DSG INTERNATIONAL SOURCING LTD v. WAON DEVELOPMENT LTD

HCMP 8/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 8 OF 2012

(ON AN INTENDED APPEAL FROM HCA NO 1294 OF 2006)

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BETWEEN

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DECISION

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Hon Kwan JA:

1.  This is the defendant’s application for leave to appeal against the decision of Suffiad J on 28 July 2011 in HCA 1294 of 2006. The judge dismissed the defendant’s application to strike out the plaintiff’s claim for want of prosecution. The defendant sought leave from the judge to appeal to the Court of Appeal. This was refused by the judge on 19 December 2011 summarily without a written decision.

2.  The defendant has placed before this court four lever arch files of the relevant documents filed in court and an additional lever arch file of the authorities relied on in support of this application. It has submitted a draft Notice of Appeal with detailed grounds of appeal and served submissions of its leading and junior counsel in this application. The defendant requested an oral hearing unless this court is prepared to grant leave to appeal.

3.  The plaintiff has served submissions of its counsel opposing this application.

4.  I will treat the submissions of counsel on both sides as the statement in support and statement in opposition served in this kind of application pursuant to Order 59 rule 2A(1) and (4) of the Rules of the High Court.

5.  This court has power under Order 59 rule 2A(5) to determine the application without a hearing on the basis of written submissions only. I think it is appropriate to do so here. The issues proposed to be raised on appeal and the submissions on both sides are clearly set out in the papers before us. Counsel for the defendant have had sufficient opportunity of developing their arguments in the intended appeal. Indeed, this is the second time they have advanced such arguments. Nothing is to be gained by convening a hearing for counsel to elaborate on their submissions which are readily understood by the court.

6.  This being an appeal against the exercise of the judge’s discretion refusing to strike out for want of prosecution, the requirement for granting leave to appeal is well established. No leave would be granted unless the court is satisfied that the appeal has a reasonable prospect of success. This involves the notion that the prospects of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable”. Generally, an appeal court will not interfere with the exercise of a judge’s discretion unless the judge has misunderstood the law or the evidence or the exercise of his discretion was plainly wrong such that it was outside the generous ambit within which a reasonable disagreement is possible.

The judgment of Suffiad J

7.  For the relevant background matters, the issues in dispute in this action and the procedural history, I refer to the judgment of Suffiad J at paras 2 to 25.

8.  As pointed out in para 1 of the judgment, the defendant applied to strike out the plaintiff’s claim on these three grounds:

(1)  absence of intention to proceed with this action thus amounting to an abuse of court process (the Grovit v Doctor limb);

(2)  inordinate and inexcusable delay by the plaintiff occasioning real prejudice to the defendant and which has rendered a fair trial impossible (the Birkett v James limb); and

(3)  intentional and contumelious breach of court order by the plaintiff.

9.  The delay here was 39 months from March 2007 to May 2010, a period which straddled the regimes before and after the implementation of the Civil Justice Reform on 2 April 2009. There is no dispute that this delay of 39 months was inordinate and inexcusable. The judgment of Suffiad J was given before the seminal judgment of the Court of Final Appeal in The liquidator of Wing Fai Construction Co Ltd (in compulsory liquidation) v Yip Kwong Robert & Ors [2012] 1 HKLRD 589.

10.  The judge held against the defendant on each of the three grounds. On the Grovit v Doctor limb, he declined to infer there was abuse of process from the delay of 39 months on the facts of this case. For the Birkett v James limb, he held that the defendant has failed to establish prejudice occasioned by the delay which would render a fair trial not possible. Regarding the limb of intentional and contumelious breach of court order, he found that the default of the plaintiff was not intentional and contumelious. The judge was of the view that this is not a proper case to strike out the plaintiff’s claim albeit there was a delay of 39 months and he exercised his discretion to dismiss the application.

Discussion

11.  Mr Yuen, SC complained that the judge had not sufficiently considered the impact of the CJR in assessing the principles relevant to striking out a claim for delay. This is the same complaint mounted by the appellants in Wing Fai Construction. Hopefully, with the judgment of the Court of Final Appeal, in which full guidance was given of the proper approach, this ground of appeal would not be relied on in future.

12.  I adopt the approach as in Wing Fai Construction, para 78. It is unnecessary to decide whether Suffiad J had taken sufficiently into account the changes made by the CJR. I would simply apply the correct principles as re-stated by the Court of Final Appeal for cases which straddle the CJR. Although the court applies the law that exists today, in examining the delay and making an evaluation of the conduct of a party in the proceedings, the court does bear in mind the circumstances and statutory structure in place at the relevant time (Wing Fai Construction, para 29).

13.  I bear in mind that striking out is a remedy of last resort and is to be deployed only where it is plain and obvious to do so (Wing Fai Construction, para 75(1)). The foundation for the exercise of this discretion is an abuse of the process of the court, regardless of whether the applicant relies on the Grovit v Doctor limb, the Birkett v James limb, or the intentional and contumelious conduct limb, they are all examples of abuse (paras 66 and 75(2)).

14.  On the Grovit v Doctor limb, Mr Yuen made two submissions. Firstly, he contended that Suffiad J had erred in relying solely on the dicta of Stone J in New China Hong Kong Group Ltd & Anr v AIG Asian Infrastructure Fund LP & Ors [2005] 1 HKLRD 383 at paras 66 and 70 and adopted the approach that “it was only when the facts were exceptional that the Court would find abuse of process”. Secondly, Suffiad J erred in refusing to infer that the plaintiff had intended to abuse the court process from the undisputed inordinate delay of 39 months.

15.  Regarding the first submission, I do not think Mr Yuen’s reading of the dicta of Stone J or the judgment of Suffiad J is a fair reading. On a proper reading of Stone J’s dicta, all that he was saying is that caution should be exercised in applying the Grovit v Doctor limb too readily, otherwise the Birkett v James limb (which requires prejudice to be established) would be emasculated by the back door, and that something “significantly more” is needed than inordinate and inexcusable delay. Stone J was exhorting that the Grovit v Doctor limb should be “confined to those instances which are patently abusive of the process, and may be demonstrated to be so” (New China Hong Kong Group, at para 66).

16.  I do not understand Stone J’s approach, properly understood, to have been doubted by Deputy Judge Burrell in Kuok Luen (Macau) Agente De Programas Televisivos Limitada & Ors v Tidetime Sun (Group) Ltd & Anr, 8 April 2011 or by the Court of Appeal in CACV 77 of 2011, 4 October 2011 (Tang VP and Fok JA), as Mr Yuen would appear to suggest. In fact, the judgments indicated clearly the contrary, see the judgment of Deputy Judge Burrell at para 28 and the judgment of Fok JA at paras 34, 35, 38, 39.

17.  Stone J’s approach received the approval of the Court of Appeal in another decision (A & M Manufacturing and Marketing Ltd v Iu Po Shing, CACV 15 of 2011, 14 September 2011 (Tang Acting CJHC, Fok JA and Lam J), see the judgment of Fok JA at paras 59 and 63). His approach was entirely consistent with the guidance given by the Court of Final Appeal that abuse of the court process must always exist as the foundation for the exercise of the striking out application and that mere delay, without more, is insufficient (Wing Fai Construction, paras 75(4), (5), (6)).

18.  On a proper reading of the judgment of Suffiad J, the judge was not taking a mechanistic approach of looking for exceptional matters. His conclusion that an inference of abuse of process cannot be drawn on the facts of the present case was arrived at after considering all the relevant circumstances, as set out in paras 41 to 45 of the judgment. Whilst recognising that the reasons given by the plaintiff for the inordinate delay may not be wholly sufficient to exonerate the plaintiff, he took the view that this was nevertheless an explanation and it would not be right in the circumstances to infer that the plaintiff had no intention of bringing this action to trial. Mr Yuen criticised the judge for accepting this explanation in that the plaintiff should have proceeded with those parts of its claim which have been ascertained instead of stalling the whole action to wait for the translation of certain documents from the Nordic region. The judge was not minded to take the view that the explanation was so contrary to common sense that it could not be accepted. This is a view open to the judge and is within the generous ambit within which a reasonable disagreement is possible.

19.  I turn to the Birkett v James limb. The prejudice alleged was two-fold. Firstly, it was asserted that the factual witnesses could not recall the details which may come up in cross-examination. Secondly, the plaintiff now asks for experts to be engaged to render a report on the cause of the faults in the tower fans, subject to leave to be granted. The defendant contended that any examination by an expert five years after the event would not be satisfactory or helpful to the court.

20.  In my view, these arguments are not tenable. Regarding the factual witnesses, the judge has analysed the issues in dispute and arrived at the conclusion that the memories of witnesses would not appear to be of any great importance (paras 51 to 60). There is no basis to interfere with that conclusion.

21.  Having perused the documents exhibited in two of the lever arch files provided to us, I am inclined to think that the contemporaneous exchanges between the parties are well documented. Further, notwithstanding that the witness statement of the defendant’s main witness David Lee was not filed until 7 October 2010, Mr Lee had contacted the defendant’s solicitors and had actively prepared the draft of his witness statement after the order of the Registrar was made on 23 October 2006 requiring the parties to file and exchange witness statements on or before 22 December 2006. According to the records of the defendant’s solicitors, they had prepared the draft of Mr Lee’s statement on 12 February 2007 and Mr Lee had also personally drafted his own witness statement on 23 March 2007. The witness statement that was filed in court was based on that draft which was amended.

22.  As for the expert evidence, there are already two reports from Intertek Testing Services Hong Kong Limited dated 8 March 2006 and 23 March 2006. The defendant does not accept the second report contending that the test was performed by Intertek without the knowledge and consent of the defendant. In the timetabling questionnaire filed by the plaintiff in August 2010, it was stated that subject to its counsel’s advice, the plaintiff may engage an expert to render a report on the cause of the faults in the tower fans. Mr Yuen is opposed to this course, he contended that without concrete evidence as to the number of tower fans remaining and their present storage condition, it is practically impossible for proper satisfactory expert evidence to be adduced.

23.  Whether such additional expert evidence is to be allowed is to be considered in an application to be made, if it is the plaintiff’s intention to engage an additional expert to examine the fans. If leave to adduce additional expert evidence is refused, the plaintiff would be left with the existing expert reports. The burden of proving that the fans are defective is on the plaintiff. If it is unable to discharge that burden because there is no or no concrete evidence as to the number of tower fans remaining and their present storage condition, as Mr Yuen has argued, this does not work to the prejudice of the defendant or render it not possible to have a fair trial of the action.

24.  I also see no basis for disagreeing with the judge that the plaintiff’s delay was not causative of the defendant’s difficulty in investigating the plaintiff’s claim for fire damage for the three incidents in Norway (paras 64 to 69 of the judgment). The fact that another Norwegian subsidiary of the plaintiff’s parent company was able to send over a report to the plaintiff in English in January 2006 is neither here nor there.

25.  The intentional and contumelious conduct limb may be dealt with shortly. The complaint was that the judge was wrong in holding that the plaintiff’s failure to comply with the aforesaid order of the Registrar to exchange witness statements and to set down for trial was not intentional and contumelious. The judge accepted the plaintiff’s explanation for the delay although he did not find it excusable and had regard to the plaintiff’s conduct as shown by the subsequent events. The judge’s view is not outside the generous ambit within which a reasonable disagreement is possible for the appeal court to interfere.

26.  None of the grounds advanced in the intended appeal have any reasonable prospect of success. The threshold requirement for leave to appeal is not met. As I have mentioned earlier, striking out should only be ordered as a last resort in a plain and obvious case. This is plainly not an appropriate case for striking out.

Conclusion and orders

27.  For the above reasons, I would dismiss the application for leave to appeal to the Court of Appeal. As the application is entirely without merit, I would make a further order pursuant to Order 59 rule 2A(8) that no party may under rule 2A(7) request the determination to be reconsidered at an oral hearing inter partes.

28.  I would make an order nisi that the defendant is to pay the plaintiff’s costs of this application forthwith, to be assessed on a gross sum basis. For the purpose of a gross sum assessment, I would direct the plaintiff to submit a skeleton bill within 14 days hereof and the defendant do have leave to respond within 7 days thereafter.

Hon Fok JA:

29.  For the reasons set out in the judgment of Kwan JA, I agree that this application for leave to appeal should be dismissed.  I also agree that the application is totally without merit, such that it is appropriate to make an order under RHC O.59 r.2A(8).  As to costs, I concur in the order nisi proposed by Kwan JA.