GOLF APPAREL BRANDS, INC.AND ANOTHER v. TONG PAT LING PATRICK AND OTHERS

HCA 10072/2000

[2022] HKCFI 2332

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10072 OF 2000

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BETWEEN

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DECISION

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THE APPLICATIONS

1.  There are 3 summonses before this Court today:

(1) The summons filed on 22 October 2021 to have the 1^st plaintiff’s action herein against the 1^st defendant dismissed for want of prosecution (“the P1 Dismissal Summons”);

(2) The summons filed on 12 October 2021 to have the 2^nd plaintiff’s action herein against the 1^st defendant dismissed for want of prosecution (“the P2 Dismissal Summons”); and

(3) The summons filed on 19 January 2022 to have the Mareva injunction made against the 1^st defendant on 27 November 2000 (“the Mareva Injunction”) discharged and the registration thereof in the Land Registry against the 1^st defendant’s property vacated (“the Discharge Summons”).

2.  The plaintiffs are absent today. Although Mr Kahn[1], in his email sent to the Court this morning, alleged that he only received notification about the hearing today on 25 July 2022, I do not accept such an assertion, because it has been affirmed by Mr Robert Brooks (the US service agent engaged by the 1^st defendant’s solicitors) that he had personally served the application papers together with the notice of the hearing today on him (Mr Kahn) on 9 June 2022.

3.  I am satisfied that all the relevant papers in relation to the proceedings today have been properly served on the plaintiffs. I therefore hold the view that the hearing today may be proceeded with in their absence.

PROCEDURAL HISTORY

4.  This action was commenced by La Mode, Inc. (“the Original 1^st plaintiff”) and the 2^nd plaintiff against the defendants on 21 November 2000. In a gist:

(1) The Original 1^st plaintiff was a company incorporated under the laws of the State of California, USA in the wholesale business of garment, sportswear and causal wears, whereas the 2^nd plaintiff was a company incorporated in Hong Kong, and an affiliate and/or associated company of the Original 1^st plaintiff;

(2) Mr Edward Jay Kahn (“Mr Kahn”) was at the material time:

(a) the majority shareholder and President of the Original 1^st plaintiff; and

(b) the majority shareholder and director of the 2^nd plaintiff;

(3) The 1^st defendant was first employed as a manager of the Original 1^st plaintiff. He then recruited the 2^nd and 3^rd defendants to help him set up the 2^nd plaintiff. The 1^st and 2^nd defendants were subsequently appointed as salaried directors of the 2^nd plaintiff while the 3^rd defendant was appointed as the 2^nd plaintiff’s manager;

(4) It was alleged that, in breach of fiduciary duties and/or duty of fidelity and their duties as directors and/or employees of the 2^nd plaintiff, the 1^st, 2^nd and 3^rd defendants had, without prior consent of the Original 1^st plaintiff, among other things, obtained secret profits and commissions and caused the Original 1^st plaintiff to make certain purchases at an inflated price. The Original 1^st plaintiff and the 2^nd plaintiff therefore claimed against the 1^st, 2^nd and 3^rd defendants for, among other things, an order of account for the secret profits and commissions received.

5.  On 27 November 2000, the Original 1^st plaintiff and the 2^nd plaintiff obtained the Mareva Injunction against the defendants.

6.  The defendants filed their Defence on 28 December 2000. Briefly, their defence was that the alleged secret commissions and profits were made pursuant to the instruction of Mr Kahn in order to facilitate a tax arrangement designed by him.

7.  On 13 October 2003, the Original 1^st plaintiff and the 2^nd plaintiff took out a summons for summary judgment against the 1^st to 3^rd defendants (“the Order 14 Application”). By an order dated 15 December 2003, the Order 14 Application was adjourned to another date to be fixed for argument. However, it appears that no such date has ever been fixed.

8.  In around July 2005, the Original 1^st plaintiff filed a petition for bankruptcy relief in the USA.

9.  On 19 May 2010, the 1^st plaintiff made an ex parte application and asked for an order that the 1^st plaintiff be made as a party in this action and to carry on the proceedings in the place of the Original 1^st plaintiff. The order sought was subsequently granted on 21 June 2010.

10.  While a Notice of Intention to Proceed was filed on behalf of the plaintiffs on 14 September 2010, no further step was taken thereafter.

11.  In August 2015, the 2^nd plaintiff’s name was struck off the Companies Register by the Company Registrar.

12.  By orders dated 25 October 2021 and 15 November 2021 respectively, it was ordered that, upon compliance of Order 67 rule 6(1) of the Rules of the High Court, the former solicitors acting for the 1^st and 2^nd plaintiffs would cease to be their solicitors on record. Certificates of Compliance were subsequently filed on 12 November 2021 and 16 November 2021 respectively. As a result, the plaintiffs’ solicitors had come off the Court record officially.

13.  By an order made by Anthony Chan J on 28 April 2022, the name of the 2^nd plaintiff was restored to the Company Register upon an application made by the 1^st defendant.

LEGAL PRINCIPLES

14.  In Wing Fai Construction Co. Ltd. (in compulsory liquidation) v Yip Kwong Robert & Others [2012] 1 HKLRD 589, Ma CJ summarised a number of principles which his Lordship said ought to be borne in mind in most applications to strike out for want of prosecution. These principles are now trite and I therefore do not propose to set them out in full here. For the present purposes, it suffices for me to state that:

(1) Abuse of the process of the Court is the foundation for the exercise of the jurisdiction to strike out for delay, and inordinate and inexcusable delay causing real prejudice would be an abuse. Thus, where such delay causes a substantial risk that a fair trial is not possible, this is perhaps the most compelling form of prejudice to a defendant. There may be other forms of prejudice, such as the prejudice caused by proceedings hanging over the head of a defendant causing undue anxiety and the prejudice caused by the existence of an interim injunction pending trial;

(2) Abuse can also be found to exist where there is simply no intention on the part of the plaintiff to bring proceedings to a conclusion;

(3) When considering delay in a case, it is normally relevant for the Court to take into account the length of the delay, the excuses put forward for the delay, the degree to which the plaintiff has failed to observe the rules of Court or any Court order, the prejudice caused to the defendant by the delay, the effect of the delay on trial, the effect of the delay on other litigants and other proceedings, the extent to which the defendant can be said to have contributed to the delay, the conduct of the parties in relation to the action and other special factors of relevance in the particular case;

(4) Where abuse is clearly demonstrated, proceedings can be struck out even where prejudice to the defendant cannot be shown. Having said that, in the majority of applications to strike out for delay, the aspect of prejudice to the defendant will often be extremely relevant;

(5) The power to strike out for delay is discretionary and derives from the inherent jurisdiction of the Court. The inherent jurisdiction of the Court exists to avoid injustice, prevent abuse, preserve the dignity of the Court or to facilitate the administration of justice. In exercising its discretion, the Court must ultimately ask whether or not it is just to strike out in the circumstances of the case.[2]

DISCUSSION

15.  I accept the 1^st defendant’s submissions that there is clearly abuse of the court process on the part of the plaintiffs in the present case:

(1) Since 2003, no substantive step has been taken in the present case;

(2) Despite Mr Kahn’s knowledge of the present applications made by the 1^st defendant back in October 2021, he did not instruct solicitors to handle these applications and offer any explanation of delay by way of affirmation;

(3) What Mr Kahn did was to send a lengthy email dated 9 December 2021 to the 1^st defendant’s solicitors, in which he did not explain why no further steps had been taken in these proceedings since 2003;

(4) It is clear from the said Mr Kahn’s email that the 1^st plaintiff cannot afford to instruct any lawyer to prosecute this action. On the other hand, Mr Kahn claimed that he is now almost 70 years old, disabled with no income. Apparently he is residing in the United States. It can therefore be inferred that the 1^st plaintiff is not minded to bring these proceedings to a conclusion;

(5) Around an hour before this hearing, the Court received an email from Mr Kahn. While he asked the Court not to discharge the Mareva Injunction, he did not express any intention to proceed with the action herein;

(6) The 2^nd plaintiff’s name had been struck off from the Company Register. No application had been made by Mr Kahn to restore the company to the Company Register. It can be inferred that there was no intention on the part of the 2^nd plaintiff to proceed with this action;

(7) The delay has caused a substantial risk that a fair trial is not possible in the present case because the 1^st defendant has lost contact with the 2^nd and 3^rd defendants for a long time. Since it is their case (as pleaded in their Defence) that they were instructed by Mr Kahn to operate in the way which led to the present action, it is vital for the 1^st defendant to be able to have the evidence of 2^nd and 3^rd defendants adduced at the trial;

(8) I accept that the hanging of these proceedings over the head of the 1^st defendant had caused undue anxiety to him;

(9) Prejudice has also been caused to the 1^st defendant by the existence of the Mareva Injunction.

16.  While there seems to be no evidence that the 1^st defendant had done anything since 13 January 2004 (when he filed his Affirmation in opposition to the Order 14 Application) to move this action forward, I am of the view that, in the particular circumstances of this case, it is just to dismiss this action against the 1^st defendant, since there is clearly no intention on the part of the plaintiffs to proceed further in this action.

ORDER

17.  By reasons of the aforesaid, I make the following orders:

(1) The plaintiffs’ application for summary judgment against the 1^st defendant made by virtue of their summons filed on 13 October 2003 be dismissed with costs to the 1^st defendant (with all costs reserved), to be taxed if not agreed.

(2) No order be made in respect of the 1^st defendant’s summons for security for costs against the 1^st plaintiff filed on 29 September 2021 with no order as to the costs thereof.

(3) This action commenced by the 1^st plaintiff as against the 1^st defendant be dismissed for want of prosecution, and the 1^st defendant’s costs of the action (including the costs of the P1 Dismissal Summons and all costs reserved) shall be paid by the 1^st plaintiff, to be taxed if not agreed.

(4) This action commenced by the 2^nd plaintiff as against the 1^st defendant be dismissed for want of prosecution, and the 1^st defendant’s costs of the action (including the costs of the P2 Dismissal Summons and all costs reserved) shall be paid by the 2^nd plaintiff, to be taxed if not agreed.

(5) The Injunction Order made by the Honourable Mr Justice Yam on 27 November 2000 as varied by the Honourable Mr Justice Yeung on 1 December 2000, continued by the Honourable Mr Justice Sakhrani on 22 December 2000, varied by Deputy High Court Judge Gill on 16 February 2001 and continued by the Honourable Mr Justice Chung on 28 March 2001 be discharged.

(6) The registration of a sealed copy of the said Injunction Order registered in the Land Registry by Memorial No. ST1194976 against the property known as all those 92 equal undivided 120,000^th parts or shares of and in Sha Tin Town Lot No.348 (Flat D6 on 13/F of Block D, Nos.15-17 On King Street, Garden Vista Site B, Shatin, New Territories) be vacated.

(7) The 1^st defendant’s costs of the Discharge Summons (including all costs reserved) be borne by the plaintiffs, to be taxed if not agreed.