheme of arrangement was approved.

33.  Moreover it would be noted that throughout this period, CIL utilized the claim in the present action as a set-off in the China Gold action in which it was the defendant.  Therefore it suited CIL to delay the progress of the present action. 

34.  Mr Ho, in a brief affirmation in opposition to the strike-out application, denied that the sum of $98m was paid to Mr Kwok for any purpose other than for the potential investment in the hotel and the aluminium pipe factory, and denied making any oral agreement. Surprisingly however he did not deal with the specific allegations in Mr Kwok’s case, eg he did not explain why the Silver Stone shares had been placed with Mr Kwok and AG, and why he did not contest the Third Party proceedings they issued against him. 

35.  On 13 September 2012 Master Ho struck-out the action. 

36.  CIL appealed.  On 11 December 2012 Chung J allowed CIL’s appeal from Master Ho’s order.  He held that there had indeed been inordinate and inexcusable delay on CIL’s part, but found that there was no prejudice because, although Mr Szeto and Mr Lau had died, Mr Ho was still available to give evidence.  He also declined to find there was abuse of process on the part of CIL.

37.  Mr Kwok applied for leave to appeal but his application was refused by Chung J.  As mentioned earlier, Mr Kwok subsequently obtained leave from A. Cheung CJHC on 25 April 2013.   

Principles

38.  This is a “straddle” case, ie a case where the proceedings were begun before the Civil Justice Reforms (CJR) took place.  It has been held that nevertheless, in an application to strike out for delay, the court’s approach to the application must take into account the Reform that has taken place, whilst also taking into account the contemporaneous circumstances when evaluating the conduct of the parties (Wing Fai Construction Co Ltd (in liq) v Yip Kwong Robert [2012] 1 HKLRD 589 at para.29). 

39.  The principles that now guide the court in determining applications to strike out for delay have been set out extensively in Wing Fai at para. 75 which will not be replicated here. In the present case, Mr Kwok has sought to strike out the present action for delay on all three grounds set out in para. 61 of that judgment, viz (1) the second limb of Birkett v James (inordinate and inexcusable delay, coupled with prejudice, which includes a substantial risk that a fair trial is not possible); (2) abuse of process; and (3) breach of O.1A r.1(b) of the Rules of the High Court (proceedings to be dealt with expeditiously).  Abuse of the process of the court is the common feature connecting all three grounds (paras. 66, 68).

40.  I recognize that striking out should only be used in plain and obvious cases (para. 65) and is a remedy of last resort (para. 75(1)).  It is also well-established that an appellate court should think long and hard before it can disturb a judge’s decision in a striking-out application as it is made in the exercise of his discretion and we should interfere only if the decision is “plainly wrong”.  Nevertheless, with all due respect to the judge, I believe this is a clear case for the application of a strike-out on the basis of the second limb of Birkett v James and for abuse.    

Discussion

41.1   The judge concluded that there has been inordinate and inexcusable delay on CIL’s part (para. 12).  There is no respondent’s notice from CIL to challenge that. 

41.2   The inordinate delay is one of nearly 10 years between the last step taken in the action (2001) and CIL’s summons for case management (2011).  Winding-up proceedings against CIL can only account for a total period of 3 years of inaction (a 2-year period between 2001 and 2003, and a 1-year period between 2005 and 2006).  That leaves a balance of nearly 7 years. 

41.3   As for whether the delay was inexcusable, whilst the court can take into account lack of funds, that must be balanced against the prejudice suffered by the defendant (Nathaniel Hymer v The Mass Transit Railway Corporation [2000] 2 HKLRD 589, at 607).  It would be noted that CIL chose to deploy its financial resources in re-activating trading in its stocks.  Moreover it was in sufficient funds to participate in other legal proceedings (the China Gold action) during this period.

42.1   As for prejudice, with respect to the judge, it is clear that the delay has caused prejudice to the defendant with a significant risk that there could not be a fair trial.  This action turns crucially on oral agreements (the CRED Agreement, the Share Deposit Agreement, the Security Agreement and the Adjusted Security Agreement) which were allegedly made between Mr Kwok (on behalf of AG) of the one part and Mr Szeto and Mr Ho (on behalf of CIL) of the other part, to which Mr Lau was an independent witness.  Indeed CIL’s own pleaded case (until the last amendment) also involved an oral agreement (the global set-off agreement).  Without contemporaneous documentation, viva voce evidence of these principal witnesses becomes all-important.

42.2   It is indisputable that with the passing of time, there would be a diminution of memory of witnesses at trial.  In the present action, the events occurred in 1998-1999, 13-12 years before CIL revived the action in 2011. 

42.3   More importantly, of the 3 witnesses (other than Mr Kwok) whose words and acts would be scrutinized at trial, 2 have died.  Had the action progressed at a normal pace, it would have finished long before Mr Szeto died in 2010 and Mr Lau died in 2011.  As it is now, no peremptory orders can possibly secure the attendance of these two important witnesses at trial.  I regard this as serious prejudice to Mr Kwok which involves a substantial risk that a fair trial would not be possible.  

42.4   Whilst Mr Ho is still available, his evidence could not now be tested against that of Mr Szeto and Mr Lau. And events have shown that Mr Szeto and Mr Lau have not previously spoken in one voice with Mr Ho. 

(1) The Silver Stone Third Party proceedings illustrate this.  Mr Ho is at the losing end of a judgment in favour of Mr Kwok, whereas Mr Szeto felt able to settle with Mr Kwok.  It is telling that according to Mr Kwok, Mr Szeto informed him that CIL had not asked him for a statement – and CIL has not rebutted this assertion by producing one. 

(2) As for Mr Lau, his statement in the Silver Stone proceedings supported Mr Kwok’s case in the present action that there was an agreement whereby CRED required to be compensated for any diminution in the CIL share price, whereas CIL’s Reply in the present action denied it (paras. 5(i) and 6(x)). 

(3) Mr Lau’s statement also supported the Share Deposit Agreement.  It did not carry on to refer to the Security Agreement or the Adjusted Security Agreement, but that was not relevant to the issues in the Silver Stone proceedings.  What is important is that (on Mr Kwok’s case) the CRED Agreement was the genesis of the transactions which followed giving rise to  CIL’s transfer of the $98m to Mr Kwok, and Mr Lau’s statement was inconsistent with CIL’s denial of it in the present action. 

The above shows that even if Mr Szeto and Mr Lau might not have given evidence in favour of Mr Kwok at the trial, counsel would have been able to expose differences in their evidence through cross-examination in order to weaken CIL’s case.  In a case turning on oral evidence alone, this is an extremely valuable tool in a litigant’s armoury.  This has now been lost to Mr Kwok through CIL’s delay.   

42.5   Of course Mr Kwok could have protected himself by seeking out Mr Szeto and Mr Lau and asking them for witness statements as there is no property in witnesses, but this begs the question why Mr Kwok should have to do that when the signal he got from CIL was that it was no longer pursuing him in the present action.

43.  Leading counsel for CIL says that it would be unjust to “let Mr Kwok off” after receiving a vast sum from a listed company.  With respect, if Mr Kwok is truly liable, then it is CIL itself that has let him off.  The truth of the events that occurred in the last century would have been discovered if CIL had brought the action to trial timeously, so that the oral evidence of the 4 main witnesses could be assessed at trial in the usual way, and the merits of the case determined by a court.

44.  I do not think any procedural blame should be laid at Mr Kwok’s door for the delay.  After years and years of inactivity by CIL, Mr Kwok discharged his solicitors in 2007, before the commencement of the CJR.  He did not instruct solicitors again until after CIL sought to revive the proceedings.  A lay person cannot be expected to understand the nuances of the post-CJR duty of a defendant not to “let sleeping dogs lie”.  Accordingly the plaintiff’s fault of delay in the present action cannot be shared with the defendant.

45.  Finally, as to the argument that Mr Kwok had “consented” to the further progress of the action since its revival in December 2011, the judge did not have to deal with it as he declined to ­strike-out the action for delay.  It is clear from Hymer that a defendant’s acts following revival of long-delayed proceedings would not be an automatic bar to obtaining a striking-out order.  Such conduct would only be a relevant factor to be taken into consideration.  As the House of Lords stated in Roebuck v Mungovin [1994] 2 AC 224 at 236, quoted in Hymer (p.602),

“ ... where the defendant’s actions are minor (as compared with the inordinate delay by the plaintiff) and cannot have lulled the plaintiff into any major additional expenditure: in such a case a judge exercising his discretion will be likely to attach only slight weight to the defendant’s actions”.

This was the situation with the present action and I do not see how that would disentitle the defendant from a strike-out order. 

46.  Moreover, as noted earlier, CIL was benefitting in the China Gold action from its delay in pursuing the present action because of its “global set-off agreement” defence which it has now abandoned.  In the China Gold action, the claim for principal and interest had risen to nearly HK$214m by April 2011.  In these circumstances, this adds an abuse element to CIL’s inaction which, with respect, the judge seems not to have appreciated. 

Order

47.  For the reasons set out above, I would allow the appeal with an order nisi that the plaintiff should pay the defendant’s costs here and below.

Hon Kwan JA:

48.  I agree with the judgment of Yuen JA.

Hon Godfrey Lam J:

49.  I also agree.