Hong Kong Jie Hing Trading Co Ltd v. Pacific Commercial Co Ltd

HCA 2167/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2167 OF 2005

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BETWEEN

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Before: Deputy High Court Judge Gill in Chambers

Date of Hearing: 12 October 2006

Date of Judgment: 18 October 2006

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J U D G M E N T

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1.This is an appeal from an order made by the Registrar in which he gave leave to the defendant to amend its defence by adding a counterclaim under the provisions of O.20 r.5 and O.18 r.9 of RHC.  O.20 r.5 gives the court power to allow a party to amend its pleadings “on such terms as to costs or otherwise as may be just and in such manner (if any) as it may direct”.  O.18 r.9 states that “a party may in any pleading plead any matter which has arisen at any time, whether before or since the issue of the writ”.

2.These rules of procedure would appear on the face of them to give the court an unfettered discretion to grant leave to amend subject only that the order must be just.

3.But a particular feature about this case is that the cause of action giving rise to the counterclaim did not accrue until after the date the defence was filed.

4.Thus the matter for consideration by me at this the rehearing of the application granted by the Registrar is whether, by virtue of the doctrine of relation back, the counterclaim being the subject of the amendment to the defence dates back to the defence, thus introducing into the action a claim which is incurably bad because it did not exist at the date of the defence.

The Facts

5.At the material time the defendant was the tenant and the plaintiff the landlord of various shop units and carparks.  The defendant defaulted in payment of rent and management fees; the plaintiff issued a writ to recover this on 3 November 2005.  The plaintiff settled some but not all of the arrears and in respect of the balance disputed the same and filed a defence on 29 December 2005. 

6.In February 2006 the tenancy came to an end and the defendant vacated the premises.  This gave rise to it being entitled to recover a rental deposit, but the plaintiff declined to pay it. 

7.The counterclaim the defendant sought leave to file is for the rental deposit.  Thus it accrued after the date the defence was filed. 

8.The application was made to the Registrar on 8 September 2006.  He granted leave on 15 September 2006.

The Law

9.When pleadings are amended the amendment takes effect not from the date of the amendment but from the date of the original document that is amended; see the commentary in the White Book at 20/8/2.  This is referred to as the doctrine of relation back.  It follows that if an amendment is made to a writ the amendment dates back to the date of the original issue of the writ and the action continues as though it had been inserted from the beginning.

10.Because of this a cause of action once begun cannot be added to by amendment if the further cause arose after the date of the issue of the writ; see Lark International Finance Limited v Lam Kim Maria [2000] 4 HKC 688, a Hong Kong Court of Appeal decision which followed the English authority Eshelby v Federated European Bank Limited [1932] 1 KB 254. 

11.The logic of this rule is apparent; one cannot sue for the consequences of action or default which post-dates one’s writ, for it simply has not yet happened.  However, the prohibition falls away if the parties consent; see Wing Siu Co. Ltd v Goldquest International Limited [2003] 2 HKC 64.  Although this would appear to allow a legal fiction to emerge, one assumes it is permitted for convenience and good management where the parties agree that there will be no prejudice.

Analysis

12.It was submitted for the plaintiff that the rule of relation back is applicable as much to the proposed amendment of a defence adding a counterclaim as it is to a proposed addition of a further claim to the writ.  Thus the amended defence, and hence counterclaim, takes on the date of filing of the defence.  It being not disputed that the counterclaim had not yet accrued when the defence was filed, the defendant should not have been granted leave to amend the defence by adding the counterclaim because as at the date of the defence, and thus the counterclaim, the defendant had no cause of action.

13.It is a straightforward, and logical, submission. 

14.But it begs the question; was the document the defendant was given leave to file an amendment to a pre-existing claim already filed? 

15.There was on file a defence and no more than that.  The summons sought leave “to amend the defence” in terms of a document exhibited.  That was entitled defence and counterclaim.  It comprised two parts, separate and distinct; defence and counterclaim.  The so-called amendment was the addition of the counterclaim.  There was no change to the defence.

16.Had the defendant been permitted by the rules of procedure it could have filed as a separate document a counterclaim.  But O.15 r.2(1) RHC which deals with counterclaims requires that it be added to the defendant’s defence.  That said in all respects the counterclaim is a separate action; see O.15 r.2(2) which reads:

“(2)	Rule 1 shall apply in relation to a counterclaim as if the counterclaim were a separate action and as if the person making the counterclaim were the plaintiff and the person against whom it is made a defendant;”

and (3) which reads:

“(3)	A counterclaim may be proceeded with notwithstanding that judgment is given for the plaintiff in the action or that the action is stayed, discontinued or dismissed.”

17.The same goes for applications for summary judgment.  The defendant who has filed a counterclaim may pursue judgment by this means regardless of the status of the plaintiff’s action; see O.14 r.5.

18.It follows that the counterclaim being a separate action from the plaintiff’s action, it must be separate from the defence to that action.  The fact that it is required to be added to the defence under O.15 r.2 must therefore be for administrative convenience; it cannot be otherwise.

19.Once this separateness and independence between defence and counterclaim becomes apparent, it follows that a so-called amendment to a defence by the adding of a counterclaim is not an amendment to the defence at all; it is the filing, for the first time, of a counterclaim.  There is no relation back and thus no backdating to the date of the defence.

20.It follows that in such circumstances there is no fetter to the discretion of the Registrar, and this court, given by O.20 r.5.

Conclusion

21.The result as I find is that the Registrar was entitled to give the defendant leave and I dismiss the appeal.  The order of 15 September 2006 stands.

22.Costs of the appeal are nisi.  They are to the defendant, taxed if not agreed, in any event.

Mr C K Wong, of Messrs Charles Yeung Clement Lam Liu and Yip, for the Plaintiff

Miss Y Cheng, instructed by Messrs Vincent T K Cheung, Yap & Co., for the Defendant