Toto Toys Ltd and Another v. King Fung Vacuum Ltd and Others

DCCJ 3338/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3338 OF 2004

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BETWEEN

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Coram:  Master Roy Yu

Date of Hearing:  29^th July 2005

Date of Handing down Ruling:  10^th August 2005

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Ruling

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The Background

1.This is an action commenced by the Plaintiffs in June 2004.  After issuance of the writ with a simple endorsement, the Plaintiffs did not serve the writ on the Defendants; in fact they never served the writ.  According to the Defendants, the Plaintiffs circulated the writ to the customers of the Defendants.  The Plaintiffs admits that they had circulated the writ to the Plaintiffs’ customers, but deny sending the writ to the Defendants’ customers.  I do not speculate the motive of the Plaintiffs.  It is sufficient to note that the Plaintiffs did circulate the writ to third parties in the trade but did not serve on the Defendants.

2.Having been informed of the writ by their customers, the Defendants’ solicitors issued a notice to the Plaintiffs under Order 12 rule 8A of the Rules of District Court demanding that –

“ unless [the Plaintiffs] serve [the writ] on [the Defendants] or discontinues this action within the next 14 days from the date hereof, [the Defendants] shall apply to the Court for an Order to dismiss these proceedings without further reference to you.  Our clients shall hold your client liable for all [our] costs incurred therefor.”

3.The Plaintiffs’ solicitors replied on or about 25^th August 2004 that they would discontinue the action within 5 days.  A notice of discontinuance was filed on 26^th August 2004 and served on the Defendants.

4.From later correspondence of the Plaintiffs’ solicitors, it is obvious that the said notice is meant to be issued and served under Order 21 rule 2, which reads –

“ Subject to paragraph (2A) the plaintiff in an action begun by writ may, without the leave of the Court, discontinue the action, or withdraw any particular claim made by him therein, as against any or all of the defendants at any time not later than 14 days after service of the defence on him or, if there are 2 or more defendants, of the defence last served, by serving a notice to that effect on the defendant concerned.

5.There is no specific form of discontinuance and it would be effective as long as the content is clear (ref. Para. 21/5/2 Hong Kong Civil Procedure 2004).  And when a plaintiff discontinues the action under Order 21 rule 2, the defendant is entitled to tax his costs under Order 62 rule 10(1).  The rule reads –

“ Where a plaintiff by notice in writing and without leave either wholly discontinues his action against any defendant or withdraws any particular claim made or question raised by him therein as against any defendant, the defendant may tax his costs of the action or his costs occasioned by the matter withdrawn, as the case may be, and, if the taxed costs are not paid within 4 days after taxation, may sign judgment for them.”

6.If the Plaintiffs issue a notice under Order 21 rule 2, it must follow that the Defendants is entitled to tax their costs under Order 62 rule 10(1).

7.The Defendant does not pursuit the issue of costs until March 2005, some 6 months later.  In a letter dated 12^th March 2005, they proposed to send a bill of costs to the Plaintiffs for payment, failing which they would proceed to taxation. 

8.By letter dated 14^th March 2005, the Plaintiffs’ solicitor refused to pay any costs alleging that the Defendants had agreed to waive costs in earlier correspondence, citing the part of the letter of the solicitors of the Defendants I quoted at paragraph 2 above.  I need not go into the details and sufficient for me to say that I cannot agree with the interpretation by Plaintiffs’ solicitors of the Defendants’ letters.  And the Plaintiffs’ counsel has not relied on this contention at his submission.

9.The Plaintiffs’ solicitors further argued that the Defendants are not defendants in the subject action as they have not been served with the writ and hence they are not entitled to claim costs of the action. 

10.It is at this junction when the Defendants solicitors argued that Order 21 rule 2 does not apply.  They said in their letter dated 17^th March 2005 that the Defendants were not entitled to discontinue the action by filing a notice of discontinuance as the writ had not been served and demanded the Plaintiffs to seek an order of Court, presumably under Order 21 rule 3, to discontinue the action with costs to the Plaintiff.  This was rejected by the Plaintiffs and the Defendants took out the present summons under Order 12 rule 8A to strike out the Writ.

11.It is obvious that both parties are minded to have the action terminated.  There is difference in legal opinion on whether Order 21 rule 2 applies; but the most important dispute is the question of costs.  It is important to refer to one more letter on the question of costs being contested.  The 2^nd Plaintiff in his affirmation filed on18^th May 2005 said he instructed his solicitors to write to the Defendants on or about 19^th March 2005 inquiring them of the legal costs involved.  The letter was then under cover of “without prejudice” and exhibited.  When the Plaintiffs’ counsel Mr. Cheung referred to this letter at his submission, the Defendants’ counsel Mr. Kwan objected to the production of the letter. 

12.It is well established that “without prejudice” is no magic words to exclude every contents of the letter (ref. Para. 24/5/41).  Having read the letter, I ruled that I am not taking into account the contents of the letter but I would receive as evidence that the Plaintiff had made enquiry on the costs that the Defendants are seeking.  It is sufficient for me to say that this letter is not helping the Plaintiffs as, if they are minded to follow the rules, then why have they not offer to pay the costs to be taxed if not agreed?  The negotiation is unsuccessful. 

13.I pointed out to Mr. Kwan that the costs of the Defendants at that stage would be around $2,000 to $3,000 at most.  Having taken instruction, Mr. Kwan confirms that my estimation is correct.  It is for this small amount of costs when further legal costs are incurred.  I need to put it no less than the Court found it a waste of costs and the Court’s time for the matter to be drag on.  The burden rests on both solicitors to talk sense to their client to resolve the matter efficiently.  It is very unfortunate that the matter has resulted in a full argument of 3 hours.

The Summons

14.In the summons, the Defendants applied for 2 orders, firstly, for the action be dismissed; and secondly, for costs of and occasioned by this application.  3 lengthy affirmations have been filed, 2 for the Defendants and 1 for the Plaintiffs.  A lot of the contents go to the other dispute between the parties in 3 other High Court actions which are total unnecessary.  All that would be necessary would be an affidavit exhibiting the correspondence between the 2 firms of solicitor in this matter.  The rest is a legal issue, i.e., could a plaintiff discontinue the action by serving a notice of discontinuance under O.21 r.2 when the writ has not been served? 

15.Mr. Cheung for the Plaintiff conceded in his skeleton submission that Order 21 r.2 does not apply and the notice of discontinuance filed is irregular.  But he applies for an order that the notice could be rectified by the Court under O.2 r.1.  At his submission, Mr. Cheung changed his stance and submitted that Order 21 rule 2 applies.

16.Looking at the application at large, both parties intend to have the action terminated.  It makes no difference if it is discontinued or dismissed.  The only outstanding issue is costs.  But in light of the heated argument on the procedural point involved, which may affect my determination on the award of costs, I have to resolve an interesting issue first.

Order 21 Rule 2

17.Now the only legal matter in dispute is whether O.21 r.2 applies.  The wordings of Order 21 rule 2 states that a plaintiff may without the leave of the Court discontinue the action.  I am referred to para. 6/7/5 of the Hong Kong Civil Procedure 2004 where the learned editor suggests that O.21 rule 2 does not apply when the writ has not been served. 

18.The passage quoted appears to be in exact wordings as para. 6/7/5 of The Supreme Court Practice 1999.  Before 1988, the Supreme Court Practice said at para. 20/1/8 that “a plaintiff is entitled to abandon his writ or originating summons before it is served on any party...”  The learned editor in the supplement to the 1988 edition opined that this is wrong and said -

“ Discontinuance or withdrawal of writ before service – Once a writ is duly sealed by the court officer and thus duly issued under r.7(3 above), it becomes part of the record of the court and it is thus entered up in the cause Book, i.e. the book or the record kept in the court office out of which the writ is issued (see O.1 r.4(1)) and thereafter it may be searched for, inspected and a copy may be taken of it (see O.63, r.4(1)(a).  It would seem therefore that the plaintiff cannot unilaterally and without leave of the court “abandon” the writ or any claim made therein or amend the writ or withdraw any claims, still less amend or erase its entry from the Cause book.  An amendment of the writ without leave of the court can only be made under the provisions of O.20 r.1.  The discontinuance of the action or the withdrawal of any claim made therein before service of the writ can only be made with the leave of the court under O.21 r.3 an the application for such leave may be made by an ex parte summons before the master."

The statement in earlier edition (see S. C. P. 1988 Vo. 1, para. 20/1/8) concerning a practice entitling the plaintiff to abandon his writ before service was erroneous.

19.I agree that once a writ is sealed, it is a court record and may not be withdrawn or amended without leave of Court.  I agree with the revised opinion of the Supreme Court Practice except for the comments that Order 21 rule 3 has to be invoked to discontinue an action when the Plaintiff has not served the writ on the defendant.  As the learned editor accepts, a writ can be amended without leave of court if so provided by the Rules (O.20 r.1 quoted by the editor), I cannot see why the writ cannot be discontinued without leave, if the Order 21 Rule 2 make such provision. 

20.Further, Order 21, (and formerly is Order 26) of the Rule of the Supreme Court “is a complete code on the subject of discontinuing an action or withdrawing defence.  The former power of a plaintiff at common law to claim a non-suit, or of a plaintiff in equity to dismiss his bill at his own option at any time, no longer exist.” (ref. The Annual Practice 1932 p.432).  It is clear that Order 21 is meant to be the codified rule for Plaintiff to discontinue or withdraw the action.  It appears that the legislative intention is that a plaintiff should discontinue the action in accordance with the provision therein.

21.Mr. Kwan submitted that a plaintiff is entitled to serve a notice of discontinuance under Order 21 rule 2 only after the Defendant has served his defence and before the lapse of 14 days from service.  I cannot agree with such a narrow interpretation of r.2.  Para. 21/5/3 of the Hong Kong Civil Procedure 2004 said “a plaintiff may serve a notice of discontinuance or withdrawal of any particular claim at any time, but the last date on which he can effectively serve such a notice, but the last date on which he can effectively serve such a notice” is within 14 days from the service of the defence.  I agree that is a more accurate interpretation of the rules and I do not found that serving of the defence is a pre-condition to invoke Order 21 rule 2.

22.Mr. Kwan further submitted that since the Defendants have not been served with the writ, they are only potential defendant and not a party.  Hence there could not be an effective service of the notice.  This is some attraction in this argument.

23.But if his argument is correct, the Defendants are not party to the action.  Then even if the Plaintiffs discontinue the action with leave and obtained a costs order in favour of the Defendants, they could not tax their costs as they are not a party.  It does not make sense.  I hold the view that the Defendants are party to the action once they are served with the proceedings of the action, not necessarily the writ.  When they are served with the notice of discontinuance, they become the defendants and may tax their costs under Order 62 rule 10(1).  Equally, when they are served with an order that the Plaintiff may discontinue the action, they become the defendants and may apply for taxation of their costs if there is such an order.

24.By the above analysis, and with great respect to the said learned editor, I have hesitation to follow the opinion expressed at para. 6/7/1.  It would be a correct statement if the defendant could not be found and the notice cannot be served.  Or, if the plaintiff does not wish to alert the defendant at all, there is no objection for the plaintiff to apply to discontinue the action under rule 3.

25.I am of the view that the notice served on the Defendants effectively discontinued the action upon service.  While Mr. Kwan also suggested that the notice has not made reference to the rules, the wording is clear that the intention of the Plaintiffs is to discontinue the action, and there could be no doubt that it is served under O.21 rule 2.  I do not have to dismiss the action as it has been discontinued.  The Defendants are entitled to tax their costs up to the date of discontinuance.

Costs of this Application

26.While the costs up to the notice of discontinuance would be governed by Order 62 rule 10(1), the costs of the application herein must be in the discretion of the Court.  Costs are always at the discretion of the Court, which discretion has to be exercised judicially.  In the normal cases, costs should follow the event.  But this is not a hard and fast rule.  The court has an unfettered discretion to do justice between the parties (per Mr. Justice Keith in Trend Publishing (HK) Ltd. v. Vivien Chan & Co (a firm) [1996] 3 HKC 433).

27.Here, the Plaintiffs objected to pay any costs alleging that the Defendants have waived costs, and on law claiming that the Defendants are not parties of the action and not entitled to costs, as set out in the correspondence between the solicitors referred to hereinabove.  Both contentions are rejected by me.  Given the objection by the Plaintiffs to bear the costs of the Defendants, it is not unreasonable for the Plaintiff to seek clarification from the Court.  Not withstanding the submission of Mr. Cheung, this application is necessitated by the stance of the Plaintiffs, who on the one hand invoke O.21 rule 2, and on the other hand, denies that the Defendants are entitled to their costs.

28.I agree that the Defendants are entitled to seek clarification.  The only comment is a substantive part the affirmation is unnecessary.  I would allow costs of this application be to the Defendants with certificate for counsel to be taxed if not agreed, except the costs of and occasioned by the 3 affirmations shall be limited to 3 hours of solicitors’ time.

29.If I were wrong with my interpretation of Order 21 rule 2, it must be a proper case for the Court to confirm the discontinuance.  From the notice, the clear intention of the Plaintiff is to discontinue the action.  Mr. Cheung asked me to confirm the discontinuance by exercising my discretion under O.2 rule 1 and Mr. Kwan submitted that I could not.  I see no reason to go into this argument to create more uncertainty.  All that is required is an order that leave be granted to the Plaintiffs to discontinue the action under Order 21 rule 3. 

30.Mr. Cheung in his written submission argues that this case had been rendered academic when the Defendants filed their Consolidated Statement of Claim in December 2004.  No costs should be awarded for the Plaintiff.  I do not agree.  Whether or not there is a consolidated statement of claim, this action has to be discontinued.  It is because of the unacceptable stance taken by the Plaintiffs that this application has to be taken out.  The Defendant should be entitled to costs, and I would make the same order on costs.

31.This case involves a short point which may not come up often.  With the consent of the parties, I would circulate this judgment.

Dated the 10^th day of August 2005.