S.K.K. (HK) CO LTD v. TSUI PO HING AND ANOTHER

HCA 16850/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 16850 OF 1998

____________

____________

_____________

D E C I S I O N

_____________

1.  This pre-trial review started on 29 June 2006.  It was not concluded.  I then took the view that the case was not properly prepared.  There were some issues which were only mentioned in the witness statement of the defendant but not pleaded in the amended defence; there were also issues in the amended defence which were not covered in the witness statements.  There was a counterclaim for outstanding commission due under some 30 contracts without any pleading of the basis for calculation or how much was outstanding.  There were also allegations of defects which were not properly pleaded.

2.  The plaintiff was then represented by both senior junior and junior counsel.  The defendant would be represented by senior and junior counsel at the trial.  I therefore anticipated that the amended defence and counterclaim would be re-amended and new witness statements to be filed to make good the deficiencies.  I therefore declined an informal application by the plaintiff to re-amend the reply.  I suggested that this proposed re-amendment should be deferred to until after the amended defence and counterclaim has been re-amended.  Mr Au, who appeared for the defendant, agreed that the amended defence and counterclaim would have to be re-amended. 

3.  I at that time also suggested that the case might not be ready for trial on 11 August 2006 and the four days scheduled would not be enough.  My then estimate was that, if properly prepared, the trial would take six days.  I proposed to vacate the trial date and allow the parties to put things in order first before fixing a new trial date.  However, this action was started in 1998 and the parties were eager to have it concluded.  They preferred to have the pre-trial review adjourned to today and see whether they could in the meantime tidy up everything and whether everything can be tried in the scheduled period.

4.  Yesterday I was given a draft re-amended defence and counterclaim and a draft supplemental witness statement by the first-named partner of the defendant.  In the draft re-amended defence and counterclaim, the defendant abandoned the unparticularised counterclaim for commission due under the 30 contracts.  The defendant instead put in a new counterclaim for $8,002,261.59 as outstanding payment for work done under 21 contracts.  I assume these 21 contracts are among the 30 contracts previously mentioned.

5.  In the amended defence and counterclaim there was also an unparticularised counterclaim for commission for painting materials sold by the plaintiff to the staff of the defendant's Beijing office.  That claim is also abandoned in the draft re-amendment.  In its place is a counterclaim for loss of profit of $669,530.50 on the ground that the defendant's Beijing office should not have ordered materials from the plaintiff direct but should have done so through the defendant.

6.  In addition, there is in the draft re-amendment a new counterclaim for loss of profit totalling $1,414,676.40 for sales made directly by the plaintiff to six customers in Shanghai allegedly in breach of the agency agreement between the plaintiff and the defendant. 

7.  In support of the new counterclaim for outstanding payment for work done under the 21 contracts, the defendant has prepared a schedule of the sums due.  This is like a Scott schedule and the plaintiff can state therein its case on this counterclaim and whether and to what extent the individual sums are being disputed.

8.  I am reminded that the plaintiff has, in its previously proposed draft re-amended reply, referred to a subcontracting arrangement between the plaintiff and the defendant with payment to be made by the plaintiff to the defendant on a back-to-back basis.  The plaintiff would pay the defendant a subcontracting charge upon its receipt of payment from the main contractor.  That averment was made not in response to any counterclaim for payment for work done.  That was a reply to a plea by the defendant that the plaintiff owed the defendant $16,101.42 as stated in an accounting document prepared for confirming the account balance.  The plaintiff's pleading of the back-to-back arrangement appeared to be for the purpose of saying that the $16,101.42 were not yet due because the plaintiff had not been paid by the main contractor.

9.  This morning Mr Chan for the plaintiff says that the case is not ready for trial on 11 August 2006 because the pleadings are not yet closed.  He will oppose any amendment to bring in the counterclaim under the 21 contracts, the counterclaim for loss of profit for sales to the defendant's Beijing office and the counterclaim for loss of profit for the sales to the six Shanghai customers.  His ground of opposition is limitation.  He says that it is only after the issue on the pleadings has been resolved that he can formulate the re-amended reply and defence to counterclaim.

10.  On the evidence, Mr Chan agreed that discovery has been completed for the 21 contracts.  However, for the new counterclaims for loss of profit, they are just being made and the plaintiff would have to go through its archive to consider what documents have to be disclosed.  He thinks that it is likely that there will be new discovery.  There will also be new witness statements to be filed for these new counterclaims.  He also estimates that the case as formulated now would take eight days to try.

11.  Mr Tong for the defendant disagreed.  He suggests that the issue of the re-amendment could be resolved in a short hearing of one to two hours or it may be postponed to the commencement of the trial.  In the latter case, the plaintiff would have to prepare a re-amended reply and defence to counterclaim on the assumption that leave would be given for the defendant to amend in terms of its draft re-amended defence and counterclaim.

12.  On the evidence, Mr Tong says that the claim under the 21 contracts are not foreign to the plaintiff as the plaintiff has already disclosed the 30 contracts in 2003 in response to the defendant's commission claim.  There is also the schedule on which the plaintiff can work and the plaintiff should work hard and not be dilatory despite the defendant's counterclaims being new.  Mr Tong further says that the plaintiff, in pleading the back-to-back arrangement in paragraph 2A of the previously submitted draft re-amended reply and defence to counterclaim, had already anticipated this new counterclaim.  On the new counterclaims for loss of profit, Mr. Tong says that there would not be much for the plaintiff to say. 

13.  He also does not think it difficult for the plaintiff to put in new witness statements as there are only three witnesses in this case, with two for the plaintiff and one for the defendant. 

14.  He also says that the action was started in 1998 and everybody should work hard so that it can be disposed of in coming August.  He also submits that with a detailed opening coupled with a good sense of counsel in conducting the trial, there is a reasonable prospect that the case can finish within four days. 

15.  Mr Chan, in reply, says that Mr Tong has over-simplified the matters.  He says that the back-to-back point was not raised to answer the new claims under the 21 contracts.  The plaintiff now has to look into these 21 contracts and the associated documents.  He agrees that he can work on the schedule but he needed time to do it properly.  Though the background and the relationship of the parties are not new, these counterclaims are all new.  Mr Chan thinks that the case cannot be finished in four days.

16.  I agree that nobody should be dilatory on the preparation of the case for trial.  However, despite the action having been started on 5 October 1998 and the defence and counterclaim filed on 17 December 1998, these new counterclaims are only formulated now.  These are major claims made for the very first time.  If anybody should be blamed for the delay, it is the defendant.  In the circumstances, I think the plaintiff should be given reasonable time to prepare its defence to these new counterclaims.

17.  There are indeed many things for the plaintiff to do.  All the documents referred to in the schedule in relation to the 21 contracts and all the figures as claimed thereunder will have to be scrutinised.  Instructions would also be required from the plaintiff's witnesses on these matters as well as on the new counterclaims for loss of profit.  After all these have been done, the plaintiff's lawyers will have to prepare re-amendments to the amended reply and defence to counterclaim and supplemental witness statements.  They also have to put down their observations on the matters in the schedule for the 21 contracts.  I do not think it reasonable to demand the plaintiff to do all these in the 23 days available before 11 August.  In fact, some time would also be needed for the preparation of the trial bundles and the detailed opening.  I think it would be asking too much from the plaintiff if I should allow the trial to start on 11 August.  It is also unfair to the plaintiff as it may not be able to prepare its defence to these new counterclaims properly. 

18.  I also agree with Mr Chan that as things stand, four days are not enough for the proper disposal of all matters.  I think the parties will be in a better position to estimate the length of the trial after all the preparation work has been done. 

19.  I therefore vacate the trial dates commencing 11 August 2006.  Since I have vacated the trial dates, the parties can now fix a day in due course for arguing the defendant's application to re-amend the amended defence and counterclaim.  I expect that the defendant would as usual take out a summons for this purpose.

(Submissions on costs)

20.  The costs for the part of the pre-trial review that took place on 29 June 2006 be costs in the cause.

21.  The costs of and occasioned by vacating the trial scheduled to commence on 11 August 2006 be paid by the defendant to the plaintiff.

(Further submissions)

22.  For the costs of today, Mr Au says that nobody could have done anything to avert it.  In fact, he said the defendant's solicitors have on 12 July furnished the plaintiff's solicitors a copy of the draft re-amendment and on the 14th, which was a Friday, a copy of the draft supplemental witness statement, but the plaintiff's solicitors did not respond until sometime at midday on Tuesday the 18th suggesting to vacate the trial.  Therefore, Mr Au argues that today's appearance could not have been avoided.  I do not agree. 

23.  In fact, after formulating these new counterclaims, the defendant should be fully aware of the need to vacate the trial so that time would be available for the parties to properly prepare for these new counterclaims and also for a new trial of a proper length to be fixed in due course.  It instead did not even respond to the plaintiff's suggestion of vacating the trial, and furthermore argues at full length that the trial should proceed on 11 August and to be conducted within the scheduled four days.  I think, even if the plaintiff should have suggested on the 14th that the trial be vacated and the pre-trial review be likewise vacated, given the attitude of the defendant, I do not think it would have taken a different view.  I think the defendant would still push for the trial to commence on 11 August and to be conducted within the four days scheduled.  I therefore order that today's costs be paid by the defendant to the plaintiff in any event.

(Further submissions)

24.  On the certificate for two counsel, since the defendant has seen fit to instruct leading and junior counsel to argue for the trial to take place as scheduled, I think it would not be right for me to say that the plaintiff should not be entitled to two counsel.  I order that there should be certificate for two counsel.

Withdrawal from position taken on commencement of limitation

25.  Since Mr Chan is neutral on whether I should allow the defendant to withdraw the position as taken by Mr Tong on the commencement of limitation period, I hereby allow the defendant to change its stance and to withdraw from the position taken by Mr Tong.  The position was only taken this morning and nothing has happened to the plaintiff's prejudice since then.  The defendant will be at liberty to argue the commencement of limitation period as it may think fit.