CHEUNG YUK CHUN v. YEUNG WO FAI

HCA 6191/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 6191 OF 1998

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D E C I S I O N

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1. The defendant relies on the second limb of Birkett v James and the principles in Grovit v Doctor to dismiss the claim for want of prosecution.

(I)   The Second Limb of Birkett v James

2. The defendant has to show:

(i)  Delay on the part of the plaintiff;

(ii)  The delay was inordinate and inexcusable;

(iii)  There was substantial risk that a fair trial would not be possible or that there would be serious prejudice to the defendant.

Delay

3. There are four periods to note:

(i)  From default judgment on 12 June 1998 to resale on 20 December 2004 (6½ years)

(ii)  From resale to 22 March 2005 (3 months)

(iii)  From after 22 March to 20 April 2006 (13 months)

(iv)  From and after 20 April 2006

4. There was clear delay in the first period.  There was not even a demand letter from the plaintiff and the litigation had grounded to a halt.  Objectively, the plaintiff had not displayed any intention to proceed.  It was also clear delay to take over six years to resell the suit property.  Whilst it is up to the master on assessment of damages to decide if the plaintiff had been reasonable in mitigation, that does not bar me in this application from deciding if there had been a delay in bringing about the assessment.  Broadly I take into account two factors:

(i)  In discharge of her duty to mitigate the plaintiff ought to dispose of the property within reasonable time.  This duty existed even with the existence of clause 21.  See Alucase Company Limited v Keen Lloyd (Holdings) Limited.  I do not accept that she needed to have an actual resale to proceed with the assessment.  If she could not resell, the court would use the market price obtainable with reasonable mitigation steps to assess her loss.  In this case whilst I will not in this application use the word “speculation” to describe the plaintiff’s delay in the sale of the property, and although I note the falling market, I find six years taken to bring this case to assessment to be unreasonable.

(ii)  The evidence on assessment will principally be from information within the plaintiff’s possession (for example, the mitigation and the rental recovered) and the expert valuer.  There would be no difficulty for the plaintiff to shape up her case for assessment within a short time from the default judgment.

5. Both counsel have sought to argue on the limitation period applicable to assessment of damages.  In my view, it was unnecessary to do so.  Limitation period, as laid down in the Limitation Ordinance has been treated as governing the substantive rights of parties to bring an action and has to be pleaded.  If the legislature does not see fit to set out the limitation time for assessment of damages, I do not see why the court needs to do so.  The assessment, being part of the procedure to dispose of a case, can be dealt with having regard to the rules and the case management powers of the court.

6. I note the holding of District Judge Sweeney in the case of Ho Tsz Bun.  Without disrespect to the learned judge, although he has mentioned the cases of  Allen v McAlpine and Birkett v James, he has not explained how his decision could be applied in general and where a defendant is not absent, as in this case.  The facts in Ho Tsz Bun are peculiar and, in my view, the decision of the learned judge should be limited to the facts of that case.

7. Having regard to the duty to mitigate, the fact that the potential evidence has been within the possession of the plaintiff and the expert evidence was not difficult to obtain, reasonable time to bring the matter up for assessment would be about a year after the default judgment.  In any case, even building in the absence of the plaintiff from Hong Kong, and the difficulty with the court’s diary, it should not be more than two years.  I find that there was inordinate and inexcusable delay for the first period.

8. With regard to the second period, I find that there had been no delay.  Between December 2004 and February 2005 were two major holidays.  It was not unreasonable for the plaintiff to demand for damages only about two months after the resale.  There then followed some correspondence over the question of discharge of the charging order, a warning from the defendant to dismiss the proceedings for want of prosecution and a purported attempt to make discovery on the part of the plaintiff before the case came to a halt again.

9. With regard to the third period, notwithstanding the defendant’s warning letter, it took the plaintiff 13 months in order to get directions for assessment.  The purported explanation was that she was waiting for an offer from the defendant to settle.  This, in my view, was not a good explanation.  If the plaintiff chose to put her own affairs above litigation she had to take the consequences.  Moreover, it was clear that the defendant has adopted an entirely uncooperative attitude and was not offering to settle.  He was even asking to discharge the charging order, not on an unreasonable ground.  If the plaintiff was really waiting for an offer to settle before deciding whether or not to proceed, I find that waiting to be unnecessarily long.  In that year I do not find the defendant to be encouraging the plaintiff to proceed, or to think that the defendant has abandoned any wish to proceed with the dismissal application.  The defendant was entitled to let sleeping dogs lie until an appropriate moment to take out the application.  Events in the fourth period show that directions were not difficult to get and could even be obtained without co-operation of the defendant.  In my view, the plaintiff’s delay in the third period was inordinate and inexcusable.

10. With regard to the fourth period, there was no delay on the part of the plaintiff.  Things moved swiftly in about one month.  The plaintiff successfully obtained directions for assessment and had actually set it down for hearing. 

11. In summary, the total period of delay was 6½ years, plus 13 months.

Prejudice to the Defendant or Risk of No Fair Trial

12. Mr Yao for the defendant has identified three potential heads of prejudice:

(i)  An increase in quantum of damages because of the delayed resale;

(ii)  The huge increase in interest by about $5 million since entry of the default judgment;

(iii)  The additional cost to obtain a valuer’s report. 

In deciding the question of prejudice, I have adopted the figures in the table presented by Mr Yao in his reply and the defendant’s valuer’s report.

13. With regard to the first head of prejudice, whether there was delay or not in the resale, the master on assessment would apply the same principles on duty to mitigate and the right to claim damages within a reasonable time.  I do not see how the actual resale price could affect those legal principles.  I do not regard this difference in the notional price, if there had been an earlier assessment, and the actual resale price, could be regarded as a prejudice to the defendant that would leave the defendant with no remedy.

14. With regard to the second head of prejudice, the master is entitled to take into account the interest incurred since the default judgment.  Equally, he or she can consider that during the years of delay the defendant has had use of the money which he would otherwise have to pay as damages.  It is up to the defendant to persuade the master to discount all or part of the interest accrued because of the delay.  This is not a prejudice that has no remedy for the defendant.

15. With regard to the third head of claim, this could not be a serious prejudice to the defendant.  The increased cost in obtaining the valuation report was minimal compared to the likely damages recoverable by the plaintiff.  Any prejudice suffered can be compensated for by costs or otherwise with persuasion of the master. 

16. In the premises I find that there was no prejudice to the defendant.

17. The question of whether or not a fair trial was possible was not emphasised in this application.  This is not a case where the delay will cause the defendant’s witnesses to lose their memory.  The evidence will be largely from the plaintiff’s realm and for the experts on both sides.  In my view a fair trial is still possible.

18. In summary, the defendant’s reliance on the second limb of Birkett v James fails for want of prejudice or risk of no fair trial.

(II)  Grovit v Doctor Principles

19. I agree with the submission of Miss Tong, that Grovit v Doctor ought to be treated with caution in the light of the New China case which is binding on me.  Delay, per se, was not sufficient.  The defendant has to show a wholesale disregard of the rules with full awareness of the consequences which amounted to abuse of process.  He also has to show that it would not be fair to let the case proceed, although it is not necessary to show prejudice to the defendant.  In the following analysis I have taken into account my analysis on the issue of delay. 

20. I do not find the plaintiff to have shown a wholesale disregard of the rules.  As soon as she decided to proceed with the assessment, she purported to make discovery and requested for the same from the defendant.  Although Order 37 expects parties to act promptly after judgment on liability has been entered, there was nothing to prevent a party from, after a period of delay, purporting to act under it and invite the other party to adopt the directions, the automatic directions, by agreement.  It was not necessary for the plaintiff to go back to a master to validate her purported act of discovery.  Equally, the defendant could have applied to the master for directions.  In the present case the plaintiff has already started the engine rolling in the year 2005 and pursued it again after a year’s delay, in the year 2006.  Apart from time, there did not appear to be breach of any rules or court order.  Overall, the plaintiff’s conduct could not be regarded as an affront to the rules. 

21. If I am wrong, the next thing to consider is whether or not the plaintiff was fully aware of the consequences of her delay.  I have no hesitation in finding in the affirmative in view of the defendant’s warning letter.

22. Would it be fair to let the plaintiff proceed?  The present position is that the plaintiff has remedied her delay before the defendant took out the present summons.  She had not disregarded Master Hui’s directions, which were complied with until they were stayed by Master de Souza’s order.  There seemed to be nothing further for the plaintiff to do but to proceed with the hearing for assessment in about two months’ time.  Mr Yao seems to suggest that it was not a race of summons between the parties and queried the application of White v Glove.  I take this line of submission with some caution.  A court looks at all the circumstances to decide the question of fairness.  The plaintiff, having discovered her delay on default proceeded quickly to remedy the situation.  The defendant, on the other hand, sat on his warning also for about a year.  The defendant’s position as at the date of the warning letter was no different from that of his summons but for the plaintiff’s remedial acts since the taking out of the summons for directions.  The defendant has to take the consequences of his inaction for one year.  For my part, I can see nothing wrong in principle with White v Glove.  I notice that there are no other authorities from Hong Kong which deal exactly with the position before me.  After all, dismissal for want of prosecution is a drastic remedy and is not to be granted, save in exceptional circumstances.  In my view, it would not be fair to dismiss the plaintiff’s claim, having regard to the defendant’s own delay.  In two months’ time the master will be considering all the questions about mitigation and prejudice to the defendant with full evidence before him or her. 

23. It is not appropriate to dismiss this claim.  In summary, the defendant also fails under the Grovit v Doctor principles.  The summons is therefore dismissed.

(Discussion re costs)

Costs

24. The defendant asks for no order as to costs, but the plaintiff asks for costs of the dismissal summons.  I have considered counsel’s submission last time.   I have also considered whether or not I should award part of the costs to the defendant since at the time the defendant took out the summons the objective circumstances were that the plaintiff had no intention to proceed, she being completely silent, even with a demand for damages or assessment.  In the end, however, I am persuaded by Miss Tong that the defendant simply failed to discharge his burden of proof of prejudice under the Birkett v James principles and had failed to demonstrate a wholesale disregard of the rules or fairness in dismissal.  The evidence required of him to set up his application did not depend on the plaintiff’s evidence in reply.  In the premises I would order that:

(i)  Costs of the dismissal summons should be awarded to the plaintiff to be assessed; 

(ii)  The cost before Master Hui should be in the cause of the assessment because that hearing dealt with the directions for assessment;

(iii)  The costs before Master de Souza should be to the plaintiff, as that hearing arose out of the application for dismissal.

25. I also order that the stay granted by Master de Souza on 12 June 2006 be uplifted, subject to the directions below.  Master Hui’s order, dated 12 May 2006 be varied to the following extent:

(i)  The defendant is to file and serve his list of documents within 14 days from today;

(ii)  There be inspection of documents within 14 days thereafter;

(iii)  The plaintiff to file and serve affidavit evidence within 14 days after inspection of documents;

(iv)  The defendant to file and serve affidavit evidence within 14 days thereafter;

(v)  The plaintiff to file and serve affidavit evidence in reply within 14 days thereafter;

(vi)  Expert evidence to be filed and exchanged within 14 days after inspection of documents.