XCHRX ONG EE CHANG v. LI TUNG LOK AND ANOTHER

HCA002541/1993

1993 HCA No. 2541

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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            J U D G M E N T

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Introduction

1. This action was commenced in 1993. It has not yet been set down for trial. The Defendants applied to dismiss the action for want of prosecution or as an abuse of the process of the court. Master Bennett dismissed that application, provided that the Plaintiff applied to set the action down for trial within 21 days. He found that such delay as there had been on the part of the Plaintiff was excusable, and that the Defendants had not established that that delay had caused them any prejudice. In addition, he found that the action was not an abuse of the court's process. The Defendants now appeal. They contend that the action should be dismissed.

2. The hearing of the appeal was not concluded in the time allowed for it. To save further costs, counsel put the remainder of their submissions into writing. I am grateful to them for the care they have obviously taken in their preparation. The trouble was that by the time I received their submissions, other work prevented me from returning to this case then. I was not able to do so for some weeks. That made it necessary for me to take some time reminding myself of the evidence which had been filed and the submissions which had been made. I mention all this because at first blush it looks as if an inexcusably long time has been taken in the preparation of this judgment.

The Plaintiff's claim

3. The Plaintiff's case is that towards the end of 1998 he was asked by Victor Batinovitch to assist in the establishment and subsequent operation of a semi-conductor assembly plant. A company was to be incorporated or acquired for that purpose. The Plaintiff was told that he would be allotted up to 5% of the shares of such a company. The Plaintiff accepted this proposal, and commenced employment with the company which had by then been acquired for this purpose. The promise relating to the allotment of shares was confirmed in a memo. dated 21st August 1989 which fixed the number of shares to which the Plaintiff would be entitled at 30, i.e. 3% of the issued shares.

4. The promise is alleged to have been made by Mr. Batinovitch on the instructions of the 1st Defendant and with his authority. However, it is possible that, in giving those instructions, the 1st Defendant was not acting on his own account but on behalf of the 2nd Defendant. That is why they are both Defendants in the action. As it was, although the Plaintiff's employment with the company ended in 1991, he claims that he did not become aware until May 1992 that the promise would not be honoured. It was then that he realised that it had never been intended that the promise would be honoured.

5. Three causes of action are pleaded: fraudulent misrepresentation, negligent misrepresentation and breach of contract. The plea of fraudulent misrepresentation is based on the allegation that at the time the promise was made, the 1st Defendant knew that it was never going to be honoured. Technically, the causes of action for misrepresentation arose in November 1988 when, in reliance on the promise, the Plaintiff accepted the proposal which had been made to him, even though on the Plaintiff's case he would not have known of his right to sue on these causes of action until he realised that the promise would not be honoured. The plea of breach of contract is based on the allegation that the promise was not in fact honoured. It is not possible to tell from the latest version of the Statement of Claim when that cause of action is alleged to have arisen, because it is not pleaded by when the shares had to be allotted to the Plaintiff.

The principles governing the dismissal of actions for want of prosecution

6. The law reports are full of cases in which the principles governing the dismissal of actions for want of prosecution have been considered. The principles - so far as they relate to applications to strike out for want of prosecution where (as here) it is not suggested that the Plaintiff has been guilty of intentional or contumelious default - were summarised by Neill L.J. in Trill v. Sacher [1993] 1 WLR 1379 at p.1398A-1400A. This summary was said by the Court of Appeal in Hongkong and Shanghai Banking Corp. Ltd. v. Kuan Tao Sheng [1998] 1 HKC 438 at p.445I to be an accurate, if general, summary of the principles. I must therefore apply them to the present case. I do not propose to repeat them here, but it will be necessary for me to refer to some other authorities where any of the principles summarised in Trill v. Sacher needs to be amplified.

The periods of delay

7. The writ was issued on 26th March 1993. The summons to dismiss the action for want of prosecution was filed on 6th August 1998. Between those dates there were a number of interlocutory skirmishes, but the Defendants' case is that the delay was attributable to two factors. The first was the inability of the Plaintiff to plead his case properly. That resulted in various applications for leave to amend and re-amend the Statement of Claim. Much of the time lost is said to have been "squandered" on the time spent by the Plaintiff putting his pleadings in order. The second was the inactivity of the Plaintiff's solicitors at two particular stages since the issue of the writ. The two particular periods of inactivity were identified as follows:

8. However, in the course of argument, Mr. Barrie Barlow for the Defendants took the point that the inordinate delay in the present case was not limited to these particular periods of inactivity or to the time which was unnecessarily squandered in correcting the pleadings. Delay is inordinate if it exceeds "by a substantial margin the times prescribed by the rules of court for the taking of steps in the action" (Trill v. Sacher, p.1398C) or if "it is materially longer than the time usually regarded by the profession and Courts as an acceptable period" (The Supreme Court Practice 1999, vol. 1, para. 25/L/5). Thus, the relevant periods of inordinate delay in the present case are now said to be:

9. The lapse of time in (i) exceeded by a substantial margin the time provided by the rules for issuing the summons for directions. The lapse of time in (ii) was materially longer than the time usually regarded as acceptable for applying for directions for the trial or for setting the action down for trial. It follows that there was inordinate delay on the part of the Plaintiff or his lawyers during those periods.

10. However, as Mr. Geoffrey Booth, a partner in the firm of solicitors instructed by the Plaintiff, asserted in para. 2 of his affidavit:

Moreover, there were, in the present case, an unusually large number of interlocutory issues which had to be resolved. When one looks at the detailed chronology of the proceedings, it is apparent that much of the parties' time was taken up with applications to the court to resolve those issues. Apart from the Plaintiff's application for discovery of documents in various classes (which was dismissed on 8th June 1995), the contested interlocutory skirmishes which caused the delay were all won by the Plaintiff, namely

11. It follows that, although there has been inordinate delay, the delay has been attributable, for the most part, to the rhythm of the litigation, in particular the need to resolve the various interlocutory issues as and when they arose. That is why Mr. Barlow realistically confined his submissions as to which part of that delay was inexcusable to the two broad areas of the evidence to which I have already referred, namely the time "squandered" on the Plaintiff putting his pleadings in order, and the two specific periods of inactivity.

The late start principle

12. In Birkett v. James [1978] AC 297, Lord Diplock said at p.322F-G:

The present case is one in which the Plaintiff's causes of action for misrepresentation had undoubtedly accrued some years before the writ was issued, and in which the Plaintiff's cause of action for breach of contract probably had as well. The proceedings can therefore be properly described as having been commenced towards the end of the limitation period for all causes of action. I recognise, of course, that on the Plaintiff's version of events he only knew of the facts which gave rise to the causes of action much closer to the time when the writ was issued. On his version of events, there was, therefore, no delay in issuing the proceedings. But the fact remains that this was a case in which his causes of action had accrued some time earlier, and it is therefore a case to which the "late start" principle applies.

The amendments to the Statement of Claim

13. The Statement of Claim was indorsed on the writ when the writ was issued on 26th March 1993. It was amended on three occasions: on 23rd September 1993, on 24th February 1997 and on 17th April 1997. The critical question is whether the need to amend the Statement of Claim on those occasions arose out of failings on the part of the Plaintiff or his advisers. Had the Plaintiff changed his instructions? Had the Plaintiff's advisers misunderstood their instructions? Or had the Plaintiff's advisers failed to plead the case properly in law and changes were necessary to plead the correct legal basis on which the Plaintiff's claim was to be put? If any of these things had happened, it could be said, I suppose, that any delay in bringing the action to trial could have been caused by culpable conduct on the part of the Plaintiff or his advisers, and that if prolonged delay had occurred as a result, the delay could be said to be inexcusable. However, the period of inexcusable delay would not be the period between the original pleading and the amended pleading. After all, many other steps in the action may have been taken in the meantime. It may be that none of them would have been affected by the subsequent amendment to the pleading. The period of inexcusable delay in such circumstances, therefore, would be the period by which the bringing of the action to trial would have been delayed by the need to amend.

14. The Statement of Claim was first amended in the following circumstances. When the writ was issued, it was believed that if the 1st Defendant had been acting in a representative capacity, the company for which he was acting was QPL International Holdings Ltd. ("QPL International"). Accordingly, QPL International was named as the 2nd Defendant. The facts pleaded in the Defence, however, showed that if the 1st Defendant had been acting in a representative capacity, the company for whom he should be regarded as having acted was not QPL International, but QPL (Holdings) Ltd. Accordingly, the Statement of Claim was amended, by consent, on 23rd September 1993 in order to substitute QPL (Holdings) Ltd. for QPL International as the 2nd Defendant.

15. The Statement of Claim was re-amended on 24th February 1997. It was, at first blush, a major re-amendment. The whole of the Amended Statement of Claim was deleted, and it was substantially recast. However, the factual allegations which had been made in the Amended Statement of Claim were, for the most part, repeated (albeit in different language). Moreover, although a cause of action in conversion was dropped, the existing causes of action of fraudulent misrepresentation and breach of contract were retained. Against that, it has to be said that the cause of action under the Misrepresentation Ordinance (Cap. 284) for negligent misrepresentation was pleaded for the first time, and all the causes of action were pleaded against the 2nd Defendant, whereas the causes of action of fraudulent misrepresentation and breach of contract had only been pleaded against the 1st Defendant.

16. It was counsel who advised that it was necessary for these amendments to be made (see para. 35 of the affidavit of Mr. Booth). But that advice was given because of the need to take "into account the factual position as revealed on discovery and the Defendants' request for further particulars". As for discovery, although I have seen copies of the lists of document disclosed on discovery, I cannot tell whether the contents of the documents disclosed by the Defendants made re-amendments of the Statement of Claim necessary when they had not been necessary before. There is therefore no basis for contradicting the assertion that it was the contents of the documents disclosed on discovery which made the re-amendments necessary. As for particulars, the Defendants had sought and obtained further and better particulars of the Amended Statement of Claim. They contended that the further and better particulars were not adequate, but before their summons relating to those particulars was heard, the Plaintiff issued his summons for leave to re-amend the Statement of Claim which would either contain the particulars sought, or would render the request unnecessary because the assertions for which particulars were being sought were no longer being made. In any event, I know that the request for further and better particulars of the Amended Statement of Claim (which it was contended had not been answered in its entirety) was not sent until 18th October 1995, which was over two years after the service of the pleading for which the particulars were sought. In these circumstances, what I assume the Plaintiff's advisers were saying was that the need to give particulars was not the reason for the re-amendment of the Statement of Claim: the Statement of Claim was having to be re-amended because of the documents disclosed on discovery, and the re-amendment of the Statement of Claim was therefore a convenient opportunity to address the question of the outstanding particulars. There is no basis for contradicting that assertion either.

17. The further re-amendment of the Statement of Claim occurred on 17th April 1997 in the following circumstances. Although the Plaintiff had been given leave to file the further Re-amended Statement of Claim on 19th February 1997, the Defendants applied for an order that parts of it be struck out under Ord. 18 r. 19. Rather than become engaged in another lengthy interlocutory skirmish, the Plaintiff's solicitors offered to re-amend the Statement of Claim further in order to meet the Defendants' objections. It is unnecessary for me to refer to the acrimonious correspondence on the topic. It is sufficient for me to say that ultimately the Defendants did not object to the proposed amendments, and a consent order was made in due course.

18. This analysis of the reasons for the various amendments to the Statement of Claim shows that the need to amend arose out of the natural dynamics of the litigation. They arose either (a) because the facts and matters which were to be pleaded by amendment had not been anticipated, and the need to plead them only emerged from the Defence and the documents disclosed by the Defendants on discovery, or (b) because of the desire to avoid a further contentious hearing. On the material before me, there is no basis for concluding that the need to amend arose out of any failings on the part of the Plaintiff or his advisers. I should add, however, that even if I had concluded that the need to re-amend the Amended Statement of Claim in February 1997 had arisen out of failings on the part of the Plaintiff or his advisers, the period of inexcusable delay, i.e. the period by which the trial would have been delayed by that need to re-amend, would not, in my view, have exceeded six months.

The periods of inactivity

             (i) 8th June 1995 - 8th January 1996. The Plaintiff's application for specific discovery had been dismissed on 8th June 1995, because the discovery sought had been "too wide and unsupported by evidence of the existence of the documents" (para. 29 of Mr. Booth's affidavit). Mr. Booth went on to explain what happened over the next seven months. First, consideration had to be given to how the application for specific discovery might be successfully pursued. The Plaintiff's instructions had to be sought. Once the Plaintiff's instructions had been obtained in connection with whether the application for specific discovery should be pursued, counsel had to be instructed to advise. On 18th September 1995, counsel advised that a further application be made, and on 19th December 1995 he advised as to the precise nature of the documents which should be asked for. The Plaintiff's instructions were sought again, this time with the benefit of counsel's advice as to the precise nature of the documents to be sought. Instructions to proceed with the application were received on 28th December 1995, and the request for documents was made on 8th January 1996.

19. This narrative of events reveals a period of inactivity on the documents front between 18th September 1995 and 19th December 1995. Mr. Booth's affidavit explains what else was happening at the time. On 18th October 1995, the request for further and better particulars of the Amended Statement of Claim was received. I have already referred to the fact that this was over two years after the Amended Statement of Claim had been served. The request was an extensive one. It ran to 23 pages. The request was sent to the Plaintiff on the following day, and his comments were received on 29th October 1995. Unfortunately, counsel was out of Hong Kong and he did not return until mid-November. The particulars were drafted by him and were served on 11th January 1996.

20. It cannot be said that this period of seven months was a period of inactivity. The steps which were appropriate to that stage in the litigation were being taken. It could be said, I think, that things could have been moved along a little quicker during this period, but even though this is a late start case, there is no way in which this period was a period during which the Plaintiff or his advisers were guilty of inexcusable delay.

             (ii) 9th July 1997 - 5th August 1998. In the early stages of the proceedings, the Plaintiff had agreed to deposit $300,000.00 with his solicitors as security for the Defendants' costs. On 3rd July 1997, the Defendants applied for further security. Their summons was dismissed on 10th July 1997, since no evidence had been filed in support of the summons. On 12th July 1997, the Defendants applied again for further security. That summons was heard on 5th November 1997 and dismissed. Apart from an order made on 14th July 1997 adjourning sine die another summons issued by the Defendants (this time for further and better particulars of the Further Re-amended Statement of Claim), no steps in the action were taken in this period of alleged inactivity.

21. The pending summons for further security for costs would not have justified inactivity on other fronts during this period. The summons related to a free-standing issue. It was unlike issues relating to pleadings and discovery (which may have to be resolved before the next step in the proceedings can be taken). So what were the Plaintiff's solicitors doing during this period? Mr. Booth's affidavit reveals that they were preparing the witness statements of the Plaintiff and Mr. Batinovitch. The statements had to be approved by counsel, the Plaintiff and Mr. Batinovitch. Counsel made various suggestions on both drafts, and Mr. Batinovitch made comments on his draft statement. Moreover, the Plaintiff was travelling extensively at the time, and it was not until he was in Hong Kong in June 1998 that his instructions on the witness statements could be obtained. They were finalised in July, and accordingly on 1st August 1998 the Plaintiff's solicitors wrote to the Defendants' solicitors informing them that they proposed to issue a summons for directions asking for an order for the exchange of witness statements within 28 days.

22. In my opinion, the witness statements should have been finalised far sooner than they were. I have read the witness statements myself, and in the light of the factual instructions which the Plaintiff's solicitors must have had before they embarked on the drafting of them, they should have taken no more than a few hours to draft. Initial drafts could have been prepared within a few weeks of 29th June 1997, which was when the Plaintiff's solicitors had last received instructions from the Plaintiff. In fact, it was not until 17th November 1997 that the draft statements were sent to counsel for his comments. Moreover, the Plaintiff's comments on the statements should have been obtained very much earlier than June 1998. It is no excuse for the Plaintiff to say that he was travelling. Since he was conducting litigation in Hong Kong, he should have kept his solicitors informed as to where he could be reached. In my view, the witness statements could and should have been finalised by the end of August 1997, and the letter which was written on 1st August 1998 could then have been written on 1st September 1997. The eleven months therefore which elapsed between 1st September 1997 and 1st August 1998 was a period during which the Plaintiff or his advisers were guilty of inexcusable delay.

The consequences of the delay

23. The power to dismiss an action for want of prosecution only arises where the inordinate and inexcusable delay on the part of the plaintiff or his lawyers

However, where the defendant relies on the second limb of this principle, i.e. the likelihood of serious prejudice, he cannot rely only on prejudice which arose as a result of the late issue of the proceedings:

The same presumably applies to cases in which the defendant is relying on the first limb of the principle, i.e. a substantial risk that a fair trial is not possible. The additional risk does not need to be great compared with that which may already have been created by the lapse of time before the issue of the writ, though it too must be more than minimal.

24. The principles governing the application of these classic statements of the law have been worked out in a number of subsequent cases. Thus, one of the principles summarised in Trill v. Sacher at p.1399F-H was:

Where there has been some divergence of opinion is over what evidence is sufficient to establish that that part of the delay which is found to be inordinate and inexcusable has created the substantial risk that a fair trial will not be possible or the likelihood of substantial prejudice to the defendant. For example, different views were expressed by the two judges who constituted the court in Hornagold v. Fairclough Building Ltd. (27th May 1993, Court of Appeal (Civil Division), Transcript No. 634 of 1993). One of them thought that some evidence had to be produced of risk or prejudice, while the other thought that in an appropriate case the necessary degree of risk or prejudice could be inferred. In Roebuck v. Mungovin [1994] 2 AC 224, the House of Lords agreed with the latter view: see p.234E-F per Lord Browne-Wilkinson.

25. The Defendants' case is that such inordinate and inexcusable delay on the part of the Plaintiff is likely to have caused serious prejudice to the Defendants. The prejudice is said to have taken two forms - evidential and financial - and I must deal with each in turn.

26. As for evidential prejudice, it is said that I should infer, in a case such as this which turns so much on the recollection of the witnesses, that their recollection of the events will now be dimmer than it otherwise would have been. I cannot go along with this argument. I am not convinced that this is a case which is as dependent on the recollection of witnesses as the Defendants suggest, but even if it is, the fact remains that the culpable delay of eleven months began nine years after the alleged promise was made and eight years after it was allegedly confirmed. I simply cannot infer that the recollection of the actual and potential witnesses (the 1st Defendant himself, Peter Dixon, Henry Cheng, Winnie Ng and George Ng) of what had occurred in 1988 and 1989 would have been any different at all if the trial had taken place when it would have done but for the culpable delay.

27. There are echoes of thinking along those lines in the cases. Thus, in Union V-Tex Shirt Factory Ltd. v. Union V-Tex Realty Ltd. (CA 48/93), Huggins V.-P. said:

And in Electricity Supply Nominees Ltd. v. Longstaff and Shaw Ltd. [1987] 3 Const. L.J. 183, Mustill L.J. (as he then was) said at p.187:

(I should interpose that that placed Mustill L.J. in something of a dilemma. He added:

He therefore questioned the correctness of the principle laid down in Birkett v. James about the limited relevance of prejudice flowing from pre-writ delay, but the issue was finally laid to rest in Department of Transport v. Chris Smaller (Transport) Ltd. [1989] 1 AC 1197, in which the House of Lords upheld the Birkett v. James principle).

28. In addition to contending that prejudice to the Defendants can in the circumstances be inferred (which I reject), the Defendants contend that there is direct evidence which establishes specific areas of evidential prejudice. The Defendants wish to adduce evidence to challenge the authenticity of (a) the memo. of 21st August 1989, and (b) the notarisation of a statement purporting to have been signed by Mr. Batinovitch in April 1992. They contend that the Plaintiff's delay has prevented them from doing so. I cannot go along with this complaint. So far as the memo. is concerned, the enquiries for evidence relating to its authenticity were commenced in 1996, i.e. before the period of culpable delay began. Even then, the person who the Defendants' solicitors wanted to interview, i.e. Ms. Shirley Hung who had been Mr. Batinovitch's secretary at the time and who presumably would have typed the memo. if it had been genuine, could not be found. The problem which the Defendants now have about challenging the authenticity of the memo., therefore, has not arisen as a result of the culpable delay. It had arisen before the culpable delay began. The same is true of the statement allegedly signed by Mr. Batinovitch in April 1992. The enquires for evidence relating to the authenticity of the notarisation of the statement, i.e. the search for the notary who purportedly notarised the statement, revealed that, had those enquires commenced before the period of culpable delay, they would have drawn a blank even then.

29. I can deal with the allegation of financial prejudice even more briefly. It will be recalled that in May 1994 the Plaintiff agreed to deposit the sum of $300,000.00 with his solicitors as security for the Defendants' costs up to the time when the action would be set down for trial. It is said that implicit in that agreement was an "understanding" that the Plaintiff would prosecute the action with reasonable diligence. In fact, the Defendants say that the costs which they have incurred so far, even though the action has not been set down, far exceed the $300,000.00. Any order for costs which the Defendants obtain in their favour will be for costs which are, save for the sum of $300,000.00, totally unsecured. It is said that that would not have occurred but for the Plaintiff's culpable delay.

30. I cannot go along with this argument. There is no causal connection between the Plaintiff's culpable delay and the fact that the Defendants are unsecured in respect of the costs incurred by them in excess of $300,000.00. The reasons why a substantial proportion of their costs is unsecured is because

In any event, financial prejudice is remediable. Any financial prejudice which the Defendants have suffered could have been met by ordering the Plaintiff to pay an additional sum into court as a condition of permitting him to proceed with the action. Dismissing the action for want of prosecution on the ground of financial prejudice alone would not be a proper exercise of my discretion, unless I had afforded the Plaintiff an opportunity to redress the prejudice by paying the sum equivalent to the Defendants' unsecured costs into court.

31. For all these reasons, I do not think that the Plaintiff's culpable delay in the eleven months which I have identified has given 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 have caused serious prejudice to the Defendants.

Abuse of process

32. In Grovit v. Doctor [1997] 1 WLR 640, it was held that to commence and continue litigation which the litigant does not intend to bring to a conclusion can amount to an abuse of process. In such a case, it is open to the court to strike out the proceedings. Mr. Barlow contended that that is an appropriate course to take in the present case. These proceedings were initiated and pursued in order to put pressure on the Defendants to pay off the Plaintiff. The Plaintiff's conduct of the litigation demonstrates that the Plaintiff has no intention of allowing the action to proceed to trial. His aim is to embarrass the Defendants into settling with the Plaintiff before it gets to trial.

33. The Plaintiff's conduct of the litigation which is said to give rise to this inference includes not merely the delay, but also the circumstances in which fraud has been pleaded (which are summarised in paras. 9.2(a), (b) and (d) of Mr. Barlow's written submissions in reply), and the fact that the Plaintiff is still not ready for trial (because late in the day his solicitors have sought to prolong things further by suggesting a split trial on liability and damages). I do not wish to make this already lengthy judgment even longer, and it is sufficient for me to state that the Plaintiff's conduct of this litigation, when looked at in the round, does not, in my view, begin to justify drawing the inference that the Plaintiff does not intend to bring this action to trial.

Conclusion

34. For these reasons, this appeal must be dismissed. At present, I see no reason why costs should not follow the event, and the order nisi which I make as to costs is that the Defendants must pay to the Plaintiff his costs of the appeal in any event.

Representation:

Remarks:
On appeal by the Defendants the Court of Appeal: Appeal dismissed with costs. Please refer to judgment CACV000194/1999.