FOR TAT ELECTRONIC ENGINEERING CO v. HONG KONG BROADBAND NETWORK LTD

DCCJ 119/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 119 OF 2003

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D E C I S I O N

1.  For Tat, the Plaintiff, is the business of Lam Yick Cheong (“Lam”). It commenced the present action against HKBN, the Defendant, in January 2003 for unpaid invoices for work done. Since June 2006, the proceedings in the action have come to a halt. In November 2009, For Tat alerted the other side of its intended to proceed. In February 2010, HKBN applied for the action to be struck out whilst For Tat applied for further direction in respect of the further conduct of the case.

2.  On 30 September 2010, the Master allowed HKBN’s application and dismissed For Tat’s application with costs.  For Tat now appeals.  I am rehearing the parties’ respective applications pursuant to O.58 of the Rules of the District Court.  For this purpose, Lam adduced into evidence a further affirmation in support.  HKBN had no objection to that.

The Chronology

3.  The writ was filed on 7 January 2003.  For Tat soon applied for legal aid.  HKBN filed its Defence in May 2003.  Legal aid certificate was not issued to For Tat until February 2004.  Through his solicitors, For Tat applied to amend the Statement of Claim 3 months later.  Consequential upon the directions of the court for the filing and service of amended pleadings, the Amended Defence was filed towards the end of July 2004.  In the following 2 months until November 2004, parties were engaged in requesting and providing further and better particulars of the Amended Defence.

4.  Nothing much happened in 2005 except for discovery of documents in August since the memorandum of the parties’ agreed directions in January.  Nearly 9 months later, in April 2006, For Tat applied to amend the Reply.  Pursuant to For Tat’s application, the court gave directions for the filing and service of the witness statements within 60 days.  The order was dated 9 June 2006.  Hence the deadline for filing the witness statements expired on 28 July 2006.

5.  Neither party complied with the above directions.  The case became stagnant until almost the end of November 2009, nearly 3 and half years later.  By then, the limitation period that applied to For Tat’s claim had also expired for over a year.  For Tat’s solicitors then notified HKBN’s solicitors that they were ready to exchange witness statements and to set the case down for trial.  Notice of intention to proceed was formally filed.

6.  In their reply in early December 2009, HKBN’s solicitors complained about For Tat’s inordinate delay in prosecuting the action; and that they could only proceed 1 month after the service of the notice.  In January 2010, For Tat’s solicitors chased HKBN’s solicitors for exchange of witness statements.  This led to the reply that HKBN would apply for the claim to be struck out for want of prosecution.

7.  On 2 February 2010, For Tat nevertheless served its witness statements on HKBN’s solicitors.  Meanwhile, it filed a summons for an Unless Order compelling HKBN to file and serve its witness statements.  On 9 February 2010, HKBN filed its summons for striking out.

8.  On 14 May 2010, the Master ordered that the claim be struck out; and consequentially dismissed For Tat’s summons.  The Master made an adverse costs order against For Tat in respect of both summonses.

The principles

9.  The court has the discretionary power to strike out an action for want of prosecution.  The often cited principles from Birkett v James [1978] AC 297 are that the power to dismiss an  action should only be exercised where the court is satisfied either:

(1)                 that the default has been intention and contumelious, such as disobedience to a peremptory order of the court or conduct amounting to an abuse of process of the court; or

(2)                 that there has been inordinate and inexcusable delay on the part of the plaintiff or his lawyers and such delay will give rise to a substantial risk that it is impossible to have a fair trial of the issues in the action or is such as is likely to cause or to have caused serious prejudice to the defendants either as between themselves and the plaintiff or between each other or between them and a third party. 

10.  The power to dismiss an action for want of prosecution in scenario (2) above should not normally be exercised within the currency of the limitation period, as the plaintiff is normally entitled to commence fresh proceedings for the same cause after the current action has been struck out.

11.  The court also has the power to dismiss an action where it is satisfied that the proceedings amount to an abuse of process.  In Grovit v Jones [1997] 1 WLR 640, Lord Woolf considered that such abuse happens where the plaintiff has commenced and continued litigation which he has no intention to bring to conclusion.  The evidence which is relied on to establish the abuse of process may be the plaintiff’s inactivity.  Whilst the same evidence will be capable of supporting an application to dismiss for want of prosecution in scenario (2) above under the Birkett v James principles, it is not strictly necessary to establish want of prosecution under either limb identified in Birkett v James if this is a case of abuse of process.

12.  In Arbuthnot Letham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426, Lord Woolf elaborated that the act of commencing and then warehousing proceedings until it is a convenient time for a party to pursue them constitutes an abuse of process.

13.  With the introduction of the CJR on 2 April 2009, the underlying objectives of the reform enumerated under O.1A, r.1 need to be given effect to.  Both the court and the parties should ensure that, among others, a case is dealt with as expeditiously as is reasonably practicable.  By giving effect to the underlying objectives, the court shall always recognise that the primary aim is to secure the just resolution of disputes in accordance with the substantive rights of the parties.

14.  The period of inactivity in the present case straddle across both pre-CJR and post-CJR era, 2 April 2009 being the dividing line.  The former lasted for about 2 years and 9 months; followed by the latter lasting for nearly 8 months.  Insofar as the pre-CJR period is concerned, the conduct of For Tat should really be viewed in accordance with the common law principles discussed above instead of the new rules.

15.  After the hearing, Mr Wu for For Tat drew this court’s attention to the written decision of Fok JA (sitting in the Court of First Instance) in Winpo Development Limited v Wong Kar Fu & Ors, HCA 3541/1993, which was handed down 2 days before the hearing.  However, insofar as the principles are concerned, His Lordship did not seek to say otherwise than those discussed above.  It is still a matter of applying the principles to the facts of each case before the court.

The delay

16.  The delay in the present case exceeds what the profession and the court would accept; and must be recognised as inordinate: Hong Kong Civil Procedure 2011, Vol.1 at 25/L/5.

17.  The plaintiff’s inactivity amounts to prima facie evidence of his lack of intention to continue the action to a conclusion: see Grovit v Doctor (above); Cheung Sai Kit v Wong Chiu Kit, Eric, HCA 1611/2005 (17 December 2009).  HKBN contends that this is the case here; and For Tat fails to rebut the prima facie evidence to resist the finding of an abuse of process.

18.  In his first affirmation, Lam explained what happened since the court’s direction in June 2006.  Essentially, he explained that his company was small and documentation was not complete.  He was busy and not fluent in English.  The time was taken to (1) discuss the case with potential witnesses; (2) prepare the witness statements; (3) prepare further discovery; and (4) apply for extension of the legal aid.  Mr Wu described his client’s case was not one of inactivity, though admittedly one of slow activity.

19.  For Tat announced its intention to proceed towards the end of November 2009.  However his statement and those of his witnesses, on their faces, have been ready by late July and early August 2009.  That said, it was still 3 years since the court’s last directions.  To say that it took such a long time to discuss with his potential witnesses and to prepare their statements is not convincing at all.  In his statement, Lam stated his case with reference to the documents disclosed back in August 2005. The short statements of his site foreman and account staff manage to cover the substance of their evidence in no more than 2 paragraphs.  As to the further discovery, For Tat’s supplemental list of document consists of nothing more than 2 plans for works at the 2 housing estates in question.

20.  That a plaintiff is busy in his own business is never an excuse for delaying the prosecution of his claim.  Nor is Lam’s language ability in the present case.  Lam was at all material times assisted by solicitors.  He managed to complete discovery of some 69 items of document back in August 2005.  He managed to amend the Reply in response to the pleading of HKBN before taking out the considered application in May 2006 for the direction to file and serve witness statements.  It was he who asked for 60 days for such purpose and it was so directed by the court.  It was simply not a case of some unexpected difficulties arising after the direction has been obtained.  In any event, had there been such difficulty, For Tat, through its solicitors, would have sought extension of time from HKBN and the court.

21.  Insofar as the explanation for the delay is concerned, the application for extension of legal aid is irrelevant.  What For Tat should have done pursuant to the direction of the court in June 2006 was matter already covered by the legal aid certificate last extended on 22 February 2006.  Further, though Lam was silent as to exactly when he applied for the further extension of legal aid, the certificate of the last extension was dated 19 November 2009 which was already nearly 2 months after he appended his signature on his witness statement.

22.  All these lead me to conclude that Lam’s explanation of the delay is not good or sufficient for excusing his inordinate extent of the delay.

Prejudice and fair trial

23.  In view of the inordinate and inexcusable delay, the power to dismiss the action may be exercised if the requisite prejudice to HKBN is shown.  HKBN contends that fair trial has become impossible, mainly because of loss of the contact of potential witnesses; and for those who could still be located, it will be unfair to require them to recall events happened some 8 years ago.  Mr Wu described the alleged prejudice is unreal and, at least partly, self-induced; and submitted that fair trial is still possible.

24.  There is no dispute that HKBN contracted For Tat for work at Lek Yuen Estate and Shun On Estate in 2001-2002.  For such work, For Tat issued to HKBN invoices in February and January 2002 respectively.  What For Tat now claims are the cost of the additional work done afterwards.

25.  As pleaded, on or about 10 April 2002, Stephen Wong and Yip Tsz Kuen of HKBN requested him to provide variation or supplementary work at those 2 sites pursuant to its quotation for the original contract work.  HKBN has subsequently approved and assessed the additional work done as evidenced by faxes in April 2002.  The cost of the additional work done was eventually agreed between the parties.  For Tat accordingly issued its invoices in June 2002.  For Tat is claiming for these 2 unpaid invoices for the total sum of HK$501,035.60.

26.  In defence, HKBN denies the alleged request or instruction to For Tat for additional work at the 2 sites.  Such work, if any, would be part of the original contract work.  There were the faxes in April 2002; however they merely reflect the result of the site audit conduct by HKBN.  All the work done by For Tat had been duly paid for in accordance with the original contract.

27.  Further or alternatively, the alleged additional work was said to fail to comply with the drawings approved by the Hong Kong Housing Authority (“HKHA”) contrary to the parties’ agreement.  By way of further and better particulars, HKBN identified the staff then responsible for such agreement and the provision of such drawings to For Tat.  Besides Stephen Wong, they are Ip Tsz Kuen, Angus Wong Ka Shek, Lee Pit Sang and Stephen Ng.  There is no counterclaim on the basis of the alleged non-compliance.

28.  Lastly, HKBN also pleads reliance on the terms of a document dated 12 September 2001 said to govern the relationship between the parties.  In essence, the effect of the terms was that HKBN has no obligation to pay for any additional work in the absence of a purchase order actually placed.

29.  By now, there should be no real doubt that the Yip Tsz Kuen that For Tat referred to is the same person as Ip Tsz Kuen of HKBN at the material time.  HKBN stated the following situation concerning their potential witnesses:

(1) Ip left the company on 31 March 2006.  Despite attempt to contact him by telephone in January 2010, Ip could no longer be located.

(2) Stephen Wong left HKBN on 9 September 2006.  He was contacted on the telephone in June 2010 but refused to testify due to long lapse of time.

(3) Angus Wong left HKBN on 1 December 2006.  He was contacted on the telephone in January 2010 but refused to testify.

(4) Lee Pit Sang has left HKBN and could not be located.

(5) Stephen Ng has left HKBN and could not be located.

30.  According to his most recent affirmation, Lam managed to contact Angus Wong on the telephone in January 2011.  Angus Wong was said to have confirmed his refusal to testify for HKBN because of his already departure from the company and lapse of memory. But he did not refuse Lam’s request to assist.

31.  For Tat identified from the outset Ip (or Yip) Tsz Kuen and Stephen Wong to be the staff members of HKBN involved in the matter.  HKBN also identified the other staff members that were allegedly involved in the matters raised in its pleading.  They were not just potential but identified witnesses.  HKBN or those acting for it did not say whether it was after enquiry with these staff members or obtaining proof of evidence from them that it managed to plead its case as it is.  In any event, there is no question of inability to locate witnesses because of delay in identifying them.

32.  More importantly, pursuant to the court’s direction in June 2006, witness statements had to be filed and served within 60 days.  HKBN was supposed to do so too.  HKBN did not say whether this has been done.  An inference could be drawn from the alleged difficulty now put forward by HKBN that this has yet to be done.  There is no justification for HKBN’s failure to do so.

33.  For Tat’s delay is no justification because the parties were not directed to exchange witness statements.  HKBN’s compliance with the direction did not depend on whether For Tat was ready to file its witness statements.  By the deadline set by the court, HKBN ought to have had no idea that For Tat would not be ready.  HKBN’s witness statements ought to have been ready by then.

34.  The identified period during which these staff members left the company was from March to December 2006.  However HKBN identified them by pleading in as early as November 2004.  Further, except for Ip Tsz Kuen, who left in March 2006, the others were still serving at HKBN when the court directed the parties in June 2006 to file the witness statements.  HKBN did not explain how it somehow allowed the identified witnesses to depart the company without preparing their statements and even become untraceable.  But if HKBN apparently made attempts to contact these former staff members only in 2010, it cannot be said that the delay of For Tat since 2006 has made any material difference to whether HKBN would be losing contact with them.

35.  Mr Wu submitted that HKBN’s loss of contact with and failure to obtain proof of evidence from its potential witnesses is self-caused and is not attributable to For Tat’s delay. For the above reasons, I agree that the causal link between the delay and HKBN’s present complaint is not proved: see Winpo Development Limited (above) at para.52.

36.  Insofar as those witnesses that could be located are concerned, it was nevertheless argued on behalf HKBN that the delay since 2006 has inevitably caused them lapse of memory and refusal to testify.  I do not consider that witness’ refusal to testify for HKBN is fatal, as either party has the liberty to consider compelling them by way of subpoena, if necessary.  It is their memory of what happened in 2002 that may be a concern.

37.  As discussed above, statements should have been prepared, if not filed, when the memory of the witnesses for HKBN should still be relatively better.  The failure to do so and therefore lack of the statements to refresh the witnesses’ memory is not attributable to the delay of For Tat.  The witnesses would have to resort to the contemporaneous documents.  Whether the documentation involved in the present case may now assist the witnesses was much debated during the hearing.

38.  By his statement, Lam explained in detail the circumstances of the case with reference to almost each of the 63 items of document he disclosed in 2005.  Therefore witnesses of HKBN that can be called will know what Lam is saying about them, including what are said to be photographs of the work.

39.  The issues of whether Lam was requested to carry out additional work and whether the work formed part of the original contract work are inter-related.  Of the 2 staff members of HKBN allegedly having made the request to Lam, only Stephen Wong can be located.  His name, together with that of Ip Tsz Kuen, are found to be handwritten on one of the faxes in April 2002 allegedly evidencing their subsequent approval and assessment of the work done.  Besides, handwritten remarks were also found in both faxes.  The sending of the faxes and their reflecting the site audit of the work done are matters not in dispute.  What matters will be the explanation of the meaning of sending the faxes and the handwriting.

40.  The explanation will also have a bearing on the issue of the alleged non-compliance of the work done with the HKHA approved drawings.  Angus Wong, who was allegedly involved in the work at the Lek Yuen site, is now located by Lam.  In his recent telephone conversation with Lam, he confirmed that he could not remember well.  But he confirmed his willingness to assist.  More importantly, he managed to recall, even offhand, that he took photographs and measured the work done by For Tat then.

41.  In respect of the issue of alleged non-compliance of For Tat’s work with the HKHA approved drawings, Lam does not dispute deviation from the approved drawings.  His case is that any deviation was necessitated by the actual condition at work at the material time.  Whether the witnesses would be called to testify in this respect, expert evidence may well be needed.  In his statement, Lam acknowledged the perceived difficulty because the work has been completed for years.  But it would seem that such difficulty would have existed by the time this case went dormant in 2006.  The delay has not resulted in the worsening of the situation in a material way.

42.  Miss Wu for HKBN pointed out various parts of Lam’s statement that, according to her, are not covered by the pleadings.  It was argued that even assuming that her client’s witnesses had prepared their statements in compliance with the court’s direction in 2006, they would still have had to deal with the new points raised by Lam.  In my view, some of them are, whereas some of them are details of the state of affairs already pleaded.

43.  On the face of it, Miss Wu’s argument sounds logical, but not if one comes to consider that realistically.  The ability of HKBN’s witnesses to deal with the new points when they are armed with their earlier statements is pure guesswork.  The reality is that HKBN has lost contact of some of its witnesses and failed to prepare their statements for filing in 2006 as directed.  As discussed above, such failure was not fairly attributable to For Tat’s failure in 2006 or its subsequent delay.  As far as any really new allegations that may be raised, such attempt should be curtailed by reference to the rules governing amendment and content of witness statement.

44.  So far, the response of the witnesses located was given as to whether they remember offhand.  However, this is not the kind of case where the witnesses would be asked to testify entirely or largely based on memory.  It is unclear what they will say when the material circumstances were highlighted by reference to the documents and the statements of For Tat.  There is no suggestion that any of the witnesses is impaired due to advance age and personal condition or any other extraneous circumstances. Whilst accepting generally prejudice in terms of natural lapse of witness’ memory due to passage of time, I do not conclude that a fair trial has become impossible, considering all the circumstances of this case discussed above.

Abuse of process

45.  This is not a case of wholesome disregard of the rules of the court.  Nor is it a case of deliberate flout of peremptory order.  Whether this is a case of abuse of process depends on the intention of For Tat as revealed by the objective evidence.  Lam has obviously taken his time irresponsibly.  Mr Wu did not shy away from it.  But in view of what he has actually done to prepare to proceed, it may not be said that For Tat commenced this action with no intention of bring it to a conclusion.  I am not prepared to condemn him as abusing the process.

Conclusion and order

46.  In conclusion, I do not think that action should be dismissed.  I am allowing For Tat’s appeal; but the consequential costs order shall, in my view, reflect the dilatory conduct of proceedings on its part.  I am also minded to give further directions.

47.  I therefore allow the appeal and set aside the order of the Master made on 14 May 2010.  Costs of the application before the Master and costs of the present appeal shall be costs in For Tat’s cause.  Costs shall be taxed, if not agreed, with certificate for counsel. For Tat’s own costs shall be taxed subject to legal aid regulations.  There will be 14 days for any application (in writing) to vary the costs order; but very good reason will be expected for such purpose.  Otherwise the costs order will become absolute.

48.  I also give the following further directions:

(1)                 Leave to HKBN to file and serve its witness statements within 56 days from today;

(2)                 Parties do fix a case management hearing before the Master but no later than 84 days from today; and for such purpose do comply with Practice Directions 5.2.