HONEY BEE ELECTRONIC INTERNATIONAL LTD v. GOLDENLUCKY CO, LTD

DCCJ5125/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5125 OF 2003

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DECISION

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1.  There are 2 summonses before me: the summonses taken out by the Plaintiff in which the Plaintiff applies for leave to amend the Statement of Claim, and the Defendant's summons in which the Defendant applies for an Order under Order 34 Rule 5 of the Rules of the District Court for the Plaintiff's claim and its Reply and Defence to Counterclaim to be struck out and that Judgment be entered in favour of the Defendant as claimed in the Counterclaim together with costs.

The Plaintiff's Summons

2.  The Defendant opposes the Plaintiff's application, stating that the proposed amendment on PRC law is nevertheless bad, lack in particulars and without evidence in support.  The Defendant states that it is difficult to see why PRC law is relevant in the present case.  The contract in question was made by 2 Hong Kong companies; it was executed in Hong Kong, and most importantly, the selling and the delivery of the used machines were to be in Hong Kong.  In paragraph 16 of the Amended Defence and Counterclaim the Defendant avers that “The Used Machines were therefore kept at the Defendant's factory site in the People's Republic of China awaiting the Plaintiff to obtain the necessary clearance documentation from the relevant authority so that the Defendant could then deliver the Used Machines to the Plaintiff in Hong Kong.”  In the premises the Used Machines were kept in the Mainland, and PRC law may be applicable to the acts or agreement committed or reached in respect of the Used Machines.  Therefore on the face of it PRC law appears to be relevant.  The Plaintiff says that the PRC law is applicable, rendering the Agreement to the extent concerning and of the Second Machine illegal and unenforceable under the PRC law.  Paragraph 17 of the proposed Amended Statement of Claim states:-

‘17. In the further and/or in the alternative, it is averred that the Agreement, at least to the extent concerning or of the Second Machine is void for illegality and that its enforcement for any alleged “forfeiture” is contrary to public policy, in that, the alleged “concensus” relating to the Second Machine was obtained by the Defendant for the purpose of defrauding the government of Hong Kong Special Administrative Region and the government of the People's Republic of China and the Plaintiff by deceiving them as to the true nature of the alleged goods (i.e. the Second Machine) and the transaction effected, by pretending the same to be a lawful transaction and by inducing them to believe that the true nature of the identified Second Machine and the transaction was lawful and/or legitimate whereas in fact the true nature of the Second Machine was only “goods for further process（來料加工）” and was illegal to be sold to the Plaintiff, as alleged, and such purported transaction or agreement for sale was also illegal and/or against public policy in either or both jurisdiction.'

4.  The Plaintiff states that the purported transaction on agreement for sale was also illegal and/or against public policy in either or both transactions.  The Agreement was rendered void or illegal in the PRC jurisdiction.  According to the Plaintiff the enforcement of the Agreement offended the law of the PRC.  But no PRC law was pleaded in the proposed amended Statement of Claim; hence the Plaintiff fails to demonstrate how the agreement was rendered illegal and/or against public policy in the PRC jurisdiction.  That being the case, the Plaintiff fails to show how and why PRC law is relevant in the present case.  I therefore disallow the part of the amendment relating to the purported transaction or agreement for sale being illegal and/or against public policy in the PRC jurisdiction under paragraph 17 of the proposed Amended Statement of Claim.  Save for this, the other amendments to the proposed Amended Statement of Claim are allowed.

The Defendant's Summons

5.  The Defendant's application is made under Order 34, r. 5 of the Rules of the District Court, which reads:-

“Where a party on whom a notice of application is served fails to serve a notice of response within the period of fixed under rule 4 (1) or such further time as may be agreed between all the parties or allowed by the Court, the applicant for a pre-trial review may apply to the Court to dismiss the action or strike out the defence, as the case may be, and, on the hearing of any such application, the Court may order the action to be dismissed on the defence struck out as the case may be and judgment to be entered accordingly or may make such other order as it thinks just.”

6.  On 13 July 2005, the Defendant's solicitors wrote to the Plaintiff's solicitors, asking the Plaintiff to apply for pre-trial review on or before 22^nd July, 2005, failing which the Defendant would apply for pre-trial review under Order 34, rule 2 of the Rules of the District Court.  On 20 July 2005, the Plaintiff's solicitors informed by letter the Defendant's solicitors that they would proceed with the application for pre-trial review within the next 14 days.  However, the Plaintiff did not apply for pre-trail review, and on 17^th January, 2006, the Defendant made the present application.

7.  The Plaintiff submits that the Plaintiff's application for leave itself explains that the Plaintiff's position, in that it is not ready to restore the pre-trial review hearing.  The underlying reasons for the amendment of those parts of the Statement of Claim spring from the very recent supply of the import documents regarding the Second Machine by way of the Defendant's Second Supplemental List of Documents dated 22 November 2005.  It is based on these import documents that a Chinese Legal Opinion was subsequently obtained and formally prepared on 23 February 2006.  Therefore, it is never the case that the Plaintiff has been showed a lukewarm in prosecuting its claim.

8.  To strike out the Plaintiff's claim and its Reply and Defence to counterclaim is a drastic step to be taken.  This Court should only make this order when there can be no other appropriate order to be made.  The Plaintiff indicated to the Defendant that it would apply for pre-trail review within the next 14 days from 20 July 2005, but it did not proceed with such an application.  The Plaintiff is slow in prosecuting its claim, but apparently this is not deliberate.  The appropriate order regarding the Defendant's that should be made is that unless the Plaintiff do file and serve a notice in response within 21 days from today, its Claim and Reply and Defence to counterclaim be struck out and that judgment be entered in favour of the Defendant as claimed in the counterclaim, together with costs, and I so order. 

Costs

9.  In respect of the Plaintiff's summons, I make an order nisi, to be made absolute in 14 days' time, that the Plaintiff is to pay costs of this application to the Defendant, to be taxed, if not agreed, with no certificate for Counsel.

10.  In respect of the Defendant's summons, I make an order nisi, to be made absolute in 14 days' time, that there be no order as to costs.