XCHRX EVERSMILE (HK) LTD. v. SEAFAST MARINE TRANSPORT INC & OTHERS

HCCL 241/1995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL LIST NO. 241 OF 1995

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REASONS FOR DECISION

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1. By an order dated 30 July 2001, direction was given for the 2 applications for the dismissal of the 2 respective actions for want of prosecution to be heard together. At the end of the hearing of the 2 applications, an order was made for the 2 actions to be struck out. The following are the reasons.

2. The nature of these 2 actions is the same and the underlying facts are similar. In HCCL No. 241 of 1995, the Plaintiff sues as the owner and shipper of 3 lots of goods shipped under 3 Bills of Lading. D2 is sued as the bailee and carrier of those goods. D3 and D4 are D2's shareholders and directors. The Plaintiff alleges that D2 to D4 misdelivered the goods to an unknown third party. It appears from the Points of Claim that by 9 November 1995 at the latest, the alleged misdelivery had already taken place. According to the Defendants' affirmation dated 28 July 2001 in support of the dismissal application, the goods were delivered in Spain respectively in January 1995 and May 1995. The Defendants deny the claim and 3 lines of defence are put forward:

(1) D2 only signed the Bills of Lading as an agent of the carrier, one Seafast Marine Transportation Inc. D3 and D4 are only D2's shareholders and directors;

(2) in any event, the goods were delivered to the notified party named in the Bills of Lading, one Shera Impex CB in Spain, in accordance with the Plaintiff's instruction to do so (as evidenced by 2 fax messages which the Defendants claim were sent by the Plaintiff);

(3) the Defendants also rely on the exemption clauses in the Bills of Lading.

3. The main factual differences between HCCL No. 241 of 1995 and HCCL No. 158 of 1996 are that in HCCL No. 158 of 1996:

(a) there were 5 lots of goods under 5 Bills of Lading;

(b) according to the Defendants' affirmation dated 28 July 2001 in support of the striking out application, the goods were released to Shera Impex CB in April 1995, June 1995 and July 1995 respectively;

(c) no letter of demand was relied upon in the Points of Claim.

The same lines of defence are put forward by the Defendants (although 3 fax messages are referred to in the Points of Defence).

4. By today's hearing, the 6-year time limitation period for bringing these 2 actions has expired. The Defendants contend in these 2 applications that:

(1) the Plaintiffs have been guilty of inordinate and inexcusable delay;

(2) the said delay was a result of intentional and contumelious default;

(3) by reason of (2) above, the Plaintiffs' conduct amounts to an abuse of the court's process. In such a case the actions ought to be struck out without considering whether the delay caused substantial prejudice to the Defendants or whether there is a real risk that a fair trial is impossible;

(4) in the alternative to (3) above, the delay had in fact caused substantial prejudice to the Defendants or a real risk that a fair trial is impossible.

The Defendants accept that the general burden or proof is on them to establish the above.

5. In relation to these 2 actions, the Defendants rely on the following chronology of events:

(1) the Plaintiffs issued the writs in December 1995 and June 1996 respectively;

(2) the writs were served in November 1996 and June 1997 respectively;

(3) in relation to HCCL No. 241 of 1995, the last substantial step taken by the Plaintiff before the action "went to sleep" was the service of a request for further and better particulars in March 1997. In relation to HCCL No. 158 of 1996, the last substantial step before the action "went to sleep" was the service of pleadings by the parties (pleading was deemed to be closed in about July 1996).

6. Counsel for the Defendants argues that the period of delay was from about March 1997 to July 2001 when the Plaintiffs took out summonses for direction (a period of about 4 years and 4 months).

7. I rather consider that the period of delay should commence from the time when pleading is deemed to have been closed. In HCCL No. 241 of 1995 that occurred in around May 1997, whereas in HCCL No. 158 of 1996 that occurred in about July 1997. The period of delay is therefore about 4 years 2 months and 4 years respectively.

8. A delay is "inordinate" when it is "materially longer than the time usually regarded by the profession and courts as an acceptable period" for taking steps in the action: see Hong Kong Civil Procedure 2001, para. 25/L/5. It was also said that an inordinate delay is easier to recognise than to define.

9. In view of the nature of the dispute in these 2 actions, I do not consider that it should take over 4 years from about May 1997 in HCCL No. 241 of 1995 (and from July 1997 in HCCL No. 158 of 1996 to July 2001) for a summons for direction to be taken out. The reasonable period for doing so should at most be about 1 month from the close of pleadings, there has therefore been an inordinate delay of about 4 years in relation to one action and slightly less than 4 years in relation to the other action.

10. Whether a delay is "inexcusable" is to be looked at primarily from the Defendants' point of view or, at least, objectively; some reasonable allowance for illness and accidents may be made: Hong Kong Civil Procedure 2001 para. 25/L/6.

11. The Plaintiffs do not seriously challenge the period which I found to have been a period of delay but put forward the following explanation:

(1) there were changes in the solicitors handling the 2 actions within the firm of the Plaintiffs' solicitors;

(2) the existence of "parallel" legal proceedings brought by the Plaintiffs against its insurer in Hong Kong as well as "without prejudice" negotiation with the insurer in the hope of settling those legal proceedings.

12. I agree with the Defendants and do not find any of the reasons given by the Plaintiffs to be valid. I consider that at least about 95% of the respective periods of inordinate delay is inexcusable. In view of the excuses disclosed by the Plaintiffs in these 2 applications, I conclude that the main reason why there was a delay was that a conscious decision has been made to "warehouse" these 2 actions. For this reason, I agree with the Defendants that there has been a "wholesale failure... to comply with the [Rules of the High Court]" and (in this sense) there has been contumelious conduct on the Plaintiffs' part. The Plaintiffs' conduct therefore falls within that which the court found to amount to an abuse of the court's process in Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426.

13. In relation to the above, solicitor for the Plaintiffs responded as follows:

(a) it is common for claims where an insurer is involved to be commenced by the insured because there is a need for the insured to take reasonable steps to protect the insurer's interest;

(b) on the other hand, the court should discourage multiplicity of litigation and thus it should not prohibit or discourage litigants from putting a litigation "on hold" while they are pursuing, or negotiating for the settlement of, other litigations (or another litigation, as the case may be);

(c) in any event, a distinction should be drawn between the conduct of litigants and that of the legal advisers: Tan Eddie Tansil v PT Bank Pembangunan Indonisia [1996] 1 HKC 231; Chiu Butt-york v Chiu Kwok-lim & others [1980] HKLR 459.

14. I reject points (a) and (b) above because it is exactly this type of practice which the courts in Grovit v Doctor [1997] 1 WLR 640 and Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426 found objectionable. In Grovit, the House of Lords found it objectionable for litigants "to commence and to continue litigation which he had no intention to bring to a conclusion". When the House of Lords referred to a litigant having "no intention to bring" litigation to a conclusion, I understand the court intended to include cases where there is "no definite intention" to do so. This is because by issuing what is commonly known to legal practitioners as a "protective" writ, a litigant must have in mind at least the possibility of continuing that litigation should the need arise.

15. In relation to point (c) above, although the court should take into consideration that the delay was caused by the legal advisers as opposed to the litigant, there is insufficient basis in these 2 actions for that to affect my discretion. There is no evidence that the Plaintiffs dissociate or distance themselves from the decision of their legal advisers to "warehouse" these actions.

16. Solicitor for the Plaintiffs also relies on:

(1) other litigations which took a much longer time than these 2 actions to conclude;

(2) (allegedly) an implicit acknowledgement in the Rules of the High Court that litigations may be delayed.

I disagree with these points. Firstly, there may be various reasons why other litigations were delayed. Secondly, I do not consider that there is any provision in the Rules of the High Court (including O.3 r.6) which acknowledges or encourages undue delay.

17. Further to the above, I also agree with the Defendants' argument that the length of, and the excuses given for, the delay in these actions justifies an inference to be drawn that the writs are "protective" in nature. Hence, leaving aside the contumelious conduct mentioned above, these actions fall within the type referred to in Grovit and are an abuse of process for that further reason.

18. Having come to the above conclusions, it is strictly unnecessary to consider the second limb of the Defendants' argument, that is, matters relating to substantial prejudice to the Defendants or real risk of no fair trial. I shall do so for completeness.

19. An important matter in these actions is whether the fax messages relied upon by the Defendants as evidence of the Plaintiff's instruction to release the goods actually originated from the Plaintiff. This is essentially a credibility issue.

20. The Plaintiffs' witnesses will in all likelihood deny that the fax messages came from the Plaintiffs. The Defendants claim that the fax messages were received by the notified party in Spain and handed over to the carriers' agent in Spain. The Defendants' case in these applications is that since about July 2000, their relationship with the Spanish agent had deteriorated and the witnesses have indicated they would not co-operate as a result. Further, when the notified party was contacted by the Defendants recently, it claimed no recollection of the events and refused to co-operate.

21. The Plaintiffs argue that:

(a) the testimony of the witnesses from the Spanish agent and the notified party is irrelevant to the issues herein;

(b) in any event, the Spanish agent has not co-operated with the Defendants since as early as 1997 or 1998;

(c) the Defendants ought to have obtained witness statements from the witnesses earlier.

22. I disagree with the Plaintiffs' point (a) above. In relation to point (b), I agree with the Defendants' contention that the totality of the evidence supports the Defendants' case that the deterioration in relationship only occurred some time around July 2000 and there is insufficient evidence from the Plaintiffs to refute that. In relation to point (c), I do not consider that the law requires a Defendant in effect to take positive steps to prevent substantial prejudice from arising; for example, by obtaining witness statements.

23. Solicitor for the Plaintiffs made the further point that because one witness had asserted that he was not in the office on a certain date, this witness therefore cannot assist the Defendants irrespective of delay or not. I do not agree. The witnesses' assertion of not being present in the office on a certain date does not logically lead to his inability to testify to the matters in issue herein (whether the relevant faxes came from the Plaintiffs). I conclude that he was only trying to be difficult. This assertion therefore supports the Defendants' case of an incooperative potential witness.

24. For the above reasons, the actions should be struck out.