KOSON MACHINERY CO LTD v. MILLION HOPE INDUSTRIES LTD

DCCJ 2635/2016

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2635 OF 2016

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D E C I S I O N

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1.  This is my decision on costs, arising out of an application taken out by the plaintiff to strike out part of the defence and counterclaim[1] or alternatively the disputed parts of the counterclaim be disposed of by a separate action on the ground that it may prejudice, embarrass or delay the fair trial of the action, pursuant to O.15, r.5 and/or O.18, r.19 of the Rules of the District Court.

2.  The parties are able to agree on the disposal of the plaintiff’s application for striking out by way of amending the defence and counterclaim to delete the disputed parts, leaving the costs issue. 

3.  The plaintiff’s case is claiming for hiring charges of crane in the sum of HK$182,580.  The defendant raised counterclaims, including set-off for being costs for replacing the scratched glass panel and other losses. 

4.  The plaintiff is claiming the defendant for two agreements, namely, the November 2013 agreement and December 2013 agreement, while the defendant’s counterclaim is for the cost of damaged glass panel amounting to HK$189,440.67.  In other words, the defendant has raised a complete set-off by counterclaiming damages to glass panel in the subject two contracts.

5.  The defendant also included another contract, namely, 21 February 2014 agreement, which involves another construction work took place in another site involving another subcontractor of the plaintiff, namely, Ah D Transportation Company Limited. 

6.  Regarding the third agreement, the work took place in the construction site situated at Siu Lam, Tuen Mun.  A fatal accident happened when a falling boom of the crane hit one of the workers in the construction site.  The defendant and other parties were prosecuted by the Labour Department.  Therefore, the defendant counterclaimed the plaintiff for the fine in the criminal case, legal costs, expert fees, other disbursements incurred in defending the criminal summonses, and also contra charges imposed by the main contractor of the Tuen Mun construction case.  Such counterclaims arising out of the third agreement are the issues of the plaintiff’s striking out application (“the Disputed Counterclaims”).

7.  The basis of the defendant’s inclusion of the third February agreement is on equitable set-off, despite that the defendant has raised complete set-off for the first two agreements.

8.  For equitable set-off to apply, it must be established that the counterclaim is closely connected with the same transaction as that giving rise to the claim and the relationship between the respective claims is such that it would be manifestly unjust to allow one to be enforced without regard to the other (Esso Petroleum Company Limited v Milton [1997] WLR 938).

9.  The defendant submitted that during the period between February 2013 and April 2014, by way of various purchase orders, the plaintiff and defendant entered into a series of transactions for provision of mobile crane hiring services provided by the plaintiff through its subcontractors at various construction sites, where the defendant carried out installation of aluminium fixtures.

10.  It further submitted that the plaintiff’s claim for the sum under the November and December 2013 agreements and the defendant’s counterclaim for loss and damages suffered under the 21 February 2014 agreement are the dealings and transactions which gave rise to the subject matter of the claim.  The parties under the three agreements are the same and performed the same role. 

11.  Therefore, the defendant submitted that three agreements are so closely connected and it would be manifestly unjust to allow the plaintiff to recover under the first two agreements without taking into account the defendant’s right to set off in equity in respect of the last one.

12.  The plaintiff, on the other hand, invites the court to look at the procedural convenience in deciding whether to sever the Disputed Counterclaims.

13.  One of the Disputed Counterclaims is about the common law claim brought by the estate of the deceased of the fatal accident that took place at the Tuen Mun construction site.

14.  There is a letter dated 9 June 2017 from the defendant’s solicitors, stating that the estate of the deceased has commenced the HCPI 84/2017 against the defendant and other parties.  In that letter, the defendant indicated that it will claim against the plaintiff for all the loss and damages arising out of and relating to the said action.

15.  The defendant’s counterclaim against the plaintiff for the February agreement is based on the plaintiff’s breach of that agreement by failing to provide a competent mobile crane operator and failing to ensure plaintiff’s subcontractor Ah D Transportation Company Limited to provide a competent mobile crane operator.  No doubt these issues would be issues in the HCPI action.

16.  In light of the defendant’s letter indicating its intention to claim against the plaintiff arising out of the fatal incident and the overlapping issues of the Disputed Counterclaims and the HCPI case, it must be more appropriate to deal with the Disputed Counterclaims together with the HCPI case in one go, as it is anticipated that same witnesses from that construction site would be involved.

17.  Besides, the counterclaim arising out of the 21 February 2014 agreement exceeds the monetary jurisdiction of District Court.  In any event, such part of the counterclaim could not be dealt with in this court and has to be dealt with by the High Court.

18.  So if the Disputed Counterclaims are allowed to remain in the present action, it will inevitably embarrass or delay the trial or is otherwise inconvenient. Therefore, the defendant should not have commenced the Disputed Counterclaims in the present case in the first place.

19.  I would like to add that, apart from the same parties, I could not see close connections between the 21 February agreement with the previous two agreements, as the last one took place in a different construction site involving different workers and different subcontractors and, most importantly, the issue is about a fatal accident.

20.  In the circumstances, I find that the concession made by the defendant to amend the defence and counterclaim by deleting the disputed parts is, in effect, a withdrawal of those parts, and the plaintiff in this regard shall be regarded as successful in the summons.

21.  Therefore, I order costs should follow the event that the costs of the plaintiff’s application be to the plaintiff.

(Discussion re certificate for counsel and costs)

22.  Upon hearing parties’ submissions on certificate for counsel and costs, I order that costs of the application be to the plaintiff with certificate for counsel, agreed at HK$54,000, payable within 28 days hereof.