NANIK N VASWANI v. GENERAL ACCIDENT INSURANCE ASIA LTD.

HCCL 126/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 126 OF 1997

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J U D G M E N T

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1. There are before the court two strike out applications, each by summons dated 15 February 2002, the relief sought being that the plaintiff's action in each instance be dismissed for abuse of process and/or want of prosecution.

2. The two actions, respectively brought by Mr Vaswani and Eversmile (HK) Ltd., relate to various policies of marine insurance entered into with the defendant in 1994 and 1995 in respect of various shipments of goods from Hong Kong to Ceuta, Spain. It is not in dispute that the policies provided for 'all risks' cover, and incorporated the ICC(A).

3. The claim of the plaintiffs is that during the currency of the policies the goods were stolen/converted consequent upon the wrongful release of the goods by the carriers to persons who were not holders of original bills of lading.

4. On that basis the defendant is said to be liable to indemnify under the policies, a liability which is denied on a number of grounds including the allegation that the losses may not have occurred within the sixty day period of cover post-discharge, that the release of the cargoes was not authorized by the plaintiffs, that there was no insurable interest, and that since the goods were lost due to theft by a party to the marine venture - it is said by carriers in collusion with sellers - there was no insured risk. To this list, said Mr Stock on behalf of the defendant, would be added an additional circuity of action defence, deriving from parallel actions against carriers which themselves have been struck out, but only if and in so far as the present applications were unsuccessful.

5. So far as the latter, 'the carrier actions', are concerned, the goods in question were carried under bills of lading issued on the standard form of Seafast Marine Transportation Inc., which were signed for Seafast Marine by Eumex Line Agencies (HK) Ltd., as agent. Accordingly, in HCCL 241 of 1995 and HCCL 158 of 1996, the plaintiffs sued Seafast Marine and Eumex Agencies in respect of the goods, claiming damages for breach of contract, negligence and wrongful detention, and seeking orders for delivery up. However, by a decision dated 24 November 2001 Mr Justice Chung dismissed the carrier actions for want of prosecution and abuse of process. These dismissals appear to have triggered the present applications.

6. There is no dispute as to the applicable principles relevant to a striking out, which are tolerably well-known. I turn therefore to the relevant heads which requiring evaluation.

Inordinate and inexcusable delay

7. The defendant relies on two periods of delay. These are between 11 February 1998, the date of the service of the defences in these actions, and 5 July 2001, when the plaintiffs took out summonses for directions. The second period specified is between 9 August 2001, the date for service of lists of documents pursuant to the Orders of Deputy Judge Woolley dated 26 July 2001) to 4 January 2002, when the plaintiffs served the lists.

8. Accordingly, submitted Mr Stock, the total period of delay relied on to support the relief now claimed is some 46 months, which plainly was inordinate and was not, in the circumstances, excusable.

9. Clearly it is the initial period of delay which is the one which excites real concern, and I have little difficulty in finding that the delay is inordinate in that the inactivity subsequent to the filing of the defences goes beyond what is generally considered acceptable in commercial litigation of this nature.

10. For the plaintiffs, Mr Laracy (whose files these were not, and who clearly has inherited a difficult situation) attempted to provide some justification for the delay. He prayed various matters in aid, ranging from change in case-handler to non-compliance with costs orders to the attempt to bring the defendant to the negotiating table, but I regret that he was unable to satisfy me that these cases involved anything more than old-fashioned inaction, albeit whether this was due to a deliberate intention to let these cases lie fallow it is difficult to say on the basis of the evidence before the court.

11. I find the existence of inordinate and inexcusable delay which is the threshold necessary to get these applications off the ground.

Abuse of Process

12. Mr Stock runs the argument that the plaintiff's conduct of these actions amounts to an abuse of process because there is and was no serious intention to prosecute the claims expeditiously and bring the actions to an end within a reasonable time. He says, in terms, that the delays were the result of a conscious decision to 'warehouse' these actions, relying in this regard upon a view expressed in the second affidavit of Mr Baker, the defendant's solicitor who says (at paragraph 19) that he suspects Ashby Recoveries Ltd. (ARL) to be "the prime moving force". Mr Baker may or may not be correct, I know not, but I do not consider suspicions held by a party's solicitor to be 'evidence' of a type upon which the court may safely act in applications of this nature.

13. Nor am I minded to accede to the argument that in this instance there has been such a wholesale disregard of the rules of court that this in itself is sufficient to get home under the abuse of process head without the requirement to demonstrate prejudice.

14. In the circumstances of this case, therefore, in my judgment the abuse of process submission fails.

Prejudice

15. It is said that as a result of the plaintiffs' inordinate and inexcusable delay in pursuing these actions, the insurer's position has been "hopelessly prejudiced". Two types of prejudice are relied upon.

16. I deal first with what I perceive to be the secondary point. Mr Stock submits that one of the central issues in the actions is whether certain letters authorizing release of the goods originated from the plaintiffs, and it is suggested on affidavit that this is an issue which would have had to have been decided in the action against Seafast Marine "if the assured was to stand any chance of pursuing a claim against the cargo insurers successfully."

17. I do not think a great deal of this argument in itself, although I can discern some relevance as part of the wider subrogation argument to which I refer below. In any event, taken in isolation I can see no reason why an issue such as this cannot be debated in the context of the present proceedings, and it seems to me that if the defendant has evidential difficulties in this regard that is a matter for them. I do not subscribe to the view that it is open to a defendant who does not wish to disturb a 'sleeping dog' to do little or nothing in terms of evidential preparation, and then to complain that delay precludes the gathering of necessary evidence. The obligation to prepare is in itself not obviated by delay.

18. However, this is not the primary 'prejudice' point. This focuses upon the recent striking out of the plaintiffs' claims in the 'carrier actions' against Seafast Marine and Eumex Agencies. It is said that the effect of that decision is that the insurers have been "irremediably prejudiced" in that if the present actions were to be allowed to proceed and the plaintiffs were to be successful in their claims against the defendant, the underwriter, in the exercise of its powers of subrogation, would no longer be able to stand in the shoes of the plaintiffs and take over conduct of those actions in order to attempt to effect recovery from Seafast Marine or from Eumex Agencies.

19. Mr Stock says, and I accept, that there is a clear duty under clause 16 of the ICC(A) which obliges the plaintiff assured to take such measures as may be reasonable in order to ensure that all rights against carriers are properly preserved, and that the decision of the defendant underwriter to decline to admit liability in the present proceedings did not relieve the plaintiffs of their duty to preserve the carrier actions for the defendant's benefit. Clearly the manifest failure to do this conceptually sounds in damages, which to avoid circuity of action would be open to be pleaded by way of amended defence, but, said Mr Stock, so far as his client was concerned the point went further than that.

20. It was established law, he submitted, that for the purposes of dismissal for want of prosecution, prejudice to a plaintiff includes not only prejudice to the strength of the plaintiff's case, but also deprivation of the chance to recover any award from a third party: see Antcliffe v Gloucester H.A. [1992] 1 WLR 1044, at 1049-1050.

21. For his part Mr Laracy asked the court not to follow this approach, suggesting that for present purposes it was sufficient if that which now had befallen 'the carrier actions' could be pleaded by way of defence, and thus enure in that fashion to the benefit of the defendant in the present actions. To adopt the line of argument adumbrated in Antcliffe, op cit, would be inappropriate he argued, although he did not have the benefit of authority to buttress this submission.

22. I have reflected upon the point. In my view the submission based upon loss of subrogation rights can constitute a form of relevant prejudice, and need not simply be consigned to the category of an additional defence. Antcliffe itself was a quite different factual situation, it is true, the successful point there being that prejudice to the defendant's prior insurance arrangements arising from the plaintiff's delay constituted relevant prejudice, since the new arrangements in place and applicable by reason of the delay would require the defendants to fund the whole of any award in favour of the plaintiff without indemnity from any medical defence society. In delivering the judgment of the Court of Appeal, Scott LJ declined to hold that prejudice entitling a defendant to strike out should be limited to proof of prejudice in the conduct of the litigation, citing Lord Griffiths in Department of Transport v Chris Smaller (Transport) Ltd. [1989] AC 1197, who similarly held that existing authorities clearly established that "prejudice may be of varying kinds and is not confined to prejudice affecting the actual conduct of the trial." Scott LJ accordingly rejected the argument that changes in insurance arrangements were incapable of amounting to prejudice sufficient to support a striking out, observing that:

"It seems to me undesirable and unnecessary to limit the circumstances that may constitute prejudice for the purpose of supporting a striking out application. If a plaintiff has been guilty of inexcusable and inordinate delay in prosecuting an action, and that is a premise from which consideration of prejudice must start, the plaintiff must take the defendant as he finds him. If the defendant, by reason of the delay, has been brought into a position in which he is prejudiced because of some feature of his business affairs or of his insurance arrangements, the prejudice should be taken into account..."

23. Differing cases, of course, throw up widely differing fact situations, but I can see no compelling reason why like considerations should not apply in this particular instance, Mr Laracy's objections notwithstanding. Had the plaintiff got on with this case, instead of comprehensively sitting on it for some four years, the issue between the parties would have been decided, and had the decision gone against the defendant, the insurer would not have been in the position as it now certainly is - Mr Laracy having confirmed that no appeal is being mounted against the decision of Chung J to strike out the carrier actions - of having no preserved recourse against either/or Seafast Marine and Eumex Agencies. It may of course be that a commercial decision was arrived at in the present cases given the relatively small amount of money at stake in each when set against costs considerations, but that is nothing to the point. Following the Antcliffe approach, it seems clear that in the cases under consideration the commercial interests of the defendant have been prejudiced in terms of the certain loss of the right to proceed by way of recourse against the carriers, and I do not think that the fact that loss of this chance can be pleaded by way of defence in the current actions is sufficient to meet the point on a striking out application when inordinate and inexcusable delay otherwise is established.

24. This may constitute an unusual situation, in particular when delay in other parallel actions is a dominant element within the factual matrix, but I do not consider that this should preclude the conclusion that the delay in these cases has caused consequential prejudice to the defendant, as opposed to the defendant's case, and, further, that such prejudice is sufficient to underpin the strike out applications.

25. I have also been satisfied on the evidence before me that the six year time limit for bringing a claim under the insurance policies has expired in both actions, and that it will not be open to the plaintiffs to issue fresh proceedings.

26. In the particular circumstances, therefore, in the exercise of my discretion I hold that the defendant is entitled to succeed in its applications in each case to strike out for want of prosecution. I so order.

27. I further make an order nisi that the costs of these applications be to the defendant, to be taxed if not agreed.