TANG HING KWONG AND ANOTHER v. JOHN DAVID ANDREW IP AND ANOTHER

HCA 7927&7928/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS 7927 & 7928 OF 2000

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J U D G M E N T

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A. BACKGROUND OF THE ACTIONS

1. This is the hearing of the appeals against Master De Souza’s decision to strike out the two actions for want of prosecution.

2. The two actions were issued as part of a trio of actions with different sets of plaintiffs but sharing the same factual background and the same causes of action.  The three actions all concerned a company known as Endenne Development Limited (“Endenne”) and its director, Fung Ping Yan (“Fung”).  Endenne was the developer of the house erected on Lot Nos 36 and 37 Wing Ning Lei, DD no 111, Yuen Long, New Territories.

3. The house was sold by Endenne as three separate flats to the respective sets of plaintiffs in the three actions.  The plaintiffs in HCA 7927 of 2000 purchased the ground floor flat, the plaintiffs in HCA 7928 of 2000 purchased the 1^st floor flat, whereas the plaintiff in HCA 7929 of 2000 (“the 3^rd Action”) purchased the 2^nd floor flat.  The defendants in all three actions (“the Defendant Firm”) were the firm of solicitors representing the vendor and purchasers in each of the three transactions.

4. The 3^rd Action proceeded to trial ahead of the two actions before me.  The trial judge dismissed the plaintiff’s claim.  The plaintiff appealed.  By a judgment dated 30 March 2007 under CACV No 12 of 2006, the Court of Appeal set aside the judgment in that action and remitted the action to the Court of First Instance for retrial.  Retrial was pending at the date of the hearing of these appeals.

5. Fung, a director of the developer Endenne, was at all material times a clerk employed by the Defendant Firm “as an unqualified person to bring in local business for the firm”[1].  All three sets of plaintiffs engaged the Defendant Firm to handle the conveyancing of the flats.  On the other hand, the Defendant Firm also accepted instructions from Fung to act for Endenne as vendor in all three conveyancing transactions.

6. It transpired that in his capacity as Endenne’s director, what Fung handed to the partner of the Defendant Firm, Willis, for the purpose of the conveyancing transactions were not the necessary documents to prove title, but forged documents, or possibly only copies of the forgeries. These included the relevant approval letter from the District Land Office of Yuen Long, the three Certificates of Exemption relating to the building, the site formation and the drainage works, and the “No Objection” letter from the District Land Office.  The forgeries went undetected and the assignment of the three flats went ahead.

7. It was only in April 2000, when the purchaser of the 1^st floor flat attempted to sell the property, that the matter came to light through requisitions raised by the solicitors acting for the prospective purchaser.

8. As remarked by the Court of Appeal in paragraph 10 of its Judgment in Ngo Tai Hong v Ip and Willis CACV No 12 of 2006, it appears to have been accepted by the Defendant Firm that the documents previously relied on in relation to the relevant property were forgeries.

9. The Court of Appeal rejected the Defendant Firm’s reliance on Rule 5C(4) of the Solicitors Practice Rules as exonerating them from acting on behalf of both vendor and purchaser, and held that there was a serious failure to recognize the very strong conflict of interest arising from the fact that in the transaction it was acting also for Fung who was a member of staff generating business for the firm, and to advise the plaintiff in the 3^rd Action of the dangers involved on this conflict.  The Court took the view that the failure amounted not only to negligence but a breach of contractual and fiduciary duty to the purchaser.[2]

10. It would appear from the judgment of the Court of Appeal in CACV 12 of 2006 that the plaintiff in the 3^rd Action also issued an action against the developer Endenne and its two directors, namely, Fung and his wife, which was consolidated with the 3^rd Action against the solicitors.  Neither Endenne nor its directors appeared at the trial, and judgment was entered against them in favour of the plaintiff.  As any judgment against them was likely to remain unsatisfied, the plaintiff in the 3^rd Action pursued the Defendant Firm, as did the plaintiffs in the two actions before me.

B.    HISTORY OF THE TWO ACTIONS

11. The present actions were commenced in August 2000 and had been prosecuted on behalf of the respective plaintiffs by Messrs KY Woo & Co, until a change of solicitors in March 2010.  Pleadings were closed on 25 October 2000.  Discovery was carried out in March 2001, and witness statements were filed by the plaintiffs on 27 April 2001.  Despite the Court’s directions given on 7 February 2001, the Defendant Firm filed no witness statements.

12. On 18 June 2010, the plaintiffs in both actions filed Notices of Change of Solicitors and Notices of Intention to Proceed and served them on the Defendant Firm’s former solicitors, apparently overlooking the fact those solicitors had already come off the record and the Defendant Firm was representing itself.  The Defendant Firm said it only received the notices in February 2011.

13. On 26 May 2011, the Defendant Firm filed summonses to strike out the actions for want of prosecution.  The summonses were heard before Master De Souza on 7 November 2011. The learned master found in favour of the Defendant Firm.

14. There was thus a period of inaction of around 10 years between the last step in the proceedings and the issue of the Notice of Intention to Proceed.  The defendants’ summons to strike out the claim was filed only about 11 months after the Notice of Intention to Proceed was filed, but no other step was taken in the proceedings in the interim period.  The total of period of inaction on the part of the plaintiffs lasted for almost 11 years.

C.    THE DEFENDANTS’ CASE

15. The Defendant Firm relied on two grounds based on which the action should be struck out.  First, it was submitted that there was inordinate and inexcusable delay which had given rise to serious prejudice.  Second, there was an abuse of the process of the court in the sense that there was no intention on the part of the plaintiffs to carry the case to trial.

16. Defence Counsel, Mr Remedios, submitted that the excuse given by the plaintiffs that they were awaiting the outcome of the 3^rd Action as advised by their previous solicitors was not a good excuse.  The delay caused by their solicitors was attributable to them.  If they have suffered loss and damage as a result of the default of their previous solicitors, they ought to pursue the latter for redress.  Mr Remedios further submitted the plaintiffs ought to have sought consent or applied to court to have the 1^st and 2^nd Actions stayed pending the outcome of the 3^rd Action.

17. The Defendant Firm also argued that as a result of the delay, they should suffered serious prejudice in that certain documents were seized and not returned since the matter was reported to the police, other files expected to be in the possession of another firm of solicitors had been lost, and the memories of certain potential witnesses had faded.  It was also pointed out that the limitation period has already passed.

18. Furthermore, the Defendant Firm relied, in particular, on the perceived prejudice arising from the litigation hanging over their heads as professional men for an extended period of time, where the plaintiffs’ allegation was one of professional negligence.

D.    THE PLAINTIFFS’ CASE

19. On behalf of both sets of plaintiffs, it was accepted that the delay involved was inordinate.  However, plaintiffs’ Counsel argued that the delay was not inexcusable.

20. The explanation given by the plaintiffs was that the two actions were not proceeded with as their previous solicitors, KY Woo, advised that since the facts and issues in the three actions were identical, it would help the two sets of plaintiffs save legal costs if the 3^rd Action were allowed to proceed ahead to trial while the plaintiffs, being less affluent than the plaintiff in the 3^rd A ction, awaited to rely on its outcome.

21. Mr Lin for the plaintiffs submitted that it was not unreasonable for the plaintiffs, being laymen of limited financial resources, to rely on the advice of their previous solicitors KY Woo in the circumstances and to decide to wait for the outcome of the 3^rd Action.

22. The plaintiffs argue that there was no serious prejudice to the Defendant Firm, nor was there abuse of process in the plaintiffs’ not having any real intention to bring the matter to trial.  They had complied with all directions given by the Court while the Defendant Firm had not.

E.    APPLICABLE LEGAL PRINCIPLES

23. Counsel for both sides have each cited a number of cases thoroughly addressing the court on the applicable legal principles.  Those of particular relevance to the arguments before me are summarized in the paragraphs below.

24. The jurisdiction whether to accede to an application to strike out for want of prosecution is discretionary, and is rooted in the applicable statutory rules set out in the relevant Rules of Court.  Judicial decisions explaining the Rules and the manner in which the Rules should be given effect should be read as an important guide to the exercise of the discretion, but not as statute replacing the Rules themselves: Liquidator of Wing Fai Construction Co (in Compulsory Liquidation) v Yip Kwong Robert (“Wing Fai”) [2011] 6 HKC 432 at 468B.

25. Prior to the CFA’s decision in Wing Fai, the guiding principles set out in Birkett v James [1977] 3 WLR 38 on striking out for want of prosecution have been followed.  The House of Lords decided that an action should be dismissed for want of prosecution where:-

(1) the plaintiff’s default has been intentional and contumelious,      or

(2) there has been inordinate and inexcusable delay

(a) giving rise to a substantial risk that a fair trial would not be possible or

(b) is such as to likely to cause or have caused serious prejudice of the defendant.

26. The above principles have recently been comprehensively and authoritatively reviewed in the Court of Final Appeal’s judgment given by Ma CJ in Wing Fai.  The re-statements with direct application to the present case include the following:-

(1)  Since the implementation of the CJR, the discretion to be exercised in dealing with an application to strike out for want of prosecution must be exercised with the principles themes of the CJR in mind, and with the circumstances and statutory structure in place at the relevant time, including the armoury of powers available to the court under the CJR. (§§30-32)

(2)  The ultimate sanction of the court may be to strike out an action or defence.  However, in the armoury of the Court’s powers, striking out must be the ultimate weapon, to be used only when it is plainly and obviously the appropriate remedy. There were many orders that could be made before striking out should be considered. (§33) 

(3)  Litigation was not to be treated as a game, but as a serious legal contest.  O1A r3 was of fundamental importance, stating it to be the duty of parties and their legal representatives to assist the court in furthering the underlying objectives.  It was important to recognize, as stated in O1A r2(2) that the primary aim was for the court to “secure the just resolution of disputes in accordance with the substantive rights of the parties”.  The emphasis must be on the word “just”. Rightside Properties Ltd v Gray [1975] Ch 72 referred to (§34).

(4)  Under the pre-CJR system, the progress of an action was left largely in the hands of the parties.  The Court was passive, only being involved when the parties chose to involve it.  The Court would generally bear in mind only the position of the parties.  Considerations such as other litigants, the Court’s resources, procedural economy and general considerations involving the administration of justice were scarcely prominent.  They were seen to be almost irrelevant.  It was within this system considered perfectly proper for a defendant to do little or nothing to progress an action.  This gave rise to 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 could be mounted.  This attitude of “letting sleeping dogs lie” was no longer acceptable post-CJR, where all parties have the obligation to progress an action.  Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229; Birkett v James [1978] AC 297; Grovit v Doctor [1997] 1 WLR 640 considered (§§44-47).

(5)  There appeared to be a growing belief that with the new litigation culture brought about by CJR, applications to strike out for delay would somehow become easier to mount than before.  All that was needed was lengthy delay.  This was not the position at all (§60).

(6)  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 (§65).

(7)  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 was the common feature which connected the various reasons that had been used as grounds to strike out.  Inordinate and inexcusable delay causing prejudice, contumelious conduct or initiating proceedings without any intention to bring them to a conclusion, were all examples of abuse.

(8)  Abuse can take many forms.  In the context of abuse, 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 available, 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 the claim indicates that there was simply no intention to bring proceedings to a conclusion or there is “wholesale disregard” of the rules or court orders, abuse can be found to exist (§75(4)).

(9)  Unlike the post-CJR position, no proceedings should get to the stage where a delay will prompt an application to strike out.  When delays 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.

(10)  It was still important that delay be both inordinate and inexcusable, and that abuse be shown.  It had never been the law that mere delay would be sufficient to justify an order to strike out. Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426; A & M Manufacturing & Marketing Ltd v Iu Po Shing [2011] HKCU 1784, (CACV 15/2011, 6 September 2011, unreported); Annoedus Entertainment v Gibson (2 February 2000, unreported) (Ch D) referred to (§75(5)).

(11)  On prejudice, the Court agreed with the proposition that where abuse was clearly demonstrated, proceedings could be struck out even where prejudice to the defendant could not be shown.  For example, where there is contumelious conduct on the part of the plaintiff, no prejudice to the defendant needs necessarily be shown.  It was not correct that post-CJR prejudice would not be relevant at all.  Prejudice to the defendant could still be very much a factor. Purefuture Ltd v Simmons & Simmons [2001] CP Rep 30 referred to (§75(7)).

(12)  Conduct of the parties would remain a relevant consideration.  It was relevant to the question of abuse as well as to the overall justice of the case.  Post-CJR, where all parties had 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.  There is no place anymore for defendants to adopt the attitude of “letting sleeping dogs lie”.  If it was sought to be argued that time has dimmed the memories of witnesses, the Court would usually want to know what steps had been taken to take instructions, or proof or locate witnesses.  The Court would certainly want to know the true nature of the defence, to assess the extent of prejudice.  Hymer v MTR Corporation [2000] 2 HKLRD 589, [2000] HKCU 124 referred to.

(13)     Under CJR it remained the position that the fact delay was caused by legal representatives will not be relevant to the exercise of the Court’s discretion.  For better or worse, acts done or omitted to be done by a party’s legal representative will be attributable to that party.  Birkett v James [1978] AC 297 considered.

27. Delay is inordinate where it is materially longer than the time usually regarded by the profession and the courts as an acceptable period: Hong Kong White Book 2012 Vol 1 paragraph 24/L/5.  Whether or not there has been inexcusable delay should be examined primarily from the defendant’s point of view or at least objectively.  Reasonable allowances may be given to good causes.  Ho Hip Lik & Anor v Kwam Man Ho & Others [1996] 2 HKLR 184 at 186 per Liu JA.

28. Delay which is inordinate is prima facie inexcusable.  It is for the plaintiff to make out a credible excuse for the delay; Trill v Sacher [1993] 1 WLR 1379 at 1397H-1340 A.

29. Delay caused by impecuniosity or lack of finance were not as such excusable.  Even though the court might afford an impecunious plaintiff certain indulgence while he was trying to raise funds or otherwise progress the case, there was likely to come a time when his action had to be struck out: Hymer v Mass Transit Railway Corp & Others [2000] 2 HKLRD 590 at 607-609.

30. Where the delay is inordinate and inexcusable, but a fair trial is still possible, it is still open to the Court to exercise its discretion to dismiss the action for want of prosecution if serious prejudice can be shown: per Godfrey JA in Can-Asia Capital v Kwok Yee William [1995] 1 HKC 521 at 525.

31. While the type of serious prejudice caused to professional men having the action hang over their heads for an extremely long period of time is well-recognised (Biss v Lambeth, Southwark Health Authority [1978] 1 WLR 382), the Court would look into the issue of causation.  Where the serious prejudice would not cease to exist even if the action were struck out, the Court would take that into account in the exercise of its discretion, as indeed it would all other relevant circumstances, such as the defendant’s own conduct: Hymer at 614-615 per Ribeiro JA.

32. As soon as someone, particularly a professional person is told that he is to be sued for negligence, it is a matter of commonsense 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.  Unless these sensible steps are taken, the prejudice that a defendant suffers as a result of fading memory of witnesses for which the plaintiff was responsible would be at most marginal and notably less than the defendant’s contribution: Hymer at 610 per Ribeiro JA, citing Hirst LJ in Hunter v Skingley [1997] 1 WLR 1466.  See also Johnson Controls Hong Kong Ltd v Associated Engineers Ltd HCCT 47/2001 (28 Feb 2012) Judgment of Au J at §§40-43.

33. In order to determine whether a defendant has suffered the necessary prejudice when it is in the form of impairment of witnesses’ recollection as a result of inordinate and inexcusable post-writ delay, the court must examine with care all the circumstances of the case, including both affidavit evidence as well as the issues disclosed in the pleadings.  So long as there are primary facts from which inferences can properly be drawn, there is nothing wrong with doing so: A & M Manufacturing and Marketing Lit v Iu Po Shing CACV 15/2011, Judgment dated 6 September 2011, per Fok JA.

34. With the above principles in mind, I turn now to consider the issues in the appeals.

35. I note that the action was commenced in 2000, at a time before the Civil Justice Reform (“CJR”) was in place.  However, by April 2009, rules implementing the CJR would have come into force, and there became available to the Court and the parties a much wider array of armoury for the purpose of pushing an action ahead, as indeed it would have been the duty of both parties to do so according to the regime and the underlying objectives of the CJR.  That would coincide with the time when the party was awaiting retrial of the 3^rd Action pursuant to the Court of Appeal’s decision.

F.    HAS THERE BEEN INORDINATE AND INEXCUSABLE DELAY?

36. Counsel for the plaintiffs rightly conceded that the delay involved in the two actions was inordinate.  Indeed, that must be the only sensible view to take.

37. It was said, however, that the delay was excusable, in that it was not unreasonable for the plaintiffs to have accepted the advice of their former solicitors, KY Woo, given to them in September 2001.  As stated in the 1^st Affidavit of Chung Siu Ching in HCA 7927/2000 (which part of the evidence was adopted in the 1^st Affirmation of Cheung Chi Wah Ben in HCA 7928/2000), the advice may be summarized as follows:-

(1)   Since all three actions were of identical facts and circumstances, and the plaintiffs in these two actions were not as affluent as the plaintiff in the 3^rd Action, it would save costs for the plaintiffs in the 1^st and 2^nd Actions not to proceed with their actions, while the 3^rd Action proceeded to trial first.  Depending on the outcome of the 3^rd Action, the 1^st and 2^nd Actions could “follow suit”.

(2)   The defendant would not be able to argue that it suffered any prejudice in the two other actions not proceeding, as the 3^rd Action would be going ahead.

38. As the plaintiff in the 3^rd Action had no objection to this course, and the plaintiffs had no reason to doubt the soundness of the above advice, it was decided that the two actions herein be held in abeyance.

39. According to the evidence, the plaintiffs in the two actions did from time to time check with Messrs KY Woo & Co the progress of the 3^rd Action, and was given information on occasions.  Towards the end of 2006, about a year after the judgment of Reyes J in the 3^rd Action was delivered, they were informed of the outcome of the trial and the fact that the decision was under appeal.  They were told to await the outcome of the appeal.  However, while the judgment of the Court of Appeal setting aside the judgment of the trial judge in the 3^rd Action was delivered on 30 March 2007, it was only at some unspecified time in 2009 that they were informed of the outcome of the appeal.  It was not clear if there were enquiries made between April 2007 and 2009 when they spoke with their solicitors at all.  Thereafter, they tried many times to speak to Mr Chung of the firm of Messrs KY Woo & Co with a view to carrying the two actions forward.  They did not receive any meaningful response.  It was not until March 2010 when they decided to cease instructing KY Woo & Co and appointed new solicitors to act on their behalf.

40. In my view, the reliance on the advice of KY Woo by no means exonerated the plaintiffs from blame for the inordinate delay.  Reliance on legal advice by a layman, as such, does not constitute any reasonable excuse for the delay.  If delay caused by lawyers’ inaction would be attributable to the party, as held by the Court of Final Appeal in Wing Fai, the party could hardly be absolved by agreeing to the course proposed by his solicitors that resulted in inordinate delay.

41. Further, it has been pointed out that the right course of action for the plaintiffs to have taken in the circumstances, in view of the advice given, would be to apply to the court, in the absence of any agreement with the Defendant Firm, for the trials of the two actions to be stayed pending the determination of the 3^rd Action, or for the two trials to be heard immediately after the trial of the 3^rd Action.  These would likewise have achieved the cost saving effects intended.

42. I agree that the more prudent course that should have been taken back in 2001 was to attempt to reach agreement or to apply for some appropriate directions from the Court with regard to the intended conduct of these two actions, instead of mere inaction.  However, as matters transpired, if the trial of the two actions had taken place right after the trial of the 3^rd Action, it might not have saved costs, due to the ensuing appeal and the order for retrial.  

43. There was no evidence of the financial resources of the respective plaintiffs in the two actions, apart from a brief statement in the 1^st affidavit of Chung Siu Ching in HCA 7927 of 2000 deposing to limited financial resources to spend on legal fees as a reason for using the developer’s solicitors in the conveyancing transaction.  I do not take “lack of funds” as being seriously argued as an excuse for the delay.  I therefore do not find it necessary to deal with the submission advanced by the defendant in this regard.

44. Taking into account all the evidence and the submissions made on behalf of the respective parties, I conclude that the delay was inexcusable.

G.   WAS SERIOUS PREJUDICE CAUSED TO THE DEFENDANT AS A RESULT OF THE DELAY?

45. As set out in Wing Fai, inordinate and inexcusable delay giving rise to serious prejudice was an example of abuse that might entail the exercise of the court’s discretion to strike out a claim.  One form of serious prejudice would be where a fair trial is no longer possible by reason of the delay.  Another form of prejudice relied on by the Defendant Firm was the well-recognized “Biss”type of prejudice.

G1.    Was a fair trial no longer possible?

46. The factors relied on by the Defendant Firm as would make a fair trial impossible were as follows:-

(1)   A number of unidentified documents relating to the conveyancing transactions in issue were seized by the police, though not for the purpose of investigating any allegations against the Defendant Firm.  These documents have yet to be returned to the Defendant Firm.

(2)   Due to the removal of office of the Defendant Firm and subsequent closure in 2002, some identified items of documents and papers could not be found and were likely to have been lost.

(3)   William & Sin & So, solicitors for the mortgagee bank, could not longer locate their files relating to these transactions.

(4)   CP Lee, the authorized person with whom the Defendant Firm had had dealings, had ceased practice for a long time and was believed to have passed away, and therefore no longer available as a witness.

(5)   Both Mr Ip and Mr Willis’ memories have been impaired over the course of the years.

47. In examining the evidence on the various claims of prejudice, I am to take into account all the factual circumstances, the issues in the actions, the issue of causation, and the conduct of the parties.  In respect of alleged loss of documents and fading of memory of potential witnesses, it would be incumbent on the Defendant Firm to identify the specific issues to which the required evidence relates, what steps have been taken, if any, to preserve such evidence, and if not, why not.

48. In respect of the documents seized by the police, the documents alleged to have been lost through removal of office and cessation of practice, and the documents kept by William Sin & So, it was not made clear in respect of which specific issue they relate to, or in what ways the availability of such documents was important for a fair trial to be conducted, bearing in mind the fact of forgery of the several documents was no longer in dispute, and no allegation has been laid against the Defendant Firm of their complicity in the crime.

49. Even assuming that the seized documents were relevant to any of the issues in the two actions, there was no evidence of any request ever made for their return, or at least for copies to be provided for the record of the Defendant Firm.  It would be hard to imagine that the relevant law enforcement agency would refuse such a request if made, or would reply saying the documents have been lost or destroyed without reference to the Defendant Firm.

50. Likewise, assuming the documents in the files of William Sin & So were relevant and necessary for the fair conduct of the trials, there was no evidence of any previous attempt made to contact them to preserve those documents until months after the summonses for striking out were filed. Plaintiffs’ Counsel described the late request made as “disingenuous”, and there was no other evidence to lead me to a contrary view.

51. Furthermore, assuming the documents were not made available in the trial of the 3^rd Action or the appeal, no issue was raised as to their relevance and absence from the discovered documents.  If they were not needed for the trial or appeal of the 3^rd Action, it is hard to see how they might suddenly become relevant to the trials of the two outstanding actions.

52. For these reasons, I do not find the requisite prejudice has been made out on account of lost documents.

53. As regards the unavailability of CP Lee as a witness, whereas the burden is upon the Defendant Firm to satisfy me that prejudice arose and was serious, there was no attempt to explain what evidence he might be expected to give as would be relevant to any identifiable issue in the trials of the present actions.

54. As the Court of Appeal has pointed out in CACV 12 of 2007, it was not in dispute in the 3^rd Action that the documents relied on in relation to the 2^nd Floor property were forgeries, and the same would necessarily apply to all 3 properties.  The evidence of CP Lee was not adduced at the trial of the 3^rd Action.  The defence has not made out how CP Lee’s evidence on the units being in compliance with the requirements and conditions of the Approval Letter and Certificates would begin to be relevant to any particular issue for the purpose of the trials of the two actions.

55. Even if the evidence of CP Lee were to be of any potential relevance, the Defendant Firm has not explained why no attempt was made to take witness proof from him back in 2001 or before, when directions for the exchange of witness statements were expected to be complied with.  This does not conform with the standard of reasonable conduct expected of a professional man, least of all a lawyer, facing a negligence claim, as Ribeiro JA remarked in Hymer at page 610.

56. The Defendant Firm ended up filing no witness statement.  No explanation has been offered on why the direction was not complied with despite the plaintiffs having filed their witness statements in the two actions.

57. The same remarks may fairly be made with regard to the alleged prejudice arising from the fading of memory of Mr Ip and Mr Willis, as parties to the action.  It would, for a start, be incumbent upon them to each state with specificity the areas of relevant evidence they might be expected to give at trial on which their memory would not serve them well due to the lapse of time.  They have not done so.

58. Further, the defendants, both being experienced solicitors, would have known the importance of having detailed proofs taken of their own evidence on the transactions while their memory was fresh, back in 2000 to 2001.  This they did not do.

59. On the other hand, they appear to have no difficulty setting out the relevant facts to an appropriate degree of detail in their affidavits filed in support of the present actions.  They had gone through the trial in the 3^rd Action and had given evidence.  The Court of Appeal, in ordering a retrial, would have taken the view that a retrial would not be unjust by reason of any significant loss of memory of the witnesses.

60. Last but not least, the memory of the Mr Ip and Mr Willis will once again be refreshed in the retrial of the 3^rd Action.  If the two actions were to survive these appeals, there is no reason why the proceedings of the two actions could not steam ahead under a tight time-table with rigorous case management involved to ensure the trials take place before memories of witnesses lapse again.  I note the submissions by defence Counsel of potential further delay in the trials if pleadings were to be amended and further discovery were to take place.  I take the view that such potential further delay could be kept to a minimum with appropriate case management if the two actions were allowed to proceed.

61. While not specifically raised in the submissions of Defence Counsel, the Affirmation of Chan Yiu Pun Jimmy (“Mr Chan”) deposed to the fact that a notebook he used to keep notes he made when attending to clients could no longer be found.  This is included as an item of “lost documents” in the affidavit evidence of Mr Willis, which would result in serious prejudice.  Mr Chan was at the time of the transactions a legal executive employed by the Defendant Firm.  No evidence was available as to what steps had been taken to preserve his notebook as potential evidence, and if not, why not.

62. The Defendant Firm have given no indication whether they intended to call Mr Chan as a witness in the trial of the two actions, and if so on which particular issue of the case.  There was no evidence as to which particular issue the contents of the notebook would be relevant to.  In so far as there was any intention to call him as a witness, and for him to rely on his notebook for refreshing his memory, the same remark would apply: no reason was given on why it was not seen necessary to take a sufficiently detailed proof of evidence from Mr Chan back in 2000 to 2001 at a time when his memory would have been fresh, and his notebook would still have been available to him.  I note that Mr Chan did not appear to have given evidence in the trial of the 3^rd Action.

63. On the other hand, Mr Chan said he was able to reconstruct his memory of the meetings with clients by reference to the conveyancing file kept by Mr Willis.  Further, if his evidence was not needed in the trial of the 3^rd Action, it has not been made out what evidence he would give that may become relevant in the two actions, the giving of which would be hampered by reason of the notebook having been lost over time.

64. In view of the above, I am not satisfied that a fair trial would no longer be possible by reason of the delay.  The defendants’ unexplained failure to preserve any of the purported relevant evidence made their own conduct at least contributory to the alleged prejudice.  The defendants have failed to make out substantial prejudice was caused by the above, and/or that such prejudice was principally caused by the inordinate delay.

G2.   “Biss” type of prejudice

65. I turn now to consider the other head of prejudice, namely, the Biss type prejudice.

66. It was said by the defendants that the actions, having hung over their heads for 11 years, has caused great anxiety, concern and distress to them as professional men.  It is said that their practice were affected as a result.  I am not without sympathy for them in this regard, but in my exercise of discretion I must take into account all the relevant factors, including causation of the prejudice, and the conduct of the defendants.  Conduct of the parties would remain a consideration relevant to the question of abuse as well as to the overall justice of the case.

67. The Law Society has made repeated enquiries with the Defendant Firm regarding the progress of the 3 cases.  Unspecified banks with which the Defendant Firm had previous connections in mortgage transactions were also interested to know of the outcome of the actions.  According to Mr Ip, banks were unwilling to give the Defendant Firm mortgage business or referrals for as long as the actions remained unresolved, as they were considered to be an “insurance” or “commercial” risk.

68. Mr Ip also said that their professional indemnity insurer had declined to provide professional indemnity insurance to the Defendant Firm regarding the claim in the two actions.  Instructions were withdrawn from Messrs Deacons in 2002.  Thereafter the Defendant Firm represented itself in these actions.  It has not been explained in evidence why their insurers have done so, except it was suggested that the decision related to the separate actions brought by the plaintiffs against Endenne and its directors for fraud or forgery.  In any event, the withdrawal of the insurer’s indemnity in 2002 did not arise out of the actions not having been resolved over a protracted period of time, and therefore can hardly be a factor of prejudice in the context of these appeals.

69. Mr Ip said that the two actions caused disruption and inconvenience to his practice, injury to his professional reputation and standing, and strain on his resources and stress.  In 2010, after the delivery of the decision of the Court of Appeal regarding the 3^rd Action, the Law Society questioned Mr Ip’s fitness to practice by reason of the existence of a property claim against him.  He was required to provide information of his means before his practice certificate was renewed.

70. In considering the effect of all the above, I remind myself that I must not lose sight of the fact that the 3^rd Action went through a trial and an appeal, and the Court of Appeal in fact overturned the decision of the trial judge.  In their judgment the Court of Appeal levelled considerable criticism against the conduct of the Defendant Firm in the subject property transactions.  Further, by reason of the relationship amongst the 3 transactions, those criticisms would inevitably apply with equal force against the Defendant Firm in relation to the transactions the subject of these two actions.  As from the date of the Court of Appeal judgment on 30 March 2007 until the date of the hearing of these appeals, the 3^rd Action was still pending retrial.  Striking out the two actions will not, in the circumstances, put an end to any lingering stigma or uncertainty that may arise from the two actions not having yet been tried.  When the causation of the perceived Biss type of prejudice is looked into, it is impossible to say that the delay in the two present actions was its principal cause, or that the removal of the actions would make any significant difference to the continued existence of such prejudice, apart from some anxiety over the additional liability they could attract.

71. On the other hand, I must also have regard to the defendants’ conduct of the actions.  From the unexplained failure in filing witness statements in the two actions, and the failure to make use of the array of weapons under the new provisions implementing the CJR since April 2009, the Defendant Firm has displayed no anxiety to have the actions tried and determined.  This attitude could well have been the result of a realization that the retrial of the 3^rd Action would in effect make it impossible for the perceived prejudice to cease to have effect even if the two actions were to disappear.

72. I consider that although the Biss type of prejudice did exist by reason of the inordinate delay, in considering all the relevant circumstances, including the issue of causation, the conduct of the defendants, and the overall justice of the case, it is not a case in which the Court should exercise its discretion to strike out the action.

H.    WAS THERE AN ABUSE OF PROCESS IN THE SENSE THAT THE PLAINTIFFS HAD NO INTENTION TO CARRY THE MATTER TO TRIAL?

73. The Defendant Firm argued that the plaintiffs in the two actions had no real intention to carry the matter to trial.  This is sometimes referred to as the “warehousing” argument.  That would in law amount to an abuse of process for which the court could exercise its discretion to strike out.  Where abuse is clearly demonstrated, proceedings could be struck out even where prejudice to the defendant could not be shown.

74. Where the ‘warehousing’ of the claim indicates that there is simply no intention to bring proceedings to a conclusion or there is ‘wholesale disregard’ of the rules or court orders, abuse can be found to exist.

75. Counsel for the defendants rely on this head of abuse of process by reference to the inordinate and inexcusable delay.  However, I was unable to see any matters over and above inaction that might demonstrate a lack of intention to bring the matter to conclusion, or any disregard of court rules of a nature that might infer such an intention.  As has been pointed out by Counsel for the plaintiffs, court directions up to the stage of filing of witness statements were all complied with by the plaintiffs.  It was the defendants who had omitted to file any witness statements in the actions, but have turned around to complain about fading memories of various potential witnesses for the purpose of their applications to strike out.

76. In considering whether there was abuse of process by reason of the delay, inaction on the part of the party complaining is of relevance. In this regard, Counsel for the plaintiffs pointed out that the summonses to strike out the two actions were not issued until almost a year after the Notices of Intention to Proceed were filed. On the part of the Defendant Firm, they said that they did not receive the notice until February 2011.  Even assuming that was so, there was no attempt on the part of the defendants since the Court of Appeal judgment in CACV 12/2006 was delivered in late March 2007 to bring the two actions up to speed with the prospective re-trial of the 3^rd Action ordered by the Court of the Appeal.  Even after the defendants received the Notices of Intention to Proceed, and knowing the retrial of the 3^rd Action was pending but not yet in sight, there was still no evidence of any attempt to bring the two actions up to speed as a way of avoiding the prolongation of the perceived prejudice beyond the retrial of the 3^rd Action.

77. In the circumstances, I am not satisfied that it was a clear case of an abuse of process as would warrant the exercise of the Court’s discretion to strike out the two actions.

I.         CONCLUSION

78. At least since the CJR provisions came were implemented, the Defendants could have been more proactive in pushing the matter ahead if they had chosen to.  As clearly stated in Wing Fai, the attitude of “letting sleeping dogs lie” was no longer acceptable.  Where there are measures that could have been taken by the defendants to avoid the prejudice under complaint and the defendants failed to avail himself of these measures, the Court is entitled to take that into account.  This approach in considering whether there was serious prejudice to the defendants or other forms of abuse of process has been clearly demonstrated in the Court of Appeal’s judgment delivered in 2000 in Hymer, well before the judgement of the CFA in Wing Fai.

79. The defendants have not demonstrated that they suffered serious prejudice caused by the delay, or there was otherwise a clear case of abuse of process on the part of the plaintiffs in their conduct of these two actions. This is therefore far from a plain and obvious case in which the court’s discretion should be exercised in favour of striking out the actions.

80. On the other hand, both parties will be well advised to heighten their awareness of their respective obligations under the current Rules of Court and to press on with the actions.

81. The appeals are therefore allowed and the orders of Master De Souza striking out the two actions are set aside and the two actions restored.

82. I also direct that the plaintiffs in both actions do take out case management summonses within 21 days hereof.

83. I make an order nisi that the costs of the appeals together with the costs below be to the plaintiffs and to be taxed if not agreed.  This order shall be made absolute 14 days from today unless any of the parties applies by summons to vary it.  

84. It remains for me to thank Counsel for the plaintiffs and defendants for their able assistance.

HCA7988&7929/2000(Consolidated),
HCA 7927/2000,HCA7928/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS. HCA 7988 & 7929 OF 2000 (Consolidated),
HCA 7927 OF 2000, HCA 7928 OF 2000

_______________________

_______________________

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J U D G M E N T

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1. This is an appeal from an order of Master Jack Wong made on 19 August this year whereby he gave the solicitors' firm Deacons leave to cease to act for the Defendants, who are also solicitors, in three related actions in which the Defendants are said to have acted negligently in the conduct of conveyancing instructions on behalf of the Plaintiffs in these actions.

2. This appeal raises an important and interesting point as to the true construction of Order 67, rule 6, Rules of the High Court. Mr Ismail, who appears for the Defendants, submits that the way the rule is designed to operate is that the solicitor first ceases to act and he then applies to the court to withdraw from the case by coming off the record. He gets support for this construction from a decision of the High Court of Australia in Plenty v Gladwin [1986] 67 ALR 26. This construction of the rule has been adopted in Hong Kong by Keith J, as he then was, in Aqua Leisure Industries Inc v Aqua Splash Limited No. 1 [1999] 3 HKC 338.

3. The rule, on its true construction, has no application to circumstances where a solicitor has not ceased to act but wishes to cease acting and so comes to court for leave to cease acting, as opposed to coming off the court record. To bring himself within the rule, a solicitor must demonstrate that he has in fact ceased to act by the time that he has issued his summons, and then appears before the court for leave to withdraw from the case.

4. The facts of Plenty v Gladwin do not matter, but the interpretation of Order 7 rule 7(1) of the High Court Rules in Australia, identical to Order 67 rule 6 in Hong Kong, is to be found at page 26, lines 20 to 50 of the report, which I should set out in full.

"In support of his appeal, which he argued in person, Mr Plenty emphasised that Order 7 rule 7(1) conferred a discretion on the court or a justice in determining whether or not to make the order sought and that the discretion must be exercised judicially. He submitted that the Acting Chief Justice ought to have declined to make the order because there had not been any good cause shown for the solicitor ceasing to act. He referred to the decision of the Court of Appeal in Underwood, Son, and Piper v Lewis [1894] 2 QB 306 as authority for the proposition that as a general rule, a solicitor should have good cause for withdrawing his services.

The fallacy in the above arguments flows from a misunderstanding by Mr Plenty of the operation of Order 7 rule 7(1). That misunderstanding would seem to have been caused by the citation of Underwood's case in the notes to the identical rule in England. See the Supreme Court Practice 1985 Volume 1, note 67/6/2 at 1025. In fact, although cited in the context of the relevant English rule, Underwood's case has nothing to do with the operation of the rule itself. It is concerned with discussing some of the incidents that generally pertain to the relationship of solicitor and client. The purpose of the rule is quite different. Its concern is with the record of the court and with the service of documents. It comes into play when, rightly or wrongly, a solicitor has ceased to act and the party has not given notice of change of solicitor or notice of intention to act in person. The solicitor may then take steps to have his name removed from the record. The first step is by applying to the court or a justice for an order declaring that the solicitor has ceased to be the solicitor acting for the party in the proceeding.

As we have noted, the court has a discretion whether or not to make the order, but unless there are special circumstances which render it expedient to retain the solicitor on the record, the order will generally be made as a matter of course upon proof that the solicitor has in fact ceased to act for the party and that no steps have been taken to take the solicitor's name off the record. Order 7 rule 7(4) makes it plain that an order made under the rule does not affect the rights or liabilities of a solicitor and a party as between themselves."

5. As I have already observed, Keith J agreed with this construction in Aqua Leisure 341B-F supra. Mr Ismail then seeks to underline the correctness of that interpretation by referring to the terms of the court forms in England, the Hong Kong rule being identical to that in England, in Atkins' Court Forms and in Chitty & Jacob's Queen's Bench Forms relating to the wording of a summons brought under Order 67 rule 6, which is predicated and drafted on the basis that the solicitor has ceased to act and now wishes to be removed from the record.

6. Mr Bowers, who appears for Deacons, has not really sought to argue for any other construction.

7. I am satisfied that the rule contemplates that the solicitor will have first ceased to act and that thereafter he will issue a summons under the rule and ask for leave to withdraw from the case. Mr Ismail is therefore correct in his submission.

8. From this, Mr Ismail has gone on to submit that when one considers the relevant correspondence, the summons and the affirmation in support, that Deacons had not ceased to act by the time that they had issued their summons, but what they in fact did was to apply to the court for leave to cease to act. That being the case, Mr Ismail then goes on to submit that they were not entitled to make such an application and the court did not therefore have jurisdiction to make the order that it did. Consequently, the Master was wrong to have entertained their summons, and his order should now be set aside.

9. It is therefore necessary for me to examine this material with a view to deciding whether Deacons had ceased to act before the date of the summons. If they had not, the Master's order cannot stand and the appeal must be allowed. If they had, I must then go on to decide whether I should, as a matter of discretion, allow them to withdraw, or whether "there are special circumstances which render it expedient to retain the solicitor on the record..." to quote from the note to Order 67 rule 6/4.

10. A brief history will suffice. Once the Defendants had been served with the writs in the three actions, they informed the Hong Kong Solicitors' Indemnity Fund, who took over the conduct of their defences in these matters. The Fund, putting it shortly, appointed Deacons one of the panel of solicitors who act on its behalf in such matters. This was on 14 August 2000. Deacons' instructions were twofold: firstly, to represent the Defendants in these actions on behalf of the Fund; and secondly, to investigate whether the Fund had grounds to repudiate liability under the terms of the indemnity fund, they having reserved their position as to that.

11. Although nothing turns on this dual instruction for the purposes of deciding this appeal, I am bound to say that it did create a rather unfortunate state of affairs for Deacons, because on the one hand they were busy defending the negligence actions on behalf of the Defendants, whilst at the same time investigating the Defendants' conduct to see whether the indemnity fund might have grounds to repudiate liability under the terms of the indemnity policy.

12. They did both; and by October 2001 they had completed their report to the Fund on the aspect of whether there might be grounds justifying repudiation. Mr Bowers has explained that their report disclosed enough of a case to justify the Fund appointing other solicitors, Messrs Stephenson, Harwood and Lo (SHL), to carry out further investigations, leaving Deacons to concentrate on defending the actions for the Defendants.

13. SHL carried out those investigations from October 2001 until May 2002. In the meantime, the three actions progressed to an advanced stage, two of which were consolidated by an order of Master Mary Yuen on 2 April 2002. I am told that they have reached the point of being ready for setting down.

14. Then, on 30 May 2002, based on SHL's investigations and recommendations made by the managers of the Fund, the managers wrote to Deacons on behalf of the Fund informing them that indemnity had been refused. This was followed up by a further letter from the managers on 7 June 2002, confirming that indemnity be refused and that Deacons should inform the Defendants of that decision. This was done by Deacons by a letter dated 11 June 2002. (See pages 40 to 41 of the bundle). This letter, and the ones that immediately followed it, are of crucial importance in deciding whether Deacons had in fact ceased to act. I should recite the material parts of this letter, which is as follows:

"Those investigations have now concluded and a decision made by the Solicitors' Indemnity Fund Limited to refuse indemnity with respect to this claim. In accordance with that decision, Insurers are no longer in a position to cover my firm's costs in the conduct of your firm's defence of the above three actions. As such, I will be grateful if you could let me have your firm's urgent instructions with regard to the further conduct of the above three actions. Presumably, your firm will be instructing replacement solicitors to act on its behalf in its continued defence of the above three actions. In the meantime, please be informed that my firm has been instructed by insurers to refrain from taking further steps in the conduct of your firm's defence in any of the above three actions.

Whilst writing, I would highlight the fact that Insurers reserve their position generally with regard to the indemnity issue pending the completion of investigations into that issue. In my firm's letter to your firm of 18 August 2000, as stated above, those investigations have now been completed. I look forward to receiving your further instructions on the further conduct of the above three actions as a matter of urgency."

15. The Defendants then replied on 14 June 2002 (pages 43 and 44) perhaps, not surprisingly, rather angrily, with a strong rebuttal of the Fund's right to repudiate its liability to indemnify them. The letter ended as follows:

"In these circumstances, we are at a loss as to our insurer's attitude and position. In relation to our firm and in the absence of any valid and cogent reasons, we are of the view that the said decision is wholly unjustified and unwarranted. We would therefore kindly request our insurer to enlighten us as to its reasons for its said decision urgently within five days hereof. Please note that if no satisfactory response is received within the time stated, we would be left with no alternative but to consider bringing an action against our insurer and/or third party proceedings against our insurer for appropriate relief for indemnity in respect of the said claims and all attendant costs in the actions and the further litigation without reference to you or our insurer. We reserve the right to produce this letter to the court on the issue of costs."

16. Nevertheless, the letter did not respond to Deacons' request to give them "further instructions on the further conduct" of the actions. This letter of 14 June had been copied to the managers, who replied directly to the Defendants on 19 June, (pages 78 and 79), saying that it was not their policy to provide reasons for repudiating the indemnity policy and drawing attention to the arbitration provisions in the event of a dispute on such matters contained in the Professional Indemnity Rules.

17. The next matter that occurred was that on 8 July 2002, Deacons then took out the summons in this matter which is now said to be a nullity. (See pages 1 and 2.) It seeks "an order that the said Deacons do cease to act on behalf of the Defendants in this action..." The affirmation in support (which starts at page 5) sets out the history of the matter. Paragraph 13 refers to Deacons' letter of 11 June 2002 which I have previous recited, and Mr Tsui, an associate of Deacons, who drafted the letter and made the affirmation, refers to the fact that in this letter that he was "seeking their (the Defendants') agreement for my firm to cease acting for them..."

18. Having set out the history of the matter, he then concludes his affirmation as follows:

"In light of the ongoing dispute on the issue of indemnity between the Fund and the Defendants which is now being dealt with directly between the parties, I reasonably believe that it would be improper for my firm to continue its representation of the Defendants in the action herein. In light of the potential conflict of interest and the irretrievable breakdown in solicitor/client relations between my firm and the Defendants, my firm cannot reasonably act in the interests of both the Fund and the Defendants.

In such circumstances, I humbly pray this Honourable Court to make an order declaring that Messrs Deacons do cease to act on behalf of the Defendants in this action."

19. What then followed, on 27 July, was an affidavit from Mr Willis, partner of the Defendants, setting out his firm's position (page 45). On 29 July 2002, Mr Bowers then wrote a letter to the Defendants which was very constructive (see pages 94 to 96). In the letter he very fairly set out the history of the matter. He says that he had been expecting the Defendants to have replied to his letter of 11 June and "its request for urgent instructions upon the further conduct of your firm's defence". The concluding parts of the letter are important and therefore bear repetition here:

"I have also reviewed Ernest Tsui's three affirmations filed and served in the above three actions on 8 July 2002. Notwithstanding the grounds upon which my firm relies in making this application for orders declaring that it cease to act on your firm's behalf in the above three actions as set out in Ernest Tsui's three affirmations, I an writing now to clarify my firm's position that notwithstanding the company's decision to refuse indemnity on this claim and the instructions subsequently given to my firm by managers to make the necessary application to come off the court record as acting on your firm's behalf in its defence of the above three actions, and despite my considerable concerns over the matters raised by Ernest Tsui in his three affirmations, my firm would be prepared to enter into a separate retainer with your firm to act on its behalf in its continued defence of the above three actions, but only upon the following conditions:

(i) that your firm provides my firm with costs on account of future fees (inclusive of counsel's fees) in the above three actions in the sum of $350,000; and that

(ii) payment on account of future fees referred to in paragraph (i) above be paid within 14 days from the date of this letter (i.e. by close of business on Monday, 12 August 2002).

In circumstances where the company has refused indemnity on this claim and where managers have confirmed that they will no longer be responsible for paying my firm's fees for acting on your firm's behalf in its defence of the above three actions, and in the light of your reaction to these latest developments, I am left with no alternative but to impose these conditions upon my firm's continued representation of your firm in the above three actions.

I trust you will understand my firm's position in circumstances where it has been instructed by managers not to act for the company in relation to this claim involving the above three actions, and where it has no instructions whatsoever from your firm in relation to the future conduct of the above three actions.

I believe my request for a payment on account by your firm in the sum of $350,000 to be entirely reasonable, bearing in mind that HCA7929/2000 has recently been consolidated with HCA7988/2000, and where a substantial amount of work will have to be carried out by my firm and counsel leading up to and during the trial of this consolidated action.

My firm has been waiting for your firm's further instructions upon the conduct of your firm's continued defence in the above three actions since 11 June 2002. My firm has no intention of being dragged into the dispute which has now arisen between your firm and the company over the refusal of indemnity on this claim, a dispute which will have to be resolved by way of arbitration proceedings between your firm and the company.

Please do not hesitate to call me if you have any questions. I look forward to hearing from you as soon as possible."

20. This was followed by a further letter the following day indicating the charge-out rates for himself and for Mr Tsui (page 97). Although these letters follow the issue of the summons, they indicate Deacons' view of how they saw their status vis-à-vis their representation of the Defendants when they issued the summons, and for this reason they are of much assistance in my decision as to whether Deacons had in fact ceased to act for the Defendants when the summons was issued.

21. Mr Bowers submits that on this evidence, once the managers had informed them of the decision to repudiate liability, his firm were bound to cease acting, which they did. Up to the time that liability was repudiated, their fees were being paid by the Fund. Once the Fund, who had appointed them to represent the Defendants, dropped out of the matter, Deacons' mandate came to an end.

22. The terms of Mr Tsui's letter which asked for further instructions as to the further conduct of the action was a professional and courteous way of dealing with the Defendants, for whom they had acted for the previous 22 months. The letter of 29 July is to be viewed as a constructive attempt to negotiate new instructions from the Defendants.

23. Once the Fund dropped out, rightly or wrongly, then Deacons must be taken to have ceased to act. What followed was an unsuccessful attempt by Deacons to get new instructions from the Defendants, who continued to insist that the Fund had no right to repudiate and that the Fund should continue to represent them.

24. That most attractive submission by Mr Bowers is countered by Mr Ismail, who points to a defective summons pleaded on the basis that Deacons are continuing to act and are applying to the court to cease to act. In an affidavit in support to the same effect, Mr Ismail submits that such an approach is not recognised by Order 67 rule 6, and that even if I were to allow Mr Bowers leave to amend his summons, that cannot avail him because I could hardly allow an amendment to Mr Tsui's affirmation in support of the summons.

25. What has happened, says Mr Ismail, is a mistake commonly made by solicitors who wish to come off the record when they are without fees or without instructions. They all too often fail to understand the nature of Order 67 rule 6, which requires a solicitor to cease to act first and then to apply to withdraw and come off the record.

26. I am bound to say that this has also been my experience hearing such applications. Practitioners erroneously hold the view that they need to come to court for leave to cease to act, and then, if successful, are given leave to cease to act and to withdraw from the record. That is not the process which is operated under the Order.

27. That having been said, a case should not stand or fall on mere semantics. I need to consider the substance of the matter, having regard to all the relevant circumstances, including, of course, the language used in the relevant correspondence which I have referred to, as well as the summons and the affirmations.

28. My view of this is that by the time that they had issued this summons, Deacons had come to the view that they had still not ceased to act. The matter remained in the air so far as they were concerned. They wanted to hear from the Defendants, which of course was fair enough, as they had represented them for very nearly two years; and Mr Bowers' letter of 29 July demonstrates, to my mind, that he would have been content to go on, provided agreement could be reached on fees.

29. I regret to say that the construction now put on the matter by Mr Bowers really amounts to an ex post facto rationalisation where, for the first time at this hearing, he has been confronted with a proper argument on how Order 67 rule 6 is intended to operate. This, I am told, was not the way the matter had been argued before the Master, who was only addressed on the discretion and as to whether proper reasons existed for Deacons to come off the record.

30. I find as a fact that they had not ceased to act at the time that they issued the summons because there had been a misunderstanding by them of their position. They considered that they required the court's leave to cease to act. They felt that they had good reasons to obtain such an order, but the appropriate mental process was not gone through.

31. The result, therefore, must be that where they had not ceased to act, they could not ask the court to make any order under Order 67 rule 6. Unfortunately, the Master was not addressed on this basis.

32. In these circumstances, this appeal must be allowed. What is regrettable about this is that, in my view, the Defendants have only succeeded in achieving a hollow victory. I say that because, had Deacons decided that they had in fact ceased to act, rather than coming to the court for that order as part of the process of the application to the court, I have no doubt that there were and are no special circumstances which require Deacons to remain on the record.

33. Whilst Mr Ismail has pointed to a number of features relating to the pivotal role of the Fund in this dispute, the fact is that the Defendants refused to pay Deacons' fees to continue representing them. They can hardly insist that the Fund should pay Deacons' fees where the Fund declines to do so.

34. I would have thought that all that Deacons need to do is to now make clear to the Defendants that they have ceased to act for them, and then take out a fresh summons which, in my view, must be unanswerable.

35. The Defendants must now, I fear, decide how best to deal with the Fund. There are mandatory arbitration provisions which they will need to invoke to have that dispute resolved and also decide how best to represent themselves in these actions.

36. I regret that this matter has turned on a technical point, but these rules are there to be observed. Non-observance has meant that the summons has failed in limine, the court not having jurisdiction to entertain it before a solicitor has ceased to act.

(Discussion re costs)

37. The usual order, of course, is that costs follow the event, but that is not an immutable rule. One has to look at the substance of the matter. It seems to me, as I indicated in the course of my judgment, that the Defendants have really had an arid or hollow victory, whichever way one wishes to characterise it. It is easy for the court perhaps to be wise after the event on behalf of the Defendants, but I really can see no useful purpose in mounting this appeal. They had got an order from the Master and it is something that they could easily have worked around and moved on with the matter in their own way, rather than bringing this appeal and, at the end of the day, achieve what I am afraid is an unproductive, technical victory.

38. I think that the real merits are reflected by my saying that there should be no orders for costs both here and below.

Representation:

31 October 2002:

Mr Anthony Ismail, instructed by Messrs Julia Wong & Partners, for Defendants (Appellant)

Mr Kevin Bowers, of Messrs Deacons, for Respondents

1 November 2002:

Mr John Ip, of Messrs Julia Wong & Partners, for Defendants (Appellant)

Mr Kevin Bowers, of Messrs Deacons, for Respondents