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15 September 2020
In Hanly International Ltd v Choy,(1) the High Court allowed the defendants' applications to dismiss the plaintiff's two actions on the ground of abuse of process – in particular, given that no procedural step had been taken by the parties since 1 April 2009, just before the civil procedure reforms came into effect in Hong Kong. 'Stale claims' (also referred to as 'dormant') are quite common in Hong Kong and, based on controlling case law, their dismissal is governed by the principles of abuse of process and generally regarded as a matter of last resort.(2) However, while it had been thought that dismissal for abuse of process was rare, there are examples where a plaintiff's delay has been so long that it evidences (among other things) a lack of an intention to bring proceedings to a conclusion. The legal principles involved are not meant to be set in stone and each application for dismissal based on abuse of process turns on its facts. However, as Hanly International Ltd demonstrates, egregious delay and inaction can prove fatal. Going forwards, these issues are likely to assume greater attention given the state of the civil court lists.
The background facts are complex. Focusing on the procedure, the plaintiff commenced legal proceedings against the first defendant in June 2005 and against the second defendant in October 2005. In the process, the plaintiff obtained an interlocutory injunction against the two defendants, restraining them from disposing of shareholdings in a company. As a result of an undertaking in the injunction orders, a director of the plaintiff paid HK$1.2 million into court (approximately US$154,000). From 2005 to 1 April 2009, the parties went through various procedural steps (including exchange of pleadings, documents, witness statements and expert reports). Thereafter, the proceedings appear to have come to a standstill.
In August 2018, as part of a review by the court of pending cases where money had been paid into court, a judicial clerk wrote to the parties seeking their written submissions on whether (among other things) the actions should be dismissed for want of prosecution and the money paid into court transferred to the general revenue (basically, the government). The plaintiff had legal representation and in October 2018 its lawyers gave notice of intention to proceed with the actions. This was nine-and-a-half years after the last procedural step. It was against this background that, on 1 November 2018, the defendants applied to have the two actions dismissed. By the time of the hearing, the defendants were acting in person.
The issue for determination was whether the two actions should be dismissed for abuse of process – in particular, for want of prosecution (although this nomenclature is no longer favoured by the courts given that it derives from case law predating the civil procedure reforms).
In a lengthy judgment, the court ordered that both actions be dismissed and the injunctions be discharged. The plaintiff was also ordered to pay the defendants' costs of the actions and of the applications to dismiss. In so ordering, the court noted that ultimately it had to determine whether dismissal was just on the facts.
The delay of nearly 10 years featured heavily in the court's deliberations. It appears that the delay had been exacerbated by the fact that the two actions had been consolidated pursuant to an order of the court and an order for 'speedy trial' had been made as far back as 2006. The reasons for the delay (both personal and business) given by the plaintiff's representatives were not found to be satisfactory.
The court acknowledged that delay could also be attributed to the defendants and the courts generally disapprove of a strategy of "letting sleeping dogs lie". Nonetheless, this was only one factor to be taken into account in the exercise of the court's discretion whether to dismiss an action for abuse of process based on (for example) want of prosecution. Neither (in this context) did the defendants' breach of the injunction orders determine the exercise of the court's discretion.
The court does not appear to have been impressed by the plaintiff's failure to bring the two actions to a speedy conclusion and the judgment refers to the plaintiff allegedly trying to use the actions to obtain a settlement sum which apparently was not supported by the evidence.(3)
The court also noted that the recollection of certain events by some of the defendants' witnesses (some of which appeared to go as far back as, for example, 2004 to 2005) had been affected by the delay, such that this amounted to prejudice to the defendants' case.
Therefore, the plaintiff's actions were dismissed.
On the facts, the decision is difficult to fault. While dismissal for want of prosecution is generally thought of as a remedy of last resort, a delay of nearly 10 years appears to speak for itself. Indeed, it appears that the judicial clerk's letter concerning the money sitting in court may have spurred the plaintiff into taking some action (eg, giving notice of intention to proceed). Matters were not helped by the plaintiff's failure to act adequately as regards the order for speedy trial which was an unusual feature of the case. It is interesting that the court also took into account the impact of the delay on the memories of witnesses, which could be said to apply in any want of prosecution case where witness evidence is important.(4)
Since the Court of Final Appeal's landmark judgment in Wing Fai,(5) the first-instance courts and the Court of Appeal have proved increasingly adept at applying the relevant legal principles in a pragmatic way (for further details please see "More dismissal of 'dormant' claims"). This trend is likely to continue as the courts seek to manage the civil court lists, particularly in a challenging COVID-19 environment. Many applications to dismiss stale claims could be disposed of based on paper submissions and documentary evidence (and without a physical hearing). While delay of many years is not necessarily determinative of abuse of process, it is highly illustrative and persuasive.
For further information on this topic please contact Adalia Chan or Antony Sassi at RPC by telephone (+852 2216 7000) or email (firstname.lastname@example.org or email@example.com). The RPC website can be accessed at www.rpc.co.uk.
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