More dismissal of 'dormant' claims

12 July 2018. Published by David Smyth, Senior Consultant

Defendants should welcome the recent judgment in Fiscalink International Ltd v Yiu Yu Sum Alex,(1) in which the court struck out the plaintiffs' claims against a majority of the defendants on the basis that the lack of progress over many years was an abuse of process such that the entire action against those defendants should be dismissed.

The court's judgment is another example at first instance of a pragmatic application of the relevant principles concerning dismissal for abuse of process – those principles are set out in a landmark judgment of the Court of Final Appeal(2) and their application (in practice) leaves much to the discretion of the case-managing courts.

Background

In 1997 the plaintiffs sued two defendants initially for declarations in respect of a contract for the purchase of shares and land. The plaintiffs apparently paid a deposit of HK$15 million, but the sale did not go ahead. The plaintiffs sued for (among other things) declarations that the contract had been rescinded for misrepresentation, return of the HK$15 million and damages. The defendants defended the claims and the first defendant counterclaimed for (among other things) declarations that the contract related only to the sale of shares and forfeiture of the HK$15 million.

In about 2000 the plaintiffs joined three more defendants to the action and amended their pleaded case to include a number of alternative claims against the new defendants.

In 2007, following a six-year hiatus during which nothing much appears to have happened in the case, some of the defendants unsuccessfully sought to strike out the claims against them. However, the court at the time gave a warning to the plaintiffs to comply with the procedural directions, failing which the defendants could re-apply to strike out the plaintiffs' amended claims.

There then appears to have been another period of delay (this time of about seven years). Matters came to a head in 2015 and 2016, with the plaintiffs' further amendment application and another application by a majority of the defendants to dismiss the action against them based on abuse of process. These applications were heard by a master of the High Court as a case management ('workaday') matter in November 2017 and February 2018, with the judgment handed down recently.

Decision

The court appears to have had little difficulty in dismissing the plaintiffs' amendment application. There had been repeated previous amendments and, about 20 years into the proceedings, the court did not seem impressed by the plaintiffs' apparent attempt to dress up material changes to their case as 'reformulations'.

As regards the application on the part of the majority of the defendants, the court struck out the plaintiffs' claims and dismissed the action against those defendants.

Delay
In terms of delay, the period of about 20 years (during which the proceedings had dragged on) appears to have spoken for itself.

Prejudice – substantial risk that a fair trial would be impossible
Much of the dispute between the parties appeared to turn on the evidence of witnesses regarding events that went back as far as between 1993 and 1997. In the circumstances, the memories of the witnesses (some of whom were quite old) were likely to have faded such that there was a substantial risk that a fair trial was no longer possible.

Disregard of court orders
The plaintiffs had (among other things) disregarded the previous warning given by the court and failed to advance the case as previously directed.

The court also noted that although the plaintiffs wanted the money back, they did not appear to intend to bring the proceedings to a conclusion.

'Just' to strike out
The court acknowledged that the defendants had also failed to carry out some of their case management responsibilities – particularly after 2009 when significant civil justice reforms were adopted in Hong Kong. Since then, the case management responsibilities to assist the court have rested on all parties. Two of the defendants also appeared none too keen to progress their counterclaim.

However, on balance – including what the court described as "the overwhelming abuse of court process on the part of the plaintiffs"(3) – the court decided that it was just to dismiss the plaintiffs' claims against those defendants who had applied to strike out.

Comment

The principles that underpin dismissal for abuse of process (particularly in the context of egregious delay and want of prosecution) initially appeared somewhat restrictive after the lead judgment of the Court of Final Appeal in 2011 (4). However, since then, the Court of Appeal and certain first-instance judges and masters have shown themselves willing to apply the relevant principles in a pragmatic manner as befits the facts of a case(5). In this case, as readers will appreciate, the proceedings had gone on for over 20 years and the events at hand went back before then.

While the judgment in this case is that of a master (as opposed to a judge of the High Court), masters deal with much of the 'workaday' business of the High Court and the judgment is underpinned by the sound application of relevant legal principles.

As often happens in these sorts of matters, an application to amend by a plaintiff is followed by an application to dismiss by a defendant (or vice versa). In this case, the plaintiffs' attempt to reformulate their case appears to have understandably received short shrift from the court.

It should be noted that that the plaintiffs' claims against two of the defendants were not dismissed because those defendants were not party to the applications to dismiss. That said, how and when this case proceeds to trial is a moot point. What can often happen (for example) is that plaintiffs seek to abandon their claims with no order as to costs and defendants are left with a commercial decision on whether to agree.

Finally, a party applying to dismiss proceedings in the context of egregious delay should usually endeavour to point to some special feature in the case that justifies dismissal for abuse of process (besides the delay itself). In this case, the plaintiffs do not appear to have had much appetite to proceed to trial against a majority of the defendants and they had already received what the court referred to as (in effect) a "final warning" from the court in 2007. Defendants' lawyers in Hong Kong will (presumably) take note.

This blog was originally published in the International Law Office (ICO) Newsletter.

Notes

(1) [2018] HKCFI 1293, 26 June 2018, HCA 5913/1997.

(2) Set out in Wing Fai Construction Co Ltd v Yip Kwong Robert (2011) 14 HKCFAR 935.