JENINE ANN POWELL AND OTHERS v. GLOBAL OPTION TRADING CO., LTD AND OTHERS

DCCJ4764/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4764 OF 2004

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DECISION

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1. This is an application by the 5^th defendant for an order that the plaintiffs’ action against him be dismissed for want of prosecution. The 5^th defendant is also asking for an order that paragraph 1(2) of the ex parte injunction order made by His Honour Judge Wong on 9 September 2004 and amended by Her Honour Judge CB Chan on 24 September 2004 be discharged as against the 5^th defendant. The summons was taken out by the 5^th defendant on 9December 2013.

Background

2. The writ of summons was issued by the plaintiffs on 10 September 2004.

3. The plaintiffs filed the statement of claim on 22 November 2004.

4. The 5^th defendant filed his defence on 20 December 2004.

5. According to the statement of claim, the 1^st and 2^nd plaintiffs deposited a total sum of US$16,096 into the 2^nd defendant’s account in 2001 for option trading on the suggestion of the representatives of the 1^st defendant.  The 3^rd plaintiff deposited a total sum of US$27,294 into the 3^rd defendant’s account in 2001 for option trading on the suggestion of the representatives of the 1^st defendant.  The 4^th plaintiff deposited a total sum of US$15,090 into the 3^rd defendant’s account for option trading in 2001 on the suggestion of the representatives of the 4^th defendant.

6. It was later discovered that the 1^st defendant’s business and the 3^rd defendant’s business were scams and the 4^th defendant had made misrepresentations to the 4^th plaintiff and had failed to follow the instructions of the 4^th plaintiff.  The plaintiffs in this action are claiming against the 1^st, 2^nd, 3^rd and 4^th defendants for the sums they had deposited.  As the 5^th defendant was and is the only director of the 3^rd defendant and the authorized signatory to the bank mandates of the 2^nd defendant’s account with Bank of East Asia Ltd and the 3^rd defendant’s account with Standard Chartered Bank, the plaintiffs say that the 5^th defendant was dishonest and was assisting the 1^st and 4^th defendants in their breaches of fiduciary duties and was assisting the 2^nd and 3^rd defendants in their breaches of trust. The plaintiffs are claiming for an order to account against the 5^th defendant.

Injunction order

7. An injunction order was granted by His Honour Judge Wong on 9 September 2004 and was ordered by Her Honour Judge CB Chan on 24 September 2004 to be continued until the trial or further order subject to variation (“the Injunction Order”).  The terms of the Injunction Order are as follows: -

“IT IS ORDERED that:-

1. Restriction on disposal of assets

(1) The 1^st to 4^th Defendants must not –

(i) remove from Hong Kong any of his assets whether in his own name or not, and whether solely or jointly owned, up to the value of US$79,353; or

(ii) in any way dispose of or deal with or diminish the value of any of his assets whether in his own name or not, and whether solely or jointly owned to the value of US$79,353. This prohibition includes the following assets in particular:-

(a) the 1^st to 4^th Defendants’ bank accounts at Standard Chartered Bank including but not limited to the account numbered 368-1-055191-4, in the name of ‘Etrade First International Ltd’;

(b) the 1^st to 4^th Defendants’ bank accounts at the Bank of East Asia including but not limited to the account numbered 015-514-25-06498-6, in the name of ‘Future Itrade Management Ltd’; and

(2) The 1^st to 5^th Defendants must not –

(i) in any way dispose of or deal with or diminish the value of any of its or his assets where such assets are in any accounts at Standard Chartered Bank and/or the Bank of East Asia Limited held in the sole or joint name of any of the signatories to the bank mandates of the 1^st to 4^th Defendants’ bank accounts.

(3) If the total unencumbered value of the Defendants’ assets in Hong Kong exceeds US$79,353, the 1^st to 5^th Defendants may remove any of those assets aforesaid from Hong Kong or may dispose of or deal with them so long as the total unencumbered value of their assets still in Hong Kong remains above US$79,353.

2. Disclosure of information

(1) The 1^st to 4^th Defendants must inform the Plaintiff in writing within 7 days of being notified of this Order of all his assets up to a value of US$79,353 or more in Hong Kong, whether in its own name or not, and whether solely or jointly owned, giving the value, location and details of all such assets.  The 1^st to 4^th Defendants may be entitled to refuse to provide some or all of this information on the grounds that it may incriminate him.

(2) The information mentioned in paragraph (1) above must be confirmed in an Affidavit which must be served on the Plaintiff’s solicitors within 14 days after this Order has been served on the 1^st to 4^th Defendants.

(3) Costs of this application and of the carrying out of this Order be reserved.

DURATION OF THIS ORDER

This Order will remain in force until trial or further Order of the Court.”

8. Her Honour Judge CB Chan also ordered that there be liberty to apply to the court to vary or discharge the Injunction Order on the part of the defendants on 48 hours’ notice to the Plaintiffs’ solicitors.

Developments after Injunction Order

9. On 24 February 2006, Master J Ko ordered the plaintiffs to make a payment of HK$180,000 into court as security for the 5^th defendant’s costs.

10. On 7 April 2006, Her Honour Judge CB Chan ordered that time for payment of the security for costs be extended until 4 pm on 21 April 2006 failing which the Injunction Order granted by His Honour Judge Wong on 9 September 2004 as varied by Her Honour Judge CB Chan on 24 September 2004 be discharged as against the 5^th defendant.

11. On 21 April 2006, Deputy District Judge Mimmie Chan ordered that the time for payment of the security for costs be extended until 4 pm on 24 April 2006.

12. On 24 April 2006, the plaintiffs paid into court the sum of HK$180,000 as security for the 5^th defendant’s costs.

13. Since then, the plaintiffs have not taken any further step in these proceedings.

The present application

14. The 5^th defendant in this application is asking for this action against him be dismissed on the grounds that:-

(a) There is inordinate and inexcusable delay on the part of the plaintiffs causing prejudice to the 5^th defendant; and/or

(b) there is abuse of the process of the court.

15. In support of this application, the 5^th defendant filed an affirmation in support on 9 December 2013.

Discussions

16. The plaintiffs’ payment into court as security of the 5^th defendant’s costs was made on 24 April 2006.  The present application for dismissal for want of prosecution was taken out by the 5^th defendant on 9 December 2013.  There has been a delay on the part of the plaintiffs for more than 7 years.

17. On 1 November 2013, solicitors for the 5^th defendant wrote to the solicitors for the plaintiffs suggesting that the plaintiffs had no intention to bring this case to trial against the 5^th defendant.  In the letter, solicitors for the 5^th defendant suggested the plaintiffs discontinue the action against the 5^th defendant, otherwise a striking out application would be made.

18. Mr Sherman of Messrs Minter Ellison, the solicitors’ firm on record for the plaintiffs, tells the court that the firm has been informed that it is no longer instructed by the 1^st and 2^nd plaintiffs. Regarding the 3^rd and 4^th plaintiffs, Mr Sherman’s firm has not been able to contact them and as a result the firm does not have instructions from them.  Mr Sherman is not making any submission in this application by the 5^th defendant to dismiss the plaintiffs’ action.

19. Mr Rattigan for the 5^th defendant submits to the court that in light of the delay on the part of the plaintiffs and their failure to give instructions to their own solicitors, it is obvious that the plaintiffs do not intend to take this case against the 5^th defendant to trial.

20. Mr Rattigan relies on the Court of Final Appeal’s decision in Wing Fai Construction Co Ltd. (in liq) v Yip Kwong Robert [2012] 1 HKLRD 590.  I find the following comments made by Chief Justice Ma instructive:-

“Abuse could take many forms. The Birkett v James second limb will continue, where it is proved, to be a form of abuse so that inordinate and inexcusable delay causing real prejudice would be an abuse. Thus, where a delay which is inordinate and inexcusable causes a substantial risk that a fair trial is not possible, this is perhaps the most compelling form of prejudice to a defendant: cf Birkett v James, 318C-D. There may be other forms of prejudice, such as prejudice caused by proceedings hanging over the head of a defendant, causing undue anxiety (Biss prejudice: see para. 17(5)(c) above). Another form of prejudice might be that caused by the existence of an interim injunction (say, a Mareva injunction) pending trial; in such cases, undue delay might aggravate that prejudice. In the context of abuse, some mention should be made of “warehousing”. I have already referred to this earlier. Merely for a party to start proceedings and then delay (which will often involve a failure to comply with the applicable rules of court) will not necessarily amount to an abuse justifying an order to strike out an action. The appropriate remedy in such cases may be for the court to exercise some of the powers I have already mentioned (such as the making of peremptory orders, the payment into court of substantial sums etc). In order for the “warehousing” of claims to justify striking out, it must be clear that the plaintiff is abusing the process of the court. Accordingly, where the “warehousing’ of claims indicates that there is simply no intention to bring proceedings to a conclusion or there is a “wholesale disregard” of the rules or court orders, abuse can be found to exist: see Grovit v Doctor, 647G-H; Arbuthnot Latham, 1436F-G. In Arbuthnot Latham, reference was made to “stale proceedings which bring the litigation process into disrespect” (at p. 1437C-D). I also place emphasis on another passage contained in Lord Woolf’s judgment in that case (at p. 1437E): “The courts exist to assist parties to resolve disputes and they should not be used by litigants for other purposes”. In Grovit v Doctor, as we have seen, the abuse took the form of the plaintiff refusing to progress the proceedings despite a letter from the defendants’ solicitors asking the plaintiff to proceed with the action or abandon it: at pp 645H-646A.” (See: paragraph 75 (3) and (4) of the judgment)

21. After the plaintiffs’ payment into court in the sum of HK$180,000 as security for the 5^th defendant’s costs on 24 April 2006, there has been a delay of almost 8 years.  There has not been any explanation from the plaintiffs for this undue delay.  Coupled with the fact that the plaintiffs now have failed to give instructions to their own solicitors, I find that they plaintiffs are “warehousing” their claim against the 5^th defendant with no intention to bring these proceedings to a conclusion.  This amounts to an abuse of the process of the court.

22. According to the 5^th defendant’s affirmation filed on 9 December 2013, the effect of the Injunction Order is that he is unable to operate his personal account with Standard Chartered Bank which still contains US$79,495.30.  I find that this is a prejudice against the 5^th defendant in view of the plaintiffs’ undue delay.

Conclusion

23. In light of the above analysis, I allow the 5^th defendant’s application and order as follows:-

(a) This action against the 5^th defendant be dismissed for want of prosecution; and

(b) Paragraph 1(2) of the ex parte injunction order made by His Honour Judge Wong on 9 September 2004 as amended by Her Honour Judge CB Chan on 24 September 2004 be discharged as against the 5^th defendant.

24. Costs should follow the event.  The 5^th defendant has prepared a statement of costs for summary assessment of the costs of this application. 

25. I grant a costs order nisi to be made absolute within 14 days that:-

(a) the plaintiffs do pay the 5^th defendant the costs of and occasioned by the 5^th defendant’s summons taken out on 9 December 2013 summarily assessed at HK$42,164; and

(b) the plaintiffs do pay the 5^th defendant the costs of this action, to be taxed if not agreed.