YEUNG KIT LING v. MA KWAN HO LAWRENCE AND ANOTHER

DCCJ 4729 /2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4729 OF 2004

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D E C I S I O N

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Introduction

1.  This is an application of the Defendants for striking out of the Plaintiff’s claims for want of prosecution. 

2.  The action was commenced in September 2004 and pleadings have been closed on 28 December 2004.  The Plaintiff filed her List of Documents on 15 February 2005 and the Defendants filed theirs’ on 1 April 2005.  Since then, apart from filing 4 Notices of Intention to Proceed each year in 2006, 2007, 2008 and 2009 respectively, no step had been taken by the Plaintiff until she took out a Case Management Summons on 25 June 2010. There was a delay for more than 5 years.

3.  At the start of this hearing, counsel expressed that the only issue for my consideration is whether there is sufficient prejudice on the Defendants caused by the delay, as the Plaintiff has rightly conceded that the delay is inordinate and inexcusable.  It is common ground that the well established principles set out under the leading case for this kind of application, Birkett v. James[1], are applicable.

4.  The only prejudice alleged by the Defendants is fading of memories of their witnesses. 

Background

5.  The Plaintiff is and was a financial service consultant by profession.  Her case is that, pursuant to two oral agreements with the 1^st Defendant made in Shanghai and Tianjin respectively, she is entitled to receive remuneration and disbursements from the 1^st and 2^nd Defendants for services rendered for promotion of a so-called “Tianjin Project” concerning the development of an oil field and a gold field in Mongolia by the 2^nd Defendant. 

6.  It is not pleaded clearly in the Statement of Claim the circumstances under which the alleged agreements were concluded. 

7.  Regarding the Shanghai agreement, it is pleaded under paragraphs 6 and 8 of the Statement of Claim that:

“6. In or about October 2003, there were various meetings held in Shanghai between the Plaintiff and the 1^st Defendant to discuss and plan for the promotion of the Tianjin Project.  It is common intention of the parties that the Plaintiff will continue to provide financial services and support to the projects of the 2^nd Defendant, including the Tianjin Project and the 1^st and 2^nd Defendants will remunerate the Plaintiff (“the Shanghai Agreement”).

8. The following are express, or alternatively the implied terms of the Shanghai Agreement (“the Implied Terms”):

(i) The 1^st and 2^nd Defendants should remunerate the Plaintiff on the services rendered in relation to the project of the 2^nd Defendant, including the Tianjin Project on an hourly rate basis at HK$1,500.00 per hour and HK$3,000.00 per hour for services rendered in Hong Kong and mainland respectively.

(ii) The 1^st and 2^nd Defendants shall pay the disbursement incidental to the promotion of the Tianjin Project.

(iii) The 1^st and 2^nd Defendants shall pay as agreed in (i) and (ii) to the Plaintiff from 23^rd March 2003.”

8.  For the Tianjin agreement, it is pleaded that:

“7. In or about November 2003, during various meetings in Tianjin, the Plaintiff, the 1^st Defendant and Tso[2] had reached another agreement verbally where it is agreed, the Plaintiff shall provide services to promote the Tianjin Project of the 2^nd Defendant and the 1^st Defendant shall transfer 50% of his shares in the 2^nd Defendant to the BVI Ma & Yeung[3] within three months subsequent to a guaranty licence (“the Licence”) being granted by the Tianjin Government (“the Tianjin Agreement”). It was made orally and to be inferred from the conducts of the parties.”

9.  The Defendants denied the existence of the said agreements but admitted that the 1^st Defendant himself had agreed to remunerate the Plaintiff for her work done but the remuneration had already been paid up by way of the 1^st Defendant settling the Plaintiff’s mortgage installments and bills as particularized under paragraph 13 of the Defence. 

10.  It is apparent that what will be in heated dispute is what had been said and done by the parties during the period between October and November 2003.  In other words, oral evidence of witnesses will form a very important part for determination of the main issue, that is, whether the alleged agreements exist and if yes, what were the agreed terms.

11.  Parties also confirmed that there is no contemporaneous document evidencing the alleged agreements.  Besides, even the written communications between parties, including the emails, can of little help.

10.              Mr. Ng, counsel for the Defendants, submitted that the lapse of time may be very prejudicial if the circumstances of an accident or oral contracts or representations are in issues, but is of much less importance in a heavy, well-documented commercial action[4].

11.              Further, the Court is entitled to infer that there would be natural loss or fading of witnesses’ memories by the passage of time as a result of delay[5]. In Herbert v. FPB Asia Limited & Ors.[6], Yeung J (as he then was) had this to say:

“…it is not essential that there should be evidence of the particular respects in which potential witnesses’ recollection were impaired, nor did the impairment have to be attributed to any particular period of delay. In an appropriate case, the Court was entitled to draw an inference that by reason of the delay complained on, serious prejudice would be caused to the Defendant as a result of impairment of witnesses’ recollection.

A judge should not always be precluded from drawing inference favourable to the Defendant in the absence of specific evidence expressly particularizing the risk of prejudice.”

12.  In Nanjing Iron & Steel Group International Trade Co. Ltd. v. STX Pan Ocean Co. Ltd.[7], Reyes J said[8]:

“…it is said that the defendants will not suffer prejudice. I am unable to accept that. Over 2 years (or more if one takes the time needed to get this matter to trial) memories are bound to dim. That is a substantial prejudice which can be assumed simply because of the passage of time.(my emphasis)”

13.  Similar approach has been taken by Au J in Cheung Sai Kit v. Wong Chiu Kit, Eric[9]. In this case, with an inordinate delay of 32 months, counsel for the plaintiff argued that there would be no risk of an unfair trial as the defendant’s witnesses have the benefit of the affirmations filed in the Order 14 application for refreshment of memories.  Rejecting counsel’s argument, His Lordship had this to say[10]:

(1)     Judging from the contentions between the parties raised in the affirmations filed in the O.14 application, oral evidence of, and thus the ability to recall with accuracy of the events by, the witnesses are likely to be important in proving [the defendant]’s defence at trial.

(2)     I accept Mr. Maurellet’s submission that the court is entitled to infer that there would be further natural loss or fading of these witnesses’ memories by the passage of time as a result of these 32 months’ delay.

(3)     Although their memories of the main events could be refreshed by the affirmations they have filed, this can only be to a certain extent, in particular in this case where the affirmations were filed for the interlocutory purpose which may not have covered many of the details of the events to be recalled.

(4)     On the other hand, it is reasonable to expect that, in the trial, the witnesses are likely to be cross-examined on various details of matters that had occurred more than 10 years ago, something which are likely to be adversely affected by the fading of the memories.  Thus, it is reasonably likely that their credibility would be challenged on that basis.

(5)     In the circumstances, I accept that this would give rise to a substantial risk that a fair trial for [the defendant] is not possible as a result of the inordinate delay.

14.  In A & M Manufacturing and Marketing Limited v. Iu Po Shing[11], although the defendant has not stated in his affirmation that he has difficulty with memory, Deputy District Judge Yu found that the loss of memories could go without saying for a delay of 2 ½ years.

15.  Since after the implementation of the Civil Justice Reform[12] (“CJR”), 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 for 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. 

17.  On the other hand, Mr. Kwan, counsel for the Plaintiff, asked this Court not to exercise its discretion to strike out the Plaintiff’s claims.  He submitted, firstly, that there is no evidence to suggest that any potential witnesses have any impairment of memory due to the lapse of time and even the 1^st Defendant did not say so in his affirmation.  In support of his submission, Mr. Kwan referred me to two cases[13], both decided before the implementation of the CJR.

18.  In Nanjing Iron, Reyes J said[14]:

“Under the present CJR regime, that would seem to me to be sufficient cause to strike out the claim.  In the absence of some compelling reason, it is contrary to the underlying objective in Order 1A, Rule 1(b) (“to ensure that a case is dealt with as expeditiously as is reasonably practicable”) for a party to allow an action to languish for 2 years once the same has been commenced.”

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.

20.  The second point in Mr. Kwan’s submission was that, it is a matter of common sense for a party on receipt of a legal claim to use reasonable diligence to review his/her position, secure any evidence that may be relevant and to seek advice if necessary.  Such defendant can reasonably be regarded as equally aware as anyone else that time is likely to undermine recollections, and thus should take basic steps to preserve relevant evidence.   

21.  The same argument was raised before Reyes J in Nanjing Iron and the defendant was blamed for not taking statements. His Lordship said[15]:

“I do not think that such reasoning is fair. The defendants were entitled to see how precisely the claim by the plaintiffswas going to be put. In the absence of even a Statement of Claim, it is difficult to see why the defendants were supposed to guess or infer from the correspondence just what case they were supposed to meet. That Statement of Claim did not materialize until June 2009.”

22.  Although the Statement of Claim was filed early in the present case, the situation here is however similar.  The circumstances upon which the alleged agreements were concluded had not been clearly pleaded.  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.  Besides, it was not clear how the terms set out under paragraph 8 of the Statement of Claim can be implied and whether they were in fact express or implied terms.  The case of the Plaintiff as pleaded is ambiguous in all these respects.

23.  Equally, it is difficult to see why the Defendants were supposed to have anticipated the delay of the Plaintiff and start preparing witness statements, or even drafts, without knowing clearly the Plaintiff’s case.  To so doing might incur extra costs which are otherwise unnecessary after the case of the Plaintiff is ascertained. 

24.  For reasons mentioned above, it would only be right to strike out the Plaintiff’s claims for want of prosecution and the Plaintiff’s action shall be dismissed. 

25.  Costs of the action, including this application, be to the Defendants to be taxed if not agreed, with certificate of counsel, save that the costs of the 2^nd Affirmation of the 1^st Defendant should not be allowed as it only advanced points of submission but not disposed to facts.  This is a costs order nisi and shall be absolute upon the expiry of 14 days from the date of this Decision.