UNIVERSAL BOATS TRADING LTD v. SOO WAI MAN AND ANOTHER

DCCJ 797/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 797 OF 2002

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DECISION

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1.  This is an application taken ou by the 1^st Defendant to strike out the Plaintiff's claim for want of prosecution and abuse of process.

Background

2.  On 10 August 2001, the 1^st Defendant was driving a car owned by the 2^nd Defendant along Sai Kung Road.  The 1^st Defendant said the Third Party negligently walked into the road. In order to prevent his car from hitting the Third Party, the 1^st Defendant swerved his car to the left and grounded on the pavement, hit a steel frame and stopped after crushing into a boat of the Plaintiff, which boat was kept at the front of the Plaintiff’s shop.

3.  It is not disputed that after the accident, the 1^st Defendant signed a letter/notedated 10 August 2001 to the Plaintiff stating he agreed to pay for the expenses of the repair and all other loss.  The boat was sent by the Plaintiff to a dockyard for repair.  The Plaintiff asked the 1^st Defendant to pay the cost which the 1^st Defendant failed to pay.  Later, the boat was sold at the price of $60,000.

4.  In the original Statement of Claim (dated 30 January 2002) filed with the Writ, the Plaintiff claims that before the accident, there was a buyer for the boat who was prepared to pay $150,000.  After the repair, his surveyor has assessed the value of the boat at $100,000.  The Plaintiff initially claims damages for the depreciation of the boat at $50,000, interest and cost (including the surveyors' fees).

5.  There were subsequent amendments to the Statement of Claim.  By the Re-amended Statement of Claim, the Plaintiff has 2 major items of damages.  Firstly, the Plaintiff claims cost of repair in the sum of $27,800.  As the boat is subsequently sold only for $60,000, the Plaintiff revised his claim for loss of value of the boat at $90,000. It also claims some other expenses, interest and cost. 

The Delay

6.  The 1^st Defendant complains that after February 2004, the Plaintiff has taken no further step in this action. The action becomes dormant until 2010. To better understand the argument, I set out the material events since this action was issued :-

Events	Filing date
Writ of Summons	2/2/2002
Acknowledge of Service by 1st Defendant	14/5/2002
Defence of 1st Defendant	14/5/2002
Plaintiff’s first list of document	27/7/2002
Plaintiff’s second list of document	2/8/2002
Amended Writ with Amended Statement of Claim and Plaintiff’s witness statement and other documents attached	7/11/2002
Amended Defence of 1st Defendant	14/10/2002
Witness statement of 1st Defendant	14/11/2002
Order of Master K. W. Wong for expert evidence	29/11/2002
Third Party Notice by 1st Defendant	29/11/2002
Certificate of Valuation by Omic & Associates Ltd., surveyor of the Plaintiff	Dated 16/1/2002
Plaintiff’s clarification letter on the contents of its Amended Writ and Amended Statement of Claim	29/11/2002
Acknowledgement of service by Third Party	11/2/2003
Notice of Application for Pre-trial Review by Plaintiff	4/4/2003
Notice to Act (1st Defendant appointed solicitors)	23/4/2003
Statement of Claim in Third Party Proceedings	25/4/2003
Defence and Counterclaim by Third Party in Third Party Proceedings	16/5/2003
Reply and Defence to Counterclaim by 1st Defendant in Third Party Proceedings	28/5/2003
Further witness statement from Plaintiff	30/5/2003
List of Document by Third Party	18/6/2003
List of Document by 1st Defendant	19/6/2003
Notice to Act (Plaintiff appointed solicitors)	12/7/2003
Witness Statement of 1st Defendant	4/9/2003
Notice of Change of Solicitors (for Plaintiff)	9/9/2003
Order of Master K. W. Wong for exchange of witness statement and expert report between 1st Defendant and Third Party	3/11/2003
Notice to act in person (by Plaintiff)	22/12/2003
Summons by Plaintiff to join 2nd Defendant	27/12/2003
Order of Master K. W. Wong for exchange of valuation report between Plaintiff, 1st Defendant and Third Party	29/12/2003
Witness Statement of Third Party	30/12/2003
Re-amended Writ of Summons	23/2/2004
Amended Defence	5/3/2004
Amended Statement of Claim by 1st Defendant in Third Party Proceedings	19/3/2004
Amended Defence and Counterclaim by Third Party in Third Party Proceedings	23/4/2004
Expert Report of 1st Defendant	21/6/2004

7.  The 1^st Defendant complains that, since the filing of the Re-amended Writ of Summons, there are more than 6 years and 8 months of inaction on the part of the Plaintiff save for the following documents filed by the Plaintiff, which inaction amount to inordinate and inexcusable delay :-

a)  Notice to Act dated 30 January 2007 and Notice of Intention to Proceed dated 30 January 2007 filed by Messrs. Wong & Chan for the Plaintiff;

b) Notice of Change of Address for Service dated 7 July 2007 file by Messrs. Wong & Chan;

c)  Notice of Change of Solicitors dated 7 September 2010 and Notice of Intention to Proceed dated 7 September 2010 filed by Messrs. S.W. Tai & Co. for the Plaintiff;

d) Case Management Summons issued on 15 November 2010 by Plaintiff.

8.  There is no dispute on the above chronology and Mr. Ng, counsel for the Plaintiff concedes there is delay.  But the Plaintiff contends that it is excusable and in any event has not caused serious prejudice to the 1^st Defendant. This is a convenient time to consider the law.

The Issues

9.  I believe it is not in dispute that the leading case on application to dismiss an action for want of prosecution is Birkett v. James [1978] AC 297.  It is said by Lord Diplock in his Judgment that: -

“The power should be exercised only where the Court is satisfied either (1) that the default has been intentional and contumelious, e.g. disobedience to a peremptory Order of the Court or conduct amounting to an abuse of the process of the Court; or (2)(a) that there has been an inordinate and inexcusable delay on the part of the Plaintiff or his lawyers; and (b) that such delay would give rise to a substantial risk that it is not possible to have a fair Trial of the issues in the action or is such as is likely to cause or to have caused serious prejudice to the Defendants either between themselves and the Plaintiff or between each other or a third party.”

10.  In Birkett v. James, their Lordships were concerned with the application of principle (2) only.  Mr. Cheung, counsel for the 1^st Defendant relies on both principle (1) and principle (2).  Hence the follow issues are before me –

a.  Whether the delay is inordinate and inexcusable on the part of the Plaintiff or his lawyers;

b.  If there is such inordinate and inexcusable delay, has such delay given rise to a substantial risk that it is not possible to have a fair trial of the issues in the action or is such as is likely to cause or to have caused serious prejudice to the Defendants whether as between the Defendants and the Plaintiff or between the Defendants and a Third Party.

c.   In the alternative to b., is the default of the Plaintiff being intentional and contumelious conduct or conduct amounting to an abuse of process of the court.

Delay

11.  While Mr. Ng does not concede that the delay is inordinate, I fail to see why inactivity on the party of the Plaintiff for over 6 years is not inordinate delay.  Inordinate delay is prima facie inexcusable and the burden rests on the Plaintiff to satisfy the Court that it is excusable.

12.  On the reason for the delay, the Plaintiff put in an affirmation filed herein on 1 March 2011. He said from issue of Writ to 30 January 2007, he was acting in person.  During the period, there has been constant progress in prosecution of the case.  This is only true up to February 2004 when he has filed his Re-amended Writ.  There is no progress in the case since then.

13.  Mr. Ng submits that the 1^st Defendant has only filed his expert report in June 2004.  I presume he suggests the Plaintiff would be waiting for the 1^st Defendant to exchange the report before proceeding further.  I accept this explanation.  But there is no action after June 2004.  And no further explanation is given for the inactivity between July 2004 and November 2010.

14.  I note that the Plaintiff’s solicitors have filed Notices to Act.  It is trite law that such is not an act in the action.  And the Notice of Intention to Proceed would not be considered as act in the action.

15.  After engaging solicitors to assist, the Plaintiff has engaged in without prejudice negotiation with the 1^st Defendant.  The Plaintiff claims that he has been misled by the 1^st Defendant into thinking that this action was going to result in another out of court settlement.

16.  Both parties agreed to waive the privilege on these without prejudice letters exchanged.  In the second affirmation of the 1^st Defendant filed herein on 14 March 2011, the 1^st Defendant exhibited 3 letters exchange to discuss settlement, and I am confirmed that these are the only correspondence on discussion for settlement.  I do not intend to disclose the contents of these letters in my judgment.  It is sufficient for me to note that the first letter was written by the 1^st Defendant’s solicitors inviting the Plaintiff to make an offer.  The second letter is from the Plaintiff’s solicitors asking the 1^st Defendant to offer a concrete sum.  These letters were exchanged in March 2007.  And in August 2007, the 1^st Defendant made some suggestions and there was no response.

17.  So for the attempt for settlement, it could at best account for inactivity for 6 months. In fact, the without prejudice negotiation should not be a reason for not proceeding with the action, without agreement between the parties.

18.  No other reason for the inactivity has been given.  For at least a period of 5 years and 8 months, the delay is inexcusable.

Estoppel

19.  Mr. Ng also argues that the 1^st Defendant is estopped by its own conduct to rely on the delay to apply for striking out of the action.  He relies on the fact that the 1^st Defendant has on 6 February 2010 filed a Notice of Intention to Proceed.  He has sent a positive signal that he is ready and willing to proceed to trial.  If there were an inexcusable delay, the 1^st Defendant has acquiesced to it.  He refers me to the judgement in Hongkong and Shanghai Banking Corp. Ltd. v. Kuan Tao Sheng & Ors [1998] 1 HKC 438. 

20.  Mr. Cheung submits that conduct by a defendant that induced the plaintiff to incur further expenses in the pursuit of the action is not an absolute bar in law to his obtaining a striking out order on the ground of previous inordinate and inexcusable delay.  It is only a ground to be taken into account in exercising the discretion of striking out.  He refers me to the case Roebuck v. Mungovin [1994] 2 A.C. 224, where Lord Browne-Wilkinson said:-

“… subsequent conduct by the defendant which induces the plaintiff to incur further expense in pursuing the action … is, of course, a relevant factor to be taken into account by the judge in exercising his discretion … At one extreme, there will be cases like the present where the defendant’s actions are minor (as compared with the inordinate delay by the plaintiff) and cannot have lulled the plaintiff into any major additional expenditure: in such a case a judge … will be likely to attach only slight weight … At the other extreme one can conceive of a case where … the defendant has for years thereafter continued with the action thereby leading the plaintiff to incur substantial legal costs: in such a case the judge may attach considerable weight to the defendant’s activities …”

21.  I agree that if the conduct of the 1^st Defendant induces the Plaintiff to incur further costs, it is only a factor I should take into account.  The issue before me is what are the extra costs incurred by the Plaintiff after the 1^st Defendant served the Notice of Intention to Proceed.  At paragraph 26 of his Affirmation, he said he has incurred extra costs in attending the case management conferences and in engaging its present solicitors.  I do not consider such to be a major additional expenditure.  And the 1^st Defendant has stated in its questionnaire filed herein on 29 November 2010 for the case management conference on 6 December 2010 that he would apply to strike out the Plaintiff’s claim for want of prosecution.  I am not convinced that the 1^st Defendant is estopped from asking to strike out the Plaintiff’s action.

22.  I conclude from the above that there is inordinate and inexcusable delay on the part of the Plaintiff and the 1^st Defendant is not estopped from seeking to strike the Plaintiff’s claim.  But the 1^st Defendant has to establish prejudice.

Prejudice

23.  Mr. Ng submits that there is no serious prejudice to the 1^st Defendant as this is a claim based on a settlement agreement which is well documented.  The only issue for the trial judge is the amount of recoverable damages. 

24.  According to the Amended Defence, the 1^st Defendant has admitted the collision and signing of the settlement agreement.  The settlement agreement has not set out the amount of compensation.  It is for the Plaintiff to prove that the damages claimed is reasonable. 

25.  Mr. Cheung said he cannot concede liability for the 1^st Defendant.  But for the purpose of this application, he agrees that the issue on liability is well documented.  He claims that there would be serious prejudice to the 1^st Defendant on the issue of damage.  He refers to Gloria v. Sokoloff and Others [1969] 1 A.E.R. 204 when Lord Denning M.R. said “if the plaintiff has been guilty of prolonged and inexcusable delay which has seriously prejudiced the defendants on the issue of damages so that there is a substantial risk that a fair trial of that issue cannot be had, then the action may be struck out for want of prosecution even though liability has been admitted by the defendants.”  I agree with the principle.  The question is whether there is such a risk in our case.

26.  Mr. Cheung submits that expert evidence would be relevant in this case.  And the Plaintiff has disclosed 2 surveyors’ reports.  The 1^st Defendant has filed one.  Given the time, it can be anticipated that the parties and the experts would have problems in recalling what they had seen in relation to the damages done to the boat. 

27.  Mr. Cheung also commented on the 2 reports produced by the Plaintiff. The first report is prepared by Omic & Associates Ltd in August 2001 (“August Report”) which is a report on liability, and is not helpful to the issue of quantum.  The second report is prepared by Omic & Associates Ltd in 2002 (“Valuation Certificate”) giving a valuation of the boat after the repair.  But there is no detail reason given by the expert on his valuation and it is anticipated that he would be subject to heavy cross examination at the trial. 

28.  Mr. Cheung refers me to the case of Lee Shing Lai trading as Lee Lai Kee Construction Company v. Lou Tong Chiu Kee Construction Company Limited HCCT 46 of 2005, when Mr. Justice Reyes commented that, after a long delay, it could not serve any useful purpose to cross examine the expert on what defects they saw or did not see and as to the likely cause of any defects seen.  His Lordship also commented that photographs by themselves without viva voce evidence to explain what they depict are unlikely to be of much help.

29.  Mr. Cheung submits that the 1^st Defendant is in the same difficult position, as he could not sufficiently cross examine the expert.  And the Court would be at an impossible position to arrive at the truth.  Hence there is a real risk that a fair trial is not possible.

30.  Further, Mr. Cheung submits the 1^st Defendant suffers further prejudice arising from the department of the Third Party from Hong Kong.  He would have difficulty in enforcing any judgment that he would obtain against the Third Party.  Mr. Ng submits that the 1^st Defendant is free to proceed with the third party proceedings and any prejudice from such inactivity on the part of the 1^st Defendant is not created by the Plaintiff.

Ruling on Prejudice

31.  I shall deal with the expert evidence first.

32.  On the issue of reasonable repair costs, the Plaintiff has produced a receipt for the repair costs.  It is not unusual for expert evidence be introduced by the parties to assist the Court is determining what is the work required and the cost thereof.  Up to this moment, there is no expert evidence on what is the reasonable cost of repair.

33.  I note that as early as in 29 November 2002, Master K.W. Wong (as he then was) granted leave to the parties to file and exchange expert evidence.  And the Plaintiff has only filed the Valuation Certificate on the value of the boat, and has not filed any expert evidence on the reasonableness of the costs of repair pursuant to this order. 

34.  On the other hand, the 1^st Defendant has not filed any expert reports pursuant to this order of Master Wong.  And after the Third Party was joined, on 3 November 2003, Master Wong granted leave to the 1^st Defendant and the Third Party to exchange expert evidence, I presume on both the reasonable cost and depreciation of the value of the boat.  Again, the 1^st Defendant has not file any expert report pursuant to this order.

35.  And on 29 December 2003, Master Wong further ordered all parties to exchange valuation report of the boat.  And pursuant to this order, the 1^st Defendant adduced his expert report on the value of the boat before and after the accident. 

36.  Mr. Ng has emphasized that, for the 1^st Defendant to succeed in the striking out application, he must prove that the prejudice has been caused by the delay of the Plaintiff.  I believe Mr. Ng argues that if the 1^st Defendant suffers from lack of expert evidence to comment on the  costs of repair, such disadvantage is not caused by the delay, but because the 1^st Defendant has not complied with the Order of Master Wong in August 2002 to prepare expert report on the costs of repair.  I agree.

37.  Further, to better understand the argument of Mr. Cheung, it is necessary to look at the repair work involved.  The works includes –

38.  In truth, the items of repair is only items a and b, for the total costs of $8,000.  I accept that the boat has been sold.  But some photographs are attached to the August Report which has been filed.  The photographs are very clear in showing the damage to the surface of the boat.  Having considered the nature of repair that was done, and the damage, I have to agree that this is a case which the photographs with the evidence of the Plaintiff and the 1^st Defendant would be sufficient to assist the trial judge in assessment the damage.

39.  I bear in mind that the 1^st Defendant claims to have fading memory. But the photograph is good enough to refresh his memory.  And if expert evidence has to be introduced, these would be sufficient material for the expert to form a comment.

40.  Items c, d and e are expenses ancillary to the repair work.  It is a matter of fact determination for the Plaintiff to justify, in particular why he did not take the boat for 74 days after the works had been completed.  For these matter, it may not justify the evidence of an expert.

41.  There are some attractions on the submission of Mr. Cheung.  But in view of the nature of the damage, I do not find in favour of his submission.

42.  On the issue of the depreciation of the sales price of the boat, we have 2 expert reports, one from the Plaintiff and one from the 1^st Defendant. Mr. Ng submits that there is written report on the value of the boat and there is no risk that a fair trial is not possible.

43.  Mr. Cheung’s main argument is that the Valuation Certificate is cryptic and lacking in particulars.  I agree. 

44.  But we have 2 experts.  The expert report produced by the 1^st Defendant is very detail.  His valuation must be key evidence to assessment.  And I note that the expert assessed the value on the model of the boat, its age and its conditions according to some photographs.  There is no suggestion by the expert that there is difficulty for him to arrive at the assessment on these informations. He should have no difficulty to response to cross examination with reference to the photographs and data he set out in his report.

45.  It is not uncommon when valuations of boat or vehicle are required.  I see no reasons why an expert could give an opinion on the value of the boat bases on the model, the age and some photographs of the vessel/vehicle in question.  I agree with Mr. Ng that there is no risk of substantial prejudice to the 1^st Defendant on the issue of valuation of the boat.

46.  On the possible sale price of $160,000, the burden rests on the Plaintiff to locate the witness.  It would not be a prejudice to the Plaintiff if he could not locate the witness.

47.  Mr. Cheung also relies on the fact that the Third Party has left Hong Kong and there would be difficulty in seeking indemnity from him if the 1^st Defendant fails in his defence but succeeds with the third party proceedings.

48.  Mr. Ng submits that the 1^st Defendant should proceed with the third party proceedings without delay.  It appears from the Court file that after February 2004, the 1^st Defendant has not taken any action in the third party proceedings.  Mr. Cheung submits that it serves no useful purpose to proceed with the third party proceedings as they could at best obtain an indemnity and the issue of quantum would be left unresolved.

49.  I do not agree that the 1^st Defendant may take no action on the third party proceedings if the Plaintiff is inactive.  There is no reason why he should leave the Third Party in a pending action, even though the Plaintiff has not proceeded.  He should continue with the third party proceedings as prescribed by the rules.  If the Plaintiff is not proceeding with the main action notwithstanding the progress of the third party proceedings, the remedy to the 1^st Defendant should be application to this Court for peremptory order to compel the Plaintiff to proceed, and if he failed to obey, the main action could be struck out.  Such power is within the jurisdiction of this Court before the Civil Justice Reform (see for example Order 34 rule 2 of the old Rules of District Court, version L.N.248/2000).

50.  I need only to add that, here the 1^st Defendant also claims against the Third Party for total loss of the car of the 2^nd Defendant.  I fail to see why he chooses not to proceed. 

Abuse

51.  Mr. Cheung also submits that the Plaintiff is in abuse of the Court proceedings in failing to comply with the order of Master Wong in 2003, and has not proceeded with the case for over 5 years.   

52.  But as I analysed above, the Plaintiff filed the Valuation Certificate after Master Wong gave the order in 2002 for expert opinion.  While this report only covers part of the issues that expert report is required,  I cannot say that the Plaintiff disregards the order of Master Wong. 

53.  And when Master Wong gave his second order on expert evidence on 3 November 2003, he only directed exchange of expert reports between the 1^st Defendant and the Third Party.  He must have in mind the first order of expert report and only direct exchange of expert report on valuation.  And in his order given on 29 December 2003, he directed exchange of expert report on the valuation of the boat between all parties.  Given the Plaintiff has filed the Valuation Certificate which is an expert report on valuation, may be too early in 2002, I cannot say that he deliberately disregarded the order of Master Wong. 

54.  I do not find that the Plaintiff has intentionally or contumeliously disobeyed an order of Master Wong.  Mr. Cheung agrees that mere delay is not sufficient to constitute abuse.  I cannot conclude there is abuse on the part of the Plaintiff.

Conclusion

55.  Having considered all the matters above, I do not consider it is a just case to strike out the Plaintiff’s claim for want of prosecution.  I therefore dismiss the 1^st Defendant’s summons. 

56.  On case management, I believe the case should proceed to trial as soon as possible.  The last direction order given by Master Wong was made in end of 2003, before the Civil Justice Reform.  The Plaintiff in the draft order attached to its questionnaire dated 15 November 2010 suggested a stay of action to facilitate mediation.  While I agree parties should try mediation, further stay of the action is not appropriate in view of the long delay.

57.  Solicitors for the parties should advise their client as soon as possible on the underlining rationale of Order 1A and report to the Master on any progress on mediation within 14 days from this decision. 

58.  The Plaintiff should within 21 days apply to restore the case management summons before the Master for further direction of setting down, or other necessary directions.

59.  Finally on costs, I am not minded to grant any costs to the Plaintiff.  Order 62 rule 5 provides that the Court in exercising its discretion on costs, should take into account the underlying principle of Order 1A rule 1 and the conduct of the parties.  And the conduct of the parties would include the manner in which a party pursued his case.  This is a case when the Plaintiff has no excuse for creating the delay.  While I am not minded to dismiss the claim, the Plaintiff’s conduct justifies a departure from the usual order of costs to follow the event.  I would therefore give an order nisi that the costs be the 1^st Defendant’s costs in the cause to be taxed if not agreed and the 1^st Defendant’s own costs be taxed according to Legal Aid Regulations.  The order nisi shall become absolute within 14 days.