Welwin Knitting Garment Factory Ltd v. Welnade Fabric Manufacturing Ltd

HCA003794/1982

Civil, Practice and Procedure, - Pleading - Correct form of plea for damages by unpaid seller who has accepted the return of the goods from a repudiating purohaser - Counterclaim to counterclaim - Striking out superfluous pleading.

The defendant, who was an unpaid seller of goods, accepted the plaintiff purchaser's repudiation of the contract of sale and took the goods back after the plaintiff rejected them on the ground of alleged defects in the goods. The plaintiff commenced proceedings against the defendant, claiming damages for loss of profits on a re-sale.

Instead of following the correct practice of counterclaiming for the difference between the contract price and the market price, or if there were no market price, the difference between the contract price and the value of the goods, the defendant counterclaimed for damages in an amount the equivalent of the full sale price, giving as Particulars "Total value of the said goods".

To that counterclaim, the plaintiff pleaded, firstly, that if it was liable to pay the price, then that liability should be extinguished in full because the goods were useless to the plaintiff. That was, in essence, a plea of set-off. The plaintiff next went on to plead the same material by way of counterclaim on the basis that every set-off can be pleaded as a counterclaim.

That counterclaim by the plaintiff served no useful purpose, but was included merely ex abundanti cautela.

The defendant, who otherwise would have needed to incur the unnecessary expense and inconvenience of filing a rejoinder to the counterclaim to counterclaim, was upheld by the court in its application to have the counterclaim to counterclaim struck out as a superfluous pleading.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: Hon. Rhind, J.

Date: 2nd May, 1983.

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JUDGMENT

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1. This is the defendant's appeal against the Master's decision, dismissing the defendant's application to have the plaintiff's Counterclaim to the defendant's Counterclaim struck out.

2. It is common ground that under the terms of a written contract of sale, the defendant, which is in the fabric business, supplied the plaintiff, which is a garment manufacturer, with 4,567.50 lbs of material at a total cost of HK$120,810.31.

3. Having contended that the goods were defective, the plaintiff purported to reject them and returned them without paying the purchase price. The plaintiff then launched the present proceedings against the defendant, claiming damages for loss of profits and wasted expenditure in relation to contracts for the sale of garments which the plaintiff had been unable to fulfill as the result of the goods supplied by the defendant being defective.

4. By its Defence, the defendant disputed that the plaintiff had been entitled to reject the goods, and contended that the plaintiff's rejection of the goods amounted to a wrongful repudiation by the plaintiff. However, so paragraph 9(b) of the Defence asserts, the defendant accepted the plaintiff's wrongful repudiation and took the goods back.

5. In the circumstances alleged by the defendant, it is abundantly clear that the defendant was no longer entitled to sue for the price, the defendant's remedy being confined to damages for non-acceptance of the goods.

6. Nonetheless, the defendant put in a plea by paragraph 10 of its Defence which in my view can only reasonably be construed as tantamount to a plea for the price.

7. The sale price had been $120,810.31 and paragraph 10 of the Defence reads -

8. This is a grotesque plea, and ideally the plaintiff should have applied to get it struck out, rather than attempt to plead to it in reply.

9. How the defendant should have pleaded in relation to the non-acceptance of its goods is demonstrated by Specimen Pleading No. 500 at page 814 of Bullen and Leake (12th Edition). The defendant's Particulars should have referred to either "Difference between the said contract price and the market price of the goods etc." or if there was no market for the goods, "Difference between the said contract price and the value of the goods etc."

10. To show in the Particulars, as the defendant has here, that the total value of the goods is $120,810.31, and for the defendant, who is still the owner, then to go on and claim that sum of $120,810.31, gives rise to confusion.

11. Along with the rest of the Defence, paragraphs 9 and 10 were repeated as a Counterclaim by the defendant.

12. If, as it should have done, the defendant in its Defence and Counterclaim had made the conventional plea that its damages were the difference between the contract price and the market price or value of the goods, then I have no doubt that in its Reply and Defence to Counterclaim the plaintiff would have contented itself merely by joining issue with the defendant and repeating its Statement of Claim.

13. Instead of that, one grotesque plea has begot another.

14. By paragraph 8 of its Defence to Counterclaim, the plaintiff has pleaded in effect that if the plaintiff can be forced to pay the defendant the price of the goods, i.e. $120,810.31, then that liability to pay the price should be fully extinguished because the goods are useless to the plaintiff.

15. This is in essence a plea of set-off, although the words "set-off" do not appear.

16. Carrying through this grotesquerie to its final conclusion, the plaintiff has repeated the material in its Defence to Counterclaim as a counterclaim to a counterclaim on the principle that every set-off can be pleaded as a counterclaim (See White Book 15/2/2).

17. Mr. Rogers for the plaintiff conceded that the plaintiff's Counterclaim to its Counterclaim served no useful function, because the material in paragraph 8 of the Defence to Counterclaim was only being used by the plaintiff as a shield, and could never serve any independent purpose beyond fending off the defendant's claim for the price. In reply to a question from me, Mr. Rogers agreed that the counterclaim to counterclaim was included ex abundanti cautela.

18. Mr. Tong argued that paragraph 8 of the Defence to Counterclaim should have been included as an alternative ground of claim in the Statement of Claim, and that the Statement of Claim should be amended to that effect. He says that to include this ground in the Defence to Counterclaim offends the rule against departures found in 0.18 r.10.

19. Normally, any new ground of claim should be included within the Statement of Claim (See e.g. Herbert v. Vaughan⁽¹⁾, but I am satisfied that the present situation comes within the exceptions allowed for in Renton Gibbs & Co. Ltd. v. Neville & Co.⁽²⁾ The plaintiff need not include in its Statement of Claim an alternative claim predicated on what is frankly nonsense, namely that the defendant as owner of the . goods can still, nonetheless, sue for the price. That is no part of the plaintiff's case, and the plaintiff should not be forced to include it in its Statement of Claim as if it were. If such a contention, as put forward by defendant, has to be dealt with anywhere, it should be in the Reply and Defence to Counterclaim.

20. I do not think the plaintiff's plea offends the rule against departures.

21. Nonetheless, I think this Counterclaim to Counterclaim should be struck out under the Court's inherent powers on the ground it is superfluous.

22. Were it merely harmlessly vestigial, I might feel inclined just to leave it there, but as it produces the unhappy effect of requiring the defendant to throw away unnecessary costs (albeit of a comparatively trivial amount) by having to file a rejoinder, I think it has to go.

23. I hold the defendant in no small measure responsible for this case going off the rails. I think the trouble can all be traced back to paragraph 10 of the Defence. In such circumstances, it ill behoves the defendant to start taking fine pleading points, and this is a factor I will have to bear in mind when I come to consider costs.

24. At some stage, the defendant's own house will have to be put in order, and something will have to be done about paragraph 10 of the Defence.

25. In the result I allow the appeal, and order that the Counterclaim to Counterclaim be struck out.

Representation:

Mr. A. Rogers (J.S.M.) for plaintiff

Mr. R. Tong (Deacons) for defendant

(1)     (1972) 1 W.L.R. 1128

(2)     (1900) 2 Q.B. 181