Hong Kong Court Indicates General Undesirability For Litigants To Fragment Cases And Litigate Parts.

21 August, 2016

 

Whilst there is no express provision in the Rules of High Court (RHC) prohibiting a second application for summary judgment under Order 14 (O.14) against the same defendant after the defendant has been granted unconditional leave to defend the proceedings, the Court has indicated in a recent decision that it is generally undesirable for litigants to fragment their cases and litigate in parts as they please.

 

O.14 provides a speedy mechanism for plaintiffs to obtain judgment against defendants in a “summary” manner where the defendant has no defence to a claim or part of a claim. The defendant may by affidavit oppose such application, for example on the grounds of a technical objection or that he has a good defence to the claim on the merits. The Court may give the defendant leave to defend the claim (or part of the claim, as the case may be) either unconditionally or on conditions (e.g. giving security or with specified time or mode of trial or otherwise).

 

In the High Court case of Skillsoft Asia Pacific Pty Ltd v Ambow Education Holding Ltd, HCCL 31/2013, 12 January 2016, the Plaintiff applied for summary judgment under O.14 against the Defendant (the Current Application) for an order for specific performance of certain obligations of the Defendant under a distribution agreement (Agreement), namely, to provide the Plaintiff with a monthly sales report and allow the Plaintiff to inspect and audit its accounting books and records relating to a specified period.

 

Prior to the Current Application, the Plaintiff had made another O.14 application in 2013 (the First Application) for two payments allegedly due under the Agreement. In that application, the Plaintiff alleged that the Defendant was liable to make the 1st payment (concerning a certain licence fee payable to the Plaintiff for each of the products sold) and the 2nd payment (concerning certain prepayment) to the Plaintiff.

 

By way of background, under the Agreement, the Defendant was to act as a distributor of the Plaintiff’s products in the PRC, initially on an exclusive basis, but thereafter on either an exclusive or non-exclusive basis, at the Defendant’s option. The Defendant served notice on the Plaintiff to exercise the option to become a non-exclusive distributor from January 2012 onwards. The Plaintiff responded that the Defendant was still obliged to pay the prepayment, but the Defendant disagreed and gave the Plaintiff notice that it did not intend to renew the Agreement for 2012. The Defendant failed to pay the prepayment and the Plaintiff issued proceedings.

 

In relation to the First Application in 2013, the Plaintiff was granted summary judgment in respect of the claim for the 1st payment and the Defendant was granted unconditional leave to defend the claim for the 2nd payment. In granting unconditional leave, the Court held that it was certainly arguable whether the 2nd payment was due under the Agreement when the Defendant had served notice to the Plaintiff electing to operate on a non-exclusive basis.

 

The Court refused to grant the Plaintiff summary judgment in the Current Application, pointing out that this was an unusual application, since it was for judgment only on part of its claim and such was concerned with the enforcement of its disputed rights under the Agreement and was not the usual case where granting final judgment would obviate the trial. The trial would still be necessary in this case, as the application for judgment was partial only and a trial would take place in any event.

 

The Court went on to say that it must generally be undesirable for litigants to fragment their cases into parts and to advance them as they please, as this could not be conducive to proper deployment of the Court’s scarce resources. The Court has a duty, it said, to jealously guard against misuse of its resources, especially after the Civil Justice Reform.

 

In any event, the current Application concerned the Plaintiff’s rights after the purported termination of the Agreement and therefore turned on the issue as to when the Agreement ended. The Court was not satisfied that the Plaintiff’s case on when the Agreement came to an end was unanswerable. Further, the issue of whether the Plaintiff was entitled to the prepayment (for which unconditional leave to defend was granted) had a bearing on whether the Defendant was entitled to terminate the Agreement. It was therefore undesirable, the Court said, for it to make an incidental finding in this regard in the Current Application, which may constitute an issue estoppel.

 

The Court’s comment above regarding fragmented cases is reconcilable with the express provision under O.14 enabling a plaintiff to obtain summary judgment as to part of his claim. What the Court considered objectionable here, was not seeking summary judgment on part of a claim, but the Plaintiff’s failure to include all parts of the claim (which it could properly bring under O.14) in the First Application, in the absence of good reason.

 

A second application under O.14 after unconditional leave has been granted may only be justifiable where the first application was defeated by some technical objection or where there has been some change in the proceedings which gives rise to a new situation not covered by the decision on the earlier application.

 

In light of the above, a plaintiff making an O.14 application for summary judgment in respect of only part of his claim, should ensure that all parts of his claims which he can properly bring under O.14 are included in the application.