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VASWANI & ANOR v GENERAL ACCIDENT INSURANCE ASIA
LTD

COURT OF FIRST INSTANCE
COMMERCIAL ACTION NOS 126 AND 127 OF 1997
STONE J
8, 11 JULY 2002

Civil Procedure Striking out Delay Prejudice Parallel action against
carriers dismissed for want of prosecution No appeal against decision to
strike out carrier actions Whether defendant insurer prejudiced by
deprivation of chance to seek recourse against carriers Whether loss of
subrogation rights sufcient ground of prejudice justifying striking out
action Rules of the High Court O 18 r 19
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The defendant in the two actions was an insurance company. The plaintiffs
sued the defendant under policies of marine insurance entered into between them
in 1994 and 1995 in respect of shipments of goods from Hong Kong to Ceuta,
Spain. It was not in dispute that the policies provided for all risks cover, and
incorporated the ICC(A). The plaintiffs claim was that during the currency of the
policies the goods were stolen/converted consequent upon the wrongful release
of the goods by the carriers to persons who were not holders of original bills of
lading. The defendant was said to be liable to indemnify under the policies. The
goods in question were carried under bills of lading issued on the standard form
of Seafast Marine Transportation Inc, which were signed by Eumex Line
Agencies (HK) Ltd as agent for Seafast Marine. Before these two actions were
instituted, the plaintiffs had brought actions against Seafast Marine and Eumex
Agencies for damages for breach of contract, negligence and wrongful detention,
and seeking orders for delivery up, which actions were dismissed by Chung J on
24 November 2001 for want of prosecution and abuse of process.
The defendant sought to strike out the plaintiffs actions on the grounds of,
inter alia, delay, abuse of process and/or prejudice.

Held, striking out the plaintiffs actions:

(1) The delay (ie between 11 February 1998 (service of the defences) and
5 July 2001 (summonses for directions took out by the plaintiffs) was inordinate
in that the inactivity subsequent to the ling of the defences went beyond what
was generally considered acceptable in commercial litigation of this nature
(at 452H-453A).
(2) The plaintiff assured was obliged under contract to take such measures as
may be reasonable in order to ensure that all rights against carriers were properly

[2002] 3 HKC

Vaswani v General Accident Insurance Asia Ltd (Stone J)

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preserved, and that the decision of the defendant underwriter to decline to admit
liability in the present proceedings did not relieve the plaintiffs of their duty to
preserve the carrier actions for the defendants benet (at 454F).
(3) Had the plaintiffs got on with the cases against the defendant, the issue
between the parties would have been decided, and had the decision gone against
the defendant, the insurer would not have been in the position as it now stood,
given that no appeal was being mounted against the decision of Chung J to strike
out the carrier actions, there would be no preserved recourse against either/or
Seafast Marine and Eumex Agencies. As a result, the commercial interests of the
defendant had been prejudiced in terms of the certain loss of the right to proceed
by way of recourse against the carriers. However, the fact that loss of this chance
could be pleaded by way of defence was not sufcient to meet the point on a
striking out application when inordinate and inexcusable delay otherwise was
established. In the particular circumstances of this case, when delay in other
parallel actions was a dominant element within the factual matrix, such prejudice
was sufcient to underpin the strike out applications.

Antcliffe v Glouscester
Health Authority

[1992] 1 WLR 1044 applied (at 454H-456B).

Cases referred to

Antcliffe v Gloucester Health Authority

[1992] 1 WLR 1044, 8 BMLR 146
(CA)

Department of Transport v Chris Smaller (Transport) Ltd

[1989] AC 1197,
[1989] 1 All ER 897 (HL)

Legislation referred to

Rules of the High Court (Cap 4A) O 18 r 19
[

Editorial note

: for further discussion of striking out under RHC O 18 r 19,
see WS Clarke

Hong Kong Civil Court Practice Desk Edition

(Butterworths,
2000 Ed); as to delay and prejudice, see

Halsburys Laws of Hong Kong

Vol 5(2)
(2000 Reissue) [90.0946]-[90.0947].]

Application

This was a hearing of two applications by the defendant to strike out the
plaintiffs actions under O 18 r 19 of the Rules of the High Court. The facts
appear sufciently in the following judgment.

Damien Laracy of Sinclair Roche & Temperley for the plaintiffs in both
actions.
Alexander Stock (Clyde & Co) for the defendants in both actions.

Stone J:

1. There are before the court two strike out applications, each by
summons dated 15 February 2002, the relief sought being that the
plaintiffs action in each instance be dismissed for abuse of process and/
or want of prosecution.
2. The two actions, respectively brought by Mr Vaswani and Eversmile
(HK) Ltd, relate to various policies of marine insurance entered into with

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the defendant in 1994 and 1995 in respect of various shipments of goods
from Hong Kong to Ceuta, Spain. It is not in dispute that the policies
provided for all risks cover, and incorporated the ICC(A).
3. The claim of the plaintiffs is that during the currency of the policies
the goods were stolen/converted consequent upon the wrongful release of
the goods by the carriers to persons who were not holders of original bills
of lading.
4. On that basis the defendant is said to be liable to indemnify under
the policies, a liability which is denied on a number of grounds including
the allegation that the losses may not have occurred within the 60-day
period of cover post-discharge, that the release of the cargoes was not
authorised by the plaintiffs, that there was no insurable interest, and that
since the goods were lost due to theft by a party to the marine venture
it is said by carriers in collusion with sellers there was no insured risk.
To this list, said Mr Stock on behalf of the defendant, would be added an
additional circuity of action defence, deriving from parallel actions
against carriers which themselves have been struck out, but only if and in
so far as the present applications were unsuccessful.
5. So far as the latter, the carrier actions, are concerned, the goods in
question were carried under bills of lading issued on the standard form of
Seafast Marine Transportation Inc, which were signed for Seafast Marine
by Eumex Line Agencies (HK) Ltd, as agent. Accordingly, in HCCL 241
of 1995 and HCCL 158 of 1996, the plaintiffs sued Seafast Marine and
Eumex Agencies in respect of the goods, claiming damages for breach of
contract, negligence and wrongful detention, and seeking orders for
delivery up. However, by a decision dated 24 November 2001 Mr Justice
Chung dismissed the carrier actions for want of prosecution and abuse of
process. These dismissals appear to have triggered the present
applications.
6. There is no dispute as to the applicable principles relevant to a
striking out, which are tolerably well-known. I turn therefore to the
relevant heads which requiring evaluation.

Inordinate and inexcusable delay

7. The defendant relies on two periods of delay. These are between 11
February 1998, the date of the service of the defences in these actions,
and 5 July 2001, when the plaintiffs took out summonses for directions.
The second period specied is between 9 August 2001, the date for
service of lists of documents pursuant to the orders of Deputy Judge
Woolley dated 26 July 2001 to 4 January 2002, when the plaintiffs served
the lists.
8. Accordingly, submitted Mr Stock, the total period of delay relied on
to support the relief now claimed is some 46 months, which plainly was
inordinate and was not, in the circumstances, excusable.

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9. Clearly it is the initial period of delay which is the one which excites
real concern, and I have little difculty in nding that the delay is
inordinate in that the inactivity subsequent to the ling of the defences
goes beyond what is generally considered acceptable in commercial
litigation of this nature.
10. For the plaintiffs, Mr Laracy (whose les these were not, and who
clearly has inherited a difcult situation) attempted to provide some
justication for the delay. He prayed various matters in aid, ranging from
change in case-handler to non-compliance with costs orders to the attempt
to bring the defendant to the negotiating table, but I regret that he was
unable to satisfy me that these cases involved anything more than old-
fashioned inaction, albeit whether this was due to a deliberate intention to
let these cases lie fallow it is difcult to say on the basis of the evidence
before the court.
11. I nd the existence of inordinate and inexcusable delay which is the
threshold necessary to get these applications off the ground.

Abuse of process

12. Mr Stock runs the argument that the plaintiffs conduct of these
actions amounts to an abuse of process because there is and was no
serious intention to prosecute the claims expeditiously and bring the
actions to an end within a reasonable time. He says, in terms, that the
delays were the result of a conscious decision to warehouse these
actions, relying in this regard upon a view expressed in the second
afdavit of Mr Baker, the defendants solicitor who says (at para 19) that
he suspects Ashby Recoveries Ltd (ARL) to be the prime moving force.
Mr Baker may or may not be correct, I know not, but I do not consider
suspicions held by a partys solicitor to be evidence of a type upon
which the court may safely act in applications of this nature.
13. Nor am I minded to accede to the argument that in this instance
there has been such a wholesale disregard of the rules of court that this in
itself is sufcient to get home under the abuse of process head without the
requirement to demonstrate prejudice.
14. In the circumstances of this case, therefore, in my judgment the
abuse of process submission fails.

Prejudice

15. It is said that as a result of the plaintiffs inordinate and inexcusable
delay in pursuing these actions, the insurers position has been
hopelessly prejudiced. Two types of prejudice are relied upon.
16. I deal rst with what I perceive to be the secondary point. Mr Stock
submits that one of the central issues in the actions is whether certain
letters authorizing release of the goods originated from the plaintiffs, and

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it is suggested on afdavit that this is an issue which would have had to
have been decided in the action against Seafast Marine if the assured was
to stand any chance of pursuing a claim against the cargo insurers
successfully.
17. I do not think a great deal of this argument in itself, although I can
discern some relevance as part of the wider subrogation argument to
which I refer below. In any event, taken in isolation I can see no reason
why an issue such as this cannot be debated in the context of the present
proceedings, and it seems to me that if the defendant has evidential
difculties in this regard that is a matter for them. I do not subscribe to the
view that it is open to a defendant who does not wish to disturb a
sleeping dog to do little or nothing in terms of evidential preparation,
and then to complain that delay precludes the gathering of necessary
evidence. The obligation to prepare is in itself not obviated by delay.
18. However, this is not the primary prejudice point. This focuses
upon the recent striking out of the plaintiffs claims in the carrier actions
against Seafast Marine and Eumex Agencies. It is said that the effect of
that decision is that the insurers have been irremediably prejudiced in
that if the present actions were to be allowed to proceed and the plaintiffs
were to be successful in their claims against the defendant, the
underwriter, in the exercise of its powers of subrogation, would no longer
be able to stand in the shoes of the plaintiffs and take over conduct of
those actions in order to attempt to effect recovery from Seafast Marine or
from Eumex Agencies.
19. Mr Stock says, and I accept, that there is a clear duty under cl 16 of
the ICC(A) which obliges the plaintiff assured to take such measures as
may be reasonable in order to ensure that all rights against carriers are
properly preserved, and that the decision of the defendant underwriter to
decline to admit liability in the present proceedings did not relieve the
plaintiffs of their duty to preserve the carrier actions for the defendants
benet. Clearly the manifest failure to do this conceptually sounds in
damages, which to avoid circuity of action would be open to be pleaded
by way of amended defence, but, said Mr Stock, so far as his client was
concerned the point went further than that.
20. It was established law, he submitted, that for the purposes of
dismissal for want of prosecution, prejudice to a plaintiff includes not
only prejudice to the strength of the plaintiffs case, but also deprivation
of the chance to recover any award from a third party: see

Antcliffe v
Gloucester Health Authority

[1992] 1 WLR 1044 at 1049-1050.
21. For his part Mr Laracy asked the court not to follow this approach,
suggesting that for present purposes it was sufcient if that which now
had befallen the carrier actions could be pleaded by way of defence, and
thus enure in that fashion to the benet of the defendant in the present
actions. To adopt the line of argument adumbrated in

Antcliffe, op cit

,

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would be inappropriate he argued, although he did not have the benet of
authority to buttress this submission.
22. I have reected upon the point. In my view the submission based
upon loss of subrogation rights can constitute a form of relevant
prejudice, and need not simply be consigned to the category of an
additional defence.

Antcliffe

itself was a quite different factual situation, it
is true, the successful point there being that prejudice to the defendants
prior insurance arrangements arising from the plaintiffs delay constituted
relevant prejudice, since the new arrangements in place and applicable by
reason of the delay would require the defendants to fund the whole of any
award in favour of the plaintiff without indemnity from any medical
defence society. In delivering the judgment of the Court of Appeal,
Scott LJ declined to hold that prejudice entitling a defendant to strike out
should be limited to proof of prejudice in the conduct of the litigation,
citing Lord Grifths in

Department of Transport v Chris Smaller
(Transport) Ltd

[1989] AC 1197, who similarly held that existing
authorities clearly established that prejudice may be of varying kinds and
is not conned to prejudice affecting the actual conduct of the trial.
Scott LJ accordingly rejected the argument that changes in insurance
arrangements were incapable of amounting to prejudice sufcient to
support a striking out, observing that:

It seems to me undesirable and unnecessary to limit the circumstances that
may constitute prejudice for the purpose of supporting a striking out
application. If a plaintiff has been guilty of inexcusable and inordinate delay
in prosecuting an action, and that is a premise from which consideration of
prejudice must start, the plaintiff must take the defendant as he nds him. If
the defendant, by reason of the delay, has been brought into a position in
which he is prejudiced because of some feature of his business affairs or of his
insurance arrangements, the prejudice should be taken into account

23. Differing cases, of course, throw up widely differing fact situations,
but I can see no compelling reason why like considerations should not
apply in this particular instance, Mr Laracys objections notwithstanding.
Had the plaintiff got on with this case, instead of comprehensively sitting
on it for some four years, the issue between the parties would have been
decided, and had the decision gone against the defendant, the insurer
would not have been in the position as it now certainly is Mr Laracy
having conrmed that no appeal is being mounted against the decision of
Chung J to strike out the carrier actions of having no preserved
recourse against either/or Seafast Marine and Eumex Agencies. It may of
course be that a commercial decision was arrived at in the present cases
given the relatively small amount of money at stake in each when set
against costs considerations, but that is nothing to the point. Following the

Antcliffe

approach, it seems clear that in the cases under consideration the
commercial interests of the defendant have been prejudiced in terms of

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the certain loss of the right to proceed by way of recourse against the
carriers, and I do not think that the fact that loss of this chance can be
pleaded by way of defence in the current actions is sufcient to meet the
point on a striking out application when inordinate and inexcusable delay
otherwise is established.
24. This may constitute an unusual situation, in particular when delay
in other parallel actions is a dominant element within the factual matrix,
but I do not consider that this should preclude the conclusion that the
delay in these cases has caused consequential prejudice to the defendant,
as opposed to the defendants case, and, further, that such prejudice is
sufcient to underpin the strike out applications.
25. I have also been satised on the evidence before me that the six
year time limit for bringing a claim under the insurance policies has
expired in both actions, and that it will not be open to the plaintiffs to
issue fresh proceedings.
26. In the particular circumstances, therefore, in the exercise of my
discretion I hold that the defendant is entitled to succeed in its
applications in each case to strike out for want of prosecution. I so order.
27. I further make an order

nisi

that the costs of these applications be to
the defendant, to be taxed if not agreed.

Reported by Yanky Lam