XCHRX SECAN LTD. v. HSIN YIEH ARTHITECTS & ASSOCIATES LTD.

HCCT69/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO.69 OF 2001

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D E C I S I O N

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1. This is an appeal against an order of Master Lung dated 8 May 2001. The learned master had granted the plaintiff two days in which to serve a Statement of Claim out of time. At the same hearing he dismissed the defendant's application to strike out for want of prosecution.

2. The brief history and chronology is important and it is as follows.

3. On 8 May 1993 a flood occurred in a building which had just been constructed. The defendant was the architect. The plaintiff was the developer. The material events, for the purposes of this appeal, thereafter were :

(i) In 1996 the plaintiff issued a Writ and Statement of Claim against the engineers ("ACE") holding them responsible for the flood. In the defence ACE denied responsibility but named the architects. Thereafter the architects were not joined as either the 2nd defendant or third parties to that action by either the plaintiff or ACE.

(ii) On 4 May 1999 a general indorsed Writ was issued by the plaintiff against the defendant. In other words, three days before the expiration of the limitation period of six years, the plaintiff commenced separate proceedings against the architects.

(iii) The plaintiff then had 12 months in which to serve the Writ. This they did on 2 May 2000, two days before the expiration of the 12-month period.

(iv) According to the rules the Statement of Claim should have followed within 28 days, namely by 29 May 2000. The Statement of Claim was not served within this time.

(v) On 18 January 2001 the plaintiff purported to serve a draft Statement of Claim on the defendant without leave. The defendant's solicitors did not accept service and returned it.

(vi) On 8 March 2001 the plaintiff filed an application to serve the Statement of Claim out of time. The defendant's cross summons sought a dismissal of the action for want of prosecution.

(vii) On 8 May 2001 both applications were heard. Two days extension was granted (which was complied with) and the defendant's summons was dismissed.

The defendant now appeals.

4. The correct approach when having such cross summons is set out in the Hong Kong White Book :

" In Costellow v. Somerset County Council [1993] 1 W.L.R. 256, [1993] 1 All E.R. 952, the English Court of Appeal gave the following guidance for courts confronted by a situation where a defendant applies to have an action dismissed because of a failure by the plaintiff to take some steps in the proceedings within the time required by the rules and where the plaintiff at the same time applies (or indicates that he will apply) for an extension of time under O.3, r.5 to take the step in question.

Two principles are to be considered. The first is that the rules of court and the associated rules of practice devised in the public interest to promote the expeditious dispatch of litigation must be observed. The second principle is that a plaintiff should not in the ordinary way be denied an adjudication of his claim on its merits because of procedural default unless the default causes prejudice to his opponent for which an award of costs cannot compensate. Neither principle is absolute, but the court's practice has been to treat the existence of such prejudice as a crucial and often decisive factor. In the great majority of cases, it will be appropriate for the court to hear both summonses together so that the case is viewed in the round. A rigid mechanistic approach is inappropriate and accordingly there can be no general rule that the plaintiff's application should be heard first with dismissal of his action as an evitable consequence if he fails to show a good reason for his procedural default, the approach adopted by another English Court of Appeal in Price v. Dannimac Ltd (1990) The Independent, August 3."

5. The Costellow case concludes with this passage :

"... But in the ordinary way, and in the absence of special circumstances, a court will not exercise its inherent jurisdiction to dismiss a plaintiff's action for want of prosecution unless the delay complained of after the issue of proceedings has caused at least a real risk of prejudice to the defendant."

6. On the particular facts of this case the court's task is to decide firstly, was there a delay which was inordinate and inexcusable and secondly, if so, has the delay caused at least a real risk of prejudice to the defendant?

7. A preliminary issue between the parties is what the period of delay actually is. Provided the Writ has been served within the limitation period the court is concerned with the post Writ delay. Mr Simon Westbrook SC for the plaintiff submits that the delay period is from the last day for service of Statement of Claim (29 May 2000) to the attempted service of the Statement of Claim on the defence solicitors without leave (mid January 2001) a total of 7½ months. Mr Geoffrey Shaw for the defendant submits that the delay period starts with the issuance of the Writ (May 1999) not its service (May 2000) and the delay period ends with the actual, not the attempted, service of the Statement of Claim (May 2001). By this method the delay is two years.

8. I agree with Mr Shaw. There is no real room for debate on the subject. The Hong Kong White Book states simply "only delay after the issue of the writ is relevant". The holding in the Costellow case includes the words "unless the delay complained of after the issue of proceedings had caused ...". In the case of Hymer v. M.T.R. Corp [2000] 2 HKLRD at p.606, Ribeiro JA said :

" As pointed out above, the writ was only issued in 1989, at the very end of the limitation period. This is therefore a 'late start' case. Accordingly, as is well established, it was :

... 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. (per Lord Diplock in Birkett v James [1978] AC 297 at p.322.)

One might add that the late start was of particular significance in the present case since, by the date of the writ, some five to seven years had already elapsed from the time of the plaintiff's employment in Hong Kong.

The plaintiff nevertheless chose not to serve the writ for almost a whole year. While the writ remained valid for service for such a period under the Rules of High Court (Cap.4, Sub.Leg.), the inactivity pending its service can be taken into account when assessing the overall delay in the event that inordinate and inexcusable delay subsequently ensues:"

9. As for the argument about the end of the delay period (January 2001or May 2001) the latter date must be right. It is somewhat surprising, looking at the case in the round, that the plaintiff tried to serve its Statement of Claim without leave and without making an application for extension of time in January 2001. They could hardly have been surprised that it was not accepted and returned. The time it then took to get the two-day extension (January to May 2001) was additional delay which they caused. Thus, we are dealing in this case with a delay of two years after the issue of the Writ which itself was six years after the event. Apart from receiving the Writ the defendant had played no other part in this litigation. This is marginally longer than the delay in the Costellow case which was 22 months.

Was the delay inordinate and inexcusable?

10. In my judgment it was both inordinate and inexcusable. Inordinate simply means not within the ordinary regulations. Plainly this delay has been excessive and irregular. As to whether it has been excusable the court is entitled to weigh in the balance the history of the action before the issue of Writ. An inordinate delay might, for example, be excusable if the plaintiff's solicitors were only instructed for the first time just before the expiration of the limitation period. Not so here. In this case the plaintiff had begun compiling its evidence immediately after the flood. Loss adjusters were engaged almost straightaway and produced reports in May 1993 and October 1994. The plaintiff's solicitors were engaged in May 1995. They commenced proceedings against ACE in May 1996. They have known of the defendant's potential liability for six years. They have known that ACE was blaming the architects for five years. Bearing in mind all this background the plaintiff delayed a further two years from May 1999 before providing the defendant (by proper service) with the particulars of its claim against them. It is impossible to discern why such time could have been needed . The plaintiff had been in possession of the evidence for years. It was not unduly complex. The Statement of Claim itself is relatively brief; most of it is a recitation of contractual terms, damages claimed and some non-controversial factual matters. In short, the plaintiff has not persuaded the court that the delay was excusable. The high water mark of their explanation is that an on going business relationship existed between the plaintiff and the defendant, which caused them to decide not to involve the defendant. The assertion is not accepted by the defendant and, even if true, provides little comfort or consolation to the defendant who ultimately and "out of the blue", does become involved eight years after the event.

Has the delay caused at least a real risk of prejudice to the defendant?

11. This question is the more difficult to resolve. The defendant's submission is that they have been prejudiced or there is, at least a real risk that they will be for three reasons :

(a) Unfortunately on 9 April 2001, their insurers, First Pacific Insurance Co. Ltd, was placed into liquidation. The defendant is now uninsured. They will have to fund the litigation and any judgment against them, themselves. It is true that the definition of prejudice in these circumstances includes not only prejudice to the defendant's case but also prejudice to the defendants themselves. However, I do not think that the loss of insurance in April 2001 amounts to sufficient prejudice to the defendant to justify a denial of the plaintiff's case. Had the plaintiff served the Statement of Claim in time it would have been served 10 months before the insurance company's liquidation. Some costs would have been met by the insurance company but the major costs would not have been. What might have happened had the defendant been sued earlier, such as a possible settlement of the case, is largely speculative and unsupported by evidence.

In this context I have considered the authority relied on by Mr Shaw, namely Antcliffe v. Gloucester Health Authority [1992] 1 WLR 1044 in which a claim for damages for medical negligence was struck out, on appeal, because -

"... the plaintiff's inordinate and inexcusable delay in prosecuting her action had the result that the defendants' new insurance arrangements would apply to any sum of damages awarded against them; that those new arrangements would require the defendants to fund the whole of any such award without indemnity from any medical defence society; and that that prejudice to the defendants' financial interests constituted relevant prejudice to the defendants caused by the plaintiff's delay; and that, accordingly, the court would order that the action be struck out for want of prosecution ..."

It is I think distinguishable from the present case on two grounds. Firstly, it was a very different case factually. Secondly, the period of delay complained of in Antcliffe was 4½ years, a much longer period and, in the context of a medical negligence case, of much greater significance on the issue of prejudice.

I think therefore, that the loss of insurance in this case, albeit a bitter blow to the defendant and albeit a matter to be taken into account, falls short of prejudicing the defendant from being ultimately able to do themselves justice in this case, or from creating a risk of such prejudice.

(b) Secondly, it is submitted that because the defendant has been brought into this case so late they are severely disadvantaged by the fact that the plaintiff has the benefit of contemporaneous reports concerning the flood whereas its investigations can only start now.

(c) Thirdly, the memories of witnesses inevitably fade with the passage of time and there will be issues of fact in this case which will or may turn on the recollections of individual witnesses.

12. (b) and (c) can be considered together. After anxious thought and not without some misgivings I have come to the conclusion that these reasons, also, do not amount to sufficient prejudice or the risk of prejudice, so as to strike the plaintiff out. Matters of trial preparation and the dimming of memories have to be looked at in the context of the issues between the parties. The plaintiff's case, primarily, is that (i) the drainage pipes were too small to cope with the inflow and outflow pipes and (ii) the overflow pipe was deflectively designed in that it discharged water directly onto the floor. It seems to me that these are issues which will be substantially resolved by an examination of contemporary documentation. The expert evidence will be of particular significance. The experts will formulate their opinions from plans and other documents, not from having been there at the time and seen the flood. Moreover, it is not suggested that any material witnesses are unavailable.

13. The learned master had a difficult decision to make. In my judgment, although a borderline case, the decision was correct and accordingly the appeal will be dismissed. I make a costs order nisi that the costs of the appeal be the plaintiff's.