Germain Electric Ltd v. Ldb Sales Co Ltd and Others

DCCJ3336/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3336 OF 2007

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BETWEEN

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Coram :  H.H. Judge Chow

Date of Hearing :  10^th April 2008

Date of Handing Down Decision :  24^th April 2008

Decision

1.This is an application by the Plaintiff under Order 18 rule  19 (b), (c) and (d) of the rules of the District Court for an order that the counterclaims of the 3 Defendants be struck out on the ground that the same is frivolous, and/or that it may prejudice, embarrass or delay the fair trial of the action, and/or that the same is otherwise an abuse of the process of the Court.

The Plaintiff’s claim

2.The Plaintiff trades in the sale of electrical and electronic products.  The 2^nd and 3^rd Defendants are the directors of the 1^st Defendant.  By a purchase order (No. 00201002 dated 27 February 2001) (“the Purchase Order”) placed by the 1^st Defendant with the Plaintiff, the 1^st Defendant agreed to purchase and the Plaintiff agreed to sell 80,004 pieces of Torch Light to be manufactured by the Plaintiff at the price of US$0.70 per piece.  The 2^nd and 3^rd Defendants personally controlled the 1^st Defendant and caused the 1^st Defendant to place the Purchase Order with the Plaintiff.

3.The Defendants represented to the Plaintiff that the first release of 40,002 pieces of Torch Light was to be shipped by 1 June 2001, and the second release of 40,002 pieces of Torch Light was to be shipped on a date to be advised by the 1^st Defendant to the Plaintiff.  In reliance of the Defendants’ representations the Plaintiff made moulds for the manufacture of the plastic casing for the Torch Light and incurred costs therefore.

4.In June 2001, the Plaintiff shipped the first release of Torch Light, and the 1^st Defendant paid for the goods delivered.  However the 1^st Defendant failed and refused to take delivery or pay for the 2^nd release of Torch Light.  Because of this the Plaintiff suffered loss and damage.  On 28^th July 2007, the Plaintiff commenced the present proceedings against the Defendants. 

The defence and counterclaim of the 1^st Defendant

5.The 1^st Defendant avers that the Plaintiff realized that the Purchase Order was for resale to General Electric.  The Plaintiff was fully aware of the rules and policies of General Electric the regarding the “release” of purchase orders placed by General Electric.  General Electric would give the first shipment date of a release purchase order, and further releases off that release purchase order would be informed by General Electric at a later date.

6.The 1^st Defendant received from the Plaintiff the first release of 40,002 pieces of Torch Light.  But unknown to the Defendants, when the Plaintiff was asking them for the 2^nd release date of 40,002 pieces of Torch Light, the Plaintiff was in full communication with General Electric.  It sent to General Electric a quotation of the 1^st Defendant’s products.  The quotation was for a substantially less amount for the said products than the amount the 1^st Defendant sold to General Electric.  General Electric stated that if the Plaintiff sent a retraction to the said quotation, business would return to normal.  The Plaintiff refused to send a retraction, and General Electric did not place the 2^nd release purchase order.  Because of the misrepresentation and induced breach of contract by the Plaintiff, the 1^st Defendant suffers loss and damage and so it counterclaims against the Plaintiff.  The 1^st Defendant sold its product to General Electric for USD$1.28 per piece, and purchased the same from the Plaintiff at USD$0.70.  Thus it suffers a loss of profit of USD$23,201.16.

7.The 1^st Defendant also counterclaims a loss of business reputation as a result of the sending by the Plaintiff a quotation of its products to General Electric misrepresenting itself, and for not sending a retraction to the quotation the Plaintiff sent to General Electric, inducing a breach of the contract, resulting in the non-release of the second release not being released by General Electric for the order of 40,002 pieces of Torch Light; the 1^st Defendant lost its business reputation and it asks for USD$30,000 for compensation.  The 1^st Defendant also asks the court to order the Plaintiff to put up an announcement of apology to the Defendants in a newspaper.

8.It claims against the Plaintiff for damages for misrepresentation for breach of contract.

9.In so far as the 2^nd and 3^rd Defendants are concerned, the contents of their counterclaim are substantially the same as those of the 1^st Defendant.

10.The Defence and Counterclaim of all the Defendants was filed on 21^st December, 2007.

High Court Action No. 5439 of 2001

11.On 19^th December 2001, the 1^st Defendant instituted an action in the Court of First Instance (High Court Action No. 5439 of 2001) (“High Court Action”) against the Plaintiff and 3 others.  This High Court Action was dismissed by Madam Registrar Queeny Au Yeung on 7 January 2008, for want of prosecution.

12.The 1^st Defendant’s counterclaim is essentially a repetition of its claims in the High Court Action.  The subject matters of the counter-claims in the present case more than 6 years ago.  Section 4 (1) of the Limitation Ordinances provides:-

“(1)        The following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued, that is to say-

(a) actions founded on simple contract or on tort;

(b) actions to enforce a recognizance;

(c) actions to enforce an award, ……

(d) actions to recover any sum recoverable by virtue of any Ordinance or imperial enactment, ……”

Volume 1 of the Hong Kong Civil Procedure 2007 states at p. 336 that “The court will prevent the improper use of its machinery, and will, in a proper case (e.g. where an action is absolutely groundless; where the claim is time-barred (Ronex Properties Ltd. v. John Laing Construction Ltd [1983] Q.B. 398; Chiu Ming sun v. Ma Wing Michael & Others [1986] H.K.C. 217) ……, summarily prevent its machinery from being used as a means of vexation and oppression in the process of litigation ……”

13.By 19^th December, 2001, the cause of action of the subject matter in the High Court Action must have accrued.  The Defence and Counterclaim of all the Defendants was filed on 21^st December, 2007.  The cause of action of all the Defendants’ counter-claims was statute-barred by the time the counter-claims were filed because by 19^th December, 2007 the cause of action had accrued for 6 years.  But the Defendants only filed their counter-claims on 21^st December, 2007. It will be an improper use of the court to allow their counter-claims to proceed against the Plaintiff. I therefore order that the counter-claims of the 3 Defendants be struck out. 

Costs

14.I make an order nisi, to be made absolute in 14 days’ time, that the Defendants do bear costs of this action, to be taxed, if not agreed, with certificate for Counsel.

The Plaintiff: represented by Miss Priscilla Wong, instructed by M/S. Zeke Mok & Co., Solicitors.

The 1^st Defendant:    represented by Mr. Robert Bruce Chaiko (O.5A Director).

The 2^nd Defendant:    present, appearing in person.

The 3^rd Defendant:    present, appearing in person.