SKECHERS SARL v. ETERNITY INT’L FREIGHT FORWARDER (HK) LTD AND OTHERS

HCCL 5/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO 5 OF 2015

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AND

HCCL 6/2016

COMMERCIAL ACTION NO 6 OF 2016

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(Heard Together)

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D E C I S I O N

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Background

1.  On 17 February 2016, the 1^st defendant (“Eternity”) applied by summons to strike out the claims made against it by the plaintiff (“Plaintiff”) in HCCL 5 of 2015 (“HCCL 5”), on the ground that the Amended Statement of Claim dated 13 August 2015 (“Amended SOC”) discloses no reasonable cause of action, is embarrassing, scandalous and otherwise an abuse of the process of the court.

2.  On 10 June 2016, the Plaintiff filed its summons dated 12 May 2016 to further amend the Amended SOC, and to join 19 other parties as plaintiffs in the action.  This application is opposed by Eternity, on the basis that the amendments are not sufficiently formulated, that no explanation has been given by the Plaintiff as to why it seeks to depart from its originally pleaded and verified case, and that without the amendments, the Plaintiff’s claim in HCCL 5 is fatally flawed such that it should be struck out.

3.  On the striking out application, Eternity claims that the Plaintiff’s claim is made under the bills of lading (“Bills”) pleaded in the Amended SOC, but that it has no title to sue as it was not a party to the Bills.  It was only in the Re-amended Statement of Claim which the Plaintiff sought leave to be filed (“Re-amended SOC”) that the Plaintiff pleads that the proposed 2^nd to 20^th plaintiffs are the parties to the Bills, and that it seeks to rely on various assignments which purportedly took place between the Plaintiff and the additional plaintiffs.  Without the alleged assignments, Eternity claims that the Plaintiff has no title to sue in HCCL 5, that the Amended SOC discloses no cause of action, and the amendments sought to be made in the Re-amended SOC are for the purpose of saving the proceedings from being struck out.  Eternity claims that in these circumstances, the proper course is for the court to strike out the Amended SOC, but grant leave to the Plaintiff to amend (if there is a properly formulated amended claim), with costs to Eternity.

The pleaded causes of action

4.  On a detailed review of the Amended SOC, I accept the submissions and explanations made on behalf of the Plaintiff, that the cause of action relied upon and as pleaded in the Amended SOC is for Eternity’s misdelivery of goods under the Agreements pleaded in paragraph 4 (a) of the Amended SOC.  As defined in paragraph 4 (a), the “Agreements” are the contracts for shipment of goods, which Agreements were made orally and were evidenced partly in writing and partly by conduct.  The oral contract was the Plaintiff’s instructions to the defendants named in the action for the goods to be shipped.  The Agreements were evidenced in writing by the Bills, as pleaded in paragraph 4 (b) of the Amended SOC.  The conduct relied upon as evidence of the Agreements was the previous course of dealings between the Plaintiff and Eternity and /or the 3^rd defendant and/or the 2^nd defendant as agent - as pleaded in paragraph 5 of the Amended SOC.  This was the state of the pleadings as at the date of the Amended SOC.

5.  As pleaded, therefore, the Amended SOC discloses an arguable cause of action on the basis of the oral Agreements and the previous course of dealings allegedly between the Plaintiff and the defendants.  Eternity may claim that there are insufficient particulars of the oral agreements allegedly made, in which case it is open to Eternity to seek further and better particulars.  I do not agree that the cause of action is unarguably bad, such that it is plain and obvious that the Plaintiff’s claims should be struck out.  Whether the Agreements exist and can be established is a matter of evidence and proof at trial, and not for striking out (Mak Yiu v Chinachem Realty Ltd HCA 10335/1998, 17 November 1999).

The proposed re-amendments

6.  The defence raised, that the Plaintiff is not a party to the Bills, prompted the Plaintiff to apply to amend its pleading and to join the parties named in the Bills as the proposed 2^nd to 20^th plaintiffs. By the Re-amended SOC, the Plaintiff seeks to plead that the proposed 2^nd to 20^th plaintiffs are the shippers named in the Bills, but they had assigned to the Plaintiff their rights under the Bills and the contracts of carriage evidenced by the Bills.  The assignments were pleaded to be dated January, February and March 2015 (“Assignments”), before the date of the Writ in HCCL 5.

7.  Eternity claims that as the Plaintiff’s pleaded case is that its right of suit was transferred to it by reason of the Assignments, the Amended SOC discloses no viable title to sue without the Assignments.

8.  In the absence of a plea of any notice of the Assignments having been served on Eternity, it would appear on the face of the proposed Re-amended SOC that the Plaintiff is an equitable assignee.  I accept the submissions made on behalf of the Plaintiff, that an equitable assignee may sue in its own name (Allson Classic Hotel (HK) Limited v Harvest Star International Limited [1996] 2 HKLR 330), and that the plea of an assignment does not introduce a new cause of action (Asia-Pac Infrastructure v Shearman & Sterling [2012] 3 HKLRD 321, Beijing Tong Gang v Allen & Overy [2015] 4 HKC 391).  So long as the Assignments were in existence at the date of the Writ, they can be pleaded by way of amendment (Telecommunications & Technology v Outblaze Ltd HCA 2541/2009, 13 May 2011).  I also accept that no question of contractual time bar applies to the facts of this case, where the goods in question were delivered without production of the original Bills (Cheong Yuk Fai v China International Freight Forwarders [2005] 4 HKLRD 544 at 556 and Starlight Exports v CTO HCCL 55/2004, 19 July 2006).

9.  Eternity’s complaint is that the Assignments are not sufficiently pleaded.  Whether they are valid under the relevant governing law, whether they are supported by valid consideration, whether they were absolute assignments, whether their terms have been sufficiently pleaded and were clearly agreed, and whether the Assignments in fact took place before the Writ was issued (as is alleged), can be pursued by requests for further and better particulars, and are to be tested and established at trial.  On the whole, I consider that the pleadings of the Assignments are adequately formulated.  As Mr Smith SC emphasized, the Plaintiff had a cause of action which was constituted at the time when the Writ was issued and the Amended SOC was filed, in reliance on the verbal Agreements evidenced by the course of dealings between the Plaintiff and Eternity and the other defendants.  The assignors are joined as a matter of practice (Chitty on Contracts Vol 1 32^nd Ed, para 19-039 to 19-040), particularly when there is a dispute as to the validity or effect of the assignments sought to be relied upon.  In view of the  arguments already raised by Eternity, as to the consideration for the Assignments, their governing law, and whether the Assignments had actually been made, it cannot be said at this stage that the joinder of the assignors as plaintiffs would not be necessary.

10.  I do not consider that the amendments proposed by the Re-amended SOC introduce allegations which are inconsistent with the verified claims originally made in the Amended SOC, on the basis of the Agreements being partly oral and partly evidenced in writing and by conduct.  Eternity’s complaint, that the Plaintiff has failed to give an explanation for its need to make the amendments, by reference to para 20/13/1 Hong Kong Civil Procedure, is not established.

Application under O12 r 8A

11.  On 8 March 2016, the Plaintiff commenced HCCL6 of 2016 (“HCCL 6”) against Eternity and the same 2^nd and 3^rd defendants as in HCCL 5, with the same 2^nd to 20^th plaintiffs as those intended to be joined in HCCL 5.  The Writ in HCCL 6 has not yet been served on the defendants.  On 4 May 2016, Eternity issued a summons for HCCL 6 to be dismissed, under O12 r8A RHC. 

12.  Under O12r8A, a defendant may serve a notice on a plaintiff, requiring the plaintiff within a period not less than 14 days either to serve the writ, or to discontinue the action against the defendant.  If the plaintiff fails to comply with such a notice, the court may, on the application of the defendant, order the action to be dismissed or make such other order as it thinks fit. 

13.  O12 r8A (3) expressly provides that a summons for dismissal of the action “shall be” supported by an affidavit verifying the facts on which the application is based, and stating that the defendant intends to contest the proceedings, and that the copy of the affidavit “must be” served with the summons.

14.  Eternity’s summons issued under O12 r8A was served with the affidavit of Leung Wai Lim made on 3 May 2016.  Nowhere in this affirmation was it stated, on behalf of Eternity, that Eternity intended to contest HCCL 6.  If Eternity seeks an order in reliance on and by virtue of the provisions of O12 r8A, the requirements specified in r8A must be satisfied.  In the absence of an affidavit served with the summons, in which it is stated that Eternity intended to contest HCCL 6, Eternity is not entitled to the order or any relief sought.

Orders on striking out, amendment and dismissal applications

15.  This is not a plain and obvious case that the Amended SOC in HCCL 5 should be struck out.  Nor do I consider that there are grounds to refuse leave to the Plaintiff to re-amend the Amended SOC, in order to plead the Assignments and to join the 2^nd to 20^th plaintiffs.  Eternity’s application to strike out HCCL 5 is dismissed, and I grant leave to the Plaintiff on its application to join the 2^nd to 20^th plaintiffs and to re-amend the Amended SOC.

16.  Eternity’s application to dismiss HCCL 6 is likewise dismissed.

17.  On the question of costs, the usual and fair order on the amendment is that the costs of and occasioned by the application to amend are to be paid by the Plaintiff to Eternity in any event, and I so order.  This includes the costs reserved in the Order of 21 June 2016.     

18.  Eternity asks for the costs of the amendment to include those incurred for the hearing on 20 July 2016.  The Plaintiff resists an order for costs in respect of the hearing on 20 July 2016 for the amendment summons, on the basis that it should have been clear to Eternity, latest by the time of the Plaintiff’s summons to re-amend the Amended SOC, that no useful purpose would be served by persisting with its application to strike out HCCL 5. 

19.  The hearing on 20 July 2016 necessitated by the parties’ stance on the 3 applications was spent on arguments of the 3 different applications.  Eternity maintained that the Amended SOC survived the striking out application in HCCL 5 as a result only of the application to amend, such that it should be awarded the costs of the hearing of the striking out and amendment applications.  This is not entirely correct in view of my findings on the Plaintiff’s cause of action on the Agreements as pleaded in the Amended SOC. 

20.  As I have endeavored to make it clear to the parties and their legal advisers with cases on the Commercial List, they are expected to avoid unnecessary legal wrangle and to focus on preparations for an effective and early trial, in a manner which commercial men can understand and appreciate.  This is in addition to their duties under O1A r3 to assist the Court to further the underlying objectives of the Rules of the High Court.  Their disputes should be confined to matters of substance, and they should come to Court only with the most essential debate, in order to achieve the objectives of an effective Commercial Court for the prompt and efficient resolution of disputes for commercial men.

21.  It was not conducive to saving legal costs and avoiding delay for these 3 interlocutory applications to have been argued in court.  In the usual course, I would either have ordered the costs of any unnecessary application to be borne by the initiating party and the costs of an unnecessary hearing to be borne by an unreasonable party on an indemnity basis, or that each party is to pay its own costs unnecessarily incurred. 

22.  In view of the circumstances of these 2 actions and the final outcome of the hearing on 20 July 2016, with Eternity’s applications for striking out (of HCCL 5) and dismissal (of HCCL 6) and its resistance to the Plaintiff’s amendment application all being unsuccessful, I will order that Eternity is to pay the costs of the hearing, with certificate for Counsel.

23.  The costs awarded are to be summarily assessed, and the Plaintiff is to file and serve on Eternity a written statement of its costs within 7 days, and Eternity is to file and serve its response (if any) within 7 days thereafter.