XCHRX LEE PUI KUEN v. ASIA TELEVISION LTD.

HCA 7775/1992

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. A7775 OF 1992

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J U D G M E N T

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1. This is an application by the defendant to strike out the plaintiff's claim for want of prosecution. The action arises out of an alleged breach of a contract of employment and related consultancy agreement, both dated 22 February 1990, by which the plaintiff commenced employment with the defendant on 2 January 1991 as deputy chief executive, later retitled assistant chief executive officer, for a period of three years. This employment was terminated by the defendant on 29 April 1992.

2. The plaintiff's case is that he was employed on an oral contract entered into in December 1989 whereby it was agreed that he would work for the defendant as deputy chief executive for three years at a salary of $3,432,000 per annum and a front end fee of $4,000,000. This agreement was embodied in two written agreements in February 1990, an employment agreement and a "consultancy agreement". The agreements included provision for payments to be made in the event of early termination. Both agreements were terminated by a letter from a director of the defendant dated 29 April 1992 and the plaintiff claims liquidated damages under the terms of the agreements.

3. The defendant's defence is that the plaintiff was in breach of the agreements by failing or neglecting to discharge his responsibilities under the agreements, and entering into contracts in excess of his authority. The defendant cites in particular in support of its first contention that production hours decreased, that he failed to screen a number of programmes produced prior to or during his employment, and increased wastage on actors' fees, and in support of the second that he entered into two memoranda of agreement in November and December 1991 with other companies, committing the defendant to extra expenditure, and renewed an actor's employment contract after being told that no contracts should be renewed without prior approval. The defendant counterclaims for a declaration that the plaintiff did act in excess of his authority and for damages thereby sustained by the defendant.

4. In his reply and defence and defence to counterclaim, the plaintiff pleads that the decrease in production hours was in accordance with an agreement made at management meetings as to the number of hours appropriate for 1991, that he acted properly in respect of the unscreened programmes, that the wastage on actors' fees was reduced, that he entered into the memoranda of agreement with authority and approval of the chief executive and deputy chief executive officers, and that the renewal of the actor's contract was agreed before the direction was issued not to do so without approval.

The progress of the proceedings

5. The plaintiff initially filed a claim with the Labour Tribunal on 16 September 1992, alleging wrongful dismissal, and on 7 October 1992 the claim was transferred to the High Court.

6. The defendant complains of three periods on inaction by the plaintiff over the next 7 years, of 20 months, 14 months and 14 months respectively, totalling 48 months, which they say amount to inordinate and inexcusable delay, and which have created a risk that it is no longer possible to have a fair trial of this action.

7. The history of this action is unremarkable for the first 14 months; the statement of claim was filed on 10 December 1992, the defence and counterclaim was filed, after an extension of time, on 15 January 1993; the rest of 1993 was taken up with requests for, and filing of, further and better particulars, apart from a summons and order for directions, which does not appear to have been complied with by either party. Following the filing of the defendant's answers to the request for further and better particulars on 6 January 1994, no further step in the proceedings was taken until 4 September 1995, except for a notice of change of solicitor on 15 April 1994, and a notice of intention to proceed on 8 October 1994. There then followed a period of about 6 weeks when the plaintiff applied for, and was granted, leave to amend the statement of claim, and an amended defence and counterclaim was filed. There was also a further notice of change of solicitor. After the filing of the amended defence and counterclaim on 26 October 1995, the action again appears to have gone to sleep for about 14 months until the plaintiff filed his list of documents on 27 December 1996. In the interim there had been two further notices of change of solicitor and a notice of intention to proceed. In January 1997, there was a further summons and order for directions, and in the following 21 months comparatively regular activity involving discovery and interrogatories. From the filing of the defendant's affidavit on 22 September 1998, in compliance with an order for specific discovery, nothing further was done until 15 November 1999 when the defendant filed this summons, and the plaintiff filed a summons to amend the reply and defence to counterclaim.

8. From this chronology it can be seen that the total period of inaction over the history of this matter is 48 months, or 4 years. There can be no doubt that such delay is inordinate, so the questions remain: was it also inexcusable, and has it caused prejudice to the defendant and given rise to a risk that a fair trial is no longer possible?

Was the delay excusable?

9. The reasons put forward for the periods of delay are set out in the affidavit of Steven Chung, who has been the plaintiff's solicitor since early 1995. A point was initially taken on the fact that no less than 6 notices of change of solicitor were filed since 1992. However, I accept the plaintiff's explanation that, prior to October 1995, there was only one change of representation, that the change in 1995 was as a result of the defendant's objection to Messrs Johnson Stokes & Master by reason of possible conflict of interest, and since then the changes have been necessitated by the handling solicitor moving firms.

10. Having said that, the first period of delay coincided with the first change of solicitors, and the excuse given for part of the delay is the time needed by the new firm to read the papers in the case which they received on 15 April 1994. This appears to have taken them 6 months, and there followed a further period of 6 months during which time they delivered two sets of instructions to counsel and received two advices. Four and a half months later they issued a summons for directions. It cannot be denied, however, that during this period of 20 months, there was no progress to take the action nearer trial, and such activity as there was can only be described as leisurely. While it cannot be claimed that the plaintiff did nothing at all, it was still clearly delay, and I am not satisfied that the reasons given for it put it into the category of excusable delay.

11. For the second period, from 26 October 1995 to 27 December 1996, no reasons are given beyond the fact that the handling solicitor was changing firms and moving offices. Mr Ronny Wong SC for the plaintiff does not seek to excuse this period which he accepts is culpable.

12. The third period, from 22 October 1998 to the date this summons was issued, was described by Mr Cheng in his first affidavit as a period when, for about a year, he was working on the plaintiff's witness statement, there was a change of trainee solicitor, and his wife gave birth to a child. None of which can seriously explain the gap in time. By a later affidavit, he further explains that he was suffering from depression, which was not diagnosed and treated until late 1999. While one is bound to have every sympathy for him, I agree with Mr Sussex for the defendant that illness cannot be an excuse for delay, even if the solicitor is unaware of the extent of his problem. On his own admission, he was not working alone on this case; he had at least a trainee solicitor with him, and no doubt there were other members of the firm who should have been aware of the fact that his cases were not being proceeded with. This period also I have to conclude was inexcusable.

13. The delay being accordingly inordinate and inexcusable, I have to consider whether there is a substantial risk that it is not now possible to have a fair trial of the issues in this action, or the delay is such as is likely to cause, or has caused, prejudice to the defendant.

Prejudice to the defendant

14. Mr Sussex places his claim to prejudice to the defendant on the impairment of memory of witnesses over the 8 years since the cause of action accrued, and the more than 10 years since the events leading up to it, and of which evidence must be given, occurred. He points out that, had the delay not occurred, and the matter had been proceeded with efficiently, a trial of this action could have taken place some 4 years ago.

15. It has long been recognized that impairment of memory is an almost inevitable prejudice caused by delay where the case is one which depends predominantly on the recollection of witnesses. Mr Wong has taken me at length through the issues that arise in this action and the witnesses likely to be called, and has sought to persuade me that the matter will be decided largely on documentary evidence, and that there is accordingly little prejudice from the delay. This may well be, as a company of the size of the defendant must keep numerous records and statistics, and minutes of management meetings. However, he himself described four witnesses as being "vital" with three others on the fringe. From my own perusal of the evidence filed for this application and the pleadings it is apparent that the circumstances surrounding the appointment and dismissal of the plaintiff are such that the recollections of witnesses will be necessary for a large part. There are clearly a considerable number of witnesses who may be called in these proceedings, and the allegations against the plaintiff, which the defendant says justifies his dismissal, are such that memories of the events over the period of his employment, and earlier, will be essential evidence. I accept that there is a considerable quantity of documentary evidence, but this will only supplement, and not replace, the oral testimony that both parties recognize will play a major role.

16. It is clear from the authorities that it is not necessary for the defendant to produce specific evidence of prejudice flowing from loss of memory. There will inevitably be prejudice where such impairment of recollection has occurred, but it is unrealistic to produce evidence of loss of memory over a particular period. As Peter Gibson LJ said in Shtun v. Zalejska [1996] 1 WLR 1270 at p. 1282, referring to the judgment of Lord Browne-Wilkinson in Roebuck v. Mungovin [1994] 2 AC 224:

"He was also stating in clear terms that the court can draw inferences of loss of recollection from any substantial delay at whatever period and that it is unsatisfactory to allocate prejudice to one rather than the other period."

17. He continues on the same page:

"I do not read him as saying that it is unnecessary to show that that prejudice arises as a result of a material period of inordinate and inexcusable delay. Instead, he is making the realistic and commonsense point that because of the difficulty in attributing loss of memory to one particular period rather than another period the court can infer prejudice from the dimming of memories and attribute such prejudice to a substantial period of inordinate and inexcusable delay after the writ. To my knowledge, in subsequent cases this court on that authority has been prepared to infer prejudice from loss of recollection through the passage of time, having regard to the particular circumstances of the case, even in the absence of specific evidence of particular respects in which memories have dimmed."

18. The principal issues here revolve around the question of whether the plaintiff failed to properly discharge his responsibilities as deputy chief executive officer, and whether he exceeded his authority. These are principally factual issues which will require oral evidence to resolve. Although I accept that documentary evidence is also available and will play a large part, the recollection of witnesses will be vital, and I can see no way that, after a period of up to ten years, such recollections cannot have been impaired. That, in my view, must be sufficient in itself to establish a degree of risk of prejudice to the defendant in conducting this litigation that, were it not for the matters to which I shall advert shortly, justify this action being struck out.

19. A further difficulty which may arise as a result of the delay is in contacting witnesses who are no longer in the employment of the defendant, and in persuading reluctant witnesses who may well not now have any interest in assisting the defendant. One example given by the defendant is Mr Lim Por Yen, who was the most senior executive with the defendant at the material time. He himself is now in litigation with the defendant, and it must be questionable whether he is now willing to be a witness, even if he can now recall relevant events, being now 86 years old. However, as will be seen below, this again should be looked at in the light of the defendant's own conduct.

Defendant's culpability

20. Mr Wong has pointed to matters which, he says, show fault of the defendant's part. One of these is the fact that, in spite of orders for exchange of witness statements, the defendant has done nothing to prepare them. This is true, it is apparent that the first order for directions was made at a comparatively early stage of the proceedings, on 26 March 1993, when the parties were ordered, inter alia, to exchange witness statements within 60 days of the date of the order. As I have noted above, this order was not complied with by either party. It appears to have been completely ignored.

21. I find it difficult to understand why parties to litigation, where oral evidence is going to be important, do not protect themselves at an early stage by recording statements from potential witnesses who may later have imperfect memories of these events. They need the information these witnesses can give to assess the strength of their clients' cases, and to know what further preparation must be made before the matter comes to trial. In the commercial field there is an additional and common risk that senior executives will move on, and either not be easily accessible later by those preparing statements, or may have moved to competitor companies and be less willing to cooperate. If a statement was already in hand, they could still be subpoenaed to give evidence with the certain knowledge that they must either follow their original story or explain why.

22. It is therefore incomprehensible that, when ordered by the court to prepare such statements, at a time when the witnesses are still available and memories are fresh, they still fail to do so. The defendant failed to do so in 1993 when there was no reason to suppose that this action would not proceed at a reasonable pace to trial. Had they done so, the evidence would have been preserved, and, with the addition of the documentary evidence which must be available here, memories could be refreshed even after this length of time sufficiently for cogent evidence to be presented at trial.

23. I have had referred to me after the conclusion of this hearing the recent decision on the Court of Appeal in Nathaniel Hymer v The Mass Transit Railway Corporation and ors CACV 304 of 1999 from which I take further support for my views above. In particular Mr Justice Ribeiro JA says, at page 31:

"As soon as someone, particularly a professional person, is told that he is to be sued for negligence, it seems to me a matter of common sense that he should use all reasonable diligence to review his position, to secure any evidence that may be relevant (by preserving documents and proofing witnesses) and to seek advice if necessary. Such a defendant can reasonably be regarded as being just as aware as anyone else that time is likely to dim his recollection of the events in question and that witnesses may disperse and documents lost. He can therefore be expected, particularly when considering the claim with his advisers, to record any relevant recollections at that stage and to take at least some basic steps to preserve relevant evidence."

24. I do not take this to mean that in every case where a defendant has failed to proof witnesses at an early stage, any later application to strike out for want of prosecution must fail, as every case will depend entirely on its own facts and circumstances. In particular, where the evidence will be almost totally oral, relying solely on witnesses memories of events long ago, there is bound to be a risk at some stage that, even refreshing their memories from their statements will not permit them to recall in sufficient detail matters which may be vital to one side or another. But where the oral evidence is supported by a large amount of documentary matter, the risk of not being able to have a fair trial becomes far less.

25. The facts of the case referred to were, of course, very different, but the same principle must apply here. There is no doubt that delays have occurred here for which the plaintiff is responsible. However, I am not satisfied, considering the circumstances of this case as a whole, that it is inevitable that a fair trial is no longer possible, and if any prejudice has been caused, the defendant must also to a great extent bear responsibility for that in not acting promptly early in the proceedings, and in the face of an order of the court, to obtain and preserve the evidence of its witnesses.

26. For these reasons I decline to make the order sought by the defendant, and that summons must be dismissed. There will also be an order nisi that the plaintiff's costs be taxed and paid by the defendant in any event.