CHEUNG SAI KIT v. WONG CHIU KIT, ERIC

HCA 1611 / 2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1611 OF 2005

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BETWEEN

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DECISION

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A. Introduction

1.  This is the Defendant’s application under his Summons dated 25 September 2009 to strike out the Plaintiff’s claim on the basis of (a) abuse of process, and/or (b) for want of prosecution.

2.  The gist of the Defendant’s complaint is that the Plaintiff’s claim, issued in August 2005, has been put in abeyance for some 32 months since January 2007. Thus, the Defendant says, the Plaintiff has no intention to continue the action to an end, which amounts to an abuse of process, or the inordinate and inexcusable delay in proceeding with the action would result in prejudice or an unfair trial if allowed to proceed now. It therefore should be struck out.

B. Background

3.  The relevant undisputed background leading to the present application can be summarized as follows.

4.  The Plaintiff (Mr Cheung) brought the present claim against the Defendant (Mr Wong) on the basis that, in late 1999, Mr Wong deceived Mr Cheung into paying him (Mr Wong) some RMB3 million odd by misrepresenting to Mr Cheung that he (Mr Wong) was the business partner of Mr Cheung’s late father in relation to a concrete sub-contract for a construction projection in Beijing (“the Beijing Project”). The sum paid by Mr Cheung was Mr Wong’s alleged share of the profits made out of the Beijing Project. It is Mr Cheung’s case that he subsequently found out that Mr Wong was not a business partner of Mr Cheung’s late father and thus Mr Wong’s said representation was made fraudulently.

5.  Therefore, in August 2005, Mr Cheung issued the present claim against Mr Wong to recover the said RMB3 million.

6.  In the Defence filed in October 2005, Mr Wong’s case is in gist that he was a business partner of Mr Cheung’s late father for the Beijing Project, and that, in any event, he had not made the said representation.

7.  After the close of the pleadings in late October 2005 (where Mr Cheung filed a Reply), in September 2006, Mr Cheung took out an application for summary judgment against Mr Wong. He filed an affirmation in support of the application.

8.  In November 2006, Mr Wong, one Jacky Wai, one Cheung Suk Fun and one Vincent Chan respectively filed an affirmation to oppose the O.14 application.

9.  Mr Wai was the manager of Mr Wong’s company Wing Wah. Ms Cheung was the accountant of Wing Wah. Mr Vincent Chan was the General Manager of a concrete company called Ready Mixed, and before joining Ready Mixed, he was a colleague of Mr Cheung’s late father in another concrete company called Anderson. Ready-mixed sub-contracted the concrete contract in the Beijing Project to Mr Cheung’s late father. These deponents’ evidence in their respective affirmations was to the effect that they confirmed that, through their personal knowledge in occasions of meetings with Mr Wong, and/or Mr Cheung’s late father and/or Mr Cheung, Mr Wong was a business partner of Mr Cheung’s late father in the Beijing Project.

10.  Mr Cheung and his sister, Ms Cheung, then filed their affirmations in reply under the O. 14 application on 17 January 2007. This was done after Mr Cheung had through his solicitors, Messrs Y H Yeung and Associates, obtained by consent an extension of time to file evidence.

11.  Thereafter, Mr Cheung has never applied to fix a hearing date for the O.14 application. He (whether by himself or through Y H Yeung and Associates) has also not taken any steps in the proceedings.

12.  Some 32 months after the last step taken in these proceedings (i.e., the filing of the reply affirmations in the O 14 application), Mr Wong took out the present application to strike out the action.

C. The present application

C1. Applicable principles

13.  It is now well established that the Court has the discretionary power to strike out an action where it is satisfied that the proceedings amount to an abuse of process. It is an abuse of process where the plaintiff has commenced and continued litigation which he has no intention to bring to a conclusion. As said by Lord Woolf in Grovit v Doctor [1997] 1 WLR 640 at 647F

“Even without this surprising late development, I am satisfied that both the deputy judge and the Court of Appeal were entitled to come to the conclusion which they did as to the reason for the appellant’s inactivity in the libel action for a period of over two years.  This conduct on the part of the appellant constituted an abuse of process.  The courts exist to enable parties to have their disputes resolved.  To commence and to continue litigation which you have no intention to bring to conclusion can amount to an abuse of process.  Where this is the situation against whom the proceedings is brought is entitled to apply to have the action struck out and if justice so requires (which will frequently be the case) the courts will dismiss the action.  The evidence which was relied upon to establish the abuse of process may be the plaintiff’s inactivity.  The same evidence will then no doubt be capable of supporting an application to dismiss for want of prosecution.  However, if there is an abuse of process, it is not strictly necessary to establish want of prosecution under either limbs identified by Lord Diplock in Birkett v. James [1978] AC 297.  In this case once the conclusion was reached that the reason for the delay was one which involved abusing the process of the court in maintaining proceedings where there was no intention of carrying the case to trial the court was entitled to dismiss the proceedings...” (emphasis added)

See also:  Advaita Enterprises v. Seafast Marine Transport Inc., (unrep., HCCL 241/1995 & 158/1996, Hon. Chung J, 24^th November 2001), para. 14; Formative Way v Lam Soon Warehouse, (unrep., HCA 5312/1991, Deputy High Court Judge Poon 22 October 2001) paras, 33, 51.

14.  For that purpose, the act of commencing and then “warehousing” proceedings until it is a convenient time for a party to pursue them has been held to constitute such an abuse. See: Arbuthnot Letham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426 at 1437 per Lord Woolf; Tam Chi Kok v Fok (unrep., HCA 1859/1992, 12 June 2003), per Deputy High Court Judge A Cheung at para 103; Advaita, supra, per Chung J at paras 10, 12 and 14; Formative Way, supra, per Deputy High Court Judge Poon, at paras 24, 51.

15.  Further, the Court can dismiss an action for want of prosecution where there has been inordinate and inexcusable delay on his or his lawyer’s part giving rise to a substantial risk that a fair trial would not be possible or to a serious prejudice to the defendant. See: Birkett v James [1978] AC 297; Hong Kong Civil Procedure 2010, paras 25/L/4, 25/L/6.

C2. Should the present action be dismissed on the basis of abuse of process

16.  Mr Maurellet, counsel for Mr Wong, submits that the 32 months inaction on the part of Mr Cheung to take any further steps both in the O.14 application and in the proceedings generally show that Mr Cheung has no intention to continue the action to a conclusion. This amounts to an abuse of process, as this at best shows that Mr Cheung is consciously “warehousing” the action.

17.  In my view, as said by Lord Woolf in Grovit v Doctor quoted above, the inactivity of Mr Cheung in taking any step in the action for 32 months (which is a long period) amounts to prima facie evidence of his lack of intention to continue the action to a conclusion.

18.  Mr Cheung has filed an affirmation to explain the inaction. The material part of his explanations are at paragraph 8 which is as follows:

“8. (1) I was made redundant by my previous employer for having taken too much leave from work for the purpose of catering for what had been left over by my late father.  Since nearly all of my personal savings had been used in making payment to the Defendant, I resumed work in or around mid 2007 but only be able to secured [sic] a position outside the Region.  As a result I spent nearly all of my time abroad and selfdom [sic] came back to Hong Kong in order to accumulate what I have been loss [sic] through payment to the Defendant.

(2)  While not knowing the relevant legal procedure and having left the Region as well as focusing on the health of my wealth, I had not made any contact with my legal representative, that is Messrs. Y.H. Yeung and Associates, Solicitors to monitor progress of the action.”

19.  In gist, what Mr Cheung is saying is that he has not contacted his lawyers in relation to the action and to monitor its progress since mid 2007 because (a) he has been focusing on his work abroad “outside the Region” and was seldom in Hong Kong, and (b) apparently his solicitors had not contacted him.

20.  Mr Yeung of Y H Yeung and Association has also filed an affirmation to confirm that he had entirely overlooked the existence of this case. He explains that this is because (a) during this material period, he was setting up his own firm (Y H Yeung and Associates) and had been engaged in some debates with his former partners (of Messrs Yeung and Tsang) for a long time which substantially delayed the handing over of the various clients’ files to his new firm, and (b) after the handing over of the files, he being the sole partner of the Y H Yeung and Associates and had only been assisted by an inexperienced clerk had simply “inadvertently” overlooked the existence of this case.

21.  I am not satisfied that these “explanations” can rebut the prima facie evidence that Mr Cheung has no intention to continue the action to an end. Even if I were to accept the evidence of Mr Cheung and Mr Yeung, it does not explain why Mr Cheung himself could not have contacted his lawyers to ask for and press for the progress of the action if he has been seriously concerned with and interested in bringing the claim to an end. To me, any reasonable person in Mr Cheung’s position with a genuine intention to proceed with the claim to an end, would have called upon his solicitors at the latest a few months after the filing of the evidence in the O.14 application to ask for the progress of the action. This is particularly so, when it is Mr Cheung’s case (as set out in the present affirmation) that Mr Wong had deceived him almost all of his life saving.

22.  In the premises, I am satisfied that the present action should be dismissed as an abuse of process.

C3. Should the action be dismissed for want for prosecution

23.  Mr Maurellet submits that:

(1)  The 32 months’ inactivity in the proceedings is clearly an inordinate and inexcusable delay.

(2)  There is a serious risk that there would not be a fair trial, if the matter is allowed to proceed, as the Court is entitled to infer loss of memory of Mr Wong’s witnesses by reason of the passage of time (caused by the delay) in relation to events occurred more than 10 years ago.

(3)  In any event, Mr Wong as a businessman has suffered serious prejudice in his reputation and his business by reason of the protraction and hanging over of this claim which accuses him of dishonesty and fraud.

24.  Mr Ng, counsel for Mr Cheung, fairly (and I think rightly) accepts that there is inordinate delay in the present case. He however says the action should not be dismissed on this ground because:

(1)  The delay is excusable (for the same reasons discussed above).

(2)  There would be no risk of an unfair trial, because Mr Wong’s witnesses would have the benefit of the various affirmations they have filed in the O14 application to refresh their memories.

(3)  There is insufficient evidence of prejudice as alleged by Mr Wong.

25.  I reject Mr Ng’s submissions for the following reasons.

26.  First, for the same reasons I have given above, I do not think the inordinate delay is excusable. In particular, for this purpose, I do not accept Mr Yeung’s above explanations as good ones to excuse his failure as a solicitor to keep track of the proceedings and to duly advise Mr Cheung to take steps to pursue his claim.

27.  Secondly, although Mr Wong’s witnesses could have the benefit of the affirmations filed in the O.14, it does not mean that Mr Wong would not suffer the risk of an unfair trial by reason of the inordinate delay. This is so because:

(1)  Judging from the contentions between the parties raised in the affirmations filed in the O.14 application, oral evidence of, and thus the ability to recall with accuracy of the events by, the witnesses are likely to be important in proving Mr Wong’s defence at trial.

(2)  I accept Mr Maurellet’s submission that the court is entitled to infer that there would be further natural loss or fading of these witnesses’ memories by the passage of time as a result of these 32 months’ delay.

(3)  Although their memories of the main events could be refreshed by the affirmations they have filed, this can only be to a certain extent, in particular in this case where the affirmations were filed for interlocutory purpose which may not have covered many of the details of the events to be recalled.

(4)  On the other hand, it is reasonable to expect that, in the trial, the witnesses are likely to be cross-examined on various details of matters that had occurred more than 10 years ago, something which are likely to be adversely affected by the fading of the memories.  Thus, it is reasonably likely that their credibility would be challenged on that basis.

(5)  In the circumstances, I accept that this would give rise to a substantial risk that a fair trial for Mr Wong is not possible as a result of the inordinate delay.

28.  Finally, Mr Wong has affirmed that his reputation as a businessman has been adversely affected by these proceedings because of the allegations of fraud against him. This in turn has affected his business and his credit. He says as follows:

“9.  Many people (including relatives, business partners and friends) who know me have heard about this case against me and asked me awkward questions about it as they had heard that someone had sued me because I cheated him.  Of course I denied and explained that there was no basis for it.  Even now people asked me if the action is over yet and when I say it has not, I can detect that they have some suspicions.  Whilst this Action has been hanging, I have been extremely stressed because I worry that my acquaintances will have a prejudiced view of me.  In fact, it did happen.  I have been using a credit card held with Standard Chartered Bank with a limit of over $50,000 for years and I settled the overdue fully from time to time.  However, after this Action was commenced, I received a letter from the Bank and been informed that my credit limit was reduced to $12,000.  There is new produced and shown to me marked "WCKE-3" a true copy of two bank statements dated 12th November 2008 and 12th August 2009 respectively.  At that time, I was shocked and made an enquires to the bank via one of its officers (whose name I already forgot) and was informed that as there is a High Court's case with an allegation of fraud against me, the credit agency employed by the Bank recommended it to reduce my credit limit to such an extent.  I am so angry at that time so that I discontinued that credit card.  Subsequently, I applied for a new credit card with HSBC with whom I held a deposit with a very substantial sum and unexpectedly, my application was refused by that bank.  I suspect that this rejection is caused by this case.

…

14.  This Action, which in any event lacks merit and should never have been brought at the first place, has caused an ongoing depressive effect on me and my reputation.  In particular, I am a businessmen doing business in Hong Kong and the PRC.  With such serious allegations hanging in the air, my reputation which is crucial to my businesses has continued to be affected.”

29.  This evidence, other than in relation to the reasons for lowering of the credit card limit, is not materially challenged.

30.  Further, as observed by Roch LJ inAl-Fayed v Emanouel Antiques Ltd (unrep., Smith Bernal transcript of judgment dated 23 July 1997, Nourse, Roch LJJ) at p 11, where a businessman is sued for fraud or dishonesty, and the action is protracted, it is of common sense that the existence of such allegations must have had a grave and disruptive effect on the defendant’s business. See also: Nourse LJ at pp 12-13.

31.  I accept and adopt these observations.

32.  In the premises, I accept Mr Maurellet’s submissions and am also satisfied that the inordinate delay has caused serious prejudice to Mr Wong.

33.  I would have therefore also struck out the action for want of prosecution.

D. Conclusion

34.  For the above reasons, I order that the action be struck out or dismissed for abuse process and/or want of prosecution.

35.  I thank counsel for their succinctness in submissions.

Representation: