C & F GARMENT FACTORY LTD v. CARLSWAY INTERNATINAL LTD

DCCJ 719/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 719 OF 2004

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JUDGMENT

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1.  This is an application by the Defendant for leave to amend its counterclaim and to join Mr. Chan Fung Tao (“CFT”) and Mr. Chan Chat Bun (“CCB”) as Plaintiffs in the counterclaim.

2.  There is initially an application by the Defendant in the same summons for leave to add the director of the Plaintiff as defendant in the counterclaim.  At this hearing, Counsel for the Defendant had indicated that they are not seeking an order on this.

Background

3.  This proceedings commenced with the Plaintiff’s writ of summons issued on 10 February 2004 claiming against the Defendant for damages for breach of contract in the sale of goods.

4.  On 14 April 2004, the Defendant filed its Defence denying liability for any damages and counterclaimed against the Plaintiff for damages for breach of contract by the Plaintiff.

5.  The Defendant alleged that between 8 May 2006 to 11 May 2006, there were acts of criminal intimidation, harassment, nuisance and defamation (“acts of harassment”) by the Plaintiff’s agent,  a debt collector company to the Defendant and all its directors, CCB and CFT.  Injunctive orders were being sought by the Defendant on 12 May 2006.

6.  On 23 May 2006, the Defendant took out a summons for the amendment of the counterclaim by adding all the acts of harassment to it and for damages suffered as a result of these acts as well as adding CFT and CCB as plaintiff in the counterclaim.

The Defendant’s Case

7.  It is a guiding principle of cardinal importance on the question of amendment that all such amendment ought to be made for the purpose of determining the real question in controversy between the parties to any proceedings or of correcting any defect or error in any proceedings ((Hong Kong Civil Procedure 2006 Vol.1 at paragraph 20/8/6).  The court has a wide discretion to allow an amendment if it’s just at any stage (O.20 r.8 RDC).

8.  O.15 r.2(1) of RDC allows the Defendant to make a counterclaim in respect of any matter whenever and however arising.  A counterclaim may have arisen since writ and may be amended so as to add a cause of action which was not in existence at the date of the writ.

9.  The Plaintiff is liable for the acts of harassment done by its agent irrespective of whether the agent had acted outside the contract of service (Wong Wai Hung & Anor. V Hui Wei Lee [2001] 2 HKC 19).  The need to amend arises from the Plaintiff’s acts of harassment which is closely related to the original action.  There is no delay in making this application and there is no injustice in this case to allow the amendment.

10.  There is no hard and fast rule that the cause of action of the counterclaim must have been accrued before the date of the writ.  O.18 r.9 allows for matters arising after the issue of the writ to be pleaded.  The English case of Vax Appliances Ltd v Hoover [1990] RPC 656 also recognized the jurisdiction of the court to grant leave to amend the counterclaim even though the amendment will rely on a cause of action which does not exist at the date when the counterclaim was first made.  The Hong Kong case of Wing Siu Co. Ltd. v Goldquest International Ltd  [2003] 2 HKC 64 is a case concerning an amendment of a claim and cannot be taken as a general rule for amendment.  Moreover, this case is decided per incuriam since the case of Beecham Group v Norton [1997] FSR 81is not drawn to the court’s attention.

11.  As for joinder of parties under O.15 r.4, it is proper to join CCB and CFT as plaintiffs to the counterclaim as they are subject to the same acts of harassment and they are claiming the same relief.

The Plaintiff’s Case

12.  This application is opposed because the proposed amendment seeks to introduce into the counterclaim causes of action which did not exist at the date when the counterclaim was originally made.  The effect of O.18 r.9 RDC is not in dispute but leave to amend a counterclaim should be refused if the amendment brings in new causes of actions which accrued after the date of the writ (Chan Yuen Yee v Chan Chuck Kwong & Another [2005] HKLRD 416).  The case of Vax and Beecham are all considered in the case of Chan Yuen Yee.  This is clearly supported by the decision of the Court of Appeal in Wing Siu Co. Ltd. 

13.  The amendment sought by the Defendant in this case is effectively introducing a totally new cause of action and such an amendment should not be allowed.  In Factories Insurance Co. v Anglo-Scottish General Commercial Insurance Co. (1913) 29 T.L.R. 312, an action for losses and balance of account under an agreement of re-insurance, leave to amend the counterclaim by adding a claim for damages for libel, a new cause of action, was refused.  The case of Vax can be distinguished in that the amendment sought in that case is to add a declaration as an alternative to the original claim.  It is held that “the matters sought to be introduced by re-amendment were not a wholly new cause of action.  The amendments were relevant to the scope of the remedy by way of injunction which was claimed by the plaintiffs” (at Headnote).

14.  The Defendant’s application to join CFT and CCB as plaintiffs to the counterclaim is not as of right and they are not sufficiently connected to the original subject of the cause or matter as required under O.15 r.4 RDC. 

15.  To allow the amendment by the Defendant in bringing a new cause of action, grave prejudice will be caused to the Plaintiff.  The original action has been set down for trial in September 2006.  With the new claim being brought in, further discovery and exchange of statement is required.  This will delay the trial and not in the best interests of both parties.  The amendment involved a new cause of action concerning new plaintiffs and new defendants.  The proper course is for the Defendant to proceed their new claim by means of a new action.

Leave to Amend the Counterclaim

16.  O.20 r.5(1) RDC do give this court a wide discretion to allow an amendment of the counterclaim at any stage of the proceedings as long as it is just to do so.  O.18 r.9 RDC also allows a pleading to plead any matter which has arisen at any time, whether before or since the issue of the writ.  There is nothing on the face of O.20 R.5 that prevents a new cause of action being added by amendment, even if the new cause of action arose only after the issue of the writ.

17.  But the decision in the Court of Appeal in Wing Siu Co. Ltd. is authority in Hong Kong for the proposition that an amendment introducing the cause of action which has arisen following the issue of the writ is not permitted.  I am bound by the decision of the Court of Appeal.

18.  A counterclaim is to be treated, for all purposes for which justice requires it to be so treated, as an independent action.  If a plaintiff cannot plead a cause of action which comes after the writ, it seems to follow that a defendant cannot plead a cause of action which comes after the counterclaim because the counterclaim is what initiates the defendant's cross-action as the writ initiates the action.  The principles laid down in the case of Wing Siu Co. Ltd should also be applicable in considering an amendment to a counterclaim.

19.  The distinction had to be made between permitting an amendment which allows the real dispute in the case to be determined and one which introduces into the action a cause of action which could be said to be incurably bad because it did not exist at the date of the original claim.  In the case of Vax, the decision to allow the amendment of the counterclaim is on the basis that it did not constitute a wholly new cause of action.  This is clearly not the case here.  The amendment sought in this case involve the addition of new parties, either as plaintiff and defendant, as well as raising a new cause of action. 

20.  The Defendant’s argument that the allegation of the acts of harassment are closely related to the original action is unfounded.  The subject matter of the original claim and the amended counterclaim are totally different involving separate sets of facts and transactions.  In the circumstances, the application for amendment must be declined.

Leave to join CFT and CCB as plaintiffs

21.  Consequent upon the failure in the application for amendment, there is no valid ground for entertaining the Defendant’s application for joining its directors as parties in the counterclaim.  This application is also refused.

Costs

22.  There is no reason why costs should not follow the event.  I order that the Defendant do pay the Plaintiff costs of this application, with certificate for counsel, to be taxed if not agreed.  This is an order nisi to be made absolute upon expiry of 14 days.