RICOH HONG KONG LTD v. WALLBANCK BROTHERS SECURITIES (HONG KONG) LTD

DCCJ2454/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2454 OF 2013

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REASONS FOR DECISION

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Introduction

1.  This is a very last minute attempt on the part of the defendant to (i) strike out the plaintiff’s claim under Order 18 rule 19 of the RDC; and (ii) make discovery of documents. 

2.  At the end of the hearing on 16 January 2015, I dismissed the defendant’s summonses together with costs.  I said I would be giving my reasons for the decision in due course.  Here are the reasons. 

Background

3.  The writ of summons and the statement of claim in the proceedings were first served on the defendant on 5 July 2013.  The defendant filed its defence on 19 August 2013.  Reply was filed by the plaintiff on 16 September 2013.  A very detailed answers to request for further and better particulars of the reply was furnished by the plaintiff on 16 April 2014.

4.  The plaintiff’s witness statement was filed on 11 August 2014 and the defendant’s witness statement was filed on the same date.

5.  The action was set down for trial pursuant to an order made by Master SP Yip on 11 September 2014.  The trial is scheduled to commence on 26 January 2015 before a bilingual judge with an estimated length of 3 days, with 27 & 28 January 2015 reserved.

6.  I should add that the defendant’s appeal to a judge in chambers against the master’s decision to set down the case for trial was dismissed by Deputy Judge J Chow on 3 December 2014.

7.  On 3 December 2014, which was merely 7 days before the pre-trial review hearing (“the PTR”), the defendant took out the striking out and discovery summonses.

8.  The PTR for the case was conducted before Deputy Judge Sanjay A Sakhrani on 10 December 2014 following an unsuccessful attempt on the part of the defendant before the same judge to try to adjourn the PTR hearing by summons pending the result of the striking out summons.

DISCUSSION

Unexplained and inordinate delay

9.  In my view, the defendant has offered no satisfactory explanation as to why the summonses were only taken out less than 2 months prior to the commencement of trial.  Given the fact that Mr Chan who represents the defendant, besides being its chief executive director, is a practising solicitor, there is no reason in my view why the applications could not have been made earlier. 

10.  Mr Chan claims that he could only review the evidence in this case after receiving the witness statement of the plaintiff in August 2014 and it also took time for the defendant to review the evidence and sought for further documents from the plaintiff.  I do not agree.  The defendant could have made the application for striking out when it was first served with the statement of claim back in July 2013 when it realised that the claim might be deficient.  At its latest, it could have been done after it had been served with the witness statement of Mr Lee Ka Lun, the credit control supervisor of the plaintiff, in August 2014.  However, that was not done.

11.  The date of hearing of the summonses was exactly 10 days prior to the commencement of the trial on 26 January 2015, with 2 weekends fall in between.  Obviously, if I were to allow the defendant’s application to strike out the plaintiff’s statement of claim, the trial will no longer be necessary.  If I were to allow the discovery sought by the defendant, it will inevitably lead to an adjournment of the trial.  Either way, the trial dates, which is a milestone date under the civil justice reform (“CJR”), would be affected.

12.  It has been accepted that, post CJR, a late interlocutory application “may be dismissed on the basis of delay alone”: see PD 5.2 §34.

13.  In Li Xiao Yun v China Gas Holdings Limited unreported CACV 38/2013, 11 March 2013, the Court of Appeal dismissed an appeal against the trial judge’s refusal of a last minute pre-trial application (to add new defendants and amend the pleadings) on the ground of delay and that the trial date would very likely be derailed.  Lam JA (as he then was), giving the reasons of the Court (Lam JA, Bharwaney and McWalters JJ) stated at §18:-

“… Last minutes pre-trial applications also disrupt the preparation for the trial on the part of a trial judge in terms of reading into the case. Instead of getting himself or herself familiar with the issues that have to be tackled at the trial, the judge would have to divert attention and spend time and efforts on such applications. Thus, such practice has to be discouraged and, unless there are good justifications, the unsuccessful appellant should normally be expected to face an order for indemnity costs.”

14.  In Waddington Limited v Chan Chun Hoo Thomas unreported HCA 3291/2003, 7 May 2013, Lok DHCJ repeated the warning that late applications can be dismissed on the basis of delay alone in accordance with §34 PD 5.2, and concluded at §51 and §53:-

“51. In this action, the parties have taken out a lot of late applications shortly before the PTR. This practice is highly unsatisfactory and should be discouraged. Apart from the prejudice likely to be caused to the parties by such late applications including the possible adjournment of the trial, there is serious disruption to the court diary as the court has to struggle to find some time during the limited time before the trial to hear the applications.

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53. Express warning about late applications has already been given in §34 of Practice Direction 5.2, and practitioners should be reminded that late applications may be dismissed on the basis of delay alone. Unless there are exceptional circumstances and there are good reasons for the delay, one should not expect the courts to grant any late applications taken out shortly before the PTR.” (emphasis added)

15.  I agree with Ms Gwilt, counsel for the plaintiff, that the defendant has not offered any satisfactory explanation as to why the applications were made at such a late stage, particularly with only a few days left prior to the PTR.

16.  Judging from the history of this case, particularly the defendant’s previous attempt to appeal against the master’s decision to set the case down for trial and his application to adjourn the PTR before Deputy Judge Sakhrani, I have little doubt that the present applications were taken out with a view to frustrate and derail the trial dates.

17.  Thus, based on this ground alone, I have no hesitation to dismiss the defendant’s 2 summonses with costs on an indemnity basis to be paid by the defendant.

Striking out summons

18.  In my view, the defendant’s striking out summons contains no substance at all.  What it tries to do is to rehearse the evidence that it is going to present at trial as basis for striking out.

19.  The defendant says that the plaintiff’s claim:-

(1) discloses no reasonable cause of action;

(2) is frivolous or vexatious; and

(3) is an abuse of the process of the court.

20.  I agree with Ms Gwilt’s submission that the following principles applies in a striking out application:-

(1) The court will exercise its summary powers to strike out a pleading or parts thereof only in “plain and obvious” cases;

(2) The court will order a striking out where the claim is “obviously unsustainable”, “the pleading unarguably bad” and where it is “impossible” for the claim to succeed;

(3) The mere fact that a case may appear weak is not sufficient.  The court must be satisfied that there is no reasonable cause of action, or that the proceedings are frivolous or vexatious:-

See: Hong Kong Civil Procedure 2015 §18/19/4 at pp 435-436

21.  Further, a claim is not liable to be struck out if it discloses some cause of action but merely not likely to succeed. What must be considered is whether the cause of action has some chance of success when only the allegations in the pleadings are considered: See Hong Kong Civil Procedure 2015 §18/19/6 at pp 436-437.

22.  A claim is liable to be struck out if it is frivolous in that “it is not capable of reasoned argument, without foundation or where it cannot possibly proceed”.  It is also liable to be struck out if it is “oppressive and/or lacks bona fides”.

See: Hong Kong Civil Procedure 2015 at pp 439-440 §18/19/10.

23.  It is submitted by the plaintiff that the claim against the defendant is liable to be struck out only if the court finds the claim to be “absolutely groundless” or the parts concerning the defendant in the statement of claim to be “a sham or entirely without substance”.  I agree.

See: Hong Kong Civil Procedure 2015 at pp. 439-440 §18/19/10.

24.  I reject the defendant’s submission that the plaintiff’s claim discloses no reasonable cause of action.

25.  In this case, the plaintiff is a company incorporated in Hong Kong carrying on the business of, inter alia, provision of photocopying equipment and products and its related services.  The defendant is a securities company who had been a long term customer of the plaintiff for its photocopying services since 2002.   

26.  The plaintiff’s claim is based on 2 separate “Easy Printing Service Agreements” respectively dated 23 April 2008 and 2 October 2009 (“the Service Agreements”) where the plaintiff, under each of the agreement, “agreed to rent to the defendant” and the defendant “agreed to rent from the plaintiff” one photocopying machine as particularized in §§3 and 5 of the statement of claim.  The plaintiff alleges that each of the machines was “rented” with the minimum rental period of 60 months at a specified monthly rental.  The monthly rental charge would include a certain maximum volume of free black & white and, in the case of the second machine, colour pages during a particular billing period. The defendant will be charged for the cost per page for any excess pages in an agreed sum during any billing period: see §§3 to 6 of the statement of claim.

27.  There were some disputes between the plaintiff and the defendant regarding the services provided by the plaintiff leading to the defendant refusing to pay for the monthly/service charges.

28.  The plaintiff’s claim is for the outstanding invoiced sums under those 2 Service Agreements which amounted to $44,426.60.  On top of that, the plaintiff claims interest which it says it is entitled to under clause 10.1 of the Service Agreements which amounted to $9,082.04 and $6,860.96 respectively.  Further, the plaintiff claims the remaining 14 months of rental payments under the 2^nd Service Agreement in the sum of $11,650.80. 

29.  The defendant submits that the statement of claim discloses no reasonable cause of action because there was simply no “rental agreement”.  It says that this is a fabricated claim as there was no “rental agreement” between the parties at all.  Further, it says that no expression or wordings of the term “rental” ever appeared in the Service Agreements, invoices or any of the relevant correspondence.  It further claims that the plaintiff’s witness statement shows the contrary as “agreement for purchase of service.”    

30.  Ms Gwilt in her submission states that the term “rental” used in the statement of claim was merely a description of the Service Agreements.  She submits however it is clear from the agreements that part of the agreement was for the renting or provision or leasing of the machine and the other part was for the terms of the payment.  What is more important, according to her, is that all the relevant terms of the Service Agreements have been pleaded in the statement of claim and those terms had been agreed by the defendant when it signed and paid the monthly charges in accordance with the terms of the Services Agreements.

31.  In my view, what is significant to note is that the defendant has in its defence admitted to §§3 and 5 of the statement of claim where the plaintiff had specifically pleaded the “rental” arrangements.  

32.  Hence, in my judgment, at least on the face of the pleadings, there is a prima facie case for the plaintiff to claim against the defendant based on the terms of those 2 Service Agreements.  The defendant’s complaint that there was no “rental agreement” as the word “rental” was not mentioned in the agreements, invoices or relevant correspondence is going to be a matter of evidence and submissions at the trial.  It does not in my view render the plaintiff’s claim obviously unsustainable or impossible to succeed.    

33.  I also disagree with the defendant’s submission that the claim is frivolous or vexatious.  What the defendant has relied on in its submissions on this limb are its subjective beliefs of the “wrongs” the plaintiff had done to it.  They included matters like alleged breaches of the “fast service response time”, breach of the implied term of “good faith and fair dealing”; and the persistent failure to re-possess the machines as requested by the defendant.

34.  With respect, none of the above will make the plaintiff’s claim become frivolous or vexatious and the defendant’s claim based on this ground must fail also.

35.  The defendant also claims that the plaintiff’s claim amounts to an abuse of the process of court.  In this regard, the defendant relies on the case of Ricoh Hong Kong Limited v China Investment (HK) Hongyi Group Industrial Limited DCCJ 3492 of 2010, unreported as his authority. However that case only involves with an assessment of damages and not on the issue of whether the claim amounts to an abuse of process of court or not.  I simply do not see how the case is relevant.

36.  Further, the defendant relies on the tort of nuisance to say that the failure on the part of the plaintiff to retrieve and repossess the 2 printing machines amount to a breach of tort of nuisance causing continuous interference against the defendant’s enjoyment of land. 

37.  I have no hesitation to reject such bad argument also.  First, the tort of nuisance was never featured as part of the pleadings in this case, whether in the statement of claim or the defence.  It is something brought up by the defendant for the first time in this application. Second, the defendant’s alleged claim for “custodial fees” of the 2 machines has already been the subject matter of claim in the Small Claim Tribunal case of SCTC 47483/2012.  Third, I simply do not see how the plaintiff’s refusal to take back the machines, even if the defendant is right about this, would amount to an abuse of the process of the court in this case.

38.  For the above reasons, I would have no hesitation to dismiss the defendant’s summons to strike out the plaintiff’s claim even if I were to allow the application to proceed.

Discovery Summons

39.  I would have dismissed the defendant’s summons to make specific discovery of documents also.

40.  As can be seen from the affirmation of the plaintiff’s creditor controller, Mr Lee Ka Lun, the defendant had made similar requests for specific discovery in the 2 related Small Claim Tribunal cases. In SCTC 11439 of 2011, the adjudicator found the defendant made the application too late and the totality of the evidence before him was sufficient for him to make findings even in the absence of the documents sought by the defendant. The application was refused.  In the other case, namely SCTC47483/2012, the adjudicator found the documents requested by the defendant were mostly irrelevant to the case and/or amounted to fishing.  The application was refused by the adjudicator.  The defendant’s subsequent appeal to the High Court before The Hon Au-Yeung J was also rejected for similar reasons.  

41.  In my view, the scope of the discovery the defendant is seeking for is far too wide and most of the documents requested for have no direct bearing or relevance to the issues in the case.  Further, they are documents which had previously been sought by the defendant in the related proceedings in the Small Claims Tribunal and had been all refused by the court/tribunals.  However, the more important point is there is no reason why such request could not have been made by the defendant at an earlier stage of the proceedings.

42.  In the circumstances, I would dismiss the specific discovery summons on the above grounds also.

Costs 

43.  At the end of the hearing on 16 January 2015, I also ordered the defendant to pay the plaintiff’s costs on an indemnity basis with certificate for counsel due to the last minute nature of the application. Given the fact that the defendant had produced 4 affidavits and raised numerous factual and legal issues in the 2 relatively simple applications (there were over 650 pages of documents in total from both sides for the hearing), I consider that counsel’s involvement in this case is both reasonable and justified. 

44.  The costs was summarily assessed by me at HK$105,000 to be paid forthwith by the defendant.