HOPEFUL MEAT LTD v. TAI PO FROZEN MEAT CO LTD
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DCCJ 15918/2000
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION
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BETWEEN
| HOPEFUL MEAT LIMITED | Plaintiff | |
| TAI PO FROZEN MEAT COMPANY LIMITED | Defendant |
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Coram: Deputy Judge J. Lam sitting in Chambers
Dates of Hearing: 29th - 30th June 2004, 9th October 2004 and 16th October 2004
Date of Handing Down Judgment in Chambers: 8th November 2004
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JUDGMENT
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1. The present application is filed by Defendant for amending its defence and its counterclaim after Plaintiff has closed its case and Defendant has opened its in the trial. Plaintiff objects to such application.
Chronology
1a. Plaintiff filed a Writ with a Statement of Claim on 3.4.2000. Defendant filed a Defence & Counterclaim on 2.5.2000. Plaintiff then filed a Reply & Defence to Counterclaim on 12.6.2000, and on 18.3.2004 an Amended Reply & Defence to Counterclaim.
2. The trial started on 20.4.2004. On the second day (21.4.2004), Plaintiff closed its case after calling its only witness, Mr. Chun Kwok Wing ('Mr. Chun'). Defendant also opened its case, indicating Mr. Lam Yuk On ('Mr. Lam') would be called as an extra witness other than Mr. Chong Hau Sai Jimmy ('Mr. Chong'). As such, Plaintiff was granted liberty to re-call Mr. Chun, if it need be. The case then went part-heard due to insufficient time.
3. Owing to the court's commitment to other cases firmly fixed, the matter could only be set down for continual hearing on 29-30.6.2004. Both parties were directed to make a joint effort to prepare a schedule of what goods had been ordered, paid and taken under individual contracts or sales in question.
4. On 17.6.2004, Defendant file a summons to apply for leave to amend its Defence & Counterclaim. Both counsel made extensive submission on the return dates of 29-30.6.2004 before Defendant was granted leave to adjourn for filing affirmations in support of its application. Plaintiff was awarded costs of those two days' hearing.
5. Defendant filed two affirmations from Mr. Chong, dated 7.7.2004 and 21.7.2004 respectively. Plaintiff filed one affirmation dated 14.7.2004 from Mr. Chun.
6. Again due to the court's listing and counsel's diary, the argument on amendment could only resume on two Saturdays in October, i.e. 9.10.2004 and 16.10.2004. Counsel made further submission. Judgment was reserved.
The Original Defence & Counterclaim
7. Plaintiff's case is that Defendant failed to take delivery of the goods ordered under 6 contracts and 4 sales. The goods were perishable frozen meat. Before the expiry dates of consumption, Plaintiff sold them and ordered replacement from the suppliers to refill the stock in the warehouse. Plaintiff holds Defendant liable for the price of the goods ($315,100.55) and the costs incurred over a period of more than 4 years for storing the original goods and their replacement ($69,549.65 plus $375,969; calculation stopped at 28.2.2004 according to para. 8 of Plaintiff's Opening). Defendant, however, says Plaintiff instructed the warehouse not to let Defendant take delivery. Defendant says it owned the property of the goods so Plaintiff had wrongfully interfered with its property. Defendant suffered loss and now counterclaims for damages ($194,028 plus $162,043 plus $77,510.6).
The Proposed Amendment
8. On 17.6.2004, Defendant filed an application to amend its Defence & Counterclaim. The amendment is substantial. To summarize, Defendant wants to make changes to:
a. Particulars
The Defence & Counterclaim is almost re-written. A lot of details are supplied. Some are general particulars that go to the background of the case; others are pertinent to the amendment of defence and of counterclaim.
b. Defence
Defendant now wants to plead repudiation on the part of Plaintiff when the latter instructed the warehouse not to let Defendant take delivery of the goods on or about 17.9.1999. Defendant accepted the repudiation on or about 18.9.1999. Defendant alternatively pleads that if it were Defendant that had breached any contract, Plaintiff was nevertheless under a duty to mitigate the loss. (Defendant also says in para. 3(gg) of the amendment that there was mutual release of obligation when Plaintiff accepted Defendant's cheque of HK$22,854.9 in October 1999. However, on 16.10.2004, Defendant dropped this 'Mutual Release of Obligation' argument in court as Defendant concedes it is inconsistent with its act of counterclaim.)
c. Counterclaim
Defendant adds to its counterclaim a sum of $77,510.6, being the amount it was adjudged to pay for the countermanded cheque of $64,399 plus interest $13,111.6. The award was made by another judge in an interlocutory hearing for summary judgment on 17.4.2001. Defendant paid accordingly on 24.10.2001 but Plaintiff never delivered the goods covered by such payment.
Affirmations
9. During the adjournment in June 2004, Mr. Chong filed 2 affirmations on behalf of Defendant, dated 7.7.2004 and 21.7.2004 respectively. In the first one, he narrates the development of the quarrel between both sides in 1999. He explains why Defendant only sent a cheque of $64,399 to Plaintiff, being $32,200 less than Plaintiff's demand of $96,599 (which should be $96,599.4 to be exact).
10. On or about 17.9.1999, Mr. Lam (an employee of Plaintiff in 1999 but no longer working for Plaintiff now) told him that Defendant could not take delivery of any goods from the warehouse unless Defendant made full payment of Plaintiff's demand. On or about 18.9.1999, Defendant informed Mr. Lam verbally that it would stop all business with Plaintiff immediately.
11. On or about 28.9.1999, Mr. Chong asked Mr. Chun to provide Defendant with an updated statement and a current stock list so as to calculate all the liabilities between both sides. He also instructed the bank to stop payment of the $64,399 cheque, which had been sent to Plaintiff earlier.
12. On 11.10.1999 and 12.10.1999 respectively, Mr. Chong got from Plaintiff the two documents he asked for. The demand by Plaintiff as stated then was $185,618.2. Mr. Chong calculated the value of the stored goods (which he believed as having been paid already) to be $162,763.38. He thus issued a cheque of $22,854.9 with a cover note for full and final settlement of all that was owed to Plaintiff. Plaintiff credited the cheque but continued to send demand notes to Defendant.
13. In late October or early November 1999, Mr. Chong called Mr. Chun, who insisted on Defendant's taking delivery of the goods but only upon full payment as demanded by Plaintiff. Mr. Chong offered to purchase the goods again at the original price but refused to pay the storage charges. The negotiation broke down. Then came the legal proceedings.
14. Defendant instructed Mr. King Wong ('Mr. Wong'), counsel now appearing for Defendant, only on 19.4.2004. (The original pleading was settled by another counsel in May 2000.) In the morning on 20.4.2004, Mr. Chong was advised by his lawyers that amendment to Defence & Counterclaim might have to be made, depending on whether the property of the goods had been passed to Defendant or not. He was also advised of the legal implication. At that stage, Mr. Chong told his lawyers not to amend.
15. In the course of the trial, Mr. Chun gave evidence that the goods in the warehouse were not specifically assigned. Mr. Chong was then consulted by his lawyers for instruction to amend Defence & Counterclaim. Mr. Chong says he had considered the inconvenience that would bring to his witness, Mr. Lam, and the implication of costs. He, "at the agony of the moment", instructed his lawyers not to amend the pleading.
16. At the end of the hearing on 21.4.2004, the trial could not finish. It had to be adjourned for about 2 months. The court directed that a detailed schedule was to be prepared with both sides' effort to clarify the goods ordered, paid and taken in relation to individual contracts and sales.
17. Mr. Chong says his company was a small one and did not have a good record of all the details required. He had to recall hard. In the course of recalling and verification, he was advised by his lawyers that Defence & Counterclaim should be amended. This time, Mr. Chong gave consent as the case had already been adjourned.
18. Mr. Chong says he was unfamiliar with the operation of the warehouse over the assignment of goods. He wrongfully thought Defendant had acquired the property of the goods. His mistaken belief was affirmed by Plaintiff's counsel (another one, not Mr. Lawrence Ng ('Mr. Ng') now appearing for Plaintiff). In his submission during the summary judgment hearing in April 2001, that counsel said the property of the goods had passed to Defendant. (See para. 12 of "CHS-A1" annexed to Mr. Chong's affirmation dated. 7.7.2004.) Such submission had never been withdrawn by Plaintiff.
19. Mr. Chong says it was only after Mr. Chun's giving evidence in April 2004 that it became clear the property of the goods had never passed to Defendant. Thus there was no practical delay on the part of Defendant to amend its Defence & Counterclaim in June 2004. He believes that the amendment will bring out the real issue for trial and there is no prejudice caused to Plaintiff.
20. Mr. Chun, on behalf of Plaintiff, filed an affirmation in reply on 14.7.2004. He says Mr. Chong's calculation of the deduction of $32,200 relating to 95 (60 plus 35) cartons of pork loin was unbelievable. He also says Plaintiff only instructed the warehouse not to release goods to Defendant around 22.9.1999 or 23.9.1999.
21. Mr. Chun cannot recall some of the discussion with Defendant during the argument in 1999. He also cannot recall if Mr. Lam had reported to him those communications, which Mr. Chong now alleges as having taken place between Defendant and Mr. Lam.
22. Mr. Chun admits sending an updated demand statement to Defendant in October. The amount was $185,618.2. He also sent Defendant a current stock list. Later, he got the cheque of $22,854.9 from Defendant. Mr. Chun says he has no clear idea of the meaning of the cover note that came with the cheque.
23. Mr. Chun says Mr. Chong did call him in October or November 1999 but only to ask Plaintiff not to claim against Defendant. He cannot recall Mr. Chong's offering to purchase the good again at the original price.
24. Mr. Chun points out that Mr. Lam was in fact dismissed by Plaintiff. That matter giving rise to the dismissal had been reported to the police. However, due to the lapse of time, the papers had been lost. This seriously undermines the court's assessment of Mr. Lam's credibility.
25. Mr. Chun says there has been no change in Plaintiff's pleading. In its original Reply & Defence to Counterclaim, Plaintiff already denied the property of the goods had ever passed to Defendant. He, however, does not explain why Plaintiff's counsel submitted otherwise during the summary judgment hearing in 2001.
26. Mr. Chun also says Defendant alleged originally that it was always willing and able to perform the contracts. It would be unfair for Plaintiff to meet a new case of repudiation now. The trial had come to a stage where Plaintiff had closed its case and Defendant has opened its. Had Defendant pleaded repudiation earlier, Plaintiff might have taken other courses, e.g., accepting Defendant's plea of repudiation as a repudiatory act by itself. Plaintiff could then mitigate its loss. These cannot be done now. Plaintiff, therefore, would suffer prejudice from the amendment.
27. As to the added item of counterclaim, Mr. Chun says he has no idea of what goods are covered by that summary judgment amount. Furthermore, Defendant has not requested for delivery after paying that sum.
28. Mr. Chong in his second affirmation (dated 21.7.2004) replies to Mr. Chun. He says Mr. Chun's affirmation does confirm there were 60 cartons delivered in August 1999. There were another 35 cartons in the warehouse. These made up the 95 cartons of defective goods which Defendant now correctly refers to in the amendment. Mr. Chong also explains why 95 cartons were mentioned as 95 pieces in the original pleading. He says it was due to the customary use in the trade of the Chinese word '件' (translated as 'piece' in English) for a carton.
29. Mr. Chong elaborates on the calculation of the deducted sum in relation to the 95 cartons of defective goods and how the final figure of $32,200 was arrived at. He says it was past practice that deduction of such kind would be allowed. Thus, Defendant issued a cheque of $64,399 to Plaintiff though the latter demanded $96,599 ($96,599.4 to be exact) under those invoices issued in the second half of August 1999.
30. After Defendant had terminated business with Plaintiff, Mr. Chong called Mr. Chun only to indicate that if Plaintiff were to release the goods then, Defendant would purchase them at the old price.
Defendant's Submission
31. Mr. Wong submits that there is a wide power for the court to grant amendment under Order 20 rule 5 (O.20, r.5) of the Rules of the District Court which states "…the Court may at any stage of the proceedings allow…any party to amend his pleading, on such terms as to costs or otherwise as may be just and in such manner (if any) as it may direct." He cites para. 20/8/6 of Hong Kong Civil Procedure 2004, Vol. 1 at p. 346-347. He also relies in particular on the case of Tang Kam Wah & Others v Tang Ming Yat & Another [2003] 1 HKC 532 to say that the guiding principle is that all amendments ought to be made "for the purpose of determining the real question in controversy between the parties or of correcting any defect or error in any proceedings". There is no injustice if the other side can be compensated by costs. Mr. Wong submits that is so in the present case.
32. In reply to the Plaintiff's objections, Mr. Wong submits that there was no substantial delay. While the proceedings had dragged on for more than four years, the Plaintiff remained inactive for more than two years after getting summary judgment in April 2001. It was Defendant who pushed Plaintiff to trial.
33. Mr. Wong says Defendant had laboured under a mistaken belief that the goods belonged to it. It, therefore, pleaded the most obvious defence of 'wrongful interference'. He, however, agrees that 'repudiation' could and should have been pleaded at least in the alternative in the first place.
34. In the June hearing, Mr. Wong admitted that Defendant's predicament could be attributed to the incompetence of lawyers. He did not elaborate. Mr. Wong was not the counsel responsible for the drafting of the original pleading though the solicitor then is still acting for Defendant now.
35. Mr. Wong submits that the other Plaintiff's counsel in the summary judgment hearing in April 2001 concurred that the property of the goods had passed to Defendant. That reinforced Defendant's mistaken belief, which was only cleared by Mr. Chun's evidence given in court in April 2004. During the adjournment that followed, with the court's order for both parties to make a joint effort to produce a schedule of goods ordered, paid and delivered, Mr. Chong recalled the incident hard. The situation was clear with the information provided by Plaintiff later. Defendant thus made the amendment in June so that the court can decide on the real issue, i.e., repudiation.
36. Mr. Wong denies Defendant is abusing the court's process. Of course, he cannot deny he had indicated at some stage in the April 2004 hearing that Defendant would not pursue repudiation. He, however, cites Re Playmates Investments Ltd [1996] 4 HKC 577 at 582:
"…It is not the law that once a claim has been abandoned, it can never be reinstated. Whether or not it should would depend on the facts of the case. In the exercise of its discretion, the court is to have regard to well-established principles which are considered below"
Those principles are found in Ketteman vs Hansel Properties Ltd [1987] 1 AC 189, 212F-H:
"First, all such amendments should be made as are necessary to enable the real questions and controversy between the parties to be decided. Secondly, amendments should not be refused solely because they have been made necessary by the honest fault or mistake of the party applying for leave to make them: it is not the function of the court to punish parties for mistakes which have been made in the conduct of their cases by deciding otherwise than in accordance with their rights. Thirdly, however blameworthy (short of bad faith) may have been a party's failure to plead the subject matter of a proposed amendment earlier, and however late the application for leave to make such amendment may have been the application should, in general, be allowed, providing that following it will not prejudice the other party. Fourthly, there is no injustice to the other party if he can be compensated by appropriate orders as to costs."
37. Mr. Wong further asks this court to consider the merits of the case. Such course is recognised by King's Quality Ltd v A.J. Paints Ltd [1997] 3 All ER 267. Application should be allowed if the merits are readily apparent. Mr. Wong submits that Plaintiff's case must fail as it is undisputed that Plaintiff instructed the warehouse not to release the goods under all contracts and sales.
38. Finally, on prejudice, Mr. Wong submits that though Defendant now amends its defence, Plaintiff might not need to and probably would not change its own case. The amendment in fact brings the diverse views on 'ownership of the property of the goods' in line. Even on its own case, Plaintiff was required to mitigate its loss, if any. There is no missing of important documents or witnesses. What Plaintiff says about Mr. Chun's loss of memory is a mere assertion and unfounded.
39. Mr. Wong repeats that any injury to Plaintiff in this case as a result of the amendment can be cured by costs. He, however, says the amount awarded against Defendant should be minimal since the injury would be slight.
40. Mr. Wong says if amendment were not allowed, Defendant would not have a case to argue. He winds up his argument by saying that the application "went to something which was obviously, and genuinely, a material issue between the parties, and the denial o the amendment was tantamount to depriving the defendants of adjudication upon the real issues in dispute between the parties." Tang Kam Wah & Others (supra.), 544E-F.
Plaintiff's Objection
41. Plaintiff complains that the application of amendment was made at a very late stage. There was much delay as the original pleading was filed some four years ago. Defendant is not making the amendment out of good faith and is abusing the court's process. Repudiation is raised as a distinct defence only for the first time now. There would be serious prejudice to Plaintiff.
42. In the June hearing, Mr. Ng criticized Defendant for lacking explanation on the amendment by failing to file affirmations in support. He relied on Wong Wing Faat v. Yaumati Ferry Co. Ltd. [1992] 1 HKC 497 at 504F-G per Kaplan J (as he then was).
43. This court allowed Defendant to adjourn on 30.6.2004 to file such affirmations. Mr Chong filed 2 affirmations in July. Yet Mr. Ng still says Defendant has not explained why repudiation was not pleaded in the first place. Nor has Defendant accounted for the inconsistent pleadings: first emphasized making repeated demands and requests for goods and now says accepting repudiation on or about 18.9.1999. He says this demonstrates that the application is mala fide. Defendant just tailor-made the amendment to meet the evidence given by Mr. Chun.
44. Mr. Ng says Plaintiff would suffer prejudice if the amendment were allowed. Plaintiff had all along conducted its case on the basis that the contracts were subsisting. Now, Plaintiff has to meet an entirely new case for the first time in the course of the trial. The purported communication of Mr. Lam and Defendant in September 1999 is just a recent fabrication. The calculation of the deducted amount of $32,200 in relation to 95 cartons of defective goods is also an invention. Mr. Ng submits that the court must be satisfied that there is some ground for the faith of the application and that it is not just a creation of one's own imagination: Lawrence v. Norreys (1888) 39 Ch D 213 at 235 per Bowen LJ.
45. Mr. Ng also submits that if Defendant had pleaded repudiation earlier, Plaintiff might treat that pleas as repudiation by Defendant and Plaintiff might accept it. That had not been the case so Plaintiff lost any chance to mitigate its own loss. Now after 5 years, Mr. Chun cannot recall if there was such report from Mr. Lam. Also, Mr. Lam was dismissed from Plaintiff's service and he was also found to be dishonest. The dishonesty had been reported to the police. Now, it is impossible to dig up any document to discredit Mr. Lam. Such prejudices cannot be compensated by costs.
46. Also, if the amendment were allowed it would lead to a renewed process of pleading, discovery, and so on. That would cause much delay to the trial already in progress and place much strain on Plaintiff. It would also put pressure on the court with increased litigation, thus affecting the whole legal process and community.
47. Mr. Ng cites Ketteman v. Hansel Properties (supra.) as per Lord Griffiths at 220D-H:
"…There is a clear difference between allowing amendments to clarify the issues in dispute and those hat permit a distinct defence to be raised for the first time…Furthermore to allow an amendment before a trial begins is quite different from allowing it at the end of the trial to give an apparently unsuccessful defendant an opportunity to renew the fight on an entirely different defence…We can no longer afford to show the same indulgence towards the negligent conduct of litigation as was perhaps possible in a more leisured age. There will be cases in which justice will be better served by allowing the consequence of the negligence of the lawyers to fall upon their own heads rather than by allowing an amendment at a very late stage of the proceedings."
48. Mr. Ng also points out that on 21.4.2004, Mr. Wong cross-examined Mr. Chun. The court asked why he asked those questions. Mr. Wong replied they were relevant to repudiation. As that had not been pleaded, the matter was stood down. Later, Mr. Wong said Defendant would not raise repudiation and he stopped that line of questioning. When he opened Defendant's case later that afternoon, no repudiation was mentioned. As such, Defendant had already elected not to argue about repudiation and should be stopped from pleading it now. Mr. Ng quotes what Nazareth VP (as he then was) says at 292E-F of Born Chief Co (t/a Beijing Restaurant) v. Tsai George & Anor [1996] 2 HKC 282:
"But the good, efficient and increasingly, the affordable administration of justice requires that parties present their entire cases and cannot expect a second bite at the cherry simply because they failed to apply for a split trial or to produce their requisite evidence…"
Ruling on Amendment of Defence
Mala Fide
49. The amendment now avers to 95 cartons of defective goods whereas in para. 4(d) of the original Defence & Counterclaim it is stated to be 95 pieces. Mr. Ng points to para. 8 of Mr. Chong's statement dated 1.9.2003. There it specifically refers to 95 pieces out of 30 cartons. Mr. Ng says this shows the reference of deducting $32,200 in relation to 95 cartons is a recent invention. Defendant's application is not made out of good faith.
50. Mr. Chong explains that the confusion of the 95 cartons arose from the customary use of the Chinese word '件' (meaning 'piece') to describe a carton of goods ('一件貨').
51. This court notes that the Chinese word '件' is really a general quantitative noun. One would use '一件貨' ('a piece of goods') to describe a unit of goods. A chop of pork loin is a unit of goods, thus a piece. A carton of pork loin is also a unit of goods, thus also a piece. It is significant to note that even in Mr. Chun's own affirmation exhibit 'CKW-2', '35 cartons' is also referred as '35 pieces' (someone wrote there '35件').
52. Furthermore, if the deduction were merely for 95 pieces of pork loin, it could not be of such high value that contributed to a final deduction of $32,200. On the other hand, Defendant now comes up with a detailed calculation of how that amount was arrived at over 95 cartons. It sounds more reasonable. Accordingly, I accept Mr. Chong's explanation about the amended particulars concerning 95 cartons. It is not mala fide.
53. Mr. Ng says Defendant had pleaded in its original Defence & Counterclaim that it was always willing and reading to perform the contracts.
54. He must be referring to para. 4(j) of that document where Defendant says that it "was always willing, ready and able to settle the same had the Plaintiff not wrongly interfered with Defendant's title, ownership and possession of the Frozen Meat in Yiu Fung Warehouse." The reference of "the same" here actually refers to the invoices mentioned in the previous paragraph of 4(i).
55. Mr. Ng attacks Defendant vigorously on para. 12 of the original Defence & Counterclaim and para. 15 of Mr. Chong's 29.9.2000 affirmation. Para. 12 alleges that there were still repeated requests and demands for collection of goods on 20.10.1999. Para. 15 even states such requests and demands were made in September, October and November 1999.
56. Mr. Chong says in para. 17 of his 7.7.2004 affirmation and para. 23 of his 21.7.2004 affirmation that there had been ongoing negotiation between him and Mr. Chun. Defendant was willing to buy the goods at the original price if Plaintiff would release the goods. Mr. Chong says the originally-pleaded 'repeated requests' actually refer to those communications he made with Plaintiff in the negotiation process subsequent to Defendant's accepting repudiation. Mr. Chun agrees that Mr. Chong did call him even in November but only to ask Plaintiff not to claim against Defendant.
57. Here, it is one's words against the other's. Who is speaking the truth remains a matter to be adjudged in the trial.
58. Mr. Ng criticises Defendant for only raising repudiation for the first time now.
59. To be precise, Mr. Wong raised the issue on 21.4.2004 during the cross-examination of Mr. Chun. As a matter of fact, though Defendant had not pleaded acceptance of repudiation at the outset, it had all along been alleging Plaintiff's instructing the warehouse not to release the goods. In this way, Defendant had always been talking about Plaintiff's breach of contractual obligation, though not using the word 'repudiation' specifically.
60. In para.9 of Mr. Chong's affirmation dated 29.9.2000, Defendant averred that "…On 28th August 1999, the Defendant wrote to the Plaintiff informing the Defendant's intention ceasing business with the Plaintiff. On 30th August, the Defendant instructed its banker not to honour a cheque to the Plaintiff on basis of overpayment of the August 1999 bills in respect of the remaining 35 cartons of Frozen pork Loin."
61. Defendant talked about 'August' in the said para. 9. However, there was only one countermanded cheque according to the evidence, i.e., the $64,399 one. It was only received by Plaintiff in mid-Sept. 1999. [Document Bundle p. 372: the date of the receipt issued by Plaintiff is 15.9.1999 while there is a date chop of 17.9.1999 on it.] It is obvious that the month averred to here count not be August but should be September. So, Mr. Chong says he wrote to Plaintiff by the end of September (not August) 1999 to inform the latter of Defendant's intention to cease dealings. There is no such document filed. However, Mr. Chong says in para. 7 of his 7.7.2004 affirmation that he requested Mr. Chun to provide him an updated statement and a current stock list. He did get those two documents later, on 11.10.1999 and 12.10.99 respectively [Witness Statement Bundle pp. 108 & 107].
62. Defendant must have a purpose for requesting the said documents. Furthermore, there is the undisputed contemporary document – the cover note [Witness Bundle p. 106] that went with the $22,854.9 cheque. Plaintiff admits receiving these on or about 20.10.1999.
63. The cover note says in no ambiguous terms that the cheque was to settle all liabilities and neither would owe the other anymore in the future. Defendant did this after deliberately checking out its stock in the warehouse and Plaintiff's demanded sum. It points to Defendant's intention of ending all contractual relationship whatsoever. As such, Defendant's late claim of accepting repudiation is not that far-fetched as Mr. Ng suggests. Whether Defendant had really communicated this to Mr. Lam verbally earlier is a different matter and has yet to be decided.
64. The '95 cartons' issue has already demonstrated there may be a serious breakdown of communication in the course of Defendant's giving instruction to its lawyers. The same might also happen in relation to this original pleading of 'repeated requests and demands'.
65. Mr. Ng points out that the original Defence & Counterclaim was settled by counsel (not Mr. Wong). I would add that Defendant also got lawyers to prepare those affirmations and statements even before the application of amendment. However, having read all such pleadings and documents, I cannot say they are of the standard as they are expected to be. Particulars are lacking in places. This obscures clarity. The accuracy of the contents has not been carefully checked either. The wrong 'August' reference in para. 9 of Mr. Chong's 2000 affirmation is one example; the '95 pieces' mis-description in the pleading is another.
66. One might say it was probably a result of Defendant's giving poor instruction. However, lawyers are supposed to assist clients to remove obvious mistakes, inquire into any apparent inconsistency or ambiguity, and finally put things in order. They are not there just to transcribe clients' words into writing.
67. Mr. Ng says the property issue has no relevance to the repudiation argument. The mistaken belief of the ownership of property would not prevent Defendant from pleading acceptance of repudiation in the first place, if there were acceptance at all.
68. Mr. Ng is certainly correct but it only indicates, a fortiori, that the failure to plead acceptance of repudiation is more a problem of the original counsel acting on behalf of Defendant rather than Defendant itself. What to plead is lawyer's job. In the light of Defendant's constant allegation of Plaintiff's breach of this contractual obligation to release the goods and the existence of the cover note, that counsel should have pleaded acceptance of repudiation at the outset, at least as an alternative to the interference claim.
69. This had not been done. Mr. Chong's affirmation did not say why. However, one must bear in mind that 'repudiation' and 'interference of property' are legal issues. Mr. Chong is only a meat merchant. He must have relied on his lawyers as to how to plead. His original counsel had failed to do the obvious and the same solicitor was, and still is, acting for him when the subsequent explanatory affirmations were prepared. The failure to mention poor advice originally rendered is not surprising then.
70. Viewing all the circumstances, I accept Defendant's explanation as to why such late amendment of defence is made. I refuse to hold Defendant mala fide.
Delay
71. Mr. Ng says Plaintiff should not be required to meet a new case some four years after the close of pleadings. The dispute was in September 1999 and the original Defence & Counterclaim was settled in May 2000. Application for amendment was only made in June 2004.
72. How much time had lapsed is just one of the considerations on whether amendment should be granted. The lapse as counted from the filing of the original Defence & Counterclaim is certainly not a short time. However, if one labours under a mistaken belief, one will not come out of it until one knows of one's own mistake. In this case, Defendant and its lawyers at first simply relied on an interference claim under a mistaken belief of the ownership of the property of the goods. Their misapprehension was reinforced to a certain extent by the submission of Plaintiff's counsel in April 2001. It was only when Mr. Chun testified in April 2004 that Defendant realised its mistaken belief. It was then apparent that Defendant's case as originally pleaded could not stand.
73. Of course, Defendant should be blamed for not making the decision to amend its case on 21.4.2004 in court. Mr. Chong made a wrong decision by instructing Mr. Wong not to raise repudiation by way of amendment there and then. But one had to consider that it was not an easy decision to make in the light of legal consequences. Should Defendant thus be prevented from making the correct decision when he came to his sense in June – a little less than two months later? I do not think so.
74. If one were to be concerned about time, one should not fail to take into account of Defendant's saying that Plaintiff had remained inactive for more than two years after getting summary judgment in 2001. Mr. Chong says it was Defendant who pushed the matter to trial in late 2003. Mr. Chun merely replies that Plaintiff did initiate settlement with Defendant during that period. If Plaintiff had been aloof for that long, the lapse of 4 or 5 years since the pleading closed or the cause of action arose ought not be taken absolutely.
Prejudice
75. Plaintiff says it would be prejudiced by Defendant's many new allegations.
76. As said, even in its original pleading and Mr. Chong's first statements, Defendant had already stated the repudiatory act of Plaintiff, though not using the term 'repudiation' specifically. Therefore, Plaintiff should not have been caught by surprise by Defendant's amendment of defence.
77. Defendant now avers to several pieces of purported communication between Defendant and Mr. Lam. Mr. Chun says he cannot recall that Mr. Lam had told him such conversation. Whether there existed such conversation can be and has to be tested by cross-examination in court.
78. Plaintiff says it now lacks documentary proof in relation to Mr. Lam's dismissal and dishonesty. I would say if any matter had been reported to the police, then even after five years' time, Plaintiff could still try to dig up some information from the police, who are supposed to keep computerised record for years. Even if Plaintiff cannot come up with any documentary proof, the court will try to understand and bear in mind the time lapsed when it comes to assess Mr. Lam's credibility.
79. Mr. Ng complains that Plaintiff has now lost any chance of mitigating loss should repudiation become a real issue of trial. It is worthwhile to note that on Plaintiff's own case, Mr. Ng's proposed submission is that Plaintiff is entitled to hold Defendant to the contracts without any need to mitigate loss. In any event, Plaintiff denies there was any repudiation on its part.
80. Whether there was repudiation and whether anyone had accepted repudiation remain to be gleaned out of the evidence. If mitigation of loss becomes an issue at the end of the day, the court will certainly consider what has prevented the injured party from doing any mitigation.
The Real Issue and Abuse of Process
81. Mr. Ng aggress that if the amendment on repudiation were not allowed, Defendant would not have a positive case to defend. He says, however, Defendant can still argue on performance of contractual obligation. But is that not just about breach of contract then? Is that not about repudiation?
82. The answers are obviously 'yes'.
83. I would also say the same is true of the counterclaim as originally pleaded. If Defendant were not allowed to plead repudiation on the part of Plaintiff, the current basis of the counterclaim based on interference of property would fall too. It may be said that Defendant can still claim damages for Plaintiff's non-performance of delivery. Again is it not about breach of contract or repudiation then?
84. The answer must also be 'yes'.
85. In fact, even on its own pleading, Plaintiff has been talking about repudiation (though not using that term specifically) by alleging Defendant failed to take delivery and failed to pay (see para. 5 of the Statement of Claim). On the other end, despite Defendant's failure to plead repudiation in its original Defence & Counterclaim, Defendant had stated in its pleading and Mr. Chong's statements clearly Plaintiff's failure to perform its contractual obligation through instructing the warehouse not to release the goods to Defendant.
86. Defendant had pleaded a wrong case under a misapprehension on the passing of property of goods (which belief was reinforced by Plaintiff's submission made in the summary judgment proceedings). The original counsel acting for Defendant failed to plead repudiation by Plaintiff and acceptance of repudiation by Defendant. Now Defendant finds out this is not correct and wants to plead in accordance with what it thinks is right. In the amendment sought, Defendant avers to the whole incident in a clearer manner. Whether such amended version is credible can only be decided after trial. The important thing is that the amendment now holds out the real issue to be decided by the court.
87. Mr. Ng relies on a number of cases to support his objection, in particular the case of Ketteman (supra).
88. Ketteman has been considered in the Tang Kam Wah case (supra), where their Lordships undertake a thorough review of the established principles. Stock JA (as he then was) says at 542:
"We note, too, authority to the effect that the courts will not readily grant amendments once the trialhas begun where the need for the amendment was abundantly apparent long ago, but not sought (see Hipgrave v Case (1885) 28 Ch Dt 356, 361). That said, all will in such cases depend on the circumstances, and our attention has also been drawn to a passage in the judgment of Ching JA (as he then was) in Chau Mei Lee Fragrance v Ng Yee Tim [1996] 4 HKC 46, 52:
…Amendments should not be refused however late the application is made provided they are not designed to over-reach and provided that no prejudice is caused to the other side which cannot be cured by costs and an adjournment if necessary." (emphasis added)
89. In the present case, I find that Defendant makes the application of amendment for cause and out of good faith. Defendant is not doing that to over-reach or to abuse the court's process. The delay is not intolerable in the circumstance. There is no prejudice caused to Plaintiff which cannot be cured by a proper costs order and any necessary adjournment.
90. I also find that if Defendant were not allowed to argue on repudiation, the situation would become what Stock JA (as he then was) laments at 544F of Tang Kam Wah (supra):
"…the denial of the amendment was tantamount to depriving the defendants of an adjudication upon the real issues in dispute between the parties."
91. No doubt, any amendment granted at this stage would lead to further delay of the trial process and increase the court's workload. However, justice is not merely measured by efficiency.
92. As to the argument that more strain would be placed on Plaintiff's shoulders now due to the amendment, one must not lose sight of the undisputed fact that it was Plaintiff who instructed the warehouse not to let Defendant take delivery of any goods in all contracts unless Defendant satisfied Plaintiff's full demand. Mr. Ng agrees that each contract is separate and distinct from one another. The goods were perishable. Plaintiff sold them before the expiry date. It insisted on holding Defendant to the contacts and ordered new goods from the suppliers to refill the stock in the warehouse. Mr. Wong says Plaintiff is an established meat merchant operating on scale, while Defendant is a street-corner business. Plaintiff does not dispute this.
93. Plaintiff has every right to sue as it deems fit but Defendant should not be deprived of a chance to defend properly even though it had committed mistakes as discussed already. I find the pressure of any adjourned litigation is more on Defendant's side and Plaintiff can bear its own burden.
94. Lord Griffiths is surely correct to say in Ketteman (supra.) at 220G that "…There will be cases in which justice will be better served by allowing the consequences ofthenegligence of the lawyers to fall upon their own heads rather than by allowing an amendment at a very late stage of the proceedings." However, such cases must be rare.
95. I find the present case "…is not …the type of case which Lord Griffiths had in mind when he highlighted this consideration in Ketteman (at p 220)" Tang Kam Wah (supra.), Stock JA (as the then was) at 550G. Having considered all the circumstances, I do not think Defendant should be refused leave to amend its defence as formulated with Defendant's withdrawing para. 3(gg) thereof.
Ruling on Amendment of Counterclaim
96. There is less dispute of facts on this head. Plaintiff admits Defendant did pay as per the summary judgment order. The only factual argument is that while Defendant alleges Plaintiff should know what goods were covered by the summary judgment sum, Plaintiff says it has no clear idea.
97. As per pars. 17-19 of the Amended Defence & Counterclaim, Defendant wants to claim back the summary judgment amount of $64,399 plus paid interest $13,111.6 on the basis that the goods covered by such payment had never been delivered.
98. By so framing, Defendant is saying it is entitled to the goods covered by the $64,399 payment since that was made on 24.10.2001. In court, Mr. Wong concedes that the cause of action of this extra item of counterclaim arose only when that sum was paid on 24.10.2001. It is well after the filing of the original Defence & Counterclaim in May 2000.
99. Mr. Ng objects to the counterclaim amendment. He relies on such cases as Lark International Finance Ltd v. Lau Kin Marisa [2000] 4 HKC 688 ('Lark'), Wing Siu Co Ltd v. Goldquest International Ltd (No.1) [2002] 4 HKC 408 ('Wing Siu (No.1)') and Wing Siu Co Ltd v. Goldquest International Ltd [2003] 2 HKC 64 ('Wing Siu (CA)') to say such cause of action cannot be included in the amendment, as it offends the relation-back theory.
100. Mr. Wong argues that the amendment can be accepted as it fits into the exception approved by Waung J in Woo Suk King v Lam Lee Yuet Ha Lilian [1995] 3 HKC 701. He further cites Leung Kin Fook & Others v Eastern Worldwide Co Ltd [1971] 1 HKC 524 to say the provision governing amendment (O.20 r.5) should be given a broad and liberal interpretation in order to attain the objective of the rules.
101. The case of Leung Kin Fook (supra) is merely about the interpretation of O.20 r.5. The case of Woo Suk King is more relevant to the present argument. It was cited to Ma J (as he then was) in 'Wing Siu (No.1)' and apparently not followed. The decision in 'Wing Siu (No.1)' had not been overturned in 'Wing Siu (CA)'.
102. In 'Lark', Keith JA (as he then was) firmly states at 699I-700A:
"It is well established that a statement of claim, whether indorsed on the writ or not, cannot be amended, without the defendant's consent, whether with the leave of the court or not, where the effect of the amendment is to add a cause of action which accrued since the issue of the writ: see Eshelby v Federated European Bank Ltd [1932] 1 KB 254 (Swift J)…"
103. Rogers VP in 'Wing Siu (CA)' at 70I-71B further says:
"In the light of those cases it cannot be said that the original rule in the Eshelby case has disappeared. The courts in England have clearly been disposed to adopt a more flexible attitude, specifically, where they have permitted the pleading of subsequent events which clarify why a claim could be made based on a cause of action which existed at the date of the issue of the writ. No decision has been brought to our attention which has gone so far as permitting, in the face of opposition, an amendment which would introduce into a writ a cause of action which simply did not exist at the date of the issue of the writ."
104. Mr. Wong argues that the issue of paying $64,399 is closely related to the overall issue of what goods had been taken and paid. It is also relevant to set-off.
105. I entirely agree with Mr. Wong here. However the amendment is not raised as a defence of set-off but as an additional item of counterclaim.
106. That interest portion of $13,111.6 cannot be claimed in any event as it tantamounts to revert the interest order of the summary judgment ruling. That portion of $64,399 relating to the countermanded cheque is now sued for non-delivery of goods as it is so drafted in the amendment. Even Mr. Wong concedes the cause of action of this extra item of counterclaim arose only after the filing of the original Defence & Counterclaim.
107. Having heard counsel's submissions and having read the cases cited by them, I feel bound by the judgment rendered by the Court of Appeal in 'Lark' and 'Wing Siu (CA)'. I, therefore, disallow Defendant's application of amending its counterclaim.
Extent of Amendment Allowed
108. To conclude, I allow Defendant's application of amending its Defence & Counterclaim as proposed in its draft filed on 17.6.2004 (with one mistake rectified as per copy filed on 7.7.2004) save and except paras. 17-19 plus prayer (b) and para. 3(gg) plus its reference in paras. 4, 5, 10 and 14.
Costs
109. Mr. Wong says any cost awarded against Defendant should be minimal. I do not agree. I find Defendant's application of amendment bona fide and Defendant had laboured under a mistaken belief of property passing which was to a certain extent reinforced by Plaintiff's other counsel in the summary judgment submission. However, as Mr. Ng rightly points out, the raising of repudiation as defence is independent of the ownership of property. Defendant had failed to so plead, at least as an alternative. Now it finds it necessary to amend. Though it is more a problem of the counsel settling the original pleading, it is still entirely fault on Defendant's side.
110. Even though Defendant has all along been alleging breach of contractual obligation, the defence of its accepting Plaintiff's repudiation is only formally raised now. Plaintiff necessarily would have to file a Re-amended Reply & Defence to Counterclaim. The matter is already on trial but a further direction hearing might be required after the close of all amended pleadings. Plaintiff most likely would have to recall Mr. Chun or even other witnesses. In effect, the trial has to start almost all over again, though some of the evidence adduced can be adopted. As such, the proceedings after Defendant's filing its defective Defence & Counterclaim on 2.5.2000 had mostly been wasted. It is only justified to order Defendant to pay Plaintiff forthwith all costs of and all costs thrown away by the amendment. Such costs are to be taxed if not agreed and should include but not limited to the costs of the 2-day trial in April and the argument on amendment with counsel's certificate granted (the costs of 29-30.6.2004 had already been dealt with in the June hearing). Plaintiff's objection is not frivolous or vexatious. Therefore, it should not be made to suffer financially.
Direction
111. I order Defendant to serve on Plaintiff within 14 days from the date of this judgment a copy of the Amended Defence & Counterclaim as approved per para. 108 above. Plaintiff has leave to file Re-amended Reply & Defence to Counterclaim within the next 14 days. Thereafter, parties are at liberty to apply for fixing date to continue with the trial and such other applications as they deem fit owing to the amendment.
(J. Lam) |
Representation:
Mr. Lawrence Ng instructed by Messrs. Lam & Partners for Plaintiff
Mr. King Wong instructed by Messrs. Edmund W.H. Chow & Co. for Defendant