LEE KIN YAN t/a KIN SHING ENGINEERING CO. v. HONEYWELL LTD.

CACV 35/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 35 OF 2000

(ON APPEAL FROM HCCT 8/1995)

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J U D G M E N T

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Hon Rogers JA :

1. This is an appeal from a decision of Burrell J given on 18 January 2000 whereby he dismissed this action for want of prosecution. The order drawn up was in an unusual form since paragraph 1 recited :-

"1. This action be dismissed for want of prosecution, with costs including the costs of and occasioned by this application to be taxed and paid by the Plaintiff to the Defendant under the inherent jurisdiction of the Court and/or for default in complying with the Rules of the High Court in that the Plaintiff has been unreasonably prolonging or inordinately or inexcusably delaying to proceed with this action which has caused or is likely to cause serious prejudice to the Defendant; and

2. The costs of and occasioned by this application to be taxed and paid by the Plaintiff to the Defendant."

2. Aside from the obvious repetition of the order in relation to costs, the order itself, insofar as it continues after the first line of paragraph 1, could be said to be ambiguous by reason of the inclusion of the words "and/or" : the basis upon which any order is to be made must be definite.

3. This action concerns a claim made by a sub-contractor in respect of the supply and installation of fire alarm systems and associated equipment at Times Square in Causeway Bay. The action was commenced in October 1994 by writ endorsed with a statement of claim. The claim concerns a contract which was alleged to have been made in mid-1991 and to have been partly oral and partly written. The essence of the action is that the plaintiff is claiming in respect of what is referred to in the statement of claim as "variation work", although it is particularised in many respects as being work which is additional to the contracted work.

4. The defendant takes the position that there is some confusion in the way that the plaintiff originally framed his case. It is the defendant's case that insofar as the plaintiff was alleging that the contract was a "re-measurement" contract, he had put his case in the wrong way and had not pleaded the case on the basis of a re-measurement but had pleaded it by trying to compare the original work and the costs thereof and the additional work and the costs of that. This matter was highlighted in the defence which was served in December 1994 whereby it was pleaded that the contract was a lump sum contract. It was not until September 1998 that the statement of claim was amended to include a claim based on quantum meruit, in effect, relying on precisely the same items which were said in the original statement of claim to be variation works or additional works. It is fair to say that the defendant contends that the plaintiff has still not pleaded his case correctly, nevertheless, a consent order was made in October 1998 permitting the defendant to amend its defence which it did shortly thereafter.

5. There were considerable periods of delay which the judge analysed in his judgment as occurring at six different periods throughout the time the action has been in being, the longest being 11 months in the period up to September 1999. Thereafter the defendant launched its application to strike the action out in October 1999. In relation to these periods, the judge said :-

"Of course the court accepts that these were not always periods of complete idleness but they were delays in the sense that no progress was made and no steps to prosecute the claim were taken."

6. The judge held that these periods of delay were both inordinate and inexcusable. The judge then went on to consider the question of whether the delay was such that the action should be struck out. He concluded that he was satisfied that the defendant would be quite unable to do justice to its case and the judge would be faced with a most difficult if not impossible task.

7. Before us, Mr Denis Yu, on behalf of the plaintiff, has not sought to contest the findings that the various periods of delay were both inexcusable and inordinate. He says however that the judge was wrong in exercising his discretion to strike out the action because the facts did not warrant such a course.

8. Before proceeding to consider whether an appeal is open in this case, it is necessary to consider the facts briefly.

9. In the first place, the plaintiff pleaded, right at the outset of the action, that insofar as the contract had been made orally, it was made by the plaintiff and Mr P.C. Chan, Mr Stephen Chan and Mr Lai Ting Chung acting on behalf of the defendant. Insofar as any reference is made to any oral matters giving rise to the additional works which were carried out, a Mr T.N. Wong was identified. In the founding affidavit seeking to support the application to strike out this action, Mr Cocking, the solicitor acting on behalf of the defendant said :-

"I am informed by the Defendant that P C Chan, Stephen Chan and Lai Ting Chung have all left the Defendant in 1994, 1994 and 1999 respectively. P C Chan has emigrated to Canada and is now a shop owner. Stephen Chan is under the employment of the Defendant's competitor in China. We are instructed that neither of them is likely to return to become a witness of the Defendant. Lai Ting Chung has recently been laid-off by the Defendant, and the Defendant is doubtful whether Mr Lai will be willing to act as a witness of the Defendant.

The Defendant has not taken any written statements from any of them, nor is there any written record of the meeting that took place in 1991. Therefore, even if any of them could be persuaded to make themselves available for a trial, there is very little material available to refresh their memory of a meeting that took place almost 8 years ago."

10. It was pointed out that that evidence was perhaps not entirely in accordance with the rules of the court and in any event, even if it should be given a liberal interpretation, it was difficult to see how the defence which was filed could have been drafted if the relevant persons said to have been at the meeting relied upon by the plaintiff were not consulted.

11. In his second affidavit, Mr Cocking amplified what had been said in the following way :-

"If the matter had proceeded expeditiously we are instructed that the case had been discussed with P C Chan and Stephen Chan who were available to give evidence. However they have now been out of the Defendant's employment for 5 years and they are no longer in touch with the Defendant. Ms Chan states in paragraph 20 of her affirmation that the Defendant should have ample time and opportunity to take a witness statement from Mr Lai Ting Chung before his dismissal. However it can be seen that the case has remained dormant for long periods of time when it was uncertain whether the Plaintiff intended to proceed and if so, what was the basis of its case."

And in the following paragraph :-

"... the Defendant has no written evidence regarding the formation of the contract in the meeting dated 21 July 1991 as alleged by the Plaintiff. The Defendant's case therefore is bound to be tried upon the oral evidence of Mr Lai."

12. The judge's assessment of that evidence is contained in the paragraph on page 9 of his judgment where he said :-

"In these circumstances the defence faces two difficulties, the combined effect of which, in my judgment, creates a real risk of an unfair trial and will cause prejudice to the defence. Firstly, it is dangerous to rely on evidence which is recounting events that occurred 10 years ago. (By the time the matter eventually comes on for trial, it could well be 11 years). Secondly, two of the defendant's three key witnesses are abroad and contact has been lost. It is also said that the third key witness might now be a reluctant witness but I place little weight on this contention."

13. It is trite law that this court will not interfere with the discretion exercised by a judge unless it can be shown that the judge erred in principle or took into account facts which should not have been taken into account or failed to take into account facts which should have been taken into account or otherwise misapprehended the evidence. This court also takes into account that the judge below had, by the date of the hearing, been appointed to take charge of the Construction and Arbitration List and hence, his views as to the viability of witnesses giving evidence carry considerable weight.

14. There are, however, obvious matters which arise from the statements which have been made in the defendant's evidence. The departure of Mr P.C. Chan and Mr Stephen Chan from the defendant's employment was something which took place very close to the commencement of these proceedings. Any difficulties occasioned because of their departure from the defendant's employment cannot be laid at the door of the plaintiff's delay. No evidence has been given that the defendant is unable to contact these two persons nor as to what steps have been taken to make contact with them, still less is there any clear statement that they have expressed an unwillingness to give evidence.

15. In relation to Mr Lai Ting Chung, the judge, in my view, rightly discounted the matter. Indeed, it seems to me that the defendant has no reason for not having taken statements from him, if not all three persons, when the action was started. As I have pointed out, in order to plead the defence in the way it was, it is surprising if statements were not taken. If Mr P.C. Chan and Mr Stephen Chan had already left the defendant's employment by the time of the service of these proceedings and the defendant had been unable in any event to obtain any written statement from those persons, again, the cause of the defendant's difficulties does not stem from the plaintiff's delay. For my part, I would adopt what was said by Hirst LJ in the case of Hunter v Skingley [1997] 1 WLR 1466 at p.1472E :-

"I first consider diminution or dimming of memory. That is essentially a function of time. The first period, 1988 to 1990, over two years, is clearly very important in this context, as that would be the time when memories would be freshest and when full statements can and should have been taken from the witnesses by the defendant's solicitors. I would add that, in the case of the three missing witnesses, had that been done there would have been statements which would no doubt have been admissible under the Civil Evidence Act 1968. For that important period in this context the defendant only has himself to blame."

16. Whatever defects the defendant may have considered arose from the manner in which the plaintiff's claim was originally framed, Mr Lai Ting Chung was employed by the defendant until 1999 and, indeed, after the service of the amended statement of claim.

17. In my view, the judge below erred in approaching the matter, as he seems to have done, on the basis that Mr P.C. Chan and Mr Stephen Chan would not be available to appear as witnesses. In any event, even if that were so, that was not caused by the plaintiff's delay. It is thus, in my view, open to this court to review the exercise the judge's discretion and to exercise anew its own discretion in relation to this matter.

18. In my view, it does not assist to reiterate in different words the test which the court should apply in deciding whether on the basis that there has been inordinate and inexcusable delay on the part of the plaintiff or its lawyers, the case should be struck out. Using the words of Lord Diplock in Birkett v. James [1978] AC 297 at 318F, the court must consider whether the delay will give rise to a substantial risk that it is not possible 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 defendant in this case as between the defendant and the plaintiff.

19. In my view, that is not made out. As has been drawn to our attention, the defendant in October 1999 stated that it intended to call as witnesses four employees, namely Eric Leung, Ricky Woo, Simon Chan and T.N. Wong; albeit in that document, the defendant stated that the three key witnesses had left Hong Kong and were unlikely to return to give evidence. Those were possibly the Messrs Chan and Mr Lai. For my part, as I have indicated, I am not satisfied from the defendant's evidence that the two Messrs Chan would not return to Hong Kong. The fact that Stephen Chan is now working for a competitor of the defendant is not in itself a matter which would militate against his giving evidence in relation to a matter which is in no way alleged to have any reference to his new employer. Similarly, the fact that Mr P.C. Chan may own a shop in Canada does not seem to be a bar in itself to his returning to assist his former employer. No reference is made in any of the defendant's evidence as to Mr Eddie Chu, who appears from many of the documents which have been exhibited in this case to be a person who was intimately involved on behalf of the defendant with the matters which are the subject of the plaintiff's claim. Whereas, of course, witnesses' memories will have faded over the years, in my view, that failing of memory is likely to have been most acute in the early years. I am not satisfied that the potential witnesses are or would be unable to recall the essential facts. The trial of an action, should, in my view, take place either later this year or early next year. Whereas this is far from ideal since it is now coming up to nine years from the time when it is said that the initial contract was made and seven years from the time when the work was completed, the defendant has not shown that degree of prejudice which would justify driving the plaintiff from the court.

20. In my view, this appeal should be allowed. The order below should be set aside and I would make an order nisi that the costs in the court below should remain as ordered by the judge but the plaintiff should have his costs in this court.

Hon Woo JA :

21. I agree that the appeal be allowed for the reasons given in my Lord Rogers JA's judgment which I have had the advantage of reading in draft. I also agree to the order for costs nisi as proposed.