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Hong Kong – Wishing Star Ltd V Etrema Co Ltd & Anor.

5 September, 2014 

 

Legal News & Analysis – Asia Pacific – Hong Kong – Dispute Resolution

 

[Court of First Instance – HCA 656/2010]

 
Wishing Star Ltd (Plaintiff) and Etrema Co Ltd & Anor (Defendants) Judgment of the High Court (Deputy High Court Judge B Chu in Chambers) dated 29 January 2014

 
Civil Procedure – Case management conference – Failure to appear – Strike out of claim – Restoration of claim

 
The Facts

 
This case involved an application by the plaintiff to restore its claim after it was provisionally struck out under Order 25 rule 1C Rules of the High Court (“RHC”) by reason of the plaintiff’s failure to appear at the 2nd Case Management Conference (“CMC”). The parties’ dispute arose out of a project in relation to the construction of a private residential development on Barker Road (the “Project”).

 
The plaintiff was the owner of the Project. The 2nd defendant was the main contractor engaged by the 1st defendant to complete the Project. The architect appointed for the Project was the 3rd defendant. The plaintiff was a sub-contractor.

 
A dispute arose between the parties and the plaintiff issued a writ on 29 June 2011 and was all along legally represented by solicitors. On 11 December 2012, in the absence of the plaintiff, the solicitors who represented the plaintiff were granted an order to cease to act for the plaintiff.

 
The CMC was initially fixed for 11 April 2013. The plaintiff was represented by Madam Wen (“Wen”) at the 1st CMC, however the matter was adjourned to 13 June 2013. The plaintiff was absent at the 2nd CMC and its claim was provisionally struck out pursuant to Order 25 rule 1C (1) RHC. The plaintiff issued a summons on 13 August 2013 to apply to restore its claim. The 1st defendant and 2nd defendant both opposed the plaintiff’s application.

 
The Judgement

 
The Court began with a review of the relevant legal principles. Order 25 rule 1C of RHC states as follows:

 
“(1) Where the plaintiff does not appear at the CMC or pre-trial review, the Court shall provisionally strike out the plaintiff’s claim.
(2)
(3) Where the Court has provisionally struck out a claim… the plaintiff or the defendant may, before the expiry of 3 months from the date of the CMC or pre-trial review, as the case may be, apply to the Court for restoration of the claim or counterclaim.
(4) The Court may restore the claim or counterclaim subject to such conditions as it thinks fit or refuse to restore it.
(5) The Court shall not restore the claim or counterclaim unless good reasons have been shown to the satisfaction of the Court.”

 
The Court then turned to the decision of Registrar Au-Yeung (as she then was) in World Chinese Business Investment Foundation & Ors v Shine Rainbow Marketing Ltd & Ors [2012] 2 HKC 294. In that case, the plaintiff’s solicitors failed to turn up at a CMC and the plaintiff’s claim was provisionally struck out under Order 25 rule 1C(1) RHC. The Court in that case stated that the court would not lightly accede to the request of a defaulting party to restore an action without sufficient explanation and consideration of the merits. In addition the Court held that the application should be dealt with in three stages:

 
(i) The applicant must satisfy the threshold of showing good reasons

 
(ii) The Court would consider whether, as a matter of discretion, it should grant the restoration

 
(iii) If the Court decided to restore the claim, the Court may consider conditions to be imposed.

 
Counsel for the 1st defendant submitted that since there was limited case law guidance on the meaning of good reasons in the context of Order 25 rule 1C(5), it would be helpful to look at other provisions in the RHC for guidance. In interpreting Order 6 rule 8 RHC (which deals with the extension of the validity of a writ), whether a reason is good or bad depends on the circumstances of the case. Examples of reasons that have been held to be bad include carelessness, oversight and incompetence of the plaintiff’s legal representation. Bearing these principles in mind the Court moved on to discuss the issues in the present case.

 
The Court emphasised that the main reason given by Wen for the plaintiff’s non-attendance at the 2nd CMC hearing was her own inadvertence. Wen was reminded that the plaintiff should instruct solicitors, yet the plaintiff failed to do so. The Court accepted that even though Wen had been involved in previous litigation this did not imbue her with legal knowledge that a lawyer would have regarding court rules and procedures.

 
In the World Chinese Business case, it was the plaintiff’s solicitors who failed to turn up at the CMC hearing. One of the reasons the solicitors gave to explain their absence was that the parties were negotiating for mediation and this was held to be a bad reason. Mistake or oversight of a solicitor was held to be a good reason because the court would not want to dismiss a good cause of action for pure technical breach or inadvertence.

 
The plaintiff’s absence in the present case was also due to inadvertence and oversight on the part of Wen. She had explained that she was busy with travelling and had forgotten about the date of the 2nd CMC. The Court was also convinced that there was no evidence that the plaintiff’s absence was intentional and there was no evidence to show that the plaintiff has disregarded or failed to comply with any previous orders. The Court held that Wen had good reason to restore the action and stated that it seems clear that there are significant disputes between the plaintiff and the 2nd defendant. The Court restored the plaintiff’s claim subject to conditions.

 

 

Commentary

 
It is unfortunate the decision of this case appears to be contrary to the main objectives of the Civil Justice Reform (“CJR”). CJR has been in effect for nearly five years. The main objectives of the CJR are to increase the cost-effectiveness of civil proceedings and to deal with cases as expeditiously as reasonably practical. The CJR also aims to promote fairness between parties and ensure that the resources of the Court are distributed fairly. The strike out provision under O.25 r.1 was introduced as part of the CJR to prevent a plaintiff from causing delay and unreasonably exhausting the Court’s resources.

 
The plaintiff issued the writ in 2010 but did not file its statement of claim until over a year later. The plaintiff in this action was legally represented until the case management stage, where she decided to act as a litigant-in-person despite being suggested by the Court to seek legal representation. At the time of the plaintiff’s application to restore its claim, it had been nearly eight years since the practical completi on of the project. It was submitted by the defendants that some of its crucial witnesses had left the company and if the claim was to be restored, it would prejudice the defendants’ case.

 
Notwithstanding the oppositions from the defendants, the Court granted restoration of the claim because it was of the view that the plaintiff’s failure to attend the CMC was an oversight and unintentional. The Court had taken a very lenient attitude towards the plaintiff who was a litigant-in-person. The Court accepted that the plaintiff’s failure to attend the hearing was due to an inadvertence and oversight on its part. The Court also noted that the plaintiff, as a litigant-in-person, was not reminded by the Court of the consequences of her absence at the CMC.

 
Her failure to attend the CMC due to her “busy” travelling schedule was accepted. The Court’s decision in this case is, unfortunately, not in the spirit of the objectives of the CJR which aim to promote efficiency and fair allocation of resources. It allowed the plaintiff to deploy dilatory tactics and waste precious court resources. Had the plaintiff been legally represented, the Court might have been less lenient towards the plaintiff’s restoration claim.

 
It is noted that the Court imposed conditions on the plaintiff’s right to restore its claim. The Court required the plaintiff to provide an undertaking to proceed expeditiously with the claim and also to comply with the relevant case management directions. The Court gave the plaintiff “one last chance” to proceed.

 
That said, the defendants’ inactivity also attributed to the Court’s decision to restore the plaintiff’s claim. It is noted that although the plaintiff had disregarded or failed to comply with the court’s case management directions, the 1st and 2nd defendants also failed to comply with the directions order and attempt to mediation as directed. It appears that the defendants basically stopped proceeding with the case due to the inactivity of the plaintiff. When the plaintiff failed to turn up at the CMC, they seized the opportunity and asked the Court to provisionally strike out the plaintiff’s claim. Further, the 2nd defendant did not assist its own case by admitting in its affidavit in opposition to the plaintiff’s application that there were significant disputes/issues between the plaintiff and the 2nd defendant. This just simply endorsed the plaintiff’s claim that it should be entitled to go to trial on its claims against the 2nd Defendant despite the plaintiff’s pure technical breach or inadvertence.

 
It is common to come across litigants-in-person in litigation proceedings. Parties should keep in mind that the Court does tend to be tolerant towards litigants-in-person. When faced with an inactive litigant in person, parties are advised to ensure that they should, on their end, continue to comply with the Court orders and the relevant civil procedures. This would assist a party’s strike out claim.

 

Pinsent Masons

 

For further information, please contact:

 

Rachel Cheng, Pinsent Masons
rachel.cheng@pinsentmasons.com

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