HONG KONG BROADBAND NETWORK LTD v. HONG KONG CABLE TELEVISION LTD

HCA 9172/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 9172 OF 2000

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D E C I S I O N

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1. The defendant (“HKCTV”) applies to strike out the claim of the plaintiff (“HKBN”) and to dismiss the action. HKBN responds with a similar application to strike out the counterclaim.

BACKGROUND

2. The background of this case was set out in detail by the previous written decision of Cheung J (as he then was) on the determination of the continuation of the interlocutory injunction on 24 November 2000.  I hope I would be excused for borrowing from His Lordship’s illustration in setting out the background below.

3. HKBN is a company providing broadband internet access to its customers then pursuant to a Fixed Telecommunication Network Service Licence issued by the Telecommunications Authority in 2000.

4. HKCTV is a cable television company, which was first issued with licence back in 90s.  HKCTV also provides broadband internet access to its customers.

5. In most multi‑storey buildings in Hong Kong, there is a public television broadcast network.  The network extended to each floor of the building and was connected to a cable, the drop‑in cable, which led to individual units by a 3‑way or 4‑way tap output of the public network on the individual floors of the building.

6. HKCTV built its own cable network in multi‑storey buildings in order to supply cable television to the occupants.  Since HKCTV’s network also transmitted television signals, in order to enable the user receiving both television signal and cable television service, HKCTV would switch the drop‑in cable of each unit from the tap output of the public network to the 3‑way or 4‑way tap output of HKCTV’s network.

7. In order to supply the broadband internet service to the units in multi‑storey buildings, HKBN built its own coaxial cable network in these buildings.  The method of connecting HKBN’s network to the individual units of each floor was this: HKBN installed a device called a 2‑way tap and redirect the drop‑in cable of the unit to the 2‑way tap which is connected to both HKBN’s network and the existing 3‑way or 4‑way tap output of the public network.  Inside the unit, the user would be given a modem to connect the drop‑in cable in order to receive the broadband internet access.  By means of the 2‑way tap, the individual units were able to receive both the television signals and also HKBN’s broadband access.

8. In cases where HKCTV’s cable customer (whose drop‑in cable was already connected to the 3‑way or 4‑way tap of HKCTV) subsequently subscribed to HKBN’s service, HKBN would connect the drop‑in cable to its 2‑way tap in which HKCTV’s 3‑way or 4‑way tap output and HKBN’s network output were connected.  In order to do so, HKCTV’s 3‑way or 4‑way tap output would have to be disconnected from the drop‑in cable and then immediately reconnected to the 2‑way tap of HKBN.

9. The construction of HKBN’s network and installation were carried out pursuant to agreements between it and the incorporated owners of the multi‑storey buildings and also between it and the individual owners.  In public estates, HKBN entered the agreement with the Housing Authority.

10. In March, June and August 2000, HKBN discovered that a number of its customers were off‑line.  Technicians dispatched there discovered that the drop‑in cables of the customers were disconnected from HKBN’s 2‑way taps and were connected to HKCTV’s 3‑way or 4‑way taps.  The disconnection caused disruption to HKBN’s service until its technician reconnected its network to the customers.  In late September 2000, HKBN discovered that their installations in eight estates covering 22 blocks of building had been disconnected by HKCTV.

11. By two letters dated 7 July 2000 and 29 August 2000, HKCTV’s then solicitors admitted that HKCTV’s employees had disconnected HKBN’s installation.

12. For alleged interference, tampering and trespass by HKCTV with its installations and connections made at various buildings in Hong Kong, HKBN commenced the present action.  On 23 September 2000, HKBN obtained the ex parte injunction against HKCTV restraining HKCTV from further interfering with its installations.

13. In October 2000, HKBN filed its amended statement of claim.  Besides the original cause of action for trespass and claim for injunctive relief, HKBN added the causes against HKCTV for interference with its business and its contracts with customers with intent to injure as well as claim for compensatory and exemplary damages.

14. In the same month, HKCTV filed the defence and counterclaim.  HKCTV admitted that the disconnections complained of were carried out by its employees.  But it contended that it was HKBN which had disconnected and re-connected HKCTV’s taps to the drop-in cables to fit in HKBN's taps in the first place, and thus constituting unauthorized interconnections and trespass of HKCTV's property and network.  HKCTV complained that HKBN’s connections resulted in a drop in signal strength adversely affecting the level of HKCTV's cable television services to its customers.

15. HKCTV counterclaimed, among other things, for damages and for an injunction requiring HKBN to remove and disconnect all unauthorized interconnections as well as for an order that HKBN do provide to HKCTV a list of all flats, units, estates, buildings or other locations in Hong Kong where HKBN had interfered with and/or made connection to HKCTV's taps and/or cables.

16. In November 2000, HKBN filed its reply and defence to counterclaim.

17. As mentioned, the ex parte injunction was continued until trial by Cheung J (as he then was) on 24 November 2000, when his Lordship also directed that there should be a speedy trial of the action. 

18. In February 2001, the Registrar gave directions for the further conduct of the case, including the time table for discovery, service of witness statements and expert reports as well as supplemental/reply expert reports, the last of them to be carried out in 84 days from the date of the order.

19. In March 2001, HKCTV made discovery of documents.

20. On 3 April 2001, Cheung J gave his ruling on the application for variation of the costs order made upon continuing the ex parte injunction.

21. Nothing had since developed.

22. 2 years and 7 months later, HKBN filed a notice of intention to proceed in early November 2003.  Another 6 months later, HKBN made discovery of documents.  More than 9 months later, in January 2005, the parties exchanged witness statements.

23. In the same year (2005), HKCTV had taken out various applications.  There was the application for variation of the injunction, and order for that was granted by consent in October 2005.  The time table for further experts reports and witness statements previously directed by the Registrar were all extended. There was also the application for further and better particulars of HKBN’s pleading as well as specific discovery; the order for that was made on 5 December 2005.  HKBN was to comply with the latest directions within period of 7 to 21 days.

24. In mid-December 2005, the parties filed their respective expert reports.  By consent, the parties further extended the time for compliance with the order dated 5 December 2005 mentioned above to 8 February 2006, and for the service of the supplemental/reply expert reports mentioned above to 8 March 2006.  They also agreed that there would be leave to serve supplemental witness statements within 4 weeks thereafter.

25. HKBN eventually complied with the order for specific discovery and further and better particulars, albeit just beyond the extended deadline mentioned above.

26. At the same time, in early February 2006, HKCTV applied for leave to amend the defence and counterclaim, which was granted in late November 2006.  The amended defence and counterclaim was filed accordingly.

27. By the amendments, further details of the allegations of facts and rights are now pleaded in defence.  Insofar as HKCTV had disconnected HKBN’s interconnections, it allegedly did so no more than what was necessary to remove the unlawful interconnections and HKBN’s properties which were said to be trespassing HKCTV’s taps and/or networks.

28. As to the counterclaim, HKCTV contends that the unlawful interconnections created a false representation to the customers of HKCTV that HKCTV was responsible for the affected quality of signal consequential upon the interconnections, and that was calculated to injure the goodwill and reputation of HKCTV.  HKCTV counterclaims for damages, being the cost of rectification and loss of profits for the alleged trespass and conversion as well as inquiry as to damages or account of profits for passing off on the part of HKBN.  The claim for injunctive relief remains.

29. HKBN’s reply and defence to counterclaim followed in January 2007.

30. Nothing much happened afterwards, except for the taxation of the costs pursuant to the costs order made on 5 December 2005.  This brings us to mid-2007.

31. The action has since lied dormant.

32. By letter dated 20 January 2012, HKCTV through solicitors requested HKBN to proceed with or to abandon the action.  This was 5 years since HKBN filed its last pleading, and more than 4 years and 7 months since the allocatur was issued in respect of the taxation of costs mentioned above.

33. Hearing nothing from HKBN, HKCTV filed its summons to strike out on 29 March 2012.

34. On 19 December 2012, HKBN responded by its summons to strike out the counterclaim as well, if the claim is struck out.

THE SUMMONSES

35. By its summons, HKCTV asks for the following:

(1) The claim should be struck out as it may prejudice, embarrass or delay the fair trial of the action[1], or it is otherwise an abuse of process of the court[2].

(2) Alternatively, if the claim remains, the injunction against it should be discharged.

36. HKBN’s application proceeds in the event that HKCTV’s summons is allowed and the claim is struck out. HKBN asks that HKCTV’s counterclaim should also be struck out on the same grounds mentioned above.

37. Whilst denying delay and abuse of process on its part, HKCTV indicates no objection to striking out HKBN’s claim on terms that HKCTV’s counterclaim is also struck out.  In other words, HKCTV does not seek to proceed with its counterclaim, if the claim is struck out.

THE PRINCIPLES

38. HKCTV argues that HKBN is guilty of inordinate and inexcusable delay in proceeding with the action and thus causing (i) a substantial risk that a fair trial becomes impossible (the so-called Birkett v James[3] limb) and (ii) other prejudice to HKCTV (the so-called injunction limb).  HKCTV also argues that the claim is liable to be struck out because of the absence of any intention on the part of HKBN to proceed with the action (the so-called Grovit v Doctor[4] limb).

39. Both sides refer to the principles restated by the Chief Justice in Wing Fai Construction Co Ltd (in liq) v Yip Kwong Robert [2012] 1 HKLRD 589.  Wing Fai was a case commenced and where the application to strike out for delay was taken out and first heard prior to the CJR coming into effect.  The Chief Justice (with whom other members of the final court agreed) restated (at§75) the principles that ought to be borne in mind in most of this kind of applications.  The principles were applied in the subsequent case of China Nonferrous Metals (Hong Kong) Finance Co Ltd (in liq) v South-East Asia Investment Holding Co Ltd, CACV 253/2012 (16 May 2013), which was a case commenced prior to the CJR and the application to strike out for want of prosecution being taken out after the CJR.  The appellate court (at §17) summarised the restated principles to the extent relevant for the purpose of determining that case.

40. The principles include:

(1) It remains that striking out is a remedy granted only in plain and obvious case.

(2) Abuse of the process of the court is the foundation for the exercise of the jurisdiction to strike out for delay.  Mere delay would not suffice, and abuse must be shown.

(3) Abuse could take many forms.  Inordinate and inexcusable delay causing real prejudice to a defendant would be an abuse.

(4) For contumelious conduct of the plaintiff which is shown to have amounted to clear abuse, proceedings could be struck out even where prejudice could not be shown.

(5) In the majority of the cases, however, prejudice would often be an extremely relevant factor.  The most compelling form of prejudice as a result of inordinate and inexcusable delay would be the substantial risk that a fair trial becomes impossible (Birkett v James).  Delay might also aggravate the prejudice caused by the existence of an interim injunction pending trial.

(6) Warehousing of claims with no intention of bringing the proceedings to a conclusion or wholesome disregard of the rules or court orders also amounts to abuse, which justifies the striking out (Grovit v Doctor).

(7) The conduct of the parties remains relevant to the question of abuse and the overall justice of the case.  Post-CJR rules on case management and their underlying objectives apply to existing proceedings.  All parties to the proceedings had the obligation to prosecute the proceedings and assist the court in furthering the underlying objectives, and therefore it would be highly relevant to consider any failure on the part of the parties.  There is no place anymore for the defendant to adopt the attitude of “letting the sleeping dogs lie”.  If it is sought to be argued that time has dimmed the memories of witnesses, the court will usually expect to know what steps the defendant has taken to take instructions or proof or to locate the witnesses.  The court would assess the extent of the prejudice with reference to the nature of the defence.

(8) Besides looking at the matter from the parties’ perspectives, the court would also take a proper regard to the administration of justice after the implementation of the CJR in furtherance of the underlying objectives of ensuring fair distribution of court resources.  Along the same line, the non-expiry of the limitation period should no longer militate against an order for striking out, abuse is clearly demonstrated.

DELAY

41. No doubt the direction for a speedy trial made in November 2000 was soon frustrated. Then came the first period of delay, which lasted for 2 years and 7 months between April 2001 and November 2003.  After the notice of intention to proceed, it took HKBN another 6 months to file its list of documents.  Nevertheless the parties had since acted in progress of the proceedings until they filed their respective expert reports in mid-December 2005.

42. Further time had also been taken by consent.  In late December 2005, the parties agreed to extend the time for HKBN to comply with the order against it made in December 2005 for, among other things, specific discovery to early February 2006 and to extend the time for the parties to serve the reply expert reports to early March 2006.  The parties also agreed to leave to serve supplemental witness statements in 4 weeks thereafter.

43. HKBN points out that some of the time taken and extended were initiated or occasioned by HKCTV.  In early February 2006, some 5 years after the filing of its defence and counterclaim, HKCTV also sought to amend its pleading.  Leave to do so was granted and complied with only in late November 2006.  HKBN’s consequential amended pleading followed in January 2007.

44. In the circumstances, it is fair to say that the time up to the beginning of 2007 was very much taken by both parties.

45. The period of delay that requires a closer look was that which lasted between 2007 and 2012.  It was 5 years, if counting from the filing of the last pleading of HKBN, and over 4.5 years, if counting from the issuing of the allocatur as mentioned. The delay was inordinate.  There is no material that could excuse such delay either.

ABUSE

46. HKCTV argues that it was an abuse when HKBN has obtained the protection of an interim injunction and then showed no interest in proceeding with the claim.  HKCTV argues that HKBN has no intention to continue the action.

47. HKCTV itself expresses lack of commercial incentive to continue the action, and it suggests the same is true in the case of HKBN.  The suggestion is made because the technology based on which the interim injunction was said to be necessary and obtained has by now been superseded.  HKBN no longer requires the injunction to protect its operation.  HKBN’s purpose has largely been served by the interim injunction.

48. Essentially the interim injunction restrains HKCTV from tampering with the connections to HKBN’s coaxial cable network installed in the estates and buildings.  When granting the continuation of the injunction, the court was acutely aware of minimising its resultant impact on the operation of HKCTV.  Hence the direction for a speedy trial.

49. Speedy trial soon became out of the question, in view of how the parties have chosen to conduct the case subsequently.  In doing so, HKCTV applied for and the parties eventually consented to variation of the injunction so that access to the installations for specific purposes of inspection and observations upon prior notice to HKBN was granted to HKCTV.  Now HKBN’s coaxial networks in the estates and the buildings are no longer in use, and there would be no connection to HKBN’s coaxial cable network that HKCTV could tamper with any further.

50. HKBN argues that the injunction now exists on paper only and cannot cause any prejudice to HKCTV.  There is indeed no evidence of what HKCTV would have been able to do, which it could not do because of the injunction in place (albeit HKBN no longer carried out the connections that would concern HKCTV).  However HKBN accepts that the purpose of the interim injunction has been served and could be discharged, even if the action continues.

51. The permanent injunctive relief appears to be no longer necessary.  But HKBN stresses that there is still its claim for loss and damage as well as the costs (said to be in the region of HK$3 million).  HKBN maintains such claim, unless the parties otherwise resolve the matter amicably.

52. The undeniable fact is that HKBN has not proceeded with its claim for the past years. The present verbal assertion of belief in the merits of HKBN’s claim for damages and costs apparently has not manifested itself in any motivation to act.  Even when HKCTV’s solicitors wrote in January 2013, HKBN did not respond. Hence HKCTV’s application.  There is no suggestion or evidence of any consideration during this period with a view to bringing the dispute to closure.  HKBN has effectively shelved the claim, whichever way one looks at it.

53. That HKBN did so, while leaving the interim injunction in place notwithstanding the subsequent material change in circumstances, is tantamount to abuse.  This is so, irrespective of whether the interim injunction is demonstrated to have aggravated the prejudice of the delay caused to HKCTV.

54. However this is not the full picture.

55. The period of delay between 2007 and 2012 straddled across the pre-CJR and post-CJR regime.  HKCTV argues that only after the CJR did both sides to the proceedings become under the obligations to prosecute the proceedings introduced by the reform.

56. I hold nothing against that, if one is referring merely to the new rules.  However, HKCTV has in place a related counterclaim, which it would have been expected to prosecute without inexcusable delay even during the pre-CJR regime in the absence of the new rules.  This was particularly so, when the court actually directed for a speedy trial.

57. HKCTV also argues that it is only after the re-statement of the principles in Wing Fai could a defendant be said to be on notice of the court’s post-CJR view of the “letting the sleeping dogs lie” approach.  Therefore, as a matter of principle, a defendant who “lets sleeping dogs lie” prior to the date of the decision in Wing Fai could not be said to have acquiesced the plaintiff’s delay.

58. I do not agree.  HKCTV’s argument is premised on the change of the law only by the decision in Wing Fai.  But the fact was that the change took place upon the CJR coming into effect.  With the CJR and the new (case management) rules coming into effect, which apply to existing proceedings, the parties to the proceedings may not claim unawareness of the change in approach until there happened to be the case of Wing Fai that went to final appeal.

59. The argument also does not align with the principle that the conduct of the parties is relevant to the issue of abuse and overall justice of the case.  In stating such principle, the Chief Justice in Wing Fai did not limit the relevance of the conduct of the parties by reference to whether it was prior to or after the CJR coming into effect, let alone after the CJR but before the decision.

60. One should perhaps return to the order of the court dated 27 November 2006.  By consent, leave was given to HKCTV to amend its defence and counterclaim.  This HKCTV did.  The consent order also provided for the timetable for the filing of the amended reply and defence to counterclaim, exchange of supplementary/reply expert reports and supplemental witness statements.

61. Subsequently HKBN obtained extension of time twice for filing the amended reply and defence to counterclaim.  Both were granted upon HKCTV’s consent.  As mentioned, HKBN filed its last pleading eventually on 12 January 2007.  The directions in respect of further expert reports and witness statements made on 26 November 2006 were never carried out.  The obligation to comply with the directions was mutual.  The inaction was likewise mutual.

62. As far as HKCTV is concerned, it has a counterclaim which exists and is for HKCTV to prosecute.  Whether or not it might have chosen to wait and see for any practical considerations is immaterial, as far as the progress of the action is concerned from the case management perspective.  Nor is it an acceptable suggestion that the counterclaim, albeit related to the claim, is primarily defensive, a suggestion which I anyway do not agree as a matter of fact.  Whichever way one looks at it, HKCTV has also effectively shelved its counterclaim.

IMPOSSIBILILTY OF FAIR TRIAL

63. HKCTV argues that due to the delay, it has suffered prejudice in that a fair trial of the claim and the counterclaim has become impossible.  HKCTV specifically refers to the issues of intent on its part that HKBN raised in the amended statement of claim[5] and the alleged discarding of HKBN’s taps by HKCTV’s employees[6].  It is said that it has become impossible to try these issues fairly.

64. What HKCTV refers to is HKBN’s contention that HKCTV committed the alleged wrongful acts (of disconnecting HKBN’s network from its customers’ drop-in cables and damaging HKBN’s taps) with intent to injure or interfere with the business of HKBN as its competitor in the same trade of provision of broadband internet access services.

65. As far as the disconnection is concerned, this has always been admitted by HKCTV[7], only that this was said to be no more than necessary to rectify what HKBN had wrongfully done to HKCTV in the first place.  The question of intent to injure HKCTV as competitor will be a matter of inference to be drawn from the all the circumstances as proved.

66. As far proof of the alleged wrongful act is concerned, HKCTV argues that the delay on the part of HKBN has caused it prejudice in the form of dimming of memories and loss of witnesses.  As mentioned, when prejudice is suggested in the form of loss of memories or contract of witnesses, the court will need to know what steps have been taken by the complaining party to take instructions or proof or to locate the witnesses.  This is particularly relevant in the present case when HKCTV has the counterclaim, albeit related to the claim, to prosecute.

67. To begin with, and contrary to the directions with a view to speedy trial, the parties exchanged witness statements only in January 2005.  No problem as to witness memory or locating witness was indicated, though it was already 5 years after the commencement of action and 4 years after the direction first given in February 2001.  The witnesses managed to give substantial statements with reference to contemporaneous documents.  They serve to refresh memory, if necessary.

68. In February 2006, HKCTV was still seeking to amend its pleading.  This was allowed and filed in November 2006.  That the pleading was amended with the additional factual particulars and cause of claim.  They had to be added as a result of instructions obtained from the person(s) who managed to tell then.  The court gave directions at the same time, which imposed on both parties equally positive obligations to prepare their further expert reports and witness statements in support of their respective cases.  Not only was there no indication of problem as to memory or locating of the relevant witnesses to testify in respect of what was pleaded, but the directions were then given by consent of the parties.

69. Now HKCTV complains that a witness, Mr Lam, has a dimmed memory of the events while another witness, Mr Shao, could not be located.  Neither of them has served their statements.  If the idea of calling them arose not earlier than the directions of the court last given in November 2006, HKCTV would have had to take the witnesses as they then were.  Insofar as their then state of memories of the events is concerned, HKBN cannot be to blame.

70. If the suggestion is that the witness’ memory has dimmed only since then, HKCTV has contributed towards that state of affairs for it has failed to obtain proof of evidence from the witness in discharge of its positive obligation pursuant to the directions last given by the court.

71. As to the loss of Mr Shao as a witness, whether the idea of calling him arose prior to or after the directions last given by the court in November 2006, it would have been HKCTV’s concern to maintain contact with the witness.  It should be noted that Mr Shao is said to have left HKCTV only in 2009 and moved to New York in the following year.  That was years after November 2006.  The fact that HKBN has no doubt delayed in prosecuting the claim did not absolve HKCTV from its own concern and obligation to secure Mr Shao as a potential witness prior to his departure.  There is no suggestion that this should not and could not have been done.

72. Even assuming prejudice in terms of the alleged impossibility of a fair trial is substantiated, I do not find the argument to attribute the blame to HKBN’s delay to be impressive.

OTHER PREJUDICE

73. HKCTV also complains about other prejudice cause by the delay in the form of the costs incurred in keeping this litigation on the books.  Such costs include legal costs for periodical review of the case by its legal representatives.

74. In my view, this must fall short of substantial prejudice as a result of the delay and, in any event, if accepted as a ground for striking out the claim, will not serve the overall justice of the case.  To begin with, HKCTV is not keeping this action on the books passively because of the claim but also of the counterclaim.  Incidental to that, both parties have incurred and will incur costs.  The amount of the costs so incurred by HKCTV is unknown but unlikely to be so substantial as to outweigh the significance of bringing these proceedings to a conclusion.

THE SCENARIO

75. Because of the related claim and counterclaim, as well as the positive obligation on both parties to proceed with their respective claims, it would not serve the overall justice of the case to strike out the claim on the grounds proposed without prejudice to the related counterclaim: Winpo Development Limited v Wong Kar Fu, HCA 3541/1993 (8 February 2011) at §§57; 62; Winpo Development Limited v Wong Kar Fu, CACV 39/2011 (22 July 2011) at §§18; 20; and Zimmer Orthopaedic Ltd v Zimmer Manufacturing Co Ltd [1968] 1 WLR 1349.

76. HKCTV must realise that, and hence its indication that should HKBN’s claim be dismissed, its counterclaim should also be dismissed.  The circumstances of the present case are such that both parties have simply shelved their respective claims with no evidence of consideration about bringing the action to closure for years.  This is a clear case of abuse from the court’s perspective.  Both the claim and the related counterclaim are liable to be struck out on that ground.

CONCLUSION AND ORDER

77. The claim is struck out; and so is the counterclaim.  The action is dismissed and the interim injunction abovementioned falls to be discharged.

78. As to costs, I should mention that HKCTV argues, but only in court, that the costs order made absolute by Cheung J on 3 April 2001 upon the continuation of the interim injunction on 24 November 2000 should somehow be varied (if HKCTV succeeds in its application).  This is not covered by its summons.  This will also be an attempt to impeach the costs order under the illegitimate disguise of setting aside of the court’s previous order.

79. Both parties are to blame for shelving the action.  In the circumstances, it is only fair that the parties should bear their own costs of the action and the application to strike out (including any costs reserved but without prejudice to the costs orders previously made in this action).  I make a nisi costs order in these terms.  In the absence of application in 14 days to vary, the order shall become absolute.

80. I thank counsel for their assistance.