CORE PACIFIC-YAMAICHI FINANCE CO LTD v. LEUNG SIU WAI AND OTHERS

HCCL 224/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.224 OF 1998

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J U D G M E N T

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The application

1. This is an application by the 1^st defendant by summons dated 23 February 2005 seeking an order that the plaintiff’s action be dismissed for want of prosecution and/or as an abuse of process.

The background

2. The plaintiff’s claim against the 1^st defendant is for a debt of HK$2,104,097.40 and/or for non-payment of a cheque for HK$2.5 million.

3. The origin of the matter is thus : on 9 January 1998 the 1^st defendant entered into a ‘Uniform Cash Client’s Agreement” with First Yuanta Brokerage Ltd for the operation of a Cash Securities Trading Account by the brokerage on the 1^st defendant’s behalf, and a General Credit Facilities Agreement for the operation of a credit account with the plaintiff for the extension of credit to the 1^st defendant in connection with the operation of the securities account.

4. On the same day the 1^st defendant delivered a cheque to the plaintiff for HK$2.5 million drawn by the 1^st defendant on HSBC in favour of the plaintiff.

5. On 9 January 1998 one Mr Lam Fai purported to place an order on the 1^st defendant’s behalf for the brokerage to purchase 3.925 million shares in one Billion International Holdings Ltd.  This order was executed for the price of HK$2,085,095.92, which sum was debited to the credit account.

6. The value of the shares subsequently dropped to nil.

7. On 12 January 1998 the cheque was presented for payment, but was dishonoured since the 1^st defendant had given instructions for it to be stopped.

8. In terms of the state of the account between the 1^st defendant and the plaintiff, the 1^st defendant allegedly remains indebted in the sum of HK$2,104,097.40.

9. Hence this action.

10. The broad lines of the defence are thus : the 1^st defendant says that she entered into the Uniform Cash Client’s Agreement and the General Credit Facilities Agreement at the request of the 3^rd defendant and third party herein, one Francis Li Chi Hung, and on the basis of the latter’s oral representations that the Securities Trading Account would be nominally in the 1^st defendant’s name only, and that the 3^rd defendant would be responsible for dealings under that account, and that the 1^st defendant would not be personally liable.

11. She also says that she received like oral assurances from one Oliver Lam of the plaintiff, and also that there would be no dealing under the Securities Trading Account and the Credit Account unless this was pursuant to the 1^st defendant’s instructions, and further that there would be no margin trading.

12. It is asserted that the oral assurances of Oliver Lam amounted to a collateral contract through which the 1^st defendant was induced to sign the agreements, and that this gave rise to a promissory estoppel.

13. It is further said that the cheque in question for HK$2.5 million was also issued at the request of Oliver Lam and on the instructions of the 3^rd defendant on the basis that the 3^rd defendant would put the 1^st defendant in funds prior to the issuance of the cheque on 12 January 1998, and that she had been assured by Oliver Lam that the plaintiff would not present the cheque for payment until the 1^st defendant informed him that she indeed had been placed in funds.

14. The 1^st defendant asserts that she did not place any order to purchase shares in Billion International Holdings Ltd, and that she does not know the Lam Fai who purported to place the share purchase order on her behalf.

15. It follows, therefore, on the basis of the 1^st defendant’s case, that there was no entitlement to debit any sum against the Credit Account, and that she is not personally liable on that account, and further that there was no consideration for the cheque as presented by the plaintiff.

16. It is also asserted that by virtue of section 18 of the Money Lenders’ Ordinance, Cap 163, the Credit Agreement is unenforceable, since the 1^st defendant was never given a copy thereof.

17. On the basis of the foregoing, the plaintiff also has issued proceedings against the 3^rd defendant.

The argument

18. For the applicant, Mr Fee submitted that in the circumstances of this case that this action should be struck out on three bases :

first, upon the principles enunciated in Grovit v. Doctor [1997] WLR 640;

second, under the first limb of Birkett v. James [1978] AC 297, namely that of contumelious conduct; and

third, on the basis of the second limb of Birkett v. James, namely that the plaintiff had been guilty of inordinate and inexcusable delay to the prejudice of the defendant, and that there is a real risk that a fair trial no longer is possible.

19. On behalf of the plaintiff/respondent, Mr Stock strongly refuted all three lines of attack, submitting that this case now should proceed to trial in normal course, and that this application should be dismissed.

Decision

20. I am unable to accept Mr Fee’s contentions in terms of his first two heads of argument.

21. In my view this case does not meet the requirements necessary to get home under the emerging principles of Grovit v. Doctor, a case which recently has been the subject of appellate consideration in Hong Kong : see New China Hong Kong Group Ltd & anr v. AIG Asian Infrastructure Fund LP & ors [2005] 1 HKLRD 383.

22. Despite the undoubted periods of delay which have taken place, and to which I advert below, on the evidence before the court I am unable to conclude that there has clearly been demonstrated a lack of intention to bring this case to trial, with the consequential conclusion there has been an abuse of process warranting a strike out application.

23. So I am against Mr Fee on this first head.

24. As I am against him also on his second.  I am unable to discern contumelious conduct of the type which their Lordships had in mind in Birkett v. James, op cit.

25. At the end of the day, this application comes down to an old-fashioned fight under that to which I am tempted to refer as the ‘usual’ Birkett v. James approach arising when there has been demonstrable delay.

26. The relevant principles are well-known.

27. Mr Fee says that in the circumstances there has been inordinate and inexcusable delay, citing in particular the following periods of patent inaction : from July 1999 until July 2000; from July 2000 until January 2004; and from January 2004 until January 2005.

28. Mr Stock does not concede the argument over ‘inordinate and inexcusable delay’, although he does recognize, as he must, that periods of significant delay have occurred.

29. In summary he submits that there was a substantial element of ‘both to blame’ for delayed compliance with existing orders to exchange witness statements, alternatively that the 1^st defendant had consented to the delay.  He also noted the existence of activity in the third party proceedings, omitted from the applicant’s chronology, and the fact that, during apparent periods of inactivity, the plaintiff had remained active in its ‘behind the scenes’ preparation in terms of drafting witness statements, liaising with the Official Receiver’s office in relation to the bankruptcy of the 2^nd defendant, and engaging private investigators to investigate the 1^st defendant’s means and background, all of which were time-consuming matters.  He noted, further, that three of the plaintiff’s officers who had been handling this matter had left the plaintiff’s employ, and that the plaintiff’s management had changed following a merger in 2000.

30. All this may be true, but it strikes me that there has been inordinate and inexcusable delay in this case, and for the purposes of the present application I find that such delay comprised the periods December 2000 to December 2003 and the further one year period from end January 2004 to end January 2005.

31. However, the finding as to inordinate and inexcusable delay suffices only to comply with the first head of the applicable principle.  In order to get home the applicant must establish that there has been “serious prejudice” to the defendant consequential upon such delay or that there is a “substantial risk” that a fair trial is not possible by reason of such delay.

32. It is under the head of causative prejudice that Mr Stock’s argument assumes the more potent force.  Indeed, he characterized the absence of such causative prejudice as his ‘knock out point’ within the context of this application.

33. To this Mr Fee demurred, citing a variety of evidential difficulties arising by reason of the delay, in particular the slim possibility now of locating the Lam Fai who had purported to place the order for the purchase of the shares on the 1^st defendant, and also the fact that, although it now appeared that the Oliver Lam who is alleged to have given the verbal assurances to the plaintiff would be called as a witness, the 1^st defendant had no idea what he was going to say, and the chance of locating potential rebuttal evidence thus had been prejudiced by the lapse of time.

34. To this Mr Stock suggested that Lam Fai was mentioned in the plaintiff’s Statement of Claim, and that if the plaintiff had wished to seek evidence she should have done so, at the very latest following the June 1999 order of the court for the exchange of witness statements.  As to Oliver Lam, he said, the 1^st defendant would have ample opportunity to cross-examine him, whilst there was nothing in the point as to the absence of documentary record of an alleged telephone conversation between Lam Fai and Oliver Lam since it was her case, to which she could testify, that such conversation had occurred anyway, so that such record would be but of peripheral relevance.

35. Nor should the court be unduly influenced, argued Mr Stock, by the fact of the 1^st defendant’s complaint that she could not locate one Yu Wing Keung, who is said to have deposited HK$200,000 into her account on 9 January 1998, because it was clear that the 1^st defendant all along was aware of this issue, and of Yu’s identity.  Whilst as to the complaint that one of the 2 cheques deposited into her account was drawn by one Lam Kai Tai, and that the chances of locating him have become slim due to the delay, this gentleman in fact is the Oliver Lam who is to be called at trial.  Moreover, in terms of the allegation relating to the difficulty of location of telephone records to prove her conversation with the 3^rd defendant, these records would have been discarded anyway in January 2000, well before the preponderance of the delay of which complaint now is made.

36. Each case obviously depends upon its own facts.  At the end of the day, however, and after some reflection, I have formed the view that the ‘prejudice points’, if thus I can term them, presently advanced on behalf of the 1^st defendant in this application are not, upon closer scrutiny, as persuasive as at first glance they may appear.

37. As Mr Stock stressed, the first order for exchange of witness statements, made in June 1999, was prior to any of the alleged delay upon which reliance is now placed, and there was no basis on the evidence to suggest, if the action had proceeded expeditiously, that the 1^st defendant would have gathered the evidence in question; in fact, it appeared that the alleged prejudice was the result of the 1^st defendant’s failure to gather evidence rather than delay on the plaintiff’s part.

38. In this context Mr Stock relied upon the observations of this court in Vaswani v. General Accident Insurance Asia Ltd [2002] 3 HKC 450,wherein the court noted that it did 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 itself is not obviated by the delay”.

39. After reflecting on the particular circumstances of this case I have concluded, therefore, that the ‘prejudice element’ has not been made out by the applicant, nor am I satisfied that the case has been made of a “substantial risk” that a fair trial would not be possible.

40. This application therefore must fail upon this ground.

Order

41. The 1^st defendant’s summons dated 23 February 2005 is dismissed.

42. As to costs, after reflecting on the history of events in this case, I make an order nisi that the costs of this application are to be plaintiff’s costs in the cause, to be taxed if not agreed.

43. In so far as may be necessary, the 1^st defendant’s costs are to be taxed according to the Legal Aid regulations.  Save as aforesaid, I make no other order as to costs.

44. I leave it to the parties’ legal representatives to agree the directions now required to take this case forward to trial, which must now be done as expeditiously as possible; absent agreement, the existing summons for directions should be restored for an early date.

45. For my own part it is not easy to discern why the plaintiff should think it worth pursuing a claim for some $2 million against a defendant who earlier had discharged her private solicitors and now successfully has obtained legal aid for this application, but that, of course, remains a matter for the plaintiff.