SUPPLY CHAIN & LOGISTICS TECHNOLOGY LTD v. NEC HONG KOGN LTD

HCA 1939/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.  1939 OF 2006

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R U L I N G

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1.  The action was scheduled for trial before this court from 13 to 17 October 2008.  There were claims and counterclaims.

2.  On 4 October 2008, the Plaintiff filed a Notice of Discontinuance in respect of the claim.  On 8 October 2008, the Defendant filed a Notice of Discontinuance in respect of the counterclaim.  There was however no application for leave under Order 21 Rule 3.

3.  Parties do not reach any agreement on costs.  The Plaintiff says there should be no order for costs for both the claim and the counterclaim.  On the other hand, the Defendant says the Plaintiff should pay the Defendant’s costs on the claim whilst there should be no order as to costs for the counterclaim.

4.  The claim of the Plaintiff is for damages for breaches of two separate agreements: an agreement in February 2006 to purchase certain equipments from the Plaintiff and engage its consultancy service [“the February Agreement”]; and an agreement made in April 2006 to supply some mounting kits and to provide consultancy services to Defendant [“the April Agreement”].  There is also a claim for procurement of breach of contract in that the Defendant obtained supply of goods from the end-supplier in breach of a distributorship agreement between the Plaintiff and the end-supplier.

5.  The counterclaim of the Defendant is in respect of damages arising from defective goods and services supplied under the April Agreement.  The Defendant denies there was any February Agreement.  It also denies it has any knowledge as regards the terms of the distributorship between the Plaintiff and the end-supplier.

6.  Since the notices of discontinuance were not served within the time prescribed under Order 21 Rule 2, the notices did not operate as discontinuance automatically.  By reason of Order 21 Rule 3, the claim and the counterclaim cannot be discontinued without leave of the court.

7.  For the same reason, Order 62 Rule 10 and Rule 3(7) are not applicable.

8.  However, it does not mean that the notices of discontinuance have no effect whatsoever.  Since the notices were served and filed, they were intimation by the Plaintiff that it had no intention to pursue the claim and intimation by the Defendant that it had no intention to pursue the counterclaim.

9.  The court acted on such intimations to order the trial dates being vacated. 

10.  Applying the principle in Grovit v Doctor [1997] 1 WLR 640, it would now be an abuse of process if parties wish to revive the claim or counterclaim.

11.  However, since the discontinuance are not effective without the leave of the court, the court retains jurisdiction over the question of costs.

12.  In a letter of 9 October 2008, solicitors for the Defendant submitted that leave was granted by implication due to the vacation of the trial dates.  I do not accept that submission.  The trial dates were vacated in view of the intimations by the parties to the court that they had no intention to pursue the claim and the counterclaim respectively.  It was envisaged that question on costs can be dealt with on papers.  There was no application for leave to discontinue the action and such leave cannot be granted by implication.

13.  Notwithstanding lengthy submissions in correspondence from the Defendant’s solicitors (whilst the Plaintiff’s solicitors simply stated the Plaintiff’s position on costs without any submissions), there was no reference to relevant cases on the court’s approach on costs in an application for leave to discontinue.  In particular, the following cases were not discussed in the written submissions: Inchroy Credit Corp Ltd v Cheung Man Cheung [1992] 1 HKLR 120, Trend Publishing (HK) Ltd v Vivien Chan & Co [1996] 2 HKLR 227 Leung Yuet Ching v Leung Yuet Kuen [2001] 4 HKC 562 and Terkildsen v Barber Asia Ltd [2007] 4 HKLRD L3, HCA 1963 of 2003, 6 June 2007.

14.  In the circumstances, unless the parties indicated otherwise in writing within 14 days, this court will treat the correspondence as applications for leave to discontinue the claim and the counterclaim under Order 21 Rule 3.  Further, unless this court otherwise directs, the applications for leave will be dealt with on papers and written submissions (including submissions on the above cases and on all conditions that the court should impose on granting leave) shall be filed within 14 days.