ASM ASSEMBLY AUTOMATION LTD AND ANOTHER v. CHAN LO KWAN AND ANOTHER

HCA 7622/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7622 OF 1999

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J U D G M E N T

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1.  The defendants by this application seek to strike out the plaintiffs’ action because of their inexcusable delay in proceeding with it, to the prejudice of the defendants.

2.  The plaintiffs are subsidiaries in the ASM group of companies, whose primary activity is to design, develop and produce micro-electronic equipment.  At the material time, this included a device known as an aluminium bonder.

3.  From 1980 until his resignation in 1995, the 1^st defendant (Mr Chan) was employed variously with the plaintiffs holding senior positions; latterly he was a director and then technical director of the 1^st plaintiff and in charge of design and development of micro-electronic equipment.  His contracts of employment recognized the sensitive nature of what he was doing, for they included clauses restraining him from disclosing confidential information during and after termination of his employment.

4.  In 1995, the year of Mr Chan’s resignation from ASM, a group of companies known as Intra-Tech came to be founded.  Mr Chan had a significant financial interest, and upon his departure from the ASM group he took up with Intra-Tech.  He was appointed a director of the 2^nd defendant (Intra-Tech Mechatronics) which was and remains one of the group.

5.  In or about October 1997, management of ASM Assembly came to learn of an aluminium bonder that was being promoted by the Intra-Tech group as Bonda 100.  Subsequent enquiry came to satisfy them that this was a copy of an aluminium bonder that had been developed by the ASM Group; that their product incorporated trade secrets and confidential information known to Mr Chan; that the emergence of the Bonda 100 in its similar format indicated that Mr Chan had divulged to his new employer secrets that he should not have.

6.  By a writ filed in May 1999, the plaintiffs began this action, claiming against Mr Chan breach of his contract, and of his fiduciary duties of confidence and copyright.  Against Intra-Tech Mechatronics they claim wrongful use of confidential information and breach of copyright.

7.  In their defence, the defendants plead that the Bonda 100 was a product which resulted from research and development undertaken by Intra-Tech Mechatronics.  Mr Chan specifically denies making use of any information that he may have acquired whilst with the ASM group.  Further, componentry that the plaintiffs allege were made using trade secrets and confidential information were freely available on the open market.

8.  The proceedings having begun in May 1999, various interlocutory matters were applied for and dealt with until May 2001, when a Master turned down an application by the plaintiffs for further and better particulars of an amended defence.  Then the action stagnated.  There was nothing further until June 2004, more than 3 years later.  Then the plaintiffs by new solicitors filed a notice of intention to proceed followed by in July 2004 a summons for directions.  This precipitated the application which is now before me, brought by the defendants in August 2004, for dismissal of the action for want of prosecution under the inherent jurisdiction of the court, upon the ground that the plaintiffs have been guilty of inordinate and inexcusable delay to their prejudice.  A second ground founded in abuse of process is not now being pursued.

The Law

9.  This is a discretionary exercise, in terms which are well settled, and not contested, as formulated by Lord Diplock in Birkett v James [1978] AC 297 at p. 318:

“The power … should be exercised only where the court is satisfied either (1) that the default has been intentional and contumelious, eg disobedience to a peremptory order of the court or conduct amounting to an abuse of the process of the court; or (2)(a) that there has been inordinate and inexcusable delay on the part of the plaintiff or his lawyers, and (b) that such 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 defendants either as between themselves and the plaintiff or between each other or between them and a third party.”

 From this emerges the issues in this application.

The Issues

10.  Has there been on the part of the plaintiffs’ inordinate and inexcusable delay?  If so, is it such as may cause serious prejudice to the defendants, or give rise to a substantial risk that it is not possible to have a fair trial of the issues in the action?

11.  I shall consider these in turn.

Delay

12.  Evidence adduced by the defendants includes a chronology which, it submits, highlights the delay it now complains of.  Summarised, this is as follows:

August 1997 –  The 2^nd defendant sent its ‘Bonda 100’ to Taiwan for a trial run.

October 1997 – The plaintiffs were first alerted to the existence of the Bonda 100.

January 1999 – The plaintiffs sent a letter before action.

May 1999 – The writ was filed and served.

July-November 1999 –   The defendants made several requests for further and better particulars; an amended statement of claim was filed.

December 1999 – The defence was filed.

March-December 2000 –  The parties made various applications for further and better particulars; amended pleadings resulted.

March 2001 –  A summons by the plaintiffs for particulars of the amended defence was filed.

May 2001 – An order was made dismissing that application.

June 2004 – The plaintiffs filed notice of intention to proceed.

13.  The period of delay giving rise to this application is that of the 3 years and 1 month between May 2001 and June 2004.  During that time, there was no activity whatsoever on the court file.  There is also a secondary period of delay about which the defence complains; namely, that the plaintiffs having found out about the Bonda 100 then waited for some 19 months before filing their writ.  It is accepted by the defence that delay pre-writ does not count; only post-writ is it relevant.  However, the point has been made that in considering the extent and consequence of delay suffered once the action has begun, the court may factor in significant delay in getting things under way; the longer this has taken, the higher the duty to prosecute diligently.  I accept this to be so; see the White Book I, 25/L/5.

14.  The plaintiffs have sought to justify the time taken in the litigation by their own chronology.  During the pre-writ period, they undertook the following, namely, they:

(a)     employed commercial investigators to carry out an investigation;

(b)     sought counsel’s advice;

(c)     engaged the Hong Kong Productivity Council (HKPC) to carry out tests;

(d)     retained counsel to prepare a statement of claim;

(e)     sent a letter before action.

15.  To explain the time lag complained of post-writ the following matters were dealt with during this period:

June 2001 –   The first drafts of the statements of four potential witnesses were settled.

June 2001 –   A Mr Poon of HKPC (apparently he was responsible for the pre-writ report) was engaged to undertake another report comparing the bonders of the parties.

June 2002 –  Mr Poon was asked for a progress report.  He responded ‘it is not ready’.

April 2002-March 2004 –   Periodic requests were made to Mr Poon for a progress report.  A meaningful response in September 2003 finally emerged: ‘the report will be ready in one week’.

May 2004 – Mr Poon’s report became available.

June 2004 – The plaintiffs filed a notice of change of solicitors, and they filed the continuance.

16.  It is conceded by the plaintiffs that there was a delay, but that was neither inexcusable or inordinate, given the amount of work that had to be carried out.

17.  With due respect to those putting forward that proposition, it is difficult to see how it could be justified.  No explanation has been proffered for Mr Poon’s tardiness and I should have thought he could, and should, have been given an ultimatum and then sacked within, say, six months of his engagement.  After all, he was not new to the history.  And to promise finality in a week after more than 2 years on the job and then delay a further 9 months is unprofessional and inexcusable.  Furthermore, there has been no reason given why the case could not have been further advanced in the meantime; why for instance discovery, the exchange of witness statements and other pre-trial activity could not have been pursued.

18.  As to the time frame pre-writ, to the extent that it may be factored in overall; I find the plaintiffs to have been somewhat unhurried during the stage, but not to the extent that what resulted was unwarranted delay.  Indeed, the time and activity then spent should have permitted the post-writ activity to have been seamlessly pursued, which quite apparently did not happen.

19.  The delay complained of was, as I find, both inordinate and inexcusable.

Serious Prejudice – Is This The Result?

20.  Waung J in Lui Chun Kwong v Kier Hong Kong Limited [1995] 1 HKC 695 reviewed leading cases on what amounts to prejudice and how it is to be established.  I adopt his synopsis at p. 704:

“	(1)	To justify dismissal some additional prejudice (over and above the prejudice caused by pre-writ delay) to the defendant flowing from the plaintiff’s post-writ delay must be shown.
	(2)	The additional prejudice need not be great but must be more than minimal.
	(3)	A casual link must be proved between delay and prejudice.
	(4)	The burden of proving prejudice is on the defendant as only the defendant can satisfactorily explain the prejudice suffered.
	(5)	To justify dismissal, more than a bald assertion that delay had prejudiced the defendants is required.  There had to be some indication of some specified prejudice on some specified issue.
	(6)	where loss of memory on a particular issue by a particular witness is concerned, the court is free to draw the necessary inference of further loss of memory from lapse on time.
	(7)	The prejudicial effect of delay depends largely on the nature of the issues in the case.”

21.  The defence claim of prejudice as advanced by Mr Liao, SC derives primarily from the unavailability of key witnesses.  Their case is that Bonda 100 was the result of independent research by members of the design team of Intra-Tech Mechatronics; thus material to its defence will be oral evidence as to how and when and otherwise in what circumstances their designs came into being.  A bare denial without positive assertions from these people may not be convincing.  With 8 or 9 years having elapsed, some members of the design team cannot be contacted or are otherwise not available.  Three key members have been identified as being Yan Cheung Hung, a mechanical engineer, Chan Chi Cheung, another mechanical engineer and Tam Sun Hoi, described as service manager and one who , it is said, spent a lot of time in developing the bonding process and in the evaluating the Bonda 100.

22.  According to the evidence, Mr Yan left his employ in April 2001 and emigrated to Australia.  His current whereabouts are, it is said, unknown, despite diligent enquiries.  Mr C C Chan left in July 1999 and his whereabouts are also unknown.  Mr Tam died in September 2003.  It is said that he was one of the most important members of the design team, with personal knowledge from the time the development of the project began.

23.  Needless to say, the other Mr Chan, the 1^st defendant, is still available to advance his and his co-defendant’s cause.

24.  What emerges from the evidence adduced for ASM in reply is the interesting fact that Mr Tam, now deceased, was in fact employed by ASM Assembly, the 1^st plaintiff; that he was so employed until July 1997, just 1 month before Intra-Tech Mechatronics sent the Bonda 100 to Taiwan for testing.  This, of course, puts into perspective his so-called involvement in the design and development of the Bonda 100 and, in particular, the testimony that he had personal knowledge of the design process since it began.

25.  Similarly, Mr Yan had also spent time at ASM, from where he resigned in September 1996.  During his time there, it is said that he did not participate in the development of bonders, calling into question his ability to have become a key player in the development of the Bonda 100 not long before its emergence.

26.  Mr Yan’s role being a contested issue is not a matter for me to determine, at least not at this time.

27.  But what is apparent are the following:

(a)	The componentry in question could only have originated in drawings.  This case must be about those drawings.  That must be where the emphasis lies.  Discovery has not yet been pursued, but one can assume that in the development of its own device, Intra-Tech Mechatronics (and Mr Chan) will have their own drawings, and specifications;
(b)	Mr Tam (deceased) could not have materially assisted in having first hand knowledge of the research and development, having arrived so soon before its emergence as a finished entity, at least not in a way that might have supported the defence case; and
(c)	even had the proceedings developed timeously, Messrs C C Chan and Yan would have been long gone by the time the matter would have been ready for trial.

28.  I make the further observation that with the writ under way by May 1999, Intra-Tech Mechatronics on advice may well have deemed it prudent to begin gathering its evidence and, in particular, to keep in touch with those of its design team who were planning to leave and then did so.

29.  Mr Liao submitted that a defendant is under no obligation until directed to prepare for trial.  Of course that must be so.  But if he chooses not to do so and loses touch with his former employees that is not of itself a matter that can be blamed on his adversary.

30.  What defeats the defence claim of prejudice is, as I find, that there is no causal link between what the defendant claims to be a significant difficulty in its defence and the plaintiffs’ delay.

A Fair Trial, Is That No Longer Possible?

31.  There has been much legal discussion but not much authority as to what is meant by a fair trial and when, because of the risk of that not being possible, the proceedings should be terminated.  It seems to me that it is very much a matter of commonsense; can in the factual circumstances of the case the matter be fully and properly analysed by the trial judge, leading to a decision that is fair?

32.  As a direct result of the plaintiffs’ inexcusable delay, might it be that vital oral or significant documentary testimony has gone for good?

33.  Waung J in Lui Chun Kwong said at page 712:

“As can be seen from the remark of Lord Salmond in Birkett v James (p 327G), impossibility of fair trial is more likely to be established in an action wholly involving oral evidence dependant on memory of events rather than dependant on assessment of credibility of witnesses.  Further, in an action where part or large part of the evidence is documentary, the difficulty of establishing [that a] fair trial [may be] not possible is considerably increased so that in many cases especially commercial cases involving substantial documentation the court could not conclude that no fair trial is possible even after very very long period of delay.”

34.  In the circumstances of this case, I fail to find on the evidence before me that there is a risk of unfairness should this matter proceed to trial.

Conclusion

35.  I have found that there has been inexcusable and inordinate delay by the plaintiffs in pursuing this action but that the defendants have failed to establish that they are to be seriously prejudiced as a result ; further, that such delay will not render a fair trial impossible.

36.  I exercise my discretion by ruling that the application fails and is dismissed.  Costs (nisi at first instance) are to the plaintiffs in any event.