COURT OF FINAL APPEAL, HKSAR
CHIEF JUSTICE GEOFFREY MA
JUSTICE KEMAL BOKHARY PJ
JUSTICE PATRICK CHAN PJ
JUSTICE R.A.V. RIBEIRO PJ
LORD SCOTT OF FOSCOTE NPJ
8 DECEMBER 2011
Chief Justice Ma
This appeal raises important questions regarding applications to strike out actions for delay (sometimes referred to as applications to strike out for want of prosecution). These questions will require a discussion of the impact of the Civil Justice Reform (the CJR) which came into effect on 2 April 2009. For many years, the courts in Hong Kong have on the whole followed the approach of the decision of the House of Lords in Birkett v James  AC 297 and the cases which followed that decision. In my view, a re-evaluation of this approach is necessary in the light of the CJR. A restatement of the applicable principles is appropriate. It was for these reasons that leave to appeal was given by the Appeal Committee of this Court to the Respondents on 21 January 2011.
On 6 July 2002, a winding up petition was presented against Wing Fai Construction Company Limited (the Company). The Company had been engaged in the business of engineering, construction, industrial consultancy services, engineering advisory services and contracting services. A winding up order was made on 9 December 2002 and liquidators were appointed. There is now only one liquidator, Mr Nicholas Hill (who is the Applicant in these proceedings). The Respondents (the Appellants in this appeal) were, until their resignations, directors of the Company. The first and the second Respondents resigned on 26 July 2001, the third Respondent on 22 April 2002.
Prior to 22 April 2002 (when the Company was sold to Sino Glister International Investments Limited), the Company was a wholly-owned subsidiary of Benefit Holdings International Limited, which in turn was a wholly-owned subsidiary of China Rich Holdings Limited, a Hong Kong listed company. The Company’s business constituted approximately 90% of the turnover of the China Rich group.
Provisional liquidators were appointed on the presentation of the Petition. They found that the financial records of the Company were virtually non-existent; they appeared either to have been removed or destroyed. The provisional liquidators therefore had to use specialist information technology consultants to retrieve data from computer hard drives. Only limited financial information was extracted. The provisional liquidators also conducted private examinations of the Respondents (as well as others) under s.221 of the Companies Ordinance Cap.32. The Respondents were also required to submit a statement of affairs under s.190 (2)(a) of the Companies Ordinance. This has yet to be provided.
On 30 August 2004, a summons was issued by the liquidators (as the Applicants) against the Respondents alleging misfeasance, breach of duty and breach of trust. The complaint identified in this summons was that they had authorized payments by cheque and the purchase of letters of credit, amounting to nearly HK$33 million from the Company’s funds, for the benefit of two companies without any apparent consideration.
This summons was supported by a lengthy affidavit from one of the liquidators (some 63 pages with 57 exhibits).
The liquidators’ claim against the Respondents was later pleaded in Points of Claim dated 12 October 2004 (which had been ordered by the Court to be served). The Points of Claim were much criticized by Mr Barrie Barlow SC (who represented the Respondents in this appeal). It was submitted by Mr Barlow that the claim against the Respondents was unparticularized, vague and even demurrable; in short, in his words, the pleading was hopeless.
In my view, these criticisms were without justification. Certainly, Chu J, in a judgment handed down on 28 March this year, saw no merit in them, when she rejected applications by the Respondents to strike out the Points of Claim and to dismiss the misfeasance proceedings. It is easy to understand why counsel pitched the case so high. As will later be seen, it is relevant, in determining whether or not the Applicant’s claim should be struck out for delay, for the Court to consider the Respondents’ own conduct and any prejudice that was allegedly suffered by them. Mr Barlow sought, by attacking the Points of Claim in the way he did, to deflect any criticism that could be made against his clients for not having even now revealed the true nature of their defence or in apparently not even taking any steps to gather evidence.
The pleaded case on misfeasance against the Respondents, as contained in the Points of Claim, is essentially as follows:-
The first and second Respondents had close links with a company called Famous Capital Enterprises Limited (FCEL). That company’s director and company secretary was at all material times one Mandy Ip who was at the same time an employee of a company (CR Airways Limited) that was owned and controlled by the first Respondent. Another director of FCEL was the daughter of the second Respondent.
All three Respondents were also linked to a company called King Capital Engineering Limited (KCEL). The directors and shareholders of KCEL included at all material times one Tsui Man Tuen Masada and Lo Wah. Ms Tsui was at all material times an employee of Greater China Technology Group Limited, a company which was owned by the second Respondent. The second and third Respondents were also directors of this company. Mr Lo was a cousin of the first Respondent.
At all material times, the Company was insolvent.
Although the Respondents formally resigned as directors of the Company, it is alleged that at all material times after doing so, they remained as de facto directors of the company. It is pleaded that the first Respondent remained the chairman and director of the Company while the second Respondent remained the chief financial officer and a director.
Between 14 February 2001 and 9 May 2002, in breach of their duties, the Respondents procured payments from the Company to FCEL amounting to $51,768,476.32. These payments were purportedly for goods delivered to the Company, but no such goods were in fact delivered. Between 9 July 2001 and 28 January 2002, payments amounting to $33,242,795 were paid to the Company by FCEL, leaving a shortfall of $18,525,681.32 apparently owing to the Company from FCEL.
Between 28 February 2002 and 9 May 2002, in breach of their duties, the Respondents procured payments from the Company to KCEL amounting to $26,217,065.80. Again, these payments were purportedly for goods delivered to the Company but no such goods were ever delivered. Between 18 February 2002 and 18 April 2002, payments totalling $12,050,000.00 were paid by KCEL to the Company, leaving a shortfall of $14,167,065.80 owing by KCEL to the Company.
The payments made to FCEL and KCEL were procured by the Respondents in their signing cheques or arranging letters of credit in favour of these companies.
Neither FCEL nor KCEL had a place of business. In FCEL’s case, when an application was made to de-register that company, Mandy Ip signed a declaration that it had “never commenced business or operations”.
Apart from breaches of duty, it is also pleaded that the Respondents were dishonest in having authorized the said payments to the two companies.
The sums claimed from the Respondents total $32,692,747.12.
The service of the Points of Claim prompted applications in November and December 2004 by the Respondents for Further and Better Particulars and for discovery. It was asserted at the time that unless these applications were granted, the Respondents would not be in a position to serve their Points of Defence. Given the pleaded case outlined above, I find this assertion surprising. Although the Points of Claim could be better particularized, it was not so lacking in content that a sensible, proper defence could not be pleaded.
On 8 December 2004, the liquidators provided Further and Better Particulars by letter, which repeated parts of the affidavit in support of the misfeasance summons and the documents exhibited in it. The next day, the parties consented to an order whereby the Respondents’ applications for Further and Better Particulars and discovery were withdrawn. The Respondents were given 14 days to serve their Points of Defence.
The Points of Defence dated 23 December 2004, which remains to this day unamended, is a pleading that was described by Kwan J (who heard the original application by the Respondents to strike out for delay) as containing no positive case, and mainly putting the liquidators to strict proof. As to those major allegations contained in the Points of Claim (see para. 9 above), there is no positive case put forward, merely denials or non-admissions:- nothing is pleaded, for example, about the Respondents’ links with FCEL and KCEL, whether these companies carried on business at all, or whether the Company had legitimate dealings with these two companies and if so, what these business dealings comprised etc.
Thereafter, in the chronology of this action, by a letter dated 11 July 2005, the liquidators provided to the Respondents three additional affirmations, together with an affidavit exhibiting additional documents.
This letter was met by a 37 page letter dated 18 July 2005 from the Respondents’ solicitors seeking Further and Better Particulars and further discovery. It appears that the vast majority of the requests made in this letter were a repetition of the requests made in November 2004. This was answered by the liquidators’ solicitors on 19 April 2006.
From 19 April 2006 to 22 May 2008 when the liquidators issued a summons of directions, there was no activity in the proceedings. This prompted the Respondents to issue a summons to strike out for delay on 19 August 2008.
B The decisions of Kwan J and the Court of Appeal
Kwan J heard the application to strike out on 23 September 2009, and handed down her decision on 7 October 2009. The basis of the application to strike out before her was two-fold:- under the second limb of Birkett v James (inordinate and inexcusable delay, coupled with prejudice) and abuse of process (the so-called Grovit v Doctor ground, named after the decision of House of Lords in Grovit v Doctor  1 WLR 640).
Regarding the Birkett v James ground, Kwan J dealt with the issues of delay and prejudice in the following way:-
The learned Judge divided the history of the litigation into four periods:- prior to 30 August 2004 (the date the misfeasance summons was issued), from 30 August 2004 to 19 April 2006 (the letter from the liquidators to the Respondents’ solicitors), from 19 April 2006 to 22 May 2008 (when, after two years, the liquidators took out a summons for directions) and from 22 May 2008 to the date the application to strike out was heard by the Court. The last period was not relevant according to the Judge.
For the first period (pre-30 August 2004), the Judge did not regard the liquidators as having started the action late (meaning that the liquidators did not wait until near the expiry of the limitation period before instituting proceedings). The Judge did not find any delay attributable to the liquidators, noting the time consuming exercise that had to be undertaken given the lack of records, the lack of assistance provided by the Respondents (who had not even submitted a statement of affairs) and the private examinations that had to be conducted.
In respect of the second period (30 August 2004 to 19 April 2006), the Judge also found no delay attributable to the liquidators. As to the Respondents’ complaints that the Points of Claim were unparticularized and that inadequate discovery was given, Kwan J regarded them as hollow. Apart from anything else, had the Respondents been serious about them, they would have pursued the applications for Further and Better Particulars and discovery made in November and December 2004 (see para. 10 above), instead of abandoning them.
However, as to the third period (19 April 2006 to 22 May 2008), Kwan J found that the liquidators had delayed inordinately and inexcusably. There remained, however, the question of prejudice to the Respondents.
Here, the learned Judge made the following findings:-
One of the Respondents’ complaints was that as a result of the unparticularized allegations contained in the Points of Claim and the inadequate discovery, the Respondents were unable to make the necessary factual investigations (including inquiries of the Company’s former staff). This was dismissed by the Judge:- first, as stated earlier, if the liquidators’ pleading and discovery had been inadequate, the Respondents should have pursued the said applications for Further and Better Particulars and for discovery; secondly, the case against them was sufficiently detailed so that the Respondents could have taken steps to investigate. As the Judge said, “Instead, the applications in November 2004 were withdrawn by consent and notwithstanding the lengthy letter of the Respondents’ solicitors in July 2005, and their apparent dissatisfaction with the liquidators’ reply in April 2006, the Respondents have not brought the matter back to the Court”. The Respondents also relied on the fact that the memory of the third Respondent (who was then 78 years of age) was deteriorating. The Judge queried why detailed proofs of evidence had not been taken from him (nor anyone else) at an earlier stage.
The Judge was therefore not persuaded that a fair trial of the misfeasance claim would not be possible (as had been asserted by the Respondents).
As to the prejudice caused by litigation anxiety (this is a reference to what is commonly referred to as ‘Biss’ prejudice: see Biss v Lambeth, Southwark and Lewisham Health Authority (Teaching)  1 WLR 382), the Judge rejected this submission. In her view, the Respondents were not to be regarded as anxious litigants.
In relation to the Grovit v Doctor ground, the Respondents argued that the liquidators had been ‘warehousing’ their claims. I will later in this judgment deal with this particular aspect of abuse. The essence of the submission was that it would be an abuse to commence proceedings without any intention to bring them to a conclusion, while other proceedings or matters were being pursued instead. Kwan J declined to find any abuse along these lines. There was insufficient evidence to infer that the two year period of inordinate and excusable delay evidenced an intention on the liquidators’ part not to bring the proceedings to a conclusion.
The application to strike out was accordingly dismissed by Kwan J. It being an interlocutory application, leave to appeal to the Court of Appeal was required. On 8 December 2009, Kwan J gave leave to appeal, primarily on the basis it was arguable whether the principles governing strike out applications for delay needed to be revised in the light of the CJR. The present proceedings of course straddled the pre- and the post-CJR regimes.
The appeal was heard by the Court of Appeal (Rogers VP and Le Pichon JA) on 16 April 2010. Judgment was handed down on 30 April 2010. The Court of Appeal upheld the decision of Kwan J. As regards the question of the applicable principles post-CJR, there was little analysis in the judgment, although the learned Vice President (with whose judgment Le Pichon JA agreed) did say (in para. 12) that “the matter of delay had to be considered in the context in which it occurred” and (in para. 13) that “a party cannot be blamed for not observing a Rule that did not exist at the relevant time”. As to these general statements, subject to what follows later in this judgment, there is perhaps little controversy.
The Court of Appeal refused leave to appeal to this Court. As noted earlier, the Appeal Committee of this Court gave leave to appeal on 21 January 2011.
I shall in due course have to set out the principles governing applications to strike out for delay and also to apply them to the facts of the present case. Before doing this, however, I should first look at the impact of the CJR.
C The impact of the CJR on the applicable law in the present case
From the foregoing, it can be seen that when the summons to dismiss for want of prosecution was taken out (19 August 2008), this was prior to the coming into effect of the CJR. By the time the summons was dealt with by Kwan J (23 September 2009), the CJR was already in operation. The question therefore arises as to the extent to which the Court has to, or even can, take into account the Reform. The Respondents submit that the CJR ought to be taken into account: the parties must take the law as they find it at the time the matter is determined by the Court. As a general statement, I agree with it. This does not, however, provide a complete answer. While of course the Court will determine any case before it on the basis of the applicable law as the Court sees it, the important question, when statutory amendments have intervened, is to inquire whether the amended law will apply to those events which have taken place prior to the coming into effect of the amendments.
What then was the impact of the CJR on proceedings in existence at the time the Reform came into effect? In England, following the introduction of the Civil Procedural Rules (the Woolf Reform), transitional provisions regarding the applicability of the new Rules to pre-existing proceedings were contained in a Practice Direction (Part 1 of Practice Direction 51A: Transitional Arrangements). By para. 15 of that Practice Direction, it was stated that the general presumption is that the new Rules would apply to pre-existing proceedings unless directed otherwise. In Hong Kong, there is no such Practice Direction and so this question must be decided as a matter of principle.
Clearly, some aspects of the CJR cannot be applied retrospectively. For example, the new O.5 r.1 prescribes that, now, civil proceedings may only be commenced either by writ of summons or originating summons. This provision does not apply to proceedings which, prior to the CJR taking effect, had already been commenced by some other originating process. Such proceedings would continue as though the amendment had not been made: O.5 r.7.
Other provisions introduced under the CJR however – indeed the majority of them – will govern pre-existing proceedings. As a matter of commonsense alone, this must be so. This is also the position as a matter of statutory construction. Mr Barlow drew our attention to a number of authorities to this effect; among them the older cases of Gardner v Lucas (1878) 3 App. Cas. 582, at 603 and Attorney General v Vernazza  AC 965 at 975 and 977, where it was held that statutory provisions dealing with procedural matters will generally be construed so as to apply to proceedings of which the Court was seized at the time the provision came into effect.
Some provisions in the new Rules under the CJR (I will in this Judgment refer to the Rules of the High Court) are expressly stated to apply to existing proceedings. One of the most important of these is the new O.25 dealing with the case management summons and conference, one of the most important changes introduced under the CJR. The new procedures under O.25 will apply to actions existing at the time the CJR took place: see O.25 r.11.
Even without such express indication that provisions are to apply, it is clear that many other new provisions will apply to existing proceedings. For example, the underlying objectives (contained in O.1A) will clearly apply to all proceedings which were in existence at the time the CJR took effect. It would be odd to suggest that they did not. Nothing in the language of the new O.1A suggests that they would not be so applicable. Further, it would be not only illogical but contrary to the ethos of the CJR were an artificial distinction to be drawn between proceedings in existence at the time the Reform was implemented and post-CJR proceedings.
The approach to applications such as the present must therefore take into account the Reform that has taken place in Hong Kong. This was held by Fok JA to be the position: see Winpo Development Ltd v Wong Kar Fu  2 HKC 524, at 532D-F (para. 31). This was also the position in England when the Woolf Reform took effect:- see Biguzzi v Rank Leisure PLC  1 WLR 1926; John Ian Purdy v Philip John Cambran  CP Rep 67; Annodeus Entertainment v Gibson, unreported, Chancery Division, 2 February 2000. The Court is to apply the law that exists today. However, this is not to say that when an evaluation is made of the conduct of a party in proceedings (in the present case to examine the delay that has taken place), the Court then somehow disregards the circumstances and the statutory structure in place at the relevant time. There is a distinction to be made between, on the one hand, the application of the law that applied pre-CJR in determining an application and, on the other, taking into account circumstances prevailing at the relevant time, when making a factual evaluation (such as whether or not delay in proceedings was excusable). There is no inconsistency between a court adopting the latter approach without applying the former. This is the position in England : see Biguzzi.
Before dealing with the principle governing applications to strike out for delay, I must first say something about the CJR itself.
D The CJR: a change in litigation culture
The CJR came into effect on 2 April 2009. Significant changes were made to those ordinances and subsidiary legislation governing civil procedure in our courts. There were of course miscellaneous provisions governing specific aspects of civil procedure. However, the main purpose of the CJR was the intention to bring about a change in litigation culture. Broadly speaking (I shall presently go into some of the more important provisions as illustrations), the principal themes of the CJR are:-
To ensure that parties to litigation are brought as expeditiously as possible to a resolution of their disputes, whether by way of adjudication or by settlement.
To increase the cost effectiveness of the system of the civil procedure and to try to eliminate delays in litigation.
To promote active case management by the courts and in doing so, not only facilitating the expeditious resolution of disputes, but also bearing in mind the position of other litigants and the courts’ own resources.
To inculcate a culture among litigants and their legal representatives that there exists a duty to assist the court in furthering the principal themes of the CJR.
To reduce, if not eliminate, those steps in proceedings, particularly interlocutory applications, which serve little purpose other than to prolong or render more costly civil proceedings.
We are of course concerned in this appeal with an application to strike out for delay. In this context, the following Rules which were introduced by the CJR are of note:
It is first important to refer to the underlying objectives set out in O.1A r.1:-
to increase the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court;
to ensure that a case is dealt with as expeditiously as is reasonably practicable;
to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings;
to ensure fairness between the parties;
to facilitate the settlement of disputes; and
to ensure that the resources of the Court are distributed fairly.
The court is required to give effect to these underlying objectives whenever it exercises any procedural power (including its inherent jurisdiction) or interprets any of the Rules or any Practice Direction :- O.1A r.2.
Much emphasis is placed on the case management function of the Court:- O.1A r.4, O.1B. Order 1A r.4(1) states that the court shall further the underlying objectives of the Rules by “actively managing cases”. It will be through active case management by the courts, supported by the duty on the parties and their legal representatives to assist, that the just resolution of disputes will be achieved.
The amendments to the Rules recognize that the court must be empowered and encouraged to make orders that would render effective its case management functions, and, in appropriate cases, to enforce compliance. Where appropriate, the court will be able to order that consequences might flow where there has been non-compliance.
Such orders may include the following:-
Part of the definition of active case management includes “giving directions to ensure that the trial of a case proceeds quickly and effectively”:- O.1A r.4(2)(l).
Where any delays occur, the court is able to make peremptory orders to ensure that proceedings are not unduly held up:- O.1B r.1(3). The court may also impose conditions such as ordering a sum of money to be paid into court: O.1B r.1(3)(a).
In some cases, where there has been non-compliance of the Rules or of orders, the court may even order that the amount in dispute or a sum representing the costs of the action be paid into court:- O.2 r.3.
There are other consequence-based powers available to the court. It is able also to order that costs are paid forthwith, assessed summarily or on a more generous basis than usual. Even if a party is successful in the proceedings, the court may, where appropriate, deprive that party of his costs. In considering the question of costs, the court must now take into account the underlying objectives (O.62 r.5(1)(aa)) and also the conduct of the parties (O.62 r.5(1)(e)).
Under the wide discretion vested in the court regarding interest (see s.48 of High Court Ordinance Cap.4), a court will have the power to deprive a successful party of interest on any sums adjudged due to him, where it is just to do so. Under O.62 r.22(5), where there is delay in the taxation of costs, the court will have the power to disallow interest or to reduce the period for which interest is payable or the rate at which it is payable.
Of course, where a party defaults or abuses the process to such an extent the court is of the view that ‘enough is enough’, the ultimate sanction of the court may be to strike out an action or the defence, without the matter going to trial. However, in the armoury of the court’s powers, striking out must be the ultimate weapon, to be used only where it is plainly and obviously the appropriate remedy. There are many orders that can be made before striking out should be considered. In other words, the court is not left with a choice of not doing anything at all on the one hand or striking out on the other; it is now encouraged to consider the many possibilities that lie in between these two extremes.
Critical to the success of the CJR and its objectives is the realization that litigation is not to be treated as a game, but as a serious legal contest (to borrow a phrase used by Walton J in another context in Rightside Properties Limited v Gray  Ch. 72 at 88 E-F). Here, O.1A r.3 is of fundamental importance, stating it to be the duty of parties to a litigation and (I would stress) their legal representatives to assist the court in furthering the underlying objectives set out in O.1A r.1. It is of course important to recognize, as stated in O.1A r.2(2) that the primary aim of exercising its powers is for the court to “secure the just resolution of disputes in accordance with the substantive rights of the parties”. This places in context the operation of the Rules under the CJR:- Rules do not exist for the sake of compliance with them as an end in itself; they exist for the purpose of ensuring that disputes before the courts are justly resolved. It does not, however, provide any excuse for parties or their legal representatives not to comply with the Rules or orders made by the court, nor does it relieve them of this duty under O.1A r.3. The emphasis must be placed on the word “just”.
E Striking out or dismissal of an action for delay
E.1 The need for a restatement of the applicable principles
With the background of the CJR and the new litigation culture that the Reform has brought, it is appropriate for this court to restate the applicable principles regarding applications to strike out or dismiss actions for delay. In my view, this is both timely and necessary.
It is timely owing to the changes brought about by the CJR. As can be seen from the discussion above, the CJR brought about many initiatives having as their objective the expeditious and effective resolution of disputes. It is important within this new context to see the role of applications to strike out for delay.
The necessity for a restatement arises from the vast jurisprudence spawned from the decision of the House of Lords in Birkett v James, both here and in England. The attempts made over the years to rationalize aspects of that decision, to develop what were seen to be new approaches to that case and even cutting inroads into it, have all led to a somewhat unsatisfactory, and at times confusing, state of affairs.
The cause for the confusion can perhaps to a large extent be attributable to the fact that, for many years, the speech of Lord Diplock in Birkett v James had been construed almost like a statute. Morever, I fear that, particularly in recent times, the courts may have lost sight of certain basic principles, and have adopted approaches which have led to some confusion. The treatment of what has been referred to as the ‘warehousing’ of claims, an aspect much relied on by the Respondents in the present case, provides a ready example. I shall deal with this aspect later in this Judgment.
E.2 Birkett v James and after
The approach of the House of Lords in Birkett v James is well-known. Essentially, it consists of that part of Lord Diplock’ speech at 318E-G:-
The dismissal of those actions was upheld and shortly after, in the three leading cases which were heard together and which, for brevity, I shall refer to as Allen v. McAlpine  2 Q.B. 229, the Court of Appeal laid down the principles on which the jurisdiction has been exercised ever since. Those principles are set out, in my view accurately, in the note to R.S.C., Ord. 25, r. 1 in the current Supreme Court Practice (1976). 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 inordinate and inexcusable delay on the part of the plaintiff or his lawyers, and (b) that such delay will 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 as between themselvesand the plaintiff or between each other or between them and a third party.
I shall in due course return to the first limb of Lord Diplock’s statement (contumelious default and abuse). It is this part of his speech that has contributed significantly to the confusion that has arisen in applications for dismissal for delay. However, for the time being, I will concentrate on the second part. It is this part of the judgment in Birkett v James which, over the years, has been most frequently used in applications for dismissal for want of prosecution. For many years, this was commonly known among practitioners and judges alike as the ‘Birkett v James’ ground for dismissal for delay.
A useful summary of the principles which have been applied by the courts in England and Hong Kong in relation to this particular ground (prior to the advent of the civil procedural reforms there and here) is contained in the judgment of Neill LJ in Trill v Sacher  1 WLR 1379, at 1398A-1400A. This approach was adopted in Hong Kong as the proper approach: see Hongkong & Shanghai Banking Corporation Ltd v Kuan Tao Sheng  2 HKLRD 585, 591B-593H; more recently in Winpo Development Limited v Wong Kar Fu at 531G-H (para. 27).
Two specific aspects were dealt with in Birkett v James that over the years have, in my view, been controversial, namely,
the treatment of the limitation period and
the belief that a defendant to proceedings was entitled to adopt an attitude of “letting sleeping dogs lie” to proceedings which have been commenced against him.
I deal with the latter first.
Under the pre-CJR (and in England, the pre-Woolf Reform) system, the progress of an action was left largely in the hands of the parties themselves. The court was passive in the vast majority of cases, only being involved when the parties chose to involve it. Furthermore, in dealing with cases, the court would generally bear in mind only the position of the parties. Considerations such as other litigants, the court’s own resources, procedural economy and general considerations involving the administration of justice were scarcely prominent in the way proceedings were conducted. Quite the contrary, they were seen to be almost irrelevant considerations. In Allen v Sir Alfred McAlpine & Sons Limited  2 QB 229, Salmon LJ said this at 268B-D:-
We have rightly been reminded that in these courts what is called the adversary system prevails, and that accordingly, with certain irrelevant exceptions, the courts cannot act of their own motion but only on the application of one or other of the parties. Moreover, it has been emphasized that in deciding any issue the courts must decide it in accordance with the rights of the particular plaintiff and the particular defendant irrespective of the repercussions of the decision upon others. Accordingly, it would be wrong to give the present defendants an advantage to which they are not entitled to or inflict a deprivation upon the present plaintiffs to which they are not liable for the purpose of benefiting the general body of plaintiffs or defendants. With all this I entirely agree.
It was within this system that it was considered perfectly proper for a defendant to do little or nothing to progress an action, with the consequence that, unless the defendant was obliged (whether under Rules or by order of court) to take a step in the proceedings, he did nothing at all. Accordingly, in the consideration of an application to dismiss for want of prosecution, the inactivity of a defendant (unless he had been obliged by the Rules or by a court order to do something) was not a relevant consideration for the court:-
In Birkett v James, at 329C-E, Lord Salmon said this:-
These delays had become a blot on the administration of justice for it is of great public importance that actions should be brought to trial with reasonable expedition. Defendants’ solicitors might no doubt have taken out applications to dismiss for want of prosecution or for peremptory orders to compel the plaintiffs to get on with their actions. Not unnaturally they rarely did so, relying on the maxim that it is wise to let sleeping dogs lie. They had good reason to believe that a dog which had remained unconscious for such long periods of time might well die a natural death at no expense to their clients; whereas, if they were to take the necessary steps to force the action to trial, they would merely be waking up a dog for the purpose of killing it at great expense to their clients which they would have no chance of recovering. Accordingly it was unusual for summonses to dismiss actions for want of prosecution or for peremptory orders to be taken out.
This passage finds support from what was said by Diplock LJ in Allen v McAlpine at 258B-E.
These statements, seemingly of principle from the highest authority in England, were applied in Hong Kong. It gave rise to (understandably) litigation tactics on the part of defendants, whereby actions were permitted to go to sleep and an inactive plaintiff would be treated as a ‘sleeping dog’ which should not be awakened, in the hope that when it did, an application to dispose of the whole action by the defendant (in an application to dismiss for want of prosecution) could be mounted. Defendants were simply encouraged not to progress an action to enable the real dispute between the parties to be resolved. Prior to the Reform in England, this attitude remained one that was apparently sanctioned by the court: see Grovit v Doctor at 644F.
This attitude of “letting sleeping dogs lie” is no longer acceptable post-CJR, where all parties to a litigation have the obligation to progress an action so that they are brought closer to the resolution of their dispute, rather than be distracted by litigation tactics. It is also important to bear in mind that post-CJR, the parties and the court have at their disposal many options to enable an action to progress to the ultimate resolution of the relevant dispute. An ‘all or nothing’ approach whereby a defendant can sit idly by while delays accumulate in the hope that, if of sufficient length, the delay can lead to a chance to apply to strike out for want of prosecution, is nowadays in my view, a deeply unattractive approach, particularly in the light of O.1A r.3 (see para. 34 above).
I now deal with the aspect of limitation periods. In Birkett v James, this was seen to be a critical factor. Where a limitation period had yet to expire by the time an application to strike out for want of prosecution was heard, this was regarded as a powerful factor against striking out. Lord Diplock described it as a matter of “great weight” (at 322D); Lord Edmund-Davies said it would be “quite exceptional (and difficult to imagine)” an action being struck out in such circumstances (at 334B-C). This approach has been followed in Hong Kong :- see, for example, Hongkong & Shanghai Banking Corporation v Kuan Tao Sheng (para. 41above). The thinking behind these statements was simple: if a plaintiff had simply left it to the last minute to issue his writ, a defendant would have suffered even more delay than was the case where proceedings had started earlier. It was felt that the courts had no power to shorten what was legislated by statute to be the proper period of limitation. Indeed, an argument was even made that, ironically, a defendant was better off with proceedings brought against him at an earlier stage (even if delays occurred) than if no proceedings were brought at all because he would then have more notice of the nature of the case made against him.
As we shall see (see para. 75(10) below), this approach has changed post-CJR. However, even before the procedural reform in England, this facet of the jurisdiction to strike out for want of prosecution was regarded as unsatisfactory. In Trill v Sacher, Neill LJ found it difficult to explain the rule:- at 1398G-H. Exceptions were found to mollify the effect of it. For example, while logically, if the non-expiry of a limitation period was to be accorded such great weight, it may be thought that any period of delay in the course of proceedings occurring prior to the expiry of the applicable limitation period ought to be disregarded, the courts have held the opposite to be the case; such delay could be counted towards a period of inordinate delay under the second limb of Birkett vs James : see Hongkong & Shanghai Banking Corporation v Kuan Tao Sheng at 595E, 597G.
The effect of non-expiry of the limitation period, which was often a decisive factor to dismiss applications to strike out for delay, was regarded by many as difficult to accept as a matter of principle. Rhetorically, why should a plaintiff who had delayed excessively to the prejudice of a defendant, be able to benefit from the mere fact that the applicable limitation period had yet to expire? True it is that the plaintiff could simply have waited to the last day before issuing his writ, but this surely did not entitle the plaintiff, if he issued his writ earlier, to delay excessively and misuse the court system. As will presently become clear, I believe that this should from now on no longer be the position.
No doubt in an attempt to lessen the potential unfairness of a limitation period operating in favour of an undeserving plaintiff (and perhaps some other aspects of the jurisdiction to strike out, such as the need on a defendant’s part to show real prejudice under the second limb of Birkett v James), the courts then started to develop within the context of delay a principle based on abuse of the process of the court. This came into prominence in the decision of the House of Lords in Grovit v Doctor. In that case, an action in defamation, the House of Lords was faced with an application to dismiss for want of prosecution in circumstances where there had been inordinate delay (two years), during which the defendant had invited the plaintiff either to proceed or to abandon the action. At the time the application was made and heard, the limitation period had not yet expired. In spite of this, the action was struck out on the basis of abuse of process. It will be recalled from the well-known passage from Birkett v James set out in para. 39 above that the first limb of striking out for want of prosecution included “conduct amounting to an abuse of the process of the court”. This was regarded by Lord Woolf of Barnes (who delivered the speech with which the others agreed in Grovit v Doctor) as constituting a separate ground to strike out for delay:- at 642H-643A. At 647G-648A, he also said this:-
Even without this surprising late development, I am satisfied that both the deputy judge and the Court of Appeal were entitled to come to the conclusion which they did as to the reason for the appellant’s inactivity in the libel action for a period of over two years. This conduct on the part of the appellant constituted an abuse of process. The courts exist to enable parties to have their disputes resolved. To commence and to continue litigation which you have no intention to bring to conclusion can amount to an abuse of process. Where this is the situation the party against whom the proceedings is brought is entitled to apply to have the action struck out and if justice so requires (which will frequently be the case) the courts will dismiss the action. The evidence which was relied upon to establish the abuse of process may be the plaintiff’s inactivity. The same evidence will then no doubt be capable of supporting an application to dismiss for want of prosecution. However, if there is an abuse of process, it is not strictly necessary to establish want of prosecution under either of the limbs identified by Lord Diplock in Birkett v. James  A.C. 297. In this case once the conclusion was reached that the reason for the delay was one which involved abusing the process of the court in maintaining proceedings when there was no intention of carrying the case to trial the court was entitled to dismiss the proceedings.
This ground of striking out, namely abuse of the process of the court in the form of commencing and continuing litigation without any intention of bringing it to a conclusion, was regarded by many as a “new approach”: see, for example, the decision of the Court of Appeal in New China Hong Kong Group Limited v AIG Asian Infrastructure Fund LP  1 HKLRD 383, at 392A-B (para. 9) per Woo VP. In that passage, the learned VP (with whose judgment Stone J agreed) regarded this approach as being one that was adopted by the court “to more readily strike out actions for want of prosecution than heretobefore”. He regarded Grovit v Doctor as having cut a significant inroad into the Birkett v James approach in that under the abuse of process limb, it was unnecessary for a defendant to demonstrate prejudice, which was a key component under the second limb of Birkett v James.
Furthermore, Grovit v Doctor was seen to circumvent the rule regarding the treatment of limitation periods. Where abuse of process was relied on, it did not matter if the applicable limitation period had yet to expire:- see Arbuthnot Latham Bank Limited v Trafalgar Holdings Limited  1 WLR 1426, at 1432G-H per Lord Woolf MR.
With these developments arising from Grovit v Doctor and the way it was dealt with in later cases, the practice regarding applications to dismiss for delay took another turn. Parties and their legal representatives began mounting applications to dismiss on the basis not just on the traditional second limb of Birkett v James, but more frequently on the basis of delay, realizing that, under this head, it was no longer necessary to show either prejudice or the expiry of the limitation period. All that was necessary was to show that in delaying, the plaintiff had demonstrated that he had no intention to bring the proceedings to a conclusion.
This form of abuse has, in recent times, been increasingly used as a basis to strike out. In Arbuthnot Latham, a reference was made by Lord Woolf to the ‘warehousing’ of claims. This rather inexact term refers generally to a situation where a plaintiff has initiated a number of actions against various people (say, as in the present case, in the course of a liquidation of a company) and, for tactical reasons or otherwise, selects which action to proceed with or not, as the case may be. At 1437B-F, Lord Woolf said:
It has been the unofficial practice of banks and others who are faced with a multitude of debtors from whom they are seeking to recover moneys to initiate a great many actions and then select which of those proceedings to pursue at any particular time. This practice should cease in so far as it is taking place without the consent of the court or other parties. If there is good reason for doing so the court can make the appropriate directions. Whereas hitherto it may have been arguable that for a party on its own initiative to, in effect, “warehouse” proceedings until it is convenient to pursue them does not constitute an abuse of process, when hereafter this happens this will no longer be the practice. It leads to stale proceedings which bring the litigation process into disrespect. As case flow management is introduced, it will involve the courts becoming involved in order to find out why the action is not being progressed. If the claimant has for the time being no intention to pursue the action this will be a wasted effort. Finding out the reasons for the lack of activity in proceedings will unnecessarily take up the time of the court. If, subject to any directions of the court, proceedings are not intended to be pursued in accordance with the rules they should not be brought. If they are brought and they are not to be advanced, consideration should be given to their discontinuance or authority of the court obtained for their being adjourned generally. The courts exist to assist parties to resolve disputes and they should not be used by litigants for other purposes. This new approach will not be applied retrospectively to delays which have already occurred but it will apply to future delay.
Seen in isolation, parts of this passage, if construed almost as a statute, may be apt to confuse, as they seem almost automatically to equate the ‘warehousing’ of claims with abuse, particularly where delay is involved. It seems to allow an argument to the effect that where there is inactivity, this would by itself indicate an unwillingness on the part of a plaintiff not to comply with the rules and therefore, without more, this would constitute abuse. In my view, the court will need more than just mere inactivity before striking out: see para. 75(4) below.
In Nanjing Iron and Steel Group International Trade Company Limited v STX Pan Ocean Company Limited, unreported, HCAJ 177 of 2006, 7 September 2009, Reyes J struck out an action for want of prosecution on the basis of a delay of two years, which he found to be inordinate. His reasoning was as follows:-
The plaintiff in that case, having invoked the Admiralty jurisdiction of the court by obtaining security from the defendants and, given the one year limitation period for cargo claims (albeit extended by agreement in that case), it was incumbent on the plaintiff to prosecute the claim expeditiously. By not doing so, and not providing a compelling explanation, the Plaintiff in that case breached O.1A r.1(b) (the underlying objective of ensuring that a case is dealt with as expeditiously as reasonably practicable). This was enough by itself for the action to be struck out under the post-CJR regime.
Even under what the Judge called the “old principles”, there was an abuse of process in the liquidator ‘warehousing’ claims, which the learned Judge took to mean where a party initiated proceedings and “then [did] nothing about it while dealing with other matters”.
The Judge also found that the defendant had suffered prejudice as a result of memories being diminished by the passage of time.
In Cheung Sai Kit v Wong Chiu Kit Eric, unreported, HCA 1611 of 2005, 17 December 2009, Au J struck out an action as an abuse on the basis that the plaintiff was “warehousing his action”. The learned Judge meant by this term that the plaintiff had not taken any step in the proceedings for 32 months and therefore this constituted prima facie evidence of a lack of intention to bring the action to a conclusion.
Most recently, in Wing Fai Construction Company Limited (In Liquidation) v Cheng Kit Yin Kelly, unreported, HCA 833 of 2004, 19 October 2010, Jeremy Poon J struck out the present liquidator’s claim against a number of defendants (including the Respondents) on the basis of a four year delay that had taken place from 2005 to 2009. The learned Judge did not regard as excusable the reason provided by the liquidator that there were insufficient funds to prosecute the action. He regarded this as ‘warehousing’. He refused an extension of time to allow the liquidator to provide security for costs out of time and also dismissed the action for want of prosecution. His decision was upheld on appeal.
There is a danger when one sees the way that the courts have dealt with the aspect of delay, to lose sight of the very basis of the jurisdiction to strike out. There appears to be a growing belief that with the new litigation culture brought about by the CJR, applications to strike out for delay will somehow become easier to mount them before. All that is needed is a lengthy delay. As I shall explain presently, this is not the position at all.
To summarize then, from recent decisions in particular of the Hong Kong courts, it would appear that applications to strike out for delay will involve one or more of three separate grounds:-
The second limb of Birkett v James: inordinate and inexcusable delay, coupled with prejudice, which of course include any substantial risk that a fair trial is not possible.
Abuse of process and under this head, the concept of ‘warehousing’ (see here: Grovit v Doctor, Arbuthnot Latham)
Breach of one or more of the underlying objectives, in particular O.1A r.1(b) (proceedings to be dealt with as expeditiously).
For an example of this three-pronged approach, see A&M Manufacturing and Marketing Limited v Iu Po Shing, unreported, CACV 15 of 2011, 6 September 2011 at para. 19. In Cheung Sai Kit, Au J approached the application on two bases: the second limb of Birkett v James and abuse of process. In the present case, as we have seen, the Respondents also relied on these two grounds.
The enlargement of the jurisdiction to strike out for delay in the way I have described, if not properly rationalized as a matter of principle, can lead to a very unsatisfactory state of affairs and may encourage even more litigation tactics than before the CJR.
Hence, as I have said earlier, it is both timely and necessary to restate the applicable principles in the light of the CJR.
E3 The applicable principles
One of the main objectives of the CJR is to enable parties to proceedings to have their dispute resolved as expeditiously, effectively and efficiently as reasonably practicable. The primary responsibility of the court, as made clear by O.1A r.2(2), is to “secure the just resolution of disputes in accordance with the substantive rights of the parties”. The role of the court is therefore not of course to prevent actions being litigated; quite the opposite.
It is accordingly within this context that the jurisdiction to strike out for delay must be seen. In my judgment, striking out should only be used in plain and obvious cases: it must be plain and obvious that by reason of his delay, a plaintiff should be deprived of the opportunity to go to trial for the resolution of his dispute with the defendant. This is not a novel proposition at all. In Allen v McAlpine (which, in many ways, was the foundation of the Birkett v James line of cases), Lord Denning referred to strike out on the basis of delay as a “stern measure” (at 245D). Diplock LJ in the same case referred to it as a “Draconian order and will not be lightly made” (at 259F).
The next general point is this. I believe the foundation for the jurisdiction to strike out for delay must be predicated on an abuse of the process of the court by the plaintiff. This is the common feature which connects the various reasons that have been used as grounds for the jurisdiction to strike out. Inordinate and inexcusable delay causing prejudice to a defendant, contumelious conduct or initiating proceedings without any intention to bring them to a conclusion, are all examples, in my view, of abuse.
I instantly recognize of course that in the well-known passage in Birkett v James (see para. 39 above), Lord Diplock referred to abuse as being part of the first limb to justify a striking out for want of prosecution. Further, in Grovit v Doctor, the House of Lords also seemed to regard abuse as a separate reason to strike out under the inherent jurisdiction of the court. Conceptually and in practical terms, this apparent distinction between abuse of process and the second limb of Birkett v James, has caused difficulties and in many cases, confusion. When Lord Diplock referred to abuse of the process of the court under his first limb, I do not believe he was referring to abuse in the general sense; he was merely discussing the matter in the context of conduct that was intentional and contumelious such as an inexcusable breach of a peremptory order.
In any event, it is now time to recognize that in Hong Kong, the foundation for the jurisdiction to strike out for delay must be abuse of process. For my part, I find it difficult to conceive of a case where a court will strike out for delay unless there is this element of abuse.
Seen in this way, and particularly given the consequences of a strike out (namely, that a plaintiff will be deprived of the opportunity to go to trial to have his dispute with the defendant adjudicated), resort to a striking out must be a remedy of last resort. I must, however, elaborate on this last statement in case there is any room for arguing that this may signal a more relaxed approach on the part of the courts regarding delays in litigation. It does not.
Under the CJR regime, the combination of greater case management by the courts and the obligation on all parties to proceedings to assist the court in achieving the underlying objectives, should ensure that delays are kept to a minimum. While certain delays may be unavoidable, certainly the type of delays that have been in the past led to applications to strike out for want of prosecution, should now be consigned to history.
As seen above, the Court now has in its arsenal a number of different powers to ensure that an action is proceeded with expeditiously and that its orders are complied with. Some of these powers have always been available to the Court, while others have been introduced under the CJR. Peremptory orders are now more readily made than before, the Court is able to act on its own motion even where the parties have not applied to court, conditions such as ordering payments into court to be made or other conditions can be imposed, and stringent order for costs (even summary assessment) can be made. The Rules also prescribe the remedy of striking out in certain circumstances: for example, under O.25 r.1(4), (5) and r.1C.
Accordingly, under the CJR regime, I would expect to see virtually no applications (at least very few) to strike out for delay, unless peremptory orders have not been complied with, or provisions such as O.25 r.1(4), (5) or r.1C apply. Unlike the pre-CJR position, the court should only in rare cases have to face such an application arising from delay. With its greater case management powers and duties, and the obligation on all parties to get on with an action, no proceedings should get to the stage where a delay will prompt an action to strike out for want of prosecution. This was the precise point made in England when the Woolf Reforms took place:- see Biguzzi v Rank Leisure PLC  1 WLR 1926, at 1933C per Lord Woolf MR. This had been the sentiment of the English Courts even before the Woolf Reforms were implemented: see Department of Transport v Chris Smaller (Transport) Limited  1 AC 1197, at 1207F-H; Grovit v Doctor at 643B-644F.
Moreover, when delays do occur, greater use of the court’s powers can, and should in the majority of cases, be made rather than an application to strike out: see here also the remarks of Lord Woolf in Biguzzi at 1933D. Orders for striking out should only be applicable in plain and obvious cases, and where there has been abuse. It should be an application made in the last resort. The courts ought not to be faced with an “all or nothing” approach whereby it is left only with the choice of either allowing the action to be continued or to strike it out. Nowadays, the court has more options than just these two extreme positions: cf Annodeus Entertainment Limited v Gibson.
But in those (hopefully rare) cases where the court is faced with an application to strike out for want of prosecution, what are the applicable principles? I must also deal with the position of those cases which ‘straddle’ the CJR, namely, where proceedings have commenced before the CJR came into effect, such as the present case.
It is not appropriate to deal on a comprehensive basis with the many nuances that can arise in an application to strike out for want of prosecution (such as the different shades of prejudice that can arise when proceedings have been subjected to delay) but the following principles ought to be borne in mind in most cases:-
It is first important to bear in mind that striking out is a remedy of the last resort, as stated above, and only where it would be plain and obvious to do so. If there are other measures that are more appropriate to be taken, they ought to be.
Abuse of the process of the court is the foundation for the exercise of the jurisdiction to strike out for delay.
Abuse can take many forms. The Birkett v James second limb will continue, where it is proved, to be a form of abuse so that inordinate and inexcusable delay causing real prejudice would be an abuse. Thus, where a delay which is inordinate and inexcusable causes a substantial risk that a fair trial is not possible, this is perhaps the most compelling form of prejudice to a defendant: cf Birkett v James at 318C-D. There may be other forms of prejudice, such as the prejudice caused by proceedings hanging over the head of a defendant, causing undue anxiety (‘Biss’ prejudice: see para. 17(5)(c) above). Another form of prejudice might be that caused by the existence of an interim injunction (say, a Mareva injunction) pending trial; in such cases, undue delay might aggravate that prejudice.
In the context of abuse, some mention should be made of ‘warehousing’. I have already referred to this earlier. Merely for a party to start proceedings and then delay (which will often involve a failure to comply with the applicable rules of court) will not necessarily amount to an abuse justifying an order to strike out an action. The appropriate remedy in such cases may be for the court to exercise some of the powers I have already mentioned (such as the making of peremptory orders, the payment into court of substantial sums etc). In order for the ‘warehousing’ of claims to justify striking out, it must be clear that the plaintiff is abusing the process of the court. Accordingly, where the ‘warehousing’ of claims indicates that there is simply no intention to bring proceedings to a conclusion or there is a “wholesale disregard” of the rules or court orders, abuse can be found to exist:- see Grovit v Doctor at 647G-H; Arbuthnot Latham at 1436F-G. In Arbuthnot Latham, reference was made to “stale proceedings which bring the litigation process into disrespect” (at 1437C-D). I also place emphasis on another passage contained in Lord Woolf’s judgment in that case (at 1437E): “The courts exist to assist parties to resolve disputes and they should not be used by litigants for other purposes”. In Grovit v Doctor, as we have seen, the abuse took the form of the plaintiff refusing to progress the proceedings despite a letter from the defendants’ solicitors asking the plaintiff to proceed with the action or abandon it:- at 645H-646A.
It is still important when looking at the aspect of delay that it should be both inordinate and inexcusable, and that abuse is shown. It has never been the law that mere delay will be sufficient to justify an order to strike out:- see Arbuthnot Latham at 1432H-1433B; New China at para. 13 [393E-G]; A & M Manufacturing at para. 63. I would also adopt what was said by Neuberger J in Annodeus regarding the court’s consideration of delay:-
Ninthly, it appears to me that it is normally relevant to consider the following factors. First, the length of the delay; secondly, any excuses put forward for the delay; thirdly, the degree to which the claimant has failed to observe the rules of court or any court order; fourthly, the prejudice caused to the defendant by the delay; fifthly, the effect of the delay on trial; sixthly, the effect of the delay on other litigants and other proceedings; seventhly, the extent, if any, to which the defendant can be said to have contributed to the delay; eighthly, the conduct of the claimant and the defendant in relation to the action; ninthly, other special factors of relevance in the particular case.
In Nanjing Iron and Steel (see para. 57 above), it would appear that one of the grounds relied on by the Judge to strike out was the delay of two years, coupled with the lack of an excuse. Reyes J specifically referred to the underlying objective contained in O.1A r.1(b). It is important here to emphasize that properly understood, Reyes J was not saying that simply because the delay was both inordinate and inexcusable, this was somehow enough to justify a striking out order being made. There also had to be the element of what I have referred to as abuse. In that case, this was established from the fact that having invoked the Admiralty procedure of the court by obtaining security for their claim and despite securing an extension of the limitation period, the plaintiffs then chose to do nothing.
I now deal with prejudice. I agree with the proposition that where abuse is clearly demonstrated, proceedings can be struck out even where prejudice to the defendant cannot be shown. For example, where there is contumelious conduct on the part of a plaintiff, no prejudice to the defendant need necessarily be shown. However, in the majority of applications to strike out for delay, the aspect of prejudice to the defendant will often be extremely relevant. Mr Barlow submitted at one stage that post-CJR, prejudice will not be relevant at all. That is not a correct submission. In my view, prejudice to the defendant (whether it exists or not) can still be very much a factor. It is a factor that may well be relevant to the overall justice of the case: see Purefuture Limited v Simmons & Simmons  CP Rep 30 at para. 54(2).
As to the conduct of the parties, this will of course remain a relevant consideration of the court. Mr Barlow submitted that post-CJR, applications to strike out for delay should not be (as he put it) “fault based”. He meant by this submission that the court should primarily look at the question of delay from the viewpoint of the trial, specifically whether as a result of the delay a fair trial was still possible, and also from the point of view of the administration of justice (an aspect with which I deal below). I have no quarrel with the court having to consider the very important fact of whether a delay has made a fair trial possible nor with the court having to consider the overall administration of justice, but it is wrong to say that the conduct of the parties is not a relevant consideration. Quite the contrary, it will be relevant both to the critical question of abuse as well as to the overall justice of the case. Thus, post-CJR, where all parties to the proceedings have the obligation to prosecute the proceedings and assist the Court in furthering the underlying objectives, it would be highly relevant to consider any failure on the part of the parties here. As far as the defendant is concerned, I would say once again that there is no place anymore for defendants to adopt the attitude of “letting sleeping dogs lie”. No longer will it be possible (if it ever was) for a defendant to sit idly by and do nothing, in the hope that sufficient delay would be accumulated so that some sort of prejudice can then be asserted. If it is sought to be argued that time has dimmed the memories of witnesses, the court will usually want to know what steps have been taken by the defendant to take instructions, or proof or locate witnesses: cf the remarks of Ribeiro JA in Hymer v Mass Transit Railway Corporation  2 HKLRD 589, at 610D-J. The court will certainly want to know what the true nature of the defence is, in order to assess the extent of the prejudice suffered by a defendant.
As observed above (see para. 44), the attitude of the court in considering applications to strike out under Birkett v James, had very much been to look only to the position of the parties themselves. With the coming into effect of the CJR, courts must now have regard to wider considerations. The underlying objectives of ensuring that the court’s resources are distributed fairly (O.1A r.1(f)) is referable to the administration of justice. The court must bear in mind its own practical limitations and take into account the fact that there are other litigants who are entitled to have their disputes resolved and their day in court. Thus, one of the reasons why the non-expiry of any applicable limitation period should no longer be regarded as a factor militating against striking out for want of prosecution, is because a plaintiff (who is guilty of inordinate and inexcusable delay and has abused the process of the court) should no longer be permitted to gain advantage of instituting another action at the expense of other, far more deserving litigants. There is another facet of the administration of justice here. As I have mentioned above, the policy of the CJR is for disputes to be expeditiously, effectively and efficiently resolved. The Reform seeks to achieve this objective by ensuring that parties to litigation get on with the proceedings, by complying with the Rules and orders of the Court. When Rules and orders are not complied with, this results in the type of unnecessary interlocutory activity that the CJR strives to eliminate. This regard to the administration of justice is supported by authority: see Grovit v Doctor at 643B-D, Arbuthnot Latham at 1436C-F; Biguzzi at 1933E. It is interesting to note that even as early as Allen v McAlpine, Diplock LJ referred to “the prejudice to the due administration of justice” if stale claims were permitted to continue: at 261B-C.
I have made several references now to the factor of the non-expiry of the limitation period. From now on, it should be made clear that this should no longer be a factor which will militate against an order for striking out. I have already referred to some aspects of the administration of justice. It seems to me wrong as a matter of principle, and certainly not logical, that where a plaintiff has otherwise abused the process of the court, he should be allowed to continue with a stale action simply on the basis he would be free to institute another action within the limitation period. In Birkett v James, Lord Diplock recognized that where abuse occurred, the non-expiry of the limitation period would not enure to the benefit of the defaulting plaintiff: at 320H-321A. Where there is abuse, the court ought to strike out the action for delay and leave it to the plaintiff to institute fresh proceedings. Once the plaintiff does so, he may well be met by an application to strike out or stay on the basis that the fresh proceedings, in view of the history, constitute an abuse and should not be permitted to continue: see Arbuthnot Latham at 1436H-1437A; Securum Finance Limited v Ashton  Ch. 291, at 308B-309G. The burden will be very much on the plaintiff to justify why he should be permitted to continue with the second action. At that stage, he has already been given an opportunity to have his claim ventilated before the court or to put another way, he has had the chance to have his day in court, and he must justify a ‘second bite at the cherry’.
I would also reiterate that under the new CJR regime, it remains the position that the fact any delay was caused by the plaintiff’s legal representatives, will not be relevant to the exercise of the court’s discretion. This was the position before: see Birkett v James at 324A-E. For better or worse, acts done or omitted to be done by a party’s legal representatives will be attributable to that party.
So what of cases such as Birkett v James and the many authorities, both in England and in Hong Kong following that decision? In the light of the restated principles, I would think that it will seldom be necessary to refer to those authorities that do not take into account the procedural changes under the CJR (or the Woolf Reform).
The present case is, as I have earlier described it, a straddle case where the proceedings were commenced prior to the CJR taking effect. Much time was devoted in the parties’ respective Cases as to whether post- or pre- CJR principles regarding the approach of the court to applications to strike out for delay, applied. Mr Barlow was at pains to point out that both Kwan J and the Court of Appeal appeared to apply pre-CJR principles, with the consequence that the exercise of discretion by both courts below was for this reason to be impugned. He invited this Court to exercise the discretion afresh.
In view of the restatement of the applicable principles, it is unnecessary to decide the issue of whether Kwan J or the Court of Appeal took sufficiently into account, if at all, the changes made by the CJR. In disposing of the present case, I have simply applied the restated principles.
As to the approach to be adopted in relation to the ‘straddle’ cases, I would repeat paras 23 to 29 above.
Finally, I would like to stress that the power to strike out for delay is of course discretionary and derives from the inherent jurisdiction of the court. The inherent jurisdiction of the court exists to avoid injustice, prevent abuse, preserve the dignity of the court or to facilitate the administration of justice:- see Credit Lyonnais v SK Global Hong Kong Limited  4 HKC 104, at 107B-C (at para. 2). In exercising its discretion under the inherent jurisdiction, a court must, in applying those principles I have earlier set out, ultimately asks itself the question whether or not in the circumstances, it is just to strike out. A mechanistic approach in which the bigger picture is lost sight of (or, to adopt a more colourful phrase commonly used in our courts, to ‘lose the wood for the trees’), is to be eschewed.
F The principles as applied in the present case
Applying those principles which have been identified earlier, I am firmly of the view that the courts below were correct to dismiss the application to strike out. My reasons are as follows:-
The identification of the abuse that is alleged to exist is of course the starting point. It remains the case that the Respondents assert that this comes in two forms: inordinate and inexcusable delay by the liquidators, and also the ‘warehousing’ allegation. Mr Barlow also relied on prejudice having been suffered by his clients, but submitted that this was no longer a key ingredient that must be shown; in other words, he submitted that the court was able to strike out even if no prejudice could be demonstrated (as noted earlier, his initial position has been that the question of prejudice was not relevant at all).
True it is that the liquidators have been guilty of inordinate and inexcusable delay for the two year period from 19 April 2006 to 22 May 2008, but such delay will not normally, in the absence of some other special feature, be sufficient to justify a striking out order. Mr Barlow made several references to the administration of justice and that under the CJR, delays will no longer be tolerated. These are of course legitimate factors for the court to take into account, but in the present case, there is nothing more than the delay found by Kwan J. As stated earlier, it is important to view any delay in the context in which it arose. The two year delay took place before the CJR came into effect, at a time when the liquidators were perhaps not expected to do as much to move the proceedings along than obviously would be the case nowadays. I daresay a delay in the post-CJR era of two years would almost inevitably involve several breaches of court orders and Rules of court, and would be indicative perhaps of an intention not to bring proceedings to a proper conclusion.
Mr Barlow made much of the ‘warehousing’ allegation. He submitted that this court could now have regard to the recent decision of Jeremy Poon J and the Court of Appeal in separate proceedings (HCA 833 of 2004) involving the same parties whereby it was held at First Instance, and upheld on appeal, that the liquidators had been ‘warehousing’ the claims there. I have already referred to this decision earlier (see para. 59 above). Thus, so submitted Mr Barlow, there is now a factual finding of ‘warehousing’ that applied in the present case. The factual findings in those decisions cannot, in my view, be used in this way. The factual circumstances were quite different (involving a delay of four years, apart from anything else). The present proceedings were not mentioned in that decision, much less any relevant findings in relation to the present action. The evidence of the Respondents comes up very short of what is needed to be shown, and it is not possible to conclude that the liquidators have evinced an intention not to bring the present proceedings to a conclusion or that there has been a wholesale disregard of the Rules or orders of the court.
On prejudice, the findings and reasoning of Kwan J (see para. 17(5) above) are unassailable. In respect of the third Respondent, I have also taken into account the medical reports dated 29 August 2008, 17 September 2008 and 12 April 2010 contained in the materials before us.
The conduct of the Respondents is also a relevant factor to be considered. As can be seen from the history of the proceedings, the Respondents have not themselves shown much enthusiasm in revealing the true nature of their defence nor to progress the proceedings to an effective resolution of their dispute with the liquidators.
Overall, justice does not demand that the present proceedings be struck out. There is not that degree of abuse that would prompt the court to strike out the proceedings; certainly it is by no means plain and obvious that this ultimate sanction should be utilized. Nor am I convinced that a fair trial of these disputes is not possible. No doubt, with the delay that has already taken place in this action (the present striking out application has, to date, taken over three years to resolve), the court and the parties will now be keen to move these proceedings along at a more acceptable pace. This will be in the interest of everyone, not least the Respondents themselves and the body of creditors whom the liquidator represents.
For the above reasons, the Respondents’ appeal is dismissed. I would also make an order nisi that the liquidator should have the costs of this appeal, to be paid by the Respondents, such costs to be taxed if not agreed. If any party wishes to have a different order for costs, written submissions should be served on the other party or parties and lodged with the Court within 14 days of the handing down of this judgment, with liberty on the other party or parties to lodge written submission within 14 days thereafter. In the absence of such written submissions, the order nisi will stand absolute at the expiry of the time limited for these submissions.
Justice Bokhary PJ
I agree with what Chief Justice Ma says and with what Lord Scott of Foscote NPJ adds.
Justice Chan PJ
I agree with the judgment of the Chief Justice and the observations made by Lord Scott of Foscote NPJ.
Justice Ribeiro PJ
I agree with the judgment of the Chief Justice.
Lord Scott of Foscote NPJ
I have had the advantage of reading in draft the judgment of Chief Justice Ma and am in full agreement with the reasons he has given for dismissing this appeal.
In paras 64 to 75 of his judgment the Chief Justice has restated the principles to be applied to applications for actions to be dismissed for want of prosecution. I am in respectful agreement with that restatement and would only add that it is, in my opinion, important to bear in mind that a judicial decision whether or not to accede to an application to strike out for want of prosecution is always a discretionary one. The statutory rules applicable to the exercise of the discretion are to be found in the Rules of Court set out in the White Book. Judicial decisions explaining the Rules that relate to strike-out applications and the manner in which those Rules should be given effect should not be treated as a statute replacing the Rules themselves but rather as a very important guide to the exercise of the discretion. The power to strike out remains a discretionary one.
In the present case the power was, as I think, exercised impeccably by the first instance judge, Kwan J. No ground has been shown justifying the invalidation of that exercise.
Chief Justice Ma
The appeal is accordingly dismissed. As to costs, the Court makes the orders set out in para. 83 above.
Barrie Barlow SC (instructed by Messrs Clyde & Co) for the appellants.
Russell Coleman SC (instructed by Messrs Reed Smith Richards Butler) for the respondent.
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