謝紅玲 v. 李偉斌律師行

HCMP 1704/2019

[2024] HKCFI 3578

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1704 OF 2019

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DECISION

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APPLICATIONS

1.  By a summons dated 27 February 2024 (the “Summons”), the Defendant, a law firm, applies to dismiss and/or strike out the Originating Summons dated 19 October 2019 (the “OS”) on the following bases: -

(a)  Want of prosecution grounds: It is said that the Plaintiff is guilty of inordinate delay and has no genuine intention of pursuing the OS till its conclusion.

(b)  Strike out grounds: The OS discloses no reasonable cause of action, is frivolous or vexatious and/or otherwise an abuse of the process of the Court.

2.  The Defendant is a Hong Kong law firm.  The Plaintiff was its client in 2015.  Unhappy with the Defendant’s services, the Plaintiff instituted the present action in 2019 for a total sum of about HK$400,000 (the “Action”).

3.  Between 2020 and 2023, the Action came to a standstill.  The Defendant submits that until this hearing, this Action was left languishing in countless call-over hearings with no sign of progress.  The Plaintiff also refuses to respond to any summonses or notices sent to her official address. 

4.  Despite due service of all the documents on the Plaintiff, she has prior to the hearing not responded or indicated her position.  The Plaintiff did turn up personally at the hearing and indicated her objections to the applications.   

MATERIAL FACTS

5.  In around September 2015, the Plaintiff approached the Defendant to enquire if the Defendant could assist her in recovering two sums of USD241,500 and RMB70,000 from API Premier Limited (“API”) as a result of an alleged investment scam. The Plaintiff had, by then, already obtained judgment and garnishee orders against API and would like the Defendant to assist in recovering the funds.  

6.  In September 2015, the Plaintiff and the Defendant signed an Engagement Letter (in Chinese), which set out the fee earners’ hourly rates.

7.  The Plaintiff’s enforcement actions against API were, however, complicated by the fact that API had other creditors.  As some creditors presented a winding up petition against API (the “Winding Up Proceedings”), the Plaintiff could not enforce the garnishee orders against API.

8.  The Defendant then assisted the Plaintiff in the negotiations with the creditors in the Winding Up Proceedings.  The Plaintiff negotiated with the petitioning creditors and entered into two settlement agreements (the “Settlement Agreements”, and “Settlement Agreement (1)” and “Settlement Agreement (2)” respectively), the effect of which was for the petitioning creditor to agree to dismiss the Winding Up Proceedings in consideration for the Plaintiff’s agreement to apportion some of her recoveries under the Garnishee Order to them.

9.  On 21 March 2016, the Defendant received the cashier order from the garnishee and successfully recovered HK$2,139,260.37 for the Plaintiff.

10.  On 31 March 2016, the Defendant issued the bill of costs to the Plaintiff (the “Bill”) in the sum of HK$250,000 (plus disbursement of HK$500).

11.  On 1 April 2016, the legal fees were settled by deducting from the Plaintiff’s recovery from the garnishee.

12.  In the present proceedings, the Plaintiff advances three claims against the Defendant.

13.  First, the Plaintiff objects to the Bill.  The Plaintiff’s reasons for objecting to the Bill is that the Defendant had failed to perform or did not act in accordance with the Plaintiff’s instructions when the Plaintiff conducted negotiations with the other Creditors. The Plaintiff also says that the Defendant had overcharged her and in effect seeks taxation of the Bill in these proceedings.   

14.  The Defendant’s case is that the Plaintiff’s allegation is frivolous and without merits as first, the Plaintiff has signed a letter dated 31 March 2016 to expressly confirm her agreement to the Bill.  

15.  Secondly, if the Plaintiff had an issue with the Bill, the proper procedure is to tax the Bill by seeking leave within the one-year period from the time the Bill is delivered and/or paid (s.67(2)(ii) Legal Practitioners Ordinance). The time limit for commencing taxation proceedings is one year from the time the Bill was delivered and/or paid (i.e. 31 March 2016). The Plaintiff never commenced taxation proceedings within the prescribed time period.

16.  Thirdly, none of the allegations of professional misconduct is substantiated. The Plaintiff made similar complaints about the Defendant to the Law Society and such complaints were rejected by the Law Society.   

17.  Further, in relation to Settlement Agreement (1) with a creditor, namely Madam Guan, the Plaintiff’s complaint is that the Defendant miscalculated and overpaid Madam Guan (on the Plaintiff’s behalf) HK$4,214.86.   

18.  The Defendant explained and denied there was any miscalculation. Moreover, before the commencement of proceedings, the Plaintiff never disputed the payment to Madam Guan.

19.  Finally, the Plaintiff claims for the Stokehold Sum of HK$171,140.83. The same arose from the following circumstances:

(a)  In the course of negotiation with creditors in the Winding Up Proceedings, the Plaintiff executed the Settlement Agreement (2) with some other creditors, and agreed to pay these creditors a certain sum of money recovered from the garnishees.

The Plaintiff irrevocably authorised the Defendant for the Defendant (as her retained law firm) to effect payment to the creditors in accordance with the Settlement Agreement (2) (the “Irrevocable Instructions”).

(b)  Based on such Irrevocable Instructions, the Defendant gave a solicitors’ undertaking to the creditors (the “Undertaking”).

20.  When the garnishees paid the Defendant, the Plaintiff changed her previous instructions and stated that she would not agree the Defendant to release HK$171,140.84 (8% of her recovery) to the creditors, instead, she instructed the Defendant to “retain” the amount pending her negotiation with those creditors. As a result, the amount was stakeheld in the Defendant’s “client account”.

21.  Bound by professional conduct rules, despite the later instructions from the Plaintiff, the Defendant honoured the Undertaking and paid HK$171,140.83 to the creditors out of the Defendant’s own “office account”.

PROCEDURAL HISTORY

22.  On 19 October 2019, the Plaintiff issued the OS against the Defendant. The Plaintiff’s complaints are based on the Bill which was issued by the Defendant to the Plaintiff in March 2016.   

23.  For the next three years, the Plaintiff took no step in the Action.  There was not a single correspondence from the Plaintiff during this period.

24.  In March 2023, the Plaintiff re-surfaced and took out a series of interlocutory hearings.

25.  The matter was adjourned several times before Master Kent Yee.  The Plaintiff did not comply with various procedural directions and was absent for a few of those call-over hearings. 

26.  As it appears to the Defendant that the Plaintiff had no intention to prosecute this Action, on 26 February 2024, the Defendant took out the present Summons to dismiss this Action for want of prosecution, and/or alternatively to strike out this Action.

27.  On 8 March 2024 (first call-over hearing of the Summons), Master Kent Yee gave directions for the Plaintiff to file affidavit in opposition to the Summons. The Plaintiff did not appear at this first call-over hearing despite due service on her and the Plaintiff had not filed any affirmation in opposition to the Summons. 

applicable legal principles

Dismissal for want of prosecution

28.  The court has inherent jurisdiction to dismiss an action for want of prosecution if there has been default in complying with the rules or excessive delay in the prosecution of the action.

29.  The relevant principles have been comprehensively reviewed and reinstated by Ma CJ in Wing Fai Construction Company Limited v Yip Kwong Robert (2011) 14 HKCFAR 935.  In gist, the following principles ought to be borne in mind: -

(a)  Striking out is a remedy of last resort and should only be used in plain and obvious cases. Greater use should be made of other powers of the court, thus avoiding an “all or nothing” approach to dismissal.

(b)  Abuse of process is the foundation for the exercise of the jurisdiction to strike out for delay. It can take many forms. Mere delay, without more, does not suffice. It includes delays which are inordinate and inexcusable and causing prejudice to a defendant, or contumelious conduct. It may take forms such as “warehousing” of claims, inexcusable non-compliance with or wholesale disregard of an order of the court or the rules of court, and litigation anxiety (Biss prejudice).

(c)  When considering “delay”, it is important that it should be both inordinate and inexcusable, and abuse is shown. It is not the law that mere delay would be sufficient to justify an order to strike out.

(d)  Where abuse is demonstrated, for example where there was contumelious conduct on the part of the plaintiff, proceedings can be struck out even where prejudice to the defendant cannot be shown.

(e)  The conduct of the parties is relevant both to the critical question of abuse and to the overall justice of the case. Post-CJR, where all parties to the proceedings have the obligation to prosecute the proceedings and assist the court in furthering the underlying objectives, it is highly relevant to consider any failure on the part of the parties. There is no place anymore for defendants to adopt the attitude of “letting sleeping dogs lie”.

(f)   The court must take into account the fact that there are other litigants entitled to have their day in court.

(g)  The fact that the limitation period has not yet expired should no longer militate against an order striking out an action.

(h)  The power to strike out is discretionary. In exercising its discretion, a court must ask itself whether or not in the circumstances it is just to strike out. A mechanistic approach in which the bigger picture is lost sight of is to be eschewed.

30.  In the very recent UK case of Watford Control Instruments v Brown [2024] EWHC 1125 (Ch), Mr Justice Richards held that a claim that has been abusively warehoused should be struck out unless there are ‘compelling reasons’ to the contrary.

31.  The ‘compelling reasons’ test derives from Grovit itself and in particular from the subsequent decision of the Court of Appeal in Board of Governors of the National Heart and Chest Hospital v Chettle (1998) 30 HLR 618. In that case, Aldous LJ held that once an action comes to amount to an abuse of process under the Grovit principle, it is ‘required to be struck out unless compelling reasons to the contrary could be demonstrated’.

32.  I am of the view that in principle, the test is to be applied is the same whether the proceedings is commenced by writ or by originating summons.

ANALYSIS ON DISMISSAL FOR WANT OF PROSECUTION

33.  Having considered Mr Kwan’s submissions and the Plaintiff’s oral submissions, first, I am of the view that although there is inordinate delay on the part of the Plaintiff, her situation is mitigated by the intervention of COVID-19 from 2020 to at least 2022. I accept that there was travel ban during the material time and the Plaintiff had other urgent matters to attend to.

34.  Secondly, as to the time taken, namely, around 3.5 years, to commence the present proceedings, I am of the view that the Plaintiff can always resort to legal proceedings to validate her rights within the statutory time limit. That will not count as an abuse of process.

35.  Thirdly, Mr Kwan for the Defendant has a better point on Section 67(2)(b)(i) of the Legal Practitioners Ordinance. The operative date is April 2016 – i.e., the date on which the Bill was issued and delivered to the Plaintiff and/or paid by the Plaintiff.  Mr Kwan submits that if the Legal Refund Claim is in reality a taxation claim, then this claim is time-barred. However, this point may be a striking out point and if so, the Defendant could always apply to strike out this claim as soon as the OS is issued.

36.  Fourthly, Mr Kwan relies on the various abusive litigation conduct of the Plaintiff since March 2023. I do not find it necessary to go through the same in detail but there are sanction mechanisms for such conduct, if proved. The Defendant could have applied for the same. I do not consider that this alone is a ground for dismissing the OS for want of prosecution. There is prosecution after 2023 albeit in an unsatisfactory manner.

37.  Fifthly, as to the prejudice to the Defendant, I take the view that it is always up to the Defendant to apply to strike out the OS which is a topic I will now turn to.

38.  To sum up, I am of the view that the special facts of the present case do not warrant a dismissal of the OS for want of prosecution.

Legal principles on Striking out

39.  As regards strike-out applications on the basis of no reasonable cause of action: -

(a)  While striking out is for plain and obvious cases, plain is not the same as simple and obvious is not the same as short.  If on a careful reading of the Statement of Claim (however complicated) it can be seen that there is no cause of action, a Court will order it to be struck out: Hong Kong Civil Procedure (2024)at §18/19/4.

(b)  A “reasonable” cause of action under O.18, r.19(1)(a) RHC means one with some chance of success when only the allegations in the pleadings are considered: Hong Kong Civil Procedure (2024)at §18/19/5.

40.  A proceeding is frivolous when it is not capable of reasoned argument, without foundation or where it cannot possibly succeed.  A proceeding is vexatious when it is oppressive and/or lacks bona fides: Hong Kong Civil Procedure (2024) at §18/19/7.

41.  The principles relating to striking out as an abuse of the Court’s process, as summarised in Super Strategy Investments v Kao Lee Yip (A Firm) [2008] HKCFI 117 at §22: -

(a)  Motive and intention as such (save only where ‘malice’ is a relevant plea) are irrelevant.

(b)  The institution of proceedings with an ulterior motive is not of itself enough to constitute an abuse: an action is only abusive if the Court’s processes are being misused to achieve something not properly available to the plaintiff in the course of properly conducted proceedings in:

(i)   the achievement of a collateral advantage beyond the proper scope of the action to secure to the plaintiff something he has no legitimate claim whatever;

(ii)  the conduct of proceedings not so as to vindicate a right but rather in a manner designed to cause the defendant the problems of expense, harassment, commercial prejudice or the like beyond those ordinarily encountered in the course of properly conducted litigation.

(c)  Only in the most clear and obvious case will it be appropriate upon preliminary application to strike out proceedings as an abuse of proce4ss so as to prevent a plaintiff from bringing an apparently proper cause of action to trial.

ANALYSIS: STRIKING OUT APPLICATION

42.  First and foremost, I am of the view that the three claims ought to be struck out for there are no reasonable causes of action. Insofar as the Legal Refund Claim (seeking taxation of the Plaintiff’s solicitors’ bills) is concerned, I agree that such claim is time-barred: s. 67(2)(b)(i) of the Legal Practitioners Ordinance. There is a good reason as to why challenges to the Bill should be taken out in good time. There can be no exception to litigants acting in person. “Special circumstances” need to be shown to overcome the time limitation, and the Plaintiff has not shown any such “special circumstances” existed.

43.  Insofar as the alleged overpayment of HK$4,214.86, I am of the view that there is no miscalculation as suggested by the Defendant.

44.  As for the payment of the sum of HK$171,140.84, the Defendant as a law firm was bound by the Undertaking. The Undertaking was given with the prior consent of the Plaintiff.

45.  I perfectly understand the Plaintiff’s complaint is that the Undertaking was given because she was misled into thinking that the creditors had a claim but in fact, according to her case, as transpired subsequently, the relevant creditors’ claims are bogus. Hence, the Defendant should not have acted on the Undertaking.

46.  However, in my view, what is not appreciated is that once the Undertaking is given by the Defendant, absent legitimate reasons provided to the Defendant, the Defendant had to comply with the same under its professional conduct. This matter was referred to the Law Society. The Law Society as a professional body had adjudicated upon it. In the circumstances, I do not find any merits in the said cause of action.

47.  At the end of the day, the Plaintiff was unhappy about the quality of the services provided by the Defendant and some items of the charges. However, this Court’s function is not to perform a taxation of the Bill. This Court is not the correct forum and the OS is not the proper procedure.

48.  Mr Kwan for the Defendant also submitted that the Plaintiff abused the process of the Court by deploying the same to, in effect, defame the Defendant. Many attacks are personal, scandalous and vile. Mr Kwan referred to various paragraphs in the Plaintiff’s affidavit. Mr Kwan also complained that the Plaintiff’s affidavit is prolix and incomprehensible.

49.  Whilst acknowledging the strengthen of Mr Kwan’s submissions, I am of the view that the Plaintiff, as a litigant in person, was genuinely aggrieved albeit on an incorrect basis due to the lack of proper legal advice. It is not proper for this Court to infer bad faith on the part of the Plaintiff.

DISPOSITION

50.  For all the reasons stated above, I make an order to strike out the OS with costs to be paid by the Plaintiff to the Defendant on a party to party basis, if the parties cannot reach any agreement.

51.  Although the Defendant seeks costs on an indemnity basis, I am of the views that for all the reasons as set out above, including this Court to refuse to dismiss the OS for want of prosecution, an indemnity costs order is not warranted.

52.  The Court forms the view that the Defendant is substantially successful in the sense that the present proceedings is struck out. Hence, the Defendant should be entitled to costs but not on an indemnity basis. The costs is summarily assessed at HK$150,000.

53.  Finally, I thank Mr Kwan for the Defendant and the Plaintiff for their assistance to this Court.