KENTWELL INTERNATIONAL LTD v. SUN WO KEE (CHINA HONG KONG) LOGISTICS LTD

HCA 2231/2014

[2026] HKCFI 4261

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2231 OF 2014

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DECISION

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Background

1.  By a Writ and Statement of Claim dated 3 November 2014, the Plaintiff (“Kentwell”) claims against the Defendant (“Sun Wo Kee”) for inter alia vacant possession and arrears of rent and/or mesne profit since 15 September 2013 in relation to certain plots of lands in DD 107, Yuen Long, New Territories, Hong Kong (“Lands”).  

2.  After the commencement of the present proceedings, Sun Wo Kee was deregistered in 2015 as a result of the application for deregistration filed by its director, Mr Tsang Kwan Ying (“Tsang”), dated 8 August 2015.  It is noteworthy that Tsang signed on the said application and confirmed the conditions stated therein, including that “the company is not a party to any legal proceedings”, which is objectively incorrect.  The significance of this shall become clear below. 

3.  Kentwell’s claim can be summarised as follows:-

(1)  Kentwell is the owner of the Lands, and entered into, inter alia, two tenancy agreements with Sun Wo Kee (China Hong Kong) transportation Company Limited (“SWKT”) on 15 July 1996 and, upon its expiry, on 23 September 1998.  After the lapse of the tenancy agreement, the Plaintiff as landlord and SWKT as tenant had, on around 15 July 2000, entered into a series of oral monthly tenancies in relation to the Lands upon the same terms of the tenancy agreement, mutatis mutandis.

(2)  Immediately upon the deregistration of SWKT on 3 June 2005, Sun Wo Kee as tenant took up the position of SWKT and entered into a series of oral monthly tenancies in relation to the Lands (“Oral Tenancy”). 

(3)  Between 3 June 2005 and 14 September 2013, Sun Wo Kee had taken up and enjoyed exclusive possession of the Lands pursuant to the Oral Tenancy.

(4)  Since 15 September 2013, Sun Wo Kee had occupied the Lands but failed and/or refused to pay the monthly rents.

4.  In Sun Wo Kee’s Defence and Counterclaim, it was pleaded that:-

(1)  Wah Yan Mo Fan Heung (“Heung”) was the owner of part of the Lands, the other part being owned by members of the Heung. 

(2)  The staff of the Heung, one Miss Chan Wai Ying (“Chan”), had misrepresented to Tsang, SWKT’s director (and also Sun Wo Kee’s director subsequently), that Kentwell was the agent of the Heung.  On that basis the “landlord” under the written tenancy agreements were stated as Kentwell, and one Wu Hong Lin (“Wu”) (accounting clerk of the Heung) signed on behalf of the “landlord”. 

(3)  After the term of two written tenancy agreements had lapsed, between July 2000 and September 2013, a monthly oral tenancy agreement was reached between Chan (acting on behalf of the Heung) and Tsang (acting on behalf of Sun Wo Kee).  The rents were paid by Sun Wo Kee into the bank account designated by Chan.  

(4)  Chan and Wu, in breach of their duties as clerk and accounting clerk of the Heung, had used the name of Kentwell to channel and divert the rental income derived from the Lands. 

(5)  On a day prior to September 2013, this malpractice was discovered by, inter alios, Foo Tak Ching (“TC Foo”), a manager of the Heung.  

(6)  The Heung then demanded Sun Wo Kee to account to the Heung of the rents paid to Kentwell for the previous six years.

(7)  On 14 January 2014, the Heung commenced HCA 83 of 2014 against Chan, Tang, Wu and Kentwell for, inter alia, fraud and accessory liability in aid of the breach of trust committed.

(8)  Upon discovery of the malpractice, Sun Wo Kee had refused to pay any further rent to Kentwell.

(9)  In Sun Wo Kee’s counterclaim, it claims against Kentwell for an indemnity in respect of the rents payable to the Heung in relation to the Lands. 

5.  There are two applications before the Court:-

(1)  By Summons dated 2 March 2026 (“Amendment Application”), Kentwell applied to amend its summons taken out more than ten years ago on 15 May 2015 to file a Rejoinder. 

(2)  By Summons dated 16 March 2026 (“Striking Out Application”), Sun Wo Kee applied to strike out the action herein for the inordinate delay that occurred from 2015 onwards, which has seen the present proceedings being left idle for more than ten years.  

6.  Both Ms Audrey Eu SC (for Sun Wo Kee) and Mr Frederick Chan (for Kentwell) agreed that I shall first deal with the Striking Out Application, as the Amendment Application will fall away if Kentwell’s claim is struck out.

7.  For completeness sake it is noted that there are the following related actions:-

(1)  A prior action (HCA 83/2014) commenced by the managers of the Heung against inter alios Tsang, Chan, Wu and Kentwell in relation to the roles they played in siphoning away rental payments from the Heung. 

(2)  A subsequent action (HCA 1455/2025) commenced by Kentwell against, inter alios, the successor in occupation of Sun Wo Kee, claiming for vacant possession and mesne profit in relation to the Lands.  The said successor’s position as stated in its Timetabling Questionnaire filed in HCA 1455/2025 is that he was in possession of the Lands since Sun Woo Kee’s deregistration in 2015. 

Striking Out Application

8.  The basis of the Striking Out Application is that Kentwell had taken no action to move the proceedings forward since the order of Master K Lo dated 4 June 2015, ordering Kentwell’s application for leave to file a Rejoinder to be adjourned for argument.  The next step that was taken in these proceedings by Kentwell was the Notice of Intention to Proceed and the Notice of Change of Solicitors dated 14 July 2023.  No further substantive steps were taken from then to until June 2025, when another set of Notice of Change of Solicitors and Notice of Intention to Proceed were filed on Kentwell’s behalf. 

9.  No substantive action was taken from June 2025 to until 2 March 2026, when Kentwell made the Amendment Application.  Apparently in response to the Amendment Application, Sun Wo Kee filed the Striking Out Application on 16 March 2026. 

Legal Principles

10.  The relevant principles in relation to striking out for want of prosecution in the post-CJR regime were set out in Ma CJ’s judgment in Wing Fai Construction Co Ltd v Yip Kwong Robert (2011) 14 HKCFAR 935 (paragraphs 64-80), and explained recently by Recorder Eugene Fung SC (as he then was) in Patrick Hung Hing Yu v Ho Yin Man and Ors HCA 92/2007, 8 November 2024, [2024] HKCFI 3186 (paragraph 22).  The following principles are to be noted:-

(1)  Striking out should only be used in plain and obvious cases and as a last resort.  It must be plain and obvious that by reason of his delay, a plaintiff should be deprived of the opportunity to go to trial for the resolution of his dispute with the defendant.

(2)  The foundation for the jurisdiction to strike out for inordinate and inexcusable delay must be predicated on an abuse of the process of the court by the plaintiff; mere delay is not sufficient to justify an order to strike out.

(3)  Prejudice to the defendant is a factor relevant to the overall justice of the case. 

(4)  Where all parties to the proceedings have the obligation to prosecute proceedings and assist the court in furthering the underlying objectives, it is relevant to consider the parties’ conduct and any failure on their part for the purpose of considering the question of abuse and the overall justice of the case.  

11.  In Wing Fai Construction Co Ltd v Yip Kwong Robert, Ma CJ highlighted the changes brought about by the CJR at paragraphs 70-73:-

“70. Under the CJR regime, the combination of greater case management by the courts and the obligation on all parties to proceedings to assist the court in achieving the underlying objectives, should ensure that delays are kept to a minimum. While certain delays may be unavoidable, certainly the type of delays that have in the past led to applications to strike out for want of prosecution, should now be consigned to history.

…

72. Accordingly, under the CJR regime, I would expect to see virtually no applications (at least very few) to strike out for delay, unless peremptory orders have not been complied with, or provisions such as O.25, r.1(4), 1(5) or 1C apply. Unlike the pre-CJR position, the court should only in rare cases have to face such an application arising from delay. With its greater case management powers and duties, and the obligation on all parties to get on with an action, no proceedings should get to the stage where a delay will prompt an action to strike out for want of prosecution. This was the practice point made in England when the Woolf Reforms took place: see Biguzzi v Rank Leisure Plc, 1933C (Lord Woolf MR). This had been the sentiment of the English Courts even before the Woolf Reforms were implemented: see Department of Transport v Chris Smaller (Transport) Ltd [1989] AC 1197, 1207F-H; Grovit v Doctor, 643B-644F.

73. Moreover, when delays do occur, greater use of the court’s powers can, and should in the majority of cases, be made rather than an application to strike out…The courts ought not to be faced with an “all or nothing” approach whereby it is left only with the choice of either allowing the action to be continued or to strike out…”

12.  In the present case, the whole period of delay from 2015 onwards occurred in the post-CJR era, and these observations apply with full force. 

13.  In relation to the question of prejudice in the context of a striking out application for want of prosecution, G Lam J said in Tsang Foo Keung v Chu Ji Mi Jimmy (unreported, HCA 7140/1995, 12 July 2013) at paragraph 80:-

“(1) The burden lies on the defendant to show prejudice or impossibility of a fair trial.

(2) The discharge of that burden will normally require evidence specifying the particular disadvantage suffered or anticipated by the defendant, though in appropriate cases inferences may be drawn by the judge …

(3) The court has to look at all the circumstances when considering whether there is prejudice or whether it will not be possible to have a fair trial …

(4) The prejudicial effect of delay on a defendant and the effect of delay on the possibility of a fair trial depend in large measure on the nature of the issues in the case, in particular whether the evidence is predominantly in documentary form or whether the crucial evidence may be largely oral …

(5) Where the prejudice relied on is the dimming of witnesses’ memories due to the lapse of time, a generalised assertion that memories must have grown fainter will generally not be sufficient ... However, it is not essential in every case that there should be evidence of particular respects in which potential witnesses’ memories have faded. So long as there are primary facts from which inferences can properly be drawn, there is nothing wrong with doing so ...

(6) The defendant must also show that there is prejudice or inability to have a fair trial, as the case may be, caused by the delay in the action. The defendant cannot therefore merely rely on prejudice caused by the delay of the plaintiff in issuing the writ ...

(7) The court may take into account what the defendant could reasonably be expected to have done which could have avoided or mitigated the prejudice he suffers or anticipates.  If, for example, the defendant relies on the dimming of witnesses’ memories through the passing of time, the court will usually want to know what steps the defendant has taken in locating and proofing the potential witnesses …”

Analysis

14.  I consider Kentwell’s delay from June 2015 to June 2025 to be inordinate and inexcusable.

(1)  Kentwell’s explanation for the delay from 2015 to July 2023 can be briefly summarised.  Essentially, it is alleged that in around April 2015, Kentwell was advised by its legal advisers at the time that the action should be proceeded with only after HCA 83/2014. 

(2)  In July 2023, Kentwell met with its new solicitors who advised that the present action should proceed in parallel with HCA 83/2014.  Accordingly the Notice of Change of Solicitors and Notice of Intention to Proceed, both dated 14 July 2023, were filed. 

(3)  From July 2023 to June 2025, it was alleged that the present action did not proceed further because of the new solicitors’ heavy workload. 

(4)  Kentwell then switched to a new firm of solicitors, and the Notice of Change of Solicitors dated 25 June 2025 and Notice of Intention to Proceed dated 27 June 2025 were filed. 

(5)  From June 2025 onwards, Kentwell took steps to progress the action, including applying to restore Sun Wo Kee, which was granted by DHCJ Yuen on 19 September 2025.  

(6)  In the absence of an application and order for stay of the present proceedings, I do not accept that there is any reasonable explanation for the prolonged period of delay.  Further, the fact that Kentwell’s solicitors were busy does not constitute an acceptable explanation for the delay either. 

15.  Sun Wo Kee also exhibited no intention to move the present proceedings forward, and has equally been guilty of inordinate and inexcusable delay.  

(1)  As noted above, after the commencement of the present proceedings, Sun Wo Kee was deregistered in 2015 as a result of the application for deregistration dated 8 August 2015 filed by Tsang as its director. 

(2)  Under s 750(2)(d) of the Companies Ordinance, Cap 622, an application for deregistration must not be made by its director unless, at the time of the application, the company is not a party to any legal proceedings. 

(3)  Tsang could not have honestly and reasonably confirmed the conditions stated in the application for deregistration, including that “the company is not a party to any legal proceedings”. 

(4)  Being the counterclaiming defendant, Sun Wo Kee did nothing at all to progress the present action.  No application was made to seek appropriate case management directions from the Court. 

16.  As noted by Ma CJ in Wing Fai Construction Co Ltd v Yip Kwong Robert, paragraphs 70-73, under the CJR regime the combination of greater case management by the courts and the obligation on all parties to get on with an action, no proceedings should get to the stage where a delay will prompt an action to strike out for want of prosecution. 

17.  Against this, Sun Wo Kee argues that it has suffered serious prejudice caused by the delay, in the form of the passing of TC Foo and the other manager of the Heung, Tang Man Kit, who according to TC Foo was the perpetrator of the malpractice against the Heung.  Having discovered the malpractice practiced against the Heung, TC Foo made a report to the authorities, and gave a statement to the ICAC on 14 February 2014.  I do not consider this to assist Sun Wo Kee. 

(1)  The main characters who have direct personal knowledge as to how the Lands became leased to Sun Wo Kee are Tsang, Chan and Wu.  TC Foo only discovered about the malpractice, and the primary evidence in support of the same exists independently of TC Foo.

(2)  Sun Wo Kee had ample opportunities to interview TC Foo from the commencement of the present action in 2014 to 2020 when TC Foo passed.  If any supplement to TC Foo’s statement given to the ICAC was deemed necessary, one would have expected Sun Wo Kee to follow up accordingly.

(3)  The passing of Tang Man Kit does not cause significant prejudice to Sun Wo Kee.  The primary evidence of malpractice would exist independently of Tang Man Kit.

(4)  In any event, any prejudice that Sun Wo Kee might have suffered is equally attributable to its own delay in progressing with the present action.

(5)  In particular, the abatement of the present action is an inevitable consequence of the deregistration of Sun Wo Kee during the course of litigation.  As it turned out, it was Kentwell who made the application to restore the registration of Sun Wo Kee to enable the present action to proceed. See Re Integrated Marketing Communications Ltd [2015] 5 HKLRD 362 at paragraph 7, per G Lam J (as he then was).  As it turned out, it was Kentwell which made the application to restore the registration of Sun Wo Kee to enable the present action to proceed. 

18.  For these reasons, I shall reject the Striking Out Application. 

Amendment Application

19.  By the Amendment Application Kentwell applies to amend the Summons seeking leave to file a Rejoinder.  An updated draft of the Rejoinder has been appended to the Amendment Application.  At present, the Court is only asked to grant leave to amend the draft Rejoinder.  While the Court should not allow the Amendment Application if there is no prospect that leave would be given for the filing of a Rejoinder, I must say that I am not able to reach that conclusion at this stage.

20.  I shall therefore grant the Amendment Application. 

Conclusion

21.  I shall make the following orders:-

(1)  The Striking Out Application be dismissed.

(2)  The Amendment Application be granted.

22.  As to costs:-

(1)  The costs of and incidental to the Amendment Application be to the Defendant in any event.

(2)  As both parties are equally guilty of inordinate delay in these proceedings, I shall make a costs order nisi that there be no order as to costs in relation to the Striking Out Application.  

(3)  The costs order nisi shall become absolute unless an application is made to vary the same within 14 days, which application is to be accompanied by written submissions in support (limited to 5 pages).

23.  I thank Ms Eu SC, Mr Wong and Mr Chan for their helpful assistance.