JOTRON AS (FORMERLY KNOWN AS JOTRON ELECTRONICS AS) v. STANLEY CHANG t/a HONG KONG INSTECH TRADING CO

HCA 378/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 378 OF 2010

(Transferred from DCCJ No. 3369 of 2009)

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J U D G M E N T

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1.  There are 3 summonses before me:

(1)  The plaintiff’s summons dated 31 March 2011 for an order that the plaintiff discontinue the balance of the plaintiff’s claim on certain terms (“the discontinuance summons”);

(2)  The plaintiff’s summons also dated 31 March 2011 for an order that the counterclaim be struck out on the ground that it is an abuse of the process alternatively, that the counterclaim be stayed on the ground of forum non conveniens (“the strike out or stay summons”);

(3)  The defendant’s summons dated 4 March 2011 for an order that leave be granted to re-amend the re-amended defence and counterclaim in the terms of the draft re-re-amended defence and counterclaim (“the leave to re-amend summons”).

2.  Mr Wright, for the plaintiff, submitted that the court should grant the applications in the discontinuance application and the strike out or stay summons.  He further submitted that if the applications in the strike out or stay summons were dismissed there would be no objection to the leave to re-amend summons.

Background

3.  The plaintiff’s action was instituted in the District Court.  It was transferred to the High Court pursuant to an order made on 23 February 2010. 

4.  As set out in the plaintiff’s re-amended statement of claim, the plaintiff’s claim is a claim for the balance of the price of goods sold and delivered by the plaintiff to the defendant.  The total amount claimed is NOK302,877.35.  There is also a claim for the return of 2 APM modems alternatively, their value in the sum of NOK29,500.

5.  The plaintiff is a company incorporated in Norway.  It carries on business as a supplier of radar marine equipment.

6.  The defendant was a purchaser of the plaintiff’s equipment.

7.  On 3 August 2009 the plaintiff was granted an ex parte Mareva order against the defendant by Judge Dufton with costs reserved.

8.  On 12 August 2009 on the plaintiff’s inter partes application to continue the Mareva order, Judge Chow continued the ex parte Mareva order until trial or further order.  He also ordered that costs of the application be costs in the cause.

9.  Before the action was transferred to the High Court the plaintiff applied in the District Court by summons dated 25 August 2009 for judgment based on admissions made by the defendant in his defence.  The plaintiff applied for judgment in the sums of NOK253,432 + NOK29,500 + NOK10,000 the total amount of which was NOK292,932.

10.  The application for judgment on admissions came before Judge Chow on 16 November 2009.  He ordered that judgment be entered for the plaintiff against the defendant for the sum of NOK253,432 with interest and also made an order nisi that the defendant do pay the costs of the application.  His reasons for decision are contained in the decision dated 16 November 2009.  Judge Chow dismissed the application for judgment for the other 2 sums of NOK29,500 and NOK10,000 (paragraphs 7 and 8 of his decision).

11.  At paragraph 10 Judge Chow said

“ The Plaintiff asks for costs of the action including costs reserved, to be awarded to the Plaintiff. This case has not been completely adjudged, because under Defence 3, there is a counter-claim. So it is inappropriate to make an order of costs in relation to the entire action.”

12.  There was no appeal from the decision of Judge Chow.

13.  The defendant’s counterclaim is for damages and injunctive relief in respect of defamatory statements made by the plaintiff.  This was first contained in his counterclaim filed on 30 August 2009.  

14.  As is set out in the draft re-re-amended defence and counterclaim (“the RRADC”) the defendant relies on emails and warning letters published on or about 19 March 2009 by the plaintiff to its own agent in Hong Kong as well as to friends and business associates containing the words which are pleaded and which are defamatory of the defendant. 

15.  Registrar Lung made an order by consent on 27 September 2010 that judgment be entered for the plaintiff for the return of the 2 APM modems within 60 days.  An order was also made by consent that the plaintiff do have leave to amend the statement of claim.  By the re-amended statement of claim filed on 29 September 2010 the plaintiff maintained its original claim of NOK302,877.35 and the return of the 2 APM modems or alternatively, their value in the sum of NOK29,500.

16.  On the plaintiff’s application in the case management summons filed on 30 July 2010 Registrar Lung also ordered by consent on 27 September 2010 that the proceedings be stayed for 3 months for mediation and he gave directions for the further conduct of the action if the mediation failed or at the expiration of 3 months whichever should first occur.  The case management conference was adjourned to 13 April 2011.

17.  The plaintiff issued a further summons dated 27 October 2010 to seek an order

“1. The costs of ex-parte Mareva Order dated 3^rd of August 2009; which were reserved and the costs of the inter-partes Mareva Order on the 12^th day of August 2009 which were ordered to be costs in the cause be paid to the Plaintiff forthwith, such costs to be taxed if not agreed.

2. The Plaintiff having succeeded on their applications for Judgment on the Defendant’s admissions on the :-

(i) 16^th November 2009 as to NOK253,432;

(ii) 27^th September 2010 for the return of the 2 Modems within 60 days (NOK29,500) with costs to the Plaintiff in any event.

that subject to paragraph 3 below, the Plaintiff has largely succeeded in its claims and the Defendant should pay the costs of the action.

3. The balance of the Plaintiff’s claim for NOK10,000 be transferred to the Small Claims Tribunal.

4.     Costs of this application be to the Plaintiff.”

18.  On 4 January 2011 Deputy Judge Au Yeung dismissed the plaintiff’s summons dated 27 October 2010 as amended with costs to the defendant.

19.  There was no appeal from the said order of Deputy Judge Au Yeung.

20.  By the discontinuance summons the plaintiff seeks an order that the plaintiff discontinue the balance of the plaintiff’s claim in the sum of NOK10,000.

“ on terms that the Plaintiff has an immediate costs order for taxation in respect of the Ex-parte and Inter-parte Summons; Orders for which were made on 3^rd day and 12^th day of August 2009 and which costs were respectively reserved and ordered to be in the cause.”

21.  It seems to me to be plain that Judge Chow has already decided that the costs of the ex parte and the inter partes Mareva orders should await the determination of the counterclaim (paragraph 10 of his decision).  There was no appeal from his decision.

22.  Further, by the order of Deputy Judge Au Yeung of 4 January 2011 the plaintiff’s application for an immediate costs order for taxation in respect of the ex parte and inter partes Mareva orders was also dismissed.  There was also no appeal from her order.

23.  In the circumstances I see no valid basis for making an order that the plaintiff discontinues the balance of its claim on the terms as sought by the plaintiff.  It has already been decided that the plaintiff should not get an immediate costs order for taxation of costs of the application for the ex parte and inter partes Mareva orders.  Whether the plaintiff should get those costs or not must await the determination of the counterclaim.  I dismiss the plaintiff’s application.  

The strike out or stay summons

24.  The plaintiff applies to strike out the counterclaim on the sole ground that it is an abuse of the process.

25.  There is no dispute that the publication takes place where the statement is seen or received by another person (Emperor (China Concept) Investments Ltd v SBI E-2 Capital Securities Ltd HCA 2686/2004 10 January 2006).

26.  The plaintiff relies on Jameel (Yousef) v Dow Jones & Co. Ltd [2005] QB 946.  In that case the claim for libel was struck out as an abuse of the process of the court.  It was held in that case inter alia that the publication within the jurisdiction was minimal and did not amount to a real and substantial tort within the jurisdiction.

27.  Jameel’s case is clearly distinguishable and provides no assistance to the plaintiff.  The court was there dealing with inter alia the  summary dismissal of the claim pursuant to s. 8(2) of Defamation Act 1996 which provided that the court may dismiss the claim if it appears to the court that it has no realistic prospect of success and there is no reason why it should be tried.  There is no similar statutory provision in Hong Kong.

28.  Mr Wright, very properly, drew my attention to the judgment of the Court of Appeal in Wong Wing Ho v Chong Lai Wah and another (CACV 212/2007, 13 February 2008) where the Court of Appeal declined to follow the approach in Jameel.

29.  It is clear that the court should exercise its power to strike out a pleading under O.18; r. 19(1) RHC only in plain and obvious cases.  As is set out at paragraph 18/19/4 Hong Kong Civil Procedure 2011, the claim must be obviously unsustainable and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out.  The mere fact that the case is weak and not likely to succeed is no ground for striking it out.

30.  It was further submitted that there was no link to the alleged loss suffered by the defendant and the alleged defamatory emails and warning letters.  I disagree. 

31.  As is set out in the evidence of the defendant in his 2^nd  affirmation, since about October 2008 the plaintiff has refused to supply goods to the defendant.  Since then the defendant has been purchasing the plaintiff’s goods from the plaintiff’s agent in Hong Kong whenever he received purchase orders from his customers in the Mainland.  However, after publication of the defamatory emails and warning letters on or about 19 March 2009 even the plaintiff’s agent refused to supply goods to the defendant.  He explained that because of the defamatory emails and warning letters he has been unable to obtain supplies of the plaintiff’s goods to sell to his customers causing him loss and damage.  

32.  The defendant explained that the Zhuhai company in the Mainland was set up and held by his siblings for him. He said that the Zhuhai company was set up because his firm in Hong Kong is regarded as a foreign company in the Mainland and as such cannot sign contracts with Mainland companies or issue invoices in the Mainland.  That being so, in order to sell the plaintiff’s goods in the Mainland contracts have to be signed in the name of a Mainland company, namely the Zhuhai company.  It is the defendant’s case that there was a drop in the turnover in the business of the Zhuhai company since 2009 and hence a loss of profits because of the defamatory emails and warning letter published by the plaintiff.  His case is that it was the defendant who had suffered the real loss.  

33.  It seems to me that the question of damages including whether the damages claimed are too remote are matters to be determined in the assessment of damages at trial.  I would also observe that apart from damages injunctive relief is also claimed.

34.  It seems to me that on the matters pleaded in the RRADC and the evidence of the defendant in his 2^nd affirmation I am not satisfied that the court should strike out the counterclaim.  The plaintiff has failed to satisfy me that that it is plain and obvious that the counterclaim should be struck out on the only ground relied on namely, that it is an abuse of the process of the court.

35.  I would dismiss the application to strike out the counterclaim.

36.  The application for a stay of the counterclaim is made on the ground of forum non conveniens in that the Mainland is the more appropriate forum to pursue the counterclaim.

37.  The applicable principles are well settled and are set out in Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460, [1986] 3 All ER 843.  As Recorder Ma SC (as he then was) said in Rambas Marketing Co. LLC v Chow Kam Fai David [2001] 3 HKC 250 at 254 the 3-stage approach is

“(I) Is it shown that Hong Kong is not only not the natural or appropriate forum for the trial, but that there is another available forum which is clearly or distinctly more appropriate than Hong Kong (p. 986H). The evidential burden is here upon the applicant. The emphasis is upon ‘appropriate’ rather than ‘convenient’ because this is not simply a matter of practical convenience. The purpose is to identify the forum ‘with which the action has the most real and substantial connection’ per Lord Keith in the Abidin Daver [1984] AC 398. The principal factors are enumerated at p. 987D. Failure by the applicant at this stage is normally fatal.

(II) If the answer to (I) is yes, will a trial at this other forum deprive the plaintiff of any ‘legitimate personal or juridical advantages’? (pp. 987F, 991-3). The evidential burden here lies upon the plaintiff (pp. 986A and 987G).

(III)     If the answer to (II) is yes, a court has to balance the advantages of (I) against the disadvantages of (II), Abidin Daver per Lord Brandon at p. 419.  Deprivation of one or more personal or juridical advantages will not necessarily be fatal to the applicant provided that the court is satisfied that notwithstanding such loss ‘substantial justice will be done in the available appropriate forum’ (p. 991H).  The court must try to be objective (p. 991F).  Proof of this, which can fairly be called the ultimate burden of persuasion, rests upon the applicant for the stay.  By these means he establishes that on balance the other forum is more suitable ‘for the interests of all the parties and the ends of justice’.  This may be another way of saying that the plaintiffs’ choice of forum has been shown to be so inappropriate as to deserve the pejorative description of ‘forum-shopping’ and to be restrained accordingly, cp. Lord Reid in The Atlantic Star [1974] AC 436.”

38.  Of the 5 publications alleged by the defendant to have been made by the plaintiff, 4 of them took place in the Mainland.  There is no dispute that one publication took place in Hong Kong which was the publication allegedly made to the plaintiff’s agent.  There can be no doubt that the alleged publication which took place in Hong Kong is an actionable tort in Hong Kong.

39.  The first question to consider under the 3-stage approach is whether it is shown that Hong Kong is not only not the natural or appropriate forum for the trial but that there is another available forum which is clearly or distinctly more appropriate than Hong Kong.

40.  It is clear that the jurisdiction in which a tort has been committed is prima facie the natural forum for the determination of the dispute (The Albaforth [1984] 2 Ll. Rep. 91; Emperor (China Concept) Investments Ltd).

41.  It seems to me that the publication in Hong Kong by the plaintiff of the defamatory statements is a separate tort so as to permit the bringing of an action in Hong Kong in respect of that publication.  It is clear that Hong Kong is the natural forum for the trial.  In my view, the answer to the first question in the 3-stage approach is “No.”.  That being so, it is not necessary to go on to consider the second and third stage questions.  

42.  I would also observe that although the counterclaim was filed on 30 August 2009 it was not until the strike out or stay summons was issued on 31 March 2011 that the plaintiff sought a stay of the counterclaim.  There have already been case management hearings with the next case management hearing scheduled for 13 July 2011 before Registrar Lung.  There has obviously been delay in applying for a stay.  This would be a factor to bear in mind in the exercise of the court’s discretion.  The delay, however, would not be a determinative factor in my view.

43.  I would dismiss the application to stay the counterclaim.

Conclusion

44.  The strike out or stay summons is dismissed.

45.  I grant leave to the defendant to re-amend the re-amended defence and counterclaim and make an order in terms of the leave to re-amend summons.

46.  I also make an order nisi that:

(1) the plaintiff do pay the defendant his costs of the discontinuance summons and the strike out or stay summons such costs to be taxed if not agreed;

(2) the defendant do pay the plaintiff its costs of the leave to re-amend summons such costs to be taxed if not agreed.