YEUNG KIT LING v. MA KWAN HO LAWRENCE AND ANOTHER

CACV 258/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 258 OF 2010

(ON APPEAL FROM DCCJ NO. 4729 OF 2004)

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Hon Stock VP:

Introduction

1.  This is an appeal from an order of District Court Judge S T Poon dated 4 October 2010 whereby he struck out the plaintiff’s claim for want of prosecution and dismissed her action with costs.  On 16 November 2010 he granted the plaintiff leave to appeal that decision.

2.  On 23 March 2011, we dismissed the appeal and said that we would give our reasons later.  This we now do.

Procedural history

3.  The proceedings in question were commenced by a writ endorsed with a Statement of Claim dated 8 September 2004.

4.  The defendants filed their Defence on 4 November 2004.

5.  The Reply is dated 4 December 2004; and the pleadings then closed.

6.  Lists of documents were served in February and April 2005.

7.  Thereafter the plaintiff took no steps until June 2010, save for two notices of change of solicitors and four notices of intention to proceed.

8.  In June 2010 the plaintiff filed a Case Management Summons and in August 2010 the defendants filed a summons to dismiss the plaintiff’s claim for want of prosecution.

9.  It was conceded before the learned judge that there had been inordinate and inexcusable delay.  The sole question for his determination was whether by reason thereof the defendants had been occasioned serious prejudice.

The issues

10.  Two limbs of appeal emerged:

(1) whether there was sufficient evidence upon which the judge could reasonably find that the defendants had discharged the onus on them to establish serious prejudice; and

(2) whether the judge relied on the Civil Justice Reform that came into effect on 2 April 2009 as altering the appropriate approach to the determination of serious prejudice and, if so, whether he erred in doing so.

The Claim

11.  The plaintiff is a financial services consultant.  She claims that in that capacity she entered into two agreements with the 1^st defendant:

(1) an agreement in or about October 2003 pursuant to “various meetings held in Shanghai” (the Shanghai agreement) by which according to “the common intention of the parties” she was to provide financial services and support to certain projects: a project for an oilfield in Mongolia; a goldfield project; and the establishment of a credit rating company in Tianjin (the Tianjin project).  It was pleaded to be “express, or alternatively implied terms of the Shanghai agreement” that the plaintiff would be remunerated by the defendants at certain rates particularised in the pleading; and

(2) an agreement in or about November 2003 pursuant to “various meetings in Tianjin” (the Tianjin agreement) whereby in exchange for her services to promote the Tianjin project, she was to receive 50% of the 1^st defendant’s shares in the 2^nd defendant company.  This agreement, it was pleaded, was “made orally and to be inferred from the conduct of the parties”.

12.  The suggestion is that despite repeated requests and demands the sum due under the Shanghai agreement, namely, HK$995,771, was not paid, and the shares to be transferred under the Tianjin agreement were not transferred.  So the claim was for damages in the sum allegedly due and a declaration that the plaintiff was the beneficial owner of 25% of the shares in the 2^nd defendant company.

The Defence

13.  The Defence is that there was no Shanghai or Tianjin agreement as alleged but that in April 2003 it was agreed that, in consideration of the plaintiff’s assistance in working on the Tianjin project that month (that is to say, well before the two agreements asserted by the plaintiff), the 1^st defendant would settle some of the plaintiff's mortgage debt and that he did so in the sum of HK$96,000 in full settlement of the amount due to the plaintiff.  There was a further understanding that if the Tianjin project was licensed, the 1^st defendant would seek to ensure the engagement of the plaintiff by the 2^nd defendant but that, in the event, no position for her was available and, further, that she was reimbursed the sum of HK$169,661 for expenses incurred by her in work for the 2^nd defendant.

The Reply

14.  The Reply imported further dimensions to the issues joined, namely, an assertion of an agreement by the 1^st defendant in July 2002 to make certain payments for the plaintiff’s expenses; an acceptance that some payment for the plaintiff’s work was made by the settling of mortgage instalments; and an allegation that a man named Tso, who held shares in the 2^nd defendant, agreed on behalf of the 2^nd defendant that the plaintiff would be paid a salary for a period of three months.

No relevant documents

15.  The lists of documents are extensive but it is conceded by the plaintiff that none of the documents supports the oral agreements upon which the plaintiff relies.

16.  It follows that this is a case depending entirely upon recollection of oral communications.

The affirmation

17.  In his affirmation in support of the summons to dismiss for want of prosecution, the 1^st defendant asserted prejudice caused by inordinate and inexcusable delay by referring to the fact that the agreements relied upon are said to have been oral; that the plaintiff’s pleadings rely upon unparticularised “various meetings” and upon agreements “to be inferred from the conduct of the parties”; that the pleadings show that evidence will be required of events going back as far as 2002; and that “due to the long lapse of time caused by the inordinate or inexcusable delay on the part of the plaintiff, witnesses including Tso will be required to give evidence according to the recollection of matters [that] happened 6 to 8 years ago.  “I believe,” he said “that there is a high risk that memory is likely to have faded.  Accordingly, I am advised and verily believe that prejudice is inevitably caused to me and the 2^nd Defendant.”

The judgment

18.  The judge referred to a number of Hong Kong decisions in which it has been said that there were certain cases in which the delay had been such that the court was entitled to infer impaired recollection such as would cause serious prejudice.  The specific cases to which he referred were Herbert Hauster v FPB Asia Limited & Ors HCA 7459 of 1992, 24 November 2000, unreported; Nanjing Iron & Steel Group International Trade Co. Ltd v STX Pan Ocean Co. Ltd HCAJ 177 of 2006, 7 September 2009, unreported; Cheung Sai Kit v Wong Chiu Kit, Eric, HCA 1611 of 2005, 17 December 2009 unreported.

19.  The judge was conscious of and referred to the principles established in Birkett v James [1978] AC 297, which are regularly applied in Hong Kong, namely, that the power to dismiss a claim for want of prosecution should be exercised only where the plaintiff’s default had been intentional and contumelious or where there had been inordinate and inexcusable delay on the plaintiff's part (or that of his lawyer) giving rise to a substantial risk that a fair trial would not be possible or to serious prejudice to the defendant.  The burden is on the defendant to establish that serious prejudice as result of that delay.

20.  He noted in particular the fact that this was a case in which there was a fundamental factual dispute, which depended entirely upon recollection unsupported by documentation, of events as far back, he said, as 2003 and he was prepared to act on the basis that in such circumstances it was open to the court to infer a loss or dimming of memory even in the absence of an express assertion by a defendant that he could not remember the events in question.  He noted that “the circumstances upon which the alleged agreements were concluded had not been clearly pleaded [and that] there was no mention of the detailed time and occasion at which the agreements were said to have been concluded and no conduct allegedly inferring the agreements had been identified”.  Neither, he added, was it clear how the terms relied upon in the Statement of Claim were said to be implied or indeed whether they were express or implied; much in the pleadings was ambiguous.

21.  It was submitted to him that it had been incumbent on the defendant in late 2004, when the Statement of Claim was filed, to collate relevant evidence and have it reduced to writing, the more so since a Defence was filed.  To this the judge said that it was difficult to see why the defendants should at that time have anticipated the plaintiff’s delay and prepare witness statements without knowing clearly what the plaintiff’s case was.

Our approach

22.  Our function is to review the exercise of a judge’s discretion.  As explained by Lord Diplock in Birkett v James, at 317, it is a matter of discretion because a decision of this kind is one which involves “balancing against one another a variety of relevant considerations upon which opinions of individual judges may reasonably differ as to the relative weight in a particular case.”  It follows that we are entitled to reverse the judge’s decision only where we are satisfied that the judge has erred in principle (for example, by giving weight to something which he ought not to have taken into account or by failing to give weight to something which he ought to take into account: see Birkett v James at p 317G) or is “otherwise plainly wrong”: see Hunter v Skingley [1997] 1 WLR 1466 at 1470D.

Sufficiency of evidence

23.  The essence of the submissions was that there was insufficient evidence from the defendants to establish serious prejudice occasioned by the delay.  

24.  Mr Kwan, who ably advanced his client’s case, asserted that there was no express contention by the 1^st defendant that he has a poor memory of what happened those years ago; that the Defence was filed relatively soon after the relevant events and that one might in the normal course of events expect, if not a proof of evidence, then at least notes to be made of his recollection of what happened between him and the plaintiff, whereas all one sees is an almost bald assertion that with the lapse of time memories fade.  There was not even an assertion that Mr Tso is not available or, if available, that his memory of the material happenings was not reliable.

25.  The bundles presented to us included numerous authorities on the question of sufficiency of evidence.  We do not think it necessary here to rehearse the detail of those authorities.  What is sufficient evidence to establish prejudice consequent upon delay is case and fact specific and there is a danger of “excessive intrusion of authority into the decision of factual questions”: per Hobhouse LJ in Shtun v Zalejska [1996] 1 WLR 1270 who added at 1287G that: “Each case turns on its own facts and whether or not, in any given case, it is appropriate to draw the inference depends upon all the circumstances of that case.”  

26.  A bald assertion of prejudice will not suffice.  It is necessary for a defendant, on whom the burden rests, to show what prejudice is occasioned and how it is occasioned.  It may be that witnesses have become unavailable.  But it may also be that although witnesses are available, the effect of the passage of time on the recollection of the witnesses becomes material in the context of the issues in the case and of the nature of the evidence to be put before the court to determine those issues.  The authorities show that it is not easy or indeed desirable to provide guidelines as to the nature or degree of the evidence required.  However whilst it is not enough “merely to assert that in the nature of things memories will have dimmed with the passage of time” (Slade v Adco Ltd [1996] PIQR 418 at 433), there will be cases where the prejudice can clearly be inferred from the primary facts.  The point was made by Peter Gibson LJ in Shtun, above, at 1285:

“In my judgment, in order to determine whether a defendant has suffered the necessary prejudice when it is in the form of the impairment of witnesses’ recollections as a result of inordinate and inexcusable post-writ delay, the court must examine with care all the circumstances of the case, including both the affidavit evidence as well as the issues disclosed by the pleadings. It is not, in my judgment, essential in every case that there should be evidence of particular respects in which potential witnesses’ memories have faded, still less that it need be shown that such fading of memories occurred in a particular period. That would be to approve of the classically inept question in cross-examination, "When did you first forget?" Every court in the land is accustomed to drawing inferences from primary facts. So long as there are primary facts from which inferences can properly be drawn, there is nothing wrong with doing so. That is as true in this area of the law as it is in any other. It is not a reversal of the burden of proof that the court at the invitation of the defendant should draw an inference of prejudice from the material put before it.”

27.  I note that it is not suggested that Mr Tso is unavailable and I note, as did the judge, that this is a case in which a Defence was filed, so that some exercise in recollection on the 1^st defendant’s part must have taken place in late 2004 in order to prepare it.  But that is far from the long and the short of the matter.  The following indicia support the inference of prejudice drawn by the judge:

(1) The events in question go back to 2002, eight years before the case management summons.

(2) The factual dispute is not simple.  In this regard, one notes that the pleadings proffer no fewer than four agreements, each one of which appears to be in dispute: the Shanghai agreement of “about October 2003”; the Tianjin agreement of “about November 2003”; the April 2002 agreement asserted by the defendants; and the July 2002 agreement asserted by the plaintiff in her Reply. Furthermore, the agreements upon which the plaintiff relies are pleaded against a background of “various meetings” in Shanghai and in Tianjin, none of which has been particularized.

(3) Whilst it is correct to say that the 1^st defendant must have embarked upon some exercise in recollection for the purpose of filing the Defence, there is no documentary evidence to which he had recourse to support his case or to counteract that of the plaintiff;

(4) no witness statements were served by the plaintiff upon the defendants as required by O.23A r5 of the Rules of the District Court then in force, so that even at this stage the Defendants can have little idea of the evidence which they have to meet or upon which, if the trial proceeds, cross-examination can be pursued (as to which latter difficulty see Slade v Adco above at p 434); and

(5) it is particularly noteworthy that in the evidence filed by the plaintiff explaining the delay, she refers to the preparation of no fewer than 17 drafts of her own witness statement.  It may be that this extensive preparation was, as she hinted in correspondence with her former solicitors, more than was necessary, but one can nonetheless reasonably infer that her story is a detailed one, details of which the defendants have no notice.

28.  Against this background, the inference drawn by the judge that the passage of time is likely to have worked serious prejudice to the Defendants in their presentation of their case could hardly be said to be plainly wrong.  In this context it is to be remembered that at the stage of an application such as this “the court is not trying the case.  The judge’s task is to assess the likely effect on the trial and on the defendant’s ability to put his case forward.  The judge must therefore draw inferences based on all the material before him.  These inferences will include inferences as to the effect of delay on the recollection of witnesses. … .  Whether that further loss of recollection is sufficient in a particular case will be for the judge to evaluate”: per Neill LJ in Shtun, above, at 1290.

The effect of the CJR

29.  However, it was contended that in his approach to the exercise of his discretion, the judge erred in principle.  The way it was put in the grounds of appeal is that: “the Court erred in law in finding that since the implementation of the Civil Justice Reform the courts will readily infer that witnesses will suffer a loss or dimming of memories, even without evidence provided … the delay is substantial.”

30.  This contention relied upon three passages in the judgment:

“15. Since after the implementation of the Civil Justice Reform … the Courts have been consistent in their approach in dealing with complaints of loss of memories as a result of inordinate delay. If the delay is substantial, the Courts will readily infer that witnesses will suffer a loss or dimming of memories, even without evidence provided as such by the defendant.

16. Moreover, if oral evidence of witnesses will form an essential part for determination of issues at trial, loss of memories of witnesses will be a sufficient prejudice striking out of the claim. In this regard, it is not necessary to categorize the ground of striking out being impossibility to have a fair trial or serious prejudice suffered by the defendant, as in the situation of loss of memories of witnesses, they are really the same thing.

….

19. Suffice for me to say is that, since the implementation of the CJR, there is a higher duty on parties to conduct legal proceedings expeditiously, as it is expressly set out as an underlying objective in Order 1A.  I will not go so far as to suggest that, in an application to strike out for want of prosecution, the defendant has no longer a duty to convince the Court that he suffers serious prejudice or there is a substantial risk that a fair trial is impossible because of the inordinate delay.  However, given a sufficiently long delay and without any compelling reason to explain the same, the inference of prejudice can easily be drawn as mentioned in Paragraphs 15 and 16 above.  In the present case, even if the delay is counted only from the implementation of the CJR, it is still more than 14 months.”

31.  It may be that the learned judge was intending to say no more than that what constitutes inordinate delay is to be looked at in the light of the policy underlying the CJR.  If so, he is correct.  If, however, he was suggesting that the test for serious prejudice is altered by the CJR, or that the evidence required to establish serious prejudice is now less onerous than before, then I would not agree.

32.  I am prepared to assume in the plaintiff’s favour, for the purposes of this appeal, that the judge meant the latter, namely, that there was a new test for prejudice or if not a new test that the evidence needed to establish it is somehow different from before; and that therefore he erred in principle.  It is noteworthy that the judge in this respect was addressing only that part of the delay since April 2009 after implementation of the CJR, so that it cannot have had a material impact upon his decision.  Be that as it may, working on the basis that this Court was required to exercise the discretion afresh, I was satisfied for the reasons I have provided that this was a claim which should be dismissed for want of prosecution.

Hon Wright J:

33.  I agree.