CHENG HOI LING v. GOLD ART CHAIN MAKING CO. LTD. AND ANOTHER

HCA8043/1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 8043 OF 1996

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REASONS FOR DECISION

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The Decision on 13 May 2002

1. By a summons dated 22 March 2002, the 2nd defendant applied to strike out the action for want of prosecution. At the hearing before me on 13 May 2002, the 2nd defendant indicated that it would not be pursuing this application but contended in relation to costs that they should, in the circumstances of the present case, not follow the event.

2. After hearing argument, I formally dismissed the summons and ordered that the costs of and occasioned by the application be paid to the plaintiff by the 2nd defendant, such costs to be taxed if not agreed.

3. I now set out the reasons for the decision on costs.

The issues

4. Mr Anson Wong (who appeared for the 2nd defendant) argued essentially that the 2nd defendant was justified in making the application to strike out and that the application was withdrawn only by reason of an event which took place subsequent to the taking out of the summons. This subsequent event, which I shall presently identify, was, it was argued, attributable to the plaintiff's default and therefore in these circumstances, it was just that costs should not follow the event.

5. Reduced to essentials, Mr Wong's arguments were as follows. At the time the application to strike out was issued, the plaintiff had been guilty of inordinate and inexcusable delay (there having been no activity in this action from October 1997 to January 2002). This delay had caused prejudice to the 2nd defendant in that important documents could no longer be located and the two persons who could deal with the relevant aspects of the case referable to these documents, had left the employment of the 2nd defendant and could not be contacted. It was not until 13 April 2002 that the plaintiff provided to the 2nd defendant in discovery the relevant documents. Only upon studying these documents did the 2nd defendant realize that its position was not as prejudiced as it had hitherto thought. It was further submitted that the late discovery of these documents was caused by the default of the plaintiff : they should have been discovered earlier, particularly when the plaintiff first served its list of documents on 8 February 2002.

6. Implicit in these submissions was the contention that but for the late discovery of the relevant documents (which, incidentally, related to paragraph 9 of the Amended Statement of Claim), the 2nd defendant would most likely have succeeded in its application to strike out.

7. Accordingly, it is necessary for me to consider two inter-related aspects :-

(1) Whether the 2nd defendant was justified in taking out the summons to strike out in the first place.

(2) Whether the plaintiff was at fault in only disclosing the relevant documents on 13 April 2002.

Was the 2nd defendant justified in taking out the application to strike out

8. In my view, the 2nd defendant was not.

9. I start with the basic proposition that in order to strike out for want of prosecution, an applicant must demonstrate the existence of three factors : inordinate delay, inexcusable delay and prejudice caused thereby.

10. In the present case, I assume the first two requirements in the 2nd defendant's favour.

11. As for prejudice, the focus here must be on the documents that were eventually discovered by the plaintiff on 13 April 2002. Where, in an application to strike out for want of prosecution, it is sought to be argued that the loss of documents has caused prejudice, it must be demonstrated that but for the plaintiff's delay, the relevant documents would not have been lost and therefore available for use at trial. Usually, this means demonstrating when and how the documents were lost. The time of loss is important in order to show that had the plaintiff not delayed, the documents would still be available for use at trial. As to how the documents were lost, this is necessary to show that the documents were lost through a fortuitous event as opposed to an event that was of the defendant's own making (for it cannot be right that a party should be able to take advantage of his own wrong).

12. The 2nd defendant has not adduced any evidence to show when the loss of these documents took place. Mr Wong referred me to the 2nd defendant's Further and Better Particulars dated 29 October 1997 in which the intention to disclose these documents at discovery was made known. It therefore followed that the relevant documents were in existence at that time but somehow had been lost subsequent to that date. I was then referred to annual returns of the 2nd defendant for 1997 and 1998 from which an inference could be drawn, so Mr Wong argued, that in May 1998, the 2nd defendant moved offices. Therefore, it was further contended, another inference could somehow be drawn that the documents were lost at that time as a result of the move of office.

13. I am unable to accept these submissions. They seem to me to have no factual basis whatsoever. If true, I would have expected proper evidence to this effect. Mr Wong's arguments were ingenious but ultimately, simply without foundation.

14. Even if it had been open to me to draw the inference that the relevant documents were lost as a result of an office move in May 1998, this still would not have been decisive in the 2nd defendant's favour. I would have found that the reason why the documents were missing was substantially also because of the fact that the 2nd defendant had been at fault in not preserving these documents at an earlier stage when it was obliged to do so. This obligation arose under Order 24, rules 1 and 2 where parties to an action must exchange lists of documents within 14 days after the close of pleadings. If the 2nd defendant had properly fulfilled its obligations as to discovery in this regard, the relevant documents would have been located and preserved well before the time of the alleged loss.

15. As for the inability to locate witnesses, insofar as this can constitute an independent ground (and in my view it does not because it is linked to the question of the alleged missing documents), I would have expected the 2nd defendant, particularly in circumstances where there were missing documents, to have adopted the sensible course and taken detailed statements from them. It apparently did not and this failure cannot in my view enure to the 2nd defendant's benefit.

16. I should finally add that even if I had been in favour of the 2nd defendant's arguments on prejudice, there was a substantial argument open to the plaintiff in any event that the 2nd defendant had acquiesced in the delay by consenting on 4 February 2002 to an order that it file and serve on the plaintiff a list of documents within 28 days. This was in my view an unequivocal indication on its part that it was prepared at that stage to proceed with the action : cf. Hong Kong Civil Procedure 2002, at paragraph 25/L/21.

17. For the above reasons, I am of the view that the 2nd defendant was not justified in taking out the application to strike out.

Was the plaintiff at fault in disclosing the relevant documents only on 13 April 2002

18. In view of my findings in relation to the previous issue, it is unnecessary to decide this issue because even if the plaintiff was at fault in making late discovery, this had nothing to do with the summons that should never have been taken out in the first place and which was bound to fail. The fact that the discovery of the relevant documents by the plaintiff was the factor that led the 2nd defendant to withdraw the application to strike out, was a fortuitous event and cannot on the facts of the present case justify an application which was otherwise not justified.

Final matters

19. It was finally argued by Mr Wong that where inordinate and inexcusable delay is found to exist but not prejudice, it is open to the court not to award costs in the plaintiff's favour. Reliance was placed on the decision of the Court of Appeal in Re HY and HT Lee Brothers & Company Limited, unreported, 29 May 2001. There, the Court of Appeal found that there was inordinate and inexcusable delay but no prejudice in relation to an appeal. I derive little assistance from that case other than the obvious principle that costs are in the discretion of the court. I accept of course that in certain circumstances, even though no prejudice is shown and therefore the application to strike out fails, the successful party may be deprived of his costs. In Re HY and HT Lee Brothers & Company Limited, there was more than a hint the appellant was not bona fide in pursuing the appeal.

20. In the present case, no factor exists which in my view should deprive the plaintiff of the normal order that costs follow the event.