FANG MENG SUNG, JOHN v. LUK MAN LOK ROCKY AND OTHERS

HCMP 1959/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1959 OF 2009

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BETWEEN

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J U D G M E N T

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1.  The issue that I need to consider in this application is whether the plaintiff’s Notice of Discontinuance (“the Notice”) filed on 29 July 2013 by which the plaintiff wholly discontinued the proceedings against the 2^nd and 3^rd defendants (“the Defendants”) is valid.  The issue is whether the plaintiff required leave to discontinue the proceedings.

2.  The Notice makes no reference to Order 21 rule 2. There is however no dispute that the Notice was issued under this rule.  The plaintiff takes the stance that he was entitled to discontinue the proceedings without leave under Order 21 rule 2(1), whilst the Defendants contend the otherwise, arguing that since this action involves multiple defendants, leave is required.

3.  The essential dispute mainly relates to the different interpretations of Order 21, rule 2(1) and (3) as to whether a plaintiff is entitled to discontinue an action without leave when multiple defendants are involved.

4.  Order 21, rule 2 (1) and (3) provide:

(1) “The plaintiff in an action begun by writ may, without the leave of the Court, discontinue the action, or withdraw any particular claim made by him therein, as against any or all of the defendants at any time not later than 14 days after service of the defence on him or, if there are two or more defendants, of the defence last served, by serving a notice to that effect on the defendant concerned.”

(3) “Where there are two or more defendants to an action begun by writ not all of whom serve a defence on the plaintiff and the period fixed by or under these rules for service by any of those defendant of his defence expires after the latest date on which any other defendant serves his defence, paragraph (1) shall have effect as if the reference therein to the service of the defence last served were a reference to the expiration of that period.”

5.  The unusual procedural history in this case seems to have given rise to this dispute, and it is therefore necessary to set it out briefly.

PROCEDURAL HISTORY

6.  The essential background facts have been helpfully outlined by both counsel in their written submissions.  For the sake of brevity, I will only set out those facts pertinent to the construction of these provisions.

(1) There are 3 defendants in this action originally instituted by way of an originating summons, which was subsequently converted into a writ action.  Thus the relevant provisions relating to a writ action in Order 21, rule 2 should apply.

(2) After the action was converted into a writ action, the 1^st defendant filed a defence but neither Defendant filed any acknowledgment of service or defence within the time stipulated by the court.

(3) Default judgments were therefore subsequently entered against the Defendants.

(4) On 10 July 2013, the court, upon application by the Defendants, set aside the default judgments unconditionally, and allowed the Defendants to file their defence and counterclaim by 7 August 2013.

(5) On 29 July 2013, the plaintiff filed and served the Notice.

(6) On 2 August 2013, the Defendants, in their insistence, filed a defence and counterclaim notwithstanding the issuance of the Notice.

PLAINTIFF’S ARGUMENTS

7.  Mr Vaughan, counsel for the plaintiff submitted that the Notice was valid as it was served before the Defendants filed their defence. Order 21 rule 2(1) therefore applied, and the plaintiff did not require leave to discontinue.

DEFENDANTS’ ARGUMENTS

8.  Mr Chan, counsel for the Defendants, contended  that the Notice was invalid on the following grounds:

(1) Default judgments having previously been entered before the court set them aside, the plaintiff had lost his right to discontinue the action, citing Re Fong Ching Lan, HCB 8046 of 2005, unreported, 26 October 2006, Chu J).

(2) Relying on Order 21 rule 2(3), Mr Chan further contended that the plaintiff’s right to discontinue was spent.  It was contented that under rule 2(3), the time limited for the plaintiff to discontinue the action without leave should have been the time the Defendants were originally required to file the defence before the entry of the default judgments.  Since that time had already passed, the plaintiff would be required to obtain leave to discontinue the action.

(3) The filing of the Notice was an abuse of process of the court as the plaintiff did not inform the Defendants of such intention at the setting aside hearing.

DISCUSSION

The default judgment argument

9.  In Fong Ching Lan, the plaintiff there filed a notice of discontinuance while there was still a subsisting default judgment. In this case, when the plaintiff filed the Notice, the default judgments against the Defendants had already been set aside.  I therefore respectfully reject Mr Chan’s submission.

The right to discontinue was spent argument

10.  Under Order 21 rule 2(3), where there are two or more defendants, as in this case, the time limited for a plaintiff to serve a notice of discontinuance without leave will be either :

(1) Not later than 14 days from the service of the defence last served or,

(2) If any defendant does not serve a defence, not later than 14 days from the date for which the service of such defendant’s defence expires;

Whichever is the later.

11.  In this case, neither of the above situations above applies.  The timetable for the filing of the defence was revived when the court set aside the default judgments, and fixed a fresh timetable for the serving of the defence.  Thus, the Defendants’ right to defend was granted by the court, and the time limit as specified in Order 21 rule 2(1) and (3), in my judgment, can be said to have been procedurally re-set again.

The abuse argument

12.  It was contended that a plaintiff’s right to discontinue is subject to the court’s power to eradicate any abuse of its process (Ernest & Young (A firm) v Butte Mining Plc [1996] 1 WLR 1605).  Mr Chan argued that from the procedural history of this case, it can be inferred that the plaintiff’s serving of the Notice is a clear abuse of process on the ground that the plaintiff never gave any indication that he would discontinue the action at any stage - neither at the contested hearing for the setting aside of the default judgments nor before the service of the Notice.

13.  Mr Vaughan agreed that the court has power to regulate its own process and prevent abuse.  However, it was submitted that the court is entitled to look at all the circumstances when a notice of discontinuance was served, and to consider what a plaintiff is attempting to achieve by issuing and serving the notice (Sheltam Rail Co (PTY) Ltd v Mirambo Holdings Ltd & Ano [2009] All ER 84).

14.  It was further submitted that there is no requirement in law that a plaintiff needs to give any indication before issuing and serving a notice of discontinuance.

15.  I am in respectful agreement with Mr Vaughan’s submission.  As both counsel correctly pointed out, a court is empowered to regulate its own process to prevent abuse by requiring leave even where the issuing of a notice of discontinuance does not otherwise require leave.  The only complaint of abuse in this case is the plaintiff’s failure in giving any indication of his intention to discontinue.  In my judgment, Order 21 rule 2 has been designed to provide a certain and fixed timeframe within which discontinuance of a claim may be filed without leave. In the circumstances, Mr Chan’s contention in relation to the need to give prior warning to the Defendants cannot be accepted.

16.  In this case, I am unable to find any evidence that the plaintiff’s serving of the Notice had been used to gain any unfair advantage or cause any prejudice to the Defendants.  Mr Chan is also unable to put forward any such evidence.  I therefore respectfully reject Mr Chan’s contention that the plaintiff’s failure in giving any indication per se constitutes abuse.

CONCLUSION

17.  For the foregoing reasons, I find that the Notice is valid. In coming to this conclusion, I am fully conscious of the inevitable consequence that the defence and counterclaim filed by the Defendants can no longer stand and that the Defendants would need to institute a separate action for their counterclaim.  Admittedly, it would be more procedurally economical and undoubtedly more desirable if the counterclaim can be allowed to be disposed of in the same proceeding together with the remaining claim against the 1^st defendant. Nonetheless, I believe that procedural economy may still be achieved even if a separate claim may later be issued by, for example, an application to consolidate such a claim with this action.

ORDER

(1) The notice of discontinuance dated 29 July 2013 issued by the plaintiff and served on the Defendants on the same day do stand effective as from its service on 29 July 2013.

(2) The defence and counterclaim of the Defendants filed on 2 August 2013 be expunged.

(3) There be a costs order nisi that the plaintiff do have the costs of the summons, including all costs reserved together with certificate for counsel. The costs are to be taxed if not agreed.  The Defendants’ own costs are to be taxed in accordance with the Legal Aid Regulations.

18.  Lastly, I wish to thank counsel for their able assistance.