WYCOMBE INVESTMENT LTD. v. EDWIN LEONG SIU HUNG

HCA 5665/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5665 OF 1997

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Dates of Hearing: 2 – 4 August 2004

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J U D G M E N T

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1.  This is an application by the defendant for an order that the plaintiff’s claim be dismissed for want of prosecution in that the plaintiff has been guilty of prolonged or inordinate and inexcusable delay in proceeding with this action to the prejudice of the defendant.

The plaintiff’s claim

2.  The plaintiff’s claim as set out in the Amended Statement of Claim is for breach of an oral agreement that the plaintiff and two other investors entered into with the defendant whereby the defendant agreed to invest in the foreign currency markets on their behalf.  The trades were to be conducted through the trading account of Tai Hung Fai Enterprises Co. Ltd. (“Tai Hung Fai”), a company controlled by the defendant.  The trading account was held at Wardley James Capel Limited (“Wardley”).

3.  The plaintiff’s case is that the defendant has at all material times held out and/or represented himself to be an investment manager in the dealing of foreign exchange with much experience in such dealings and with a track record of making profitable investments.  Induced by and in reliance on the defendant’s representation, the plaintiff agreed with the defendant that the investments in foreign exchange would be made upon the following terms:

(a)             that the proposed foreign exchange dealings would be personally supervised by the defendant;

(b)            that such dealings would be conducted on a conservative basis, and with a gearing ratio of not more than 2 to 3 times the equity of the scheme;

(c)             that the defendant would report regularly with weekly overviews and daily trading report; and

(d)            that the defendant would be entitled to commission being 30% of any net profit made calculated on a quarterly basis.

4.  Pursuant to the oral agreement the plaintiff remitted to the defendant the sum of US$2 million on or about 26 July 1991.  The two other investors namely, Mr Thomas Kwok and Good Fortune Holdings Limited (represented by Mr Henry Fong) remitted a total sum of US$2.27 million, which, together with the said sum of US$2 million remitted by the plaintiff, constituted the Fund to be invested in foreign exchange dealings.

5.  The plaintiff’s case is that the defendant held the Fund and any foreign exchange investments acquired on trust for the plaintiff and the other investors as beneficiaries.  It is further asserted that the defendant would act as agent and/or broker for the beneficiaries in the said foreign exchange dealings. 

6.  The plaintiff further asserts that the defendant in or about June 1991 warranted that he would put his own money into the venture.  In breach of the said warranty, the defendant failed to put any money of his own into the scheme or venture of foreign exchange dealing. 

7.  The plaintiff’s case is that the defendant issued trading reports to the plaintiff’s agents during the period from 13 August to 3 January 1992 which confirmed that the scheme was making substantial profits.  However, on 12 January 1992 the defendant delivered a statement advising that the Fund had sustained a loss in a substantial amount.

8.  The plaintiff alleges that wrongfully and in breach of the fiduciary duties owed by the defendant, the defendant had engaged in unauthorized, reckless, rash and hazardous trading or speculation, far exceeding any prudent proportion to the capital involved, and/or exceeding the agreed gearing ratio of 2 to 3 times the equity of the scheme and/or the equity thereof as provided by the plaintiff.  Further or alternatively, the defendant negligently invested the Fund in foreign exchange dealings resulting in the total loss of the Fund.

9.  As a result of the unauthorized reckless and hazardous trading or speculation, the Fund had already suffered substantial losses for a long period prior to 3January 1992 and the entire Fund was lost no later than 13 January 1992. 

10.  The plaintiff has lost the investment of US$2 million.  The plaintiff claims an account, an enquiry, the sum of US$2 million and/or damages to be assessed, and compound interest. 

The defence

11.  The defendant’s case is as set out in the Amended Defence and Counterclaim.  At all material times he was the managing director of Tai Hung Fai.  He acted in his capacity as a director and for and on behalf of Tai Hung Fai at all material times and never entered into an oral agreement with the investors in his personal capacity.

12.  The defendant’s case that in or about June 1991, he approached 4 individuals, namely Messrs Kennedy Wong, Philip Wong, Thomas Kwok and Henry Fong, with a view to discussing with them the establishment of a foreign exchange investment Fund.  Mr Philip Wong is the father of Mr Kennedy Wong.  Both of them are practising solicitors.

13.  It was originally envisaged that any fund to be created would be managed through a company to be incorporated.

14.  The defendant’s case is that it was orally agreed that the 4 individuals would contribute capital to a joint investment Fund which would trade in the foreign exchange markets.  Pending the establishment of the company the Fund would be managed by Tai Hung Fai as agent for and on behalf of the investors.  Tai Hung Fai would operate in the foreign exchange spot and option markets, would retain 30% of the net profits derived from such trading and would report to the investors on a monthly basis. 

15.  It is the defendant’s case that the said agreement was entered into between Tai Hung Fai and each of the investors as individuals.  At all times the defendant was acting in his capacity as a director of Tai Hung Fai in relation to the said matters and not in his personal capacity.

16.  It is also denied that the plaintiff entered into an agreement with either Tai Hung Fai or the defendant.

17.  Pursuant to the agreement Tai Hung Fai opened a foreign exchange trading account with Wardley on behalf of the investors with a view to trading in the foreign exchange spot and option markets.

18.  Funds were deposited by the investors with Tai Hung Fai.  The defendant admits receiving the sum of US$2 million on or about 26 July 1991 from Mr Kennedy Wong and/or Mr Philip Wong but denies that such payment was remitted by the plaintiff.  Sums of US$500,000 and US$1.77 million were remitted respectively, by Messrs Henry Fong and Thomas Kwok for investment in the Fund.

19.  The defendant denies that he warranted that he would put in his own money into the proposed venture. 

20.  The defendant’s case is that between 3 and 10 January 1992 the foreign exchange markets experienced severe and unforeseeable fluctuations which resulted in the loss of the funds deposited by the investors.  By 12 January 1992 the Tai Hung Fai account had lost its capital and its accrued profits and had incurred a liability of US$4,185,096.77 to Wardley.

21.  Pursuant to a personal guarantee given by the defendant to Wardley, the defendant discharged the liability of US$4,185,096.77 owed to Wardley.

22.  The defendant denies that he is liable to the plaintiff. 

The counterclaim

23.  The defendant also has a counterclaim.  This is on the basis that if the agreement was entered into between the plaintiff and the defendant acting in his personal capacity, then the defendant claims to be entitled to an indemnity against all losses incurred by him in the execution of his duties as an agent or trustee of the plaintiff.  There is thus a counterclaim for the said sum of US$4,185,0966.77 paid to Wardley. 

The delay

24.  In the application before me Mr Sussex SC together with Mr Lam, for the defendant, relies in particular on three periods of inactivity on the part of the plaintiff occurring after the service of the writ on 26 May 1998.  The three periods are as follows:

(1)             Period No 1:  After the service of the Plaintiff’s Reply and Defence to Counterclaim on 29 June 1999 until 7 March 2000, there was a period of 8 months of inactivity.

(2)             Period No 2:  After the Defendant served his list of documents on 29 September 2000 until 26 April 2001, there was a period of 7 months of inactivity.

(3)             Period No 3:  After an order to answer interrogatories by the Defendant on 2 November 2002 (and answers given on 14 November 2002) until 8 December 2003, there was a final period of over 12 months of inactivity.

25.  The defendant’s case is that the periods of delay amount to inordinate and inexcusable delay to the prejudice of the defendant so that the action should be dismissed.

26.  As Mr Sussex rightly pointed out this is a late start action.  The events which gave rise to the cause of action occurred in 1992.  The writ was issued on 28 May 1997.  The writ was, however, only served on 26 May 1998 only two days before the writ was due to expire.

27.  As regards a late start action, Lord Diplock said this in Birkett v James [1978] AC 297 at page 322 G to H:

“  A late start makes it the more incumbent upon the plaintiff to proceed with all due speed and a pace which might have been excusable if the action had been started sooner may be inexcusable in the light of the time that has already passed before the writ was issued.”

28.  It is plain that an action cannot be struck out for want of prosecution for pre-writ delay alone.  A plaintiff is entitled to take advantage of the full length of the limitation period before instituting his action.  A plaintiff cannot be penalised for any delay that occurs between the accrual of the cause of action and the issue of the writ.  During this period the evidence of Mr. Kennedy Wong is that the parties were extremely active in pursuing negotiations and exploring different modes of settlement.  This, however, did not produce the desired result.  However, in my view it was reasonable and sensible to actively pursue negotiations for a settlement.  The personalities involved all came from prominent families in Hong Kong and it was obviously desirable that litigation be avoided if at all possible.  On the evidence, I am unable to accept, as Mr. Sussex submitted, that the attempts to settle were desultory.  

29.  The defendant cannot rely on any prejudice caused to him by the late issue of the writ within the limitation period as the plaintiff is entitled to the benefit of any limitation period in respect of the causes of action relied on.  However, where inordinate and inexcusable delay subsequently arises, there must be shown additional prejudice which is something more than minimal  (Birkett v James at page 323).

30.  And the Court can take into account the delay between the issue and service of the writ in assessing the totality of the delay where there is inordinate and inexcusable delay post-writ.  In Trill v Sacher [1993] 1 WLR 1379, Neill LJ said at page 1399:

“  A defendant cannot rely on any prejudice caused to him by the late issue of a writ.  Thus such prejudice is not due to delay which can be characterised as inordinate or inexcusable.  Some additional prejudice after the issue of the writ must be shown.  The additional prejudice “need not be great compared with that which may have been already caused by the time elapsed before the writ was issued,” but it

“  must be more than minimal; and the delay in taking a step in the action if it is to qualify as inordinate as well as prejudicial must exceed the period allowed by rules of court for taking that step:”

Birkett v James [1978] A.C. 297, 323

31.  The first thing I have to consider is whether or not the delay relied on by the defendant is inordinate and inexcusable.

Period No. 1

32.  The period of delay relied on in period no. 1 is from 29 September 1999 to 7 March 2000, a period of 8 months.  This is the period after the service of the Plaintiff’s Reply and Defence to Counterclaim. 

33.  Mr Fung SC, together with Ms Lam, submitted that the plaintiff had to wait for the defendant to provide its Statement of Loss pursuant to an Order of Mr Justice Yeung (as he then was) made on 22 June 1999.  By that Order the defendant was ordered, inter alia,to give an account of loss incurred by the Tai Hung Fai account with Wardley during the period from 3 to 12 January 1992 within two months from the date of the Order.  This was necessary to enable the plaintiff to make amendments to the Statement of Claim.  The Statement of Loss was not provided to the plaintiff until 23 August 1999. 

34.  Thereafter a joint consultation was held with the plaintiff’s then Senior Counsel on 3 September 1999.  Upon Senior Counsel’s advice the plaintiff prepared a number of summaries, explanatory notes and calculations for the purpose of the Amended Statement of Claim which were provided to the solicitors on 29 December 1999.  Instructions were then given to new Junior Counsel on 4 January 2000 to amend the Statement of Claim.  A number of queries were raised from Counsel and replies to those queries were provided on 9 February 2000.  The first draft of the Amended Statement of Claim was produced on 24 February 2000.  It was then circulated for comment.

35.  The Amended Statement of Claim was finalized on 28 February 2000 and on 7 March 2000 a summons was issued for leave to amend the Statement of Claim.

36.  It seems to me that in the light of the fact that this was a late start action, the plaintiff was obliged to proceed with greater speed.  The period of 6 months from the time the Statement of Loss was provided to finalize the Amended the Statement of Claim was, in my view, inordinate and inexcusable delay.

Period No. 2

37.  The period of delay relied on in period no. 2 is from 29 September 2000 to 26 April 2001, a period of 7 months.  This was after the defendant had served his list of documents on 29 September 2000.  Mr Fung submitted, correctly in my view, that during this period no account has been taken by the defendant of the discovery of the documents made by the defendant and the inspection which took place on 5 October 2000. 

38.  In view of the voluminous discovery made by the defendant much time was taken in digesting and considering the documents in detail as shown in the affidavit of Mr Shaw Shun Fat, the plaintiff’s former solicitor.  The documents were considered in detail and advice was sought from Counsel as to whether interrogatories should be served at that stage.  This was prepared and sent to Counsel for consideration and settling on 8 November 2000.  Counsel advised on 29 November 2000 against serving interrogatories until after the exchange of witness statements.  Thereafter, a draft witness statement of Mr Kennedy Wong was prepared and sent to Junior Counsel on 5 January 2001 for settling.  A revised draft witness statement was received from Junior Counsel on 29 January 2001, and further instructions on the witness statement were taken during a conference with Junior Counsel on 3 March 2001.  A further improved draft witness statement was sent to Junior Counsel for comments on 7 April 2001.  These were received on 17 April 2001 and were incorporated into the final draft of the witness statement.  The witness statement was signed on 17 May 2001.  On 26 April 2001, a Consent Summons was filed for leave to amend the plaintiff’s List of Documents. 

39.  In my view, in the light of the steps taken as set out in the affidavit of Mr Shaw there was no inordinate and inexcusable delay for period no. 2.  It does not seem to me that time was wasted in progressing the action to trial.

40.  By the Order of Master Lung dated 8 September 2000 giving directions, the Master, apart from making an order for the exchange of the lists of documents, also ordered that the plaintiff and defendant do exchange signed witness statements as to facts within 42 days after the date of inspection of documents.  It was also ordered that the parties be at liberty to adduce expert evidence.

41.  Both the plaintiff and the defendant were required to comply with the directions given by the Master.  There is no doubt that both the plaintiff and the defendant failed to comply with the Master’s directions as to the exchange of witness statements as to facts within 42 days after the inspection of documents.  Although the plaintiff did delay the preparation of the witness statement of Mr Kennedy Wong, the defendant also delayed the preparation of his witness statementand of his witness Mr Eddie Chow.  These were only signed on 4 October 2001. 

42.  It lies ill in the mouth of the defendant to say that there has been inexcusable and inordinate delay on the part of the plaintiff during period no. 2 when he himself delayed the preparation of his witness statement and that of his witness Mr Chow.  It seems to me that the defendant has condoned the plaintiff’s failure to comply with the Master’s direction for the exchange of witness statements. 

43.  I am not satisfied that the delay in the period no. 2 relied on by the defendant was inordinate and inexcusable in the circumstances. 

Period No. 3

44.  The period of delay relied on in period no. 3 is the period of over 12 months from 14 November 2002 to 8 December 2003.

45.  On 2 November 2002, Master E. Shum ordered that the defendant provide answers to a number of interrogatories.  These were answered by the Fourth Affirmation of the defendant on 14 November 2002.

46.  As Mr Fung pointed out, during period no. 3 time was occupied in preparing and finalizing the expert report of Mr Dennis Lam for the plaintiff. 

47.  Between March and May 2002 the defendant had requested no less than four extensions of time for the exchange of experts’ reports as hisexperts required more time to finalise the reports.  This is borne out in the evidence and in the correspondence to which I was referred. 

48.  After the answers to the interrogatories were provided by the defendant a large amount of time was spent in connection with the preparation and finalization of the plaintiff’s expert report by the plaintiff’s solicitors and the expert witness Mr Dennis Lam.  This is dealt with the Third Affidavit of Mr. Jeremy David Levy.

49.  After a considerable amount of work, numerous drafts of the expert report were prepared and a number of meetings with the client to discuss the various draft reports were held.  The first full draft of Mr Dennis Lam’s report was produced on 27 February 2003. 

50.  A conference with Senior Counsel to go through the first full draft took place on 28 March 2003 pursuant to which substantial further work had to be done in relation to the report.  On 30 April 2003 Junior Counsel was also instructed to review the draft report.  There then followed a series of discussions and conferences which culminated in a number of further improved drafts being produced by Mr Dennis Lam.  

51.  A further meeting with Senior and Junior Counsel took place on 26 October 2003.  After this meeting some further amendments were made to finalize the report.  It is a substantial document comprising 50 pages and 27 exhibits.  This was ready for exchange by 5 December 2003.

52.  By letter dated 7 November 2003, Messrs Robertsons (“Robertsons”), the plaintiff’s solicitors, gave notice to Messrs Herbert Smith (“Herbert Smith”), the defendant’s solicitors, to exchange experts’ reports on 5 December pursuant to the agreement reached between them.

53.  In considering whether period no. 3 is inordinate and inexcusable it is important to consider the agreement reached between the parties.

54.  By the said Order of Master Lung made on 8 September 2000, both the plaintiff and the defendant were required to take certain steps including exchanging lists of documents and exchanging signed witness statements of facts.  Both parties were at liberty to adduce expert evidence and a direction was given that written reports of the experts be exchanged 42 days after the exchange of witness statements.  That part of Master Lung’s Order was varied by a later order dated 22 January 2002 whereby the parties were ordered to exchange experts’ reports 28 days after the provision of security for costs by the plaintiff.

55.  There was correspondence between the solicitors as regard the exchange of experts’ reports.  By letter dated 28 May 2002, Herbert Smith wrote to Robertsons suggesting that the exchange of experts’ reports be extended until after the question of the interrogatories had been dealt with and in any event,upon written notice by either party to the other that experts’ reports be exchanged within 28 days after such notice is given.  This course was acceptable to the plaintiff.  Robertsons wrote on 12 June 2002 to Herbert Smith agreeing to their suggestion that the exchange of experts’ reports be extended to 28 days after written notice was given by either party to the other. 

56.  Thus, it is clear from the correspondence that an agreement was reached between the solicitors on 12 June 2002 that time for the exchange of experts’ reports be extended generally to 28 days after written notice is given by either party to the other that experts’ reports be exchanged.  This was a proposal made by the solicitors for the defendant which was accepted by the solicitors for the plaintiff.  

57.  Pursuant to the agreement reached between the solicitors, Robertsons gave notice to Herbert Smith by letter dated 7 November 2003 that the experts’ reports be exchanged 28 days later i.e. on 5 December 2003.  There was no reply to this letter or to the letter dated 5 December 2003 from Robertsons to Herbert Smith whereby they stated that they were in the position to exchange the experts’ reports on that date i.e. 5 December 2003 and looked forward to hearing from them with their confirmation that they were in a position to exchange experts’ reports.  Instead of receiving such confirmation Robertsons received a letter dated 7 December 2003 from Herbert Smith pointing out that one year had elapsed since the last proceeding and therefore unless a notice of intention to proceed as required by the rules of the High Court was served, no notice of exchange of experts’ reports could be given.

58.  As Mr Fung correctly pointed out, the last step actually taken prior to the notice to exchange experts’ reports was the filing of the Fourth  Affirmation of the defendant on 14 November 2002. The notice of 7 November 2003 that was given was within the one year period.

59.  By letter dated 9 December 2003 Robertsons pointed out to Herbert Smith that a notice of intention to proceed had been served the day before and that after the one month period had elapsed they would apply to have the matter heard before the Listing Master with a view to having the actionset down for trial.  At the same time, they would apply to the Listing Master for an order for the exchange of experts’ reports if they have not been exchanged by then.

60.  By letter dated 8 January 2004 Robertsons wrote to Herbert Smith informing them that their clerk would attend the Senior Judicial Clerk office on Tuesday 13 January 2003 for fixing a hearing date.

61.  By letter dated 12 January 2004 Herbert Smith wrote to Robertsons informing them for the first time that they would be seeking Leading Counsel’s advice regarding an application to strike out the action for want of prosecution.  They also informed them that any listing appointment that Robertsons should obtain was to be without prejudice to the defendant’s position that the action was liable to be struck out for want of prosecution. 

62.  The plaintiff issued a summons on 17 February 2004 for the exchange of experts’ reports.  On 23 February 2004, Master Woolley ordered the parties to exchange experts’ reports within 28 days, i.e. by 22 March 2004. 

63.  On 16 March 2004, the defendant took out this application to strike out the action for want to prosecution.  By reason of this application by the defendant, the checklist hearing and the application to set the action down for trial have not been heard.

64.  The experts’ reports would have been exchanged pursuant to the order of Master Woolley and the checklist hearing would have taken place on 17 March 2004 but for this application.  In my view, but for this application taken out by the defendant it is likely that this action would have by now been set down for trial.

65.  It is wholly unrealistic to suggest that this action has gone to sleep over the period of delay complained of.  In my view, the correspondence shows clearly that there was an agreement to extend time generally for the filing of experts’ reports.  O.3; r.5(3) RHC provides that the period within which a person is required by, inter alia, any order or direction to, inter alia, serve any document may be extended by consent.  Since both parties had expressly agreed to a general extension of timeit lies ill in the mouth of the defendant to complain of the delay in the preparation of the experts’ reports. 

66.  I accept Mr Fung’s submission that in the circumstances it cannot be said the delay in period no. 3 was inordinate and inexcusable.

67.  I was referred to what Godfrey JA (as he then was) said in Hongkong & Shanghai Banking Corporation v Kuan Tao Sheng & Others [1998] 2 HKLRD 285 at page 597 as follows:

“  On the second issue, whether the plaintiff’s delay here was inordinate and inexcusable, I entirely agree with Mortimer V-P that the plaintiff’s delay was, plainly and obviously, inordinate.  I would myself have held that it was inexcusable as well.  But it seems to me that the defendants have so conducted themselves as to induce the plaintiff to incur further costs in the reasonable belief that the defendants intended to exercise their right to proceed to trial notwithstanding the plaintiff’s delay.  I would hold that in all the circumstances of the case, identified by the judge and by Mortimer V-P, the defendants cannot be allowed to rely on the plaintiff’s delay as inexcusable.  That being so, there is no need for me to consider the matter of the prejudice allegedly suffered by the defendants by reason of that delay.”

68.  On the correspondence culminating in the agreement reached between the solicitors on 12 June 2002 it seems to me that the plaintiff was also induced to incur further costs in the reasonable belief that the defendant intended to exercise his right to proceed to trial notwithstanding the plaintiff’s delay which the defendant complains of.

69.  That being so, the defendant cannot be allowed to rely on the delay in period no. 3 as inexcusable.

The prejudice

70.  I turn to the question of prejudice.  The defendant must show that the inordinate and inexcusable delay will give rise to a substantial risk that it is not possible to have a fair trial of the issues inthe action or is such as is likely to cause or to have caused serious prejudice to the defendant(Birkett v James [1978] AC 297 at page 318). 

71.  It is necessary for the defendant to show a causallink between the delay and the inability to have a fair trial or other prejudice to the defendant.  This is clear from what Slade LJ said in Rath and Another v C S Lawrence & Partners and Others [1991] 1 WLR 399 at page 410 as follows :

“  Under the principle of Birkett v James [1978] A.C. 297, the ultimate question for the court is whether the inordinate and inexcusable delay on the part of the plaintiffs or their lawyers gives 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 respective defendants.  For this purpose a causal link must be proved between the delay and the inability to have a fair trial or other prejudice, as the case may be.”

72.  Mr Sussex submitted that the disputes in the action centre around two broad issues:

(1)              the parties to and the terms of the oral agreement; and

(2)              the defendant’s trading of the Fund in the foreign currency markets between July 1991 and January 1992.

73.  It was submitted that as a result of the length of the overall delay both before and after the service of the writ there is clearly a substantial risk that a fair trial is no longer possible and/or there is serious prejudice to the defendant.

74.  Undoubtedly, there is a dispute about the terms of the oral agreement.  The defendant’s case is that the oral agreement was in fact entered into between Tai Hung Fai rather than him personally and with Mr Kennedy Wong and/or Mr Philip Wong, rather than with the plaintiff.  There can be no doubt that the recollection of witnesses will fade with the passage of time.  And with any period of delay there will be a diminution in the recollection of witnesses.

75.  Although the plaintiff’s case is based on an oral agreement, there is, however, some contemporaneous documents which would, in my view, assist the Court in determining the parties to and the terms of the oral agreement.  There is a hand-written note made by Mr Kennedy Wong at the meeting held on the 29 June 1991 referred to in his witness statement at paragraph 13.

76.  The terms of the oral agreement relied on bythe plaintiff are also reflected in the letter dated 13 January 1992 from Mr Thomas Kwok, Mr Henry Fong and the plaintiff to the defendant.  That is a letter written at the end of the period of trading by the defendant where the terms of the oral agreement relied on by the plaintiff are set out.

77.  There is also the letter dated 22 January 1992 in reply to that letter sent by the defendant to Mr Kennedy Wong, care of the plaintiff.  It has been pointed out by Mr Fung that in that letter the defendant did not dispute the existence of the oral agreement nor did he question the capacity of the plaintiff although there was some dispute on the terms.

78.  The contemporaneous documents would assist the Court at trial to determine the parties to and the terms of the oral agreement.  I bear in mind that this is not a case where the Court relies on the eye witness testimony of witnesses.  This is a dispute on a commercial matter.  I accept that witnesses will have to recollect events which took place in 1991 and 1992.  Although the plaintiffrelies on an oral agreement, it does not seem to me, in the light of the contemporaneous documents which are available, to be an impossible task for the Court todetermine the issues.  It does not seem to me that there is a substantial risk that the Court will not be able to conduct a fair trial of the action.  Witness statements for the parties have been prepared and served in 2001. 

79.  Mr Sussex made the point that the defendant’s solicitors had attempted to contact another witness Mr Thomas Kwok, who was one of the other investors in the Fund, to provide corroborative evidence as to the existence of certain meetings and conversations on 29 June 1991.  By letter dated 18 October 2001, Herbert Smith wrote to Mr Kwok enquiring as to whether he could assist the defendant.  However, on 3 December 2001, Herbert Smith received a call from a solicitor for Mr Kwok who relayed the message that Mr Kwok had no recollection of the events which took place in 1991 and that his diary for 1991 had been destroyed in the course of the time and was not available.  Mr Kwok was, therefore, unable to assist the defendant or anyone else involved in the case. 

80.  It may well be that by 2001 Mr Kwok was no longer able to assist the defendant or anyone else involved in the case.  However, there is, in my view, no causal link between any alleged delay on the part of the plaintiff and the inability of Mr Kwok to assist in this matter.  There is no evidence as to when Mr Kwok’s diary had been destroyed in the course of time.  I do not think that the fact that Mr Kwok is unable to assist takes the matter any further.

81.  In his witness statement at paragraph 39, the defendant says that he did not know about the proceedings until his solicitor had told him that a writ had been issued in November 1997.  In about July 1997 he moved offices and in the course of doing so a number of his business records were lost or destroyed.  These included his diary and certain other records including correspondence.  Despite searches, he has been unable to find these documents particularly, his daily hand-written transaction records and diaries for 1991 and 1992.  It was, therefore, submitted that this also leads to the impossibility of a fair trial or serious prejudice to the defendant.

82.  However, in his Fifth Affidavit, Mr David Wong Ying Kit, makes it plain that he did telephone the defendant on 31 May 1997 to notify him that a writ had been issued against him and explained to him the reason why it had to be issued at that stage namely,that they had to issue a protective writ and that they hoped to reach an amicable settlement with the defendant to settle the dispute.  He also informed the defendant that although the writ had been issued upon legal advice, it would not be served for the time being as in view of the long standing friendship between him and his family, the plaintiff still wanted to explore the possibility of arriving at a settlement.  The defendant in his affirmations does not deny having been so informed by Mr David Wong.

83.  I refer to what Ribeiro JA (as he then was) said in Hymer v Mass Transit Railway Corporation [2000] 2 HKLRD 589 at page 610:

“  Miss Eu argued that a defendant should not be regarded as under a duty to take “elaborate proofs from their potential witnesses” upon first being told of an intended or freshly instituted action (per Harman J in Shearing v Cinven Ltd (unrep., The Times, 24 November 1997)).  I agree if the stress is on the word “elaborate”.  As soon as someone, particularly a professional person, is told that he is to be sued for negligence, it seems to me a matter of commonsense that he should use all reasonable diligence to review his position, to secure any evidence that may be relevant (by preserving documents and proofing witnesses) and to seek advice if necessary.  Such a defendant can reasonably be regarded as being just as aware as anyone else that time is likely to dim his recollection of the events in question and that witnesses may disperse and documents lost.  He can therefore be expected, particularly when considering the claim with his advisers, to record any relevant recollections at that stage and to take at least some basic steps to preserve relevant evidence.”

84.  By the letter of 13 January 1992 addressed to the defendant signed by Mr Thomas Kwok, Mr Kennedy Wong for the plaintiff and Mr Henry Fong for Good Fortune Holdings Limited, it was made plain to the defendant that the investors were holding him responsible for failing to carry out trades in accordance with the oral instructions given to him in the meeting held on 29 June 1991.  There can be no question but that matters had come to a head and the defendant must have realized that he was being held responsible for the unauthorized trades.

85.  In any event, by May 1997 and before he moved offices in July 1997, thedefendant had been told by Mr David Wong that a writ had been issued.  It seems to me that thedefendant should have used all reasonable diligence at the latest by that time to review his position and to secure and preserve any evidence that may be relevant to his defence.  The defendant has only himself to blame if he failed to do so. 

86.  The defendant also relies on the fact that due to the lapse of the time important documents have been lost by Wardley, the broker through whom the trades were conducted and, therefore, complete records of the transactions in question no longer exist.

87.  In his Second Affidavit, Mr David Nigel Francis said that the substantial delay by the plaintiff, first in commencing the proceedings and second in conducting them, has resulted in potentially important documents being lost, most importantly, Wardley the broker through whom the trades were conducted is no longer able to provide a complete set of records of the trades.

88.  I have two observations on the lost documents.  First, as far back as 13 January 1992 the defendant knew that the plaintiff was complaining about unauthorized trades made by the defendant.  He should, therefore, have taken steps to preserve the documents of the trading transactions conducted through Wardley as soon as he realized that he was being held responsible for those trades.

89.  Secondly, he was informed of the writ being issued in May 1997 and he should have taken steps to preserve the evidence for his defence of the claim.  That he failed to do so cannot be laid at the door of the plaintiff.

90.  The complaint is also made that the defendant had sought expert witness assistance from several sources but because of the plaintiff’s delay in progressing the matter one or more experts already instructed on the matter have ceased to be available and an alternative expert has had to be found and instructed.  Mr Francis in his Second Affidavit refers specifically to Mr Will Slatyer and Mr Alex Kwok who was formerly with KPMG but has since left the firm.  It is said that the defendanthas lost the use of certain individuals as experts who were only identified after considerable effort in respect of which there is no guarantee that a similarly qualified replacement can be found.  It is also said that the defendant has suffered serious prejudice as he had already expended substantial sums in relation to the obtaining and the preparation of the experts’ reports. 

91.  I am not impressed with the alleged prejudice in respect of the expert witnesses. 

92.  On 23 February 2004, Master Woolley ordered the parties to exchange experts’ reports within 28 days.  But for this application the expert’s reports would have been exchanged within 28 days of his Order.

93.  The evidence does not go so far to show that there have been actual difficulties encountered by the defendant and his experts in obtaining relevant market data during the relevant periods and the factors causing market fluctuation.

94.  On the evidence, Mr Slatyer is still available to advise on the matter.  There is no suggestion that the experts will not be able to give reliable expert evidence to assist the Court at trial.  Although the defendant has had to change experts for a number of reasons as set out in Mr Francis’ Second Affidavit, the fact that Mr Alex Kwok and Mr Samuel Chan have left their respective firms KPMG and Pricewaterhouse Coopers does not mean that they are no longer available to advise and to give expert evidence at trial.  The evidence falls far short of showing that these witnesses are no longer available to give evidence.  

95.  As regards the expenditure by the defendant in obtaining and preparing experts’ reports, the defendant will recover these if he succeeds at trial. 

96.  The defendant, in my view, fails to show that the prejudice complained of has been caused by the delay of the plaintiff. 

Discretion

97.  Even if it can be said that the plaintiff’s delay complained of was inordinate and inexcusable and there has been prejudice to the defendant, in my view, in the exercise of the Court’s discretion, the application ought to be dismissed.

98.  In Roebuck v Mungovin [1994] 2 AC 224, it was held that the conduct by a defendant that induced the plaintiff to incur further expenses in the pursuit of the action was not an absolute bar in law to his obtaining a striking out order on the ground of previous inordinate, inexcusable and prejudicial delay by the plaintiff.  It was a relevant factor to be taken into account by the judge in the exercise of his discretion and was to be given such weight as was appropriate in the circumstance.

99.  In Kerry Foodstuff Company Limited v Phulsawat Navy Company Limiteddealing with the facts of that case Rogers JA (as he then was) said at page 529:

“  To my mind, the correspondence shows that the defendants including the first defendant went along with the dilatory manner in which the case proceeded.  That conduct was more than merely sitting back and doing nothing.  On occasions, the first defendant clearly conducted itself in a manner where an outside observer would conclude that it was content with the manner in which the action was proceeding.”

100.  The defendant was content with the manner in which the action was proceeding.  By proposing that time be extended at large for the exchange of experts’ report culminating in the agreement reached between the solicitors on 12 June 2002 it seems to me that the defendant was doing more than merely sitting back and doing nothing.  It lies ill in his mouth to complain of delay resulting in prejudice to him.  It seems to me that the conduct of the defendant resulting in the agreement between the solicitors is a highly relevant factor to take into account in the exercise of the discretion. 

101.  The application is dismissed.  I also make an order nisi that the costs of the application be costs to the plaintiff with certificate for two counsel.