Court discretion in allowing discontinuance of counterclaims balances justice and efficiency, focusing on the merits of claims and the implications on limitation periods.

JUDGMENT

Wong Kian Kheong J:

A. Novel Issue

[1] In court enclosure no 62 (Encl 62), the defendant company (Defendant) has applied for leave of court to discontinue the Defendant's counterclaim (Counterclaim) against the plaintiff company (Plaintiff) with liberty to file afresh and with costs to be borne by the Defendant. The novel question that arises in Encl 62 is whether the court should exercise its discretion under O 21 r 3(1) of the Rules of 2012 (RC) to strike out the Counterclaim without liberty for the Defendant to file a fresh claim against the Plaintiff because the Plaintiff had informed the court that the Plaintiff was considering to cite, among others, the Defendant and its directors, for contempt of a discovery order granted earlier by the court.

B. Background

[2] The Plaintiff had been appointed by the Defendant to supply equipment and related services (Works) in a construction project (Project).

[3] The Plaintiff claimed to have completed approximately 95% of the Works (Completed Works) but had not been paid in full by the Defendant for the Completed Works. Hence, with regard to the Completed Works, the Plaintiff filed this suit against the Defendant (Original Action) and claimed for, among others, a total sum of RM3,625,503.54 [Claimed Sum (Original Action)].

[4] The Defendant not only resisted the Original Action but also filed the Counterclaim. In the Counterclaim, the Defendant counterclaimed from the Plaintiff for a total sum of RM5,088,61.05 [Claimed Sum (Counterclaim)] based on the following grounds:

(1) "back charge" in a sum of RM197,829.38 was incurred by the Defendant to engage a third party to rectify the defects in the Works performed by the Plaintiff;

(2) an amount of RM4,780.67 was paid by the Defendant for cleaning works which had been undertaken on behalf of the Plaintiff; and

(3) liquidated and ascertained damages amounting to RM4,886,000.00 should be paid by the Plaintiff to the Defendant due to the Plaintiff's delay in completing the Works.

[5] The Defendant was initially represented by Messrs Selva Mookiah & Associates (Messrs SMA).

[6] Subsequently, Messrs Ganeson Gomathy Fadzlin M. Nava & Co (Messrs GFN) replaced Messrs SMA as the Defendant's solicitors in this case.

[7] After the Defendant was represented by Messrs GFN, the Defendant applied for and obtained leave of court to withdraw its defence to the Original Action (Defence). Consequently, the Defendant agreed to the Plaintiff's entry of a Judgment In Default Of Defence against the Defendant (Plaintiff's Default Judgment) for, among others, the Claimed Sum (Original Action) with interest on the Claimed Sum (Original Action) and costs as stipulated in the Plaintiff's Default Judgment [Costs (Original Action)].

C. Enclosure 62

[8] In Encl 62, the Defendant has applied for the following orders, among others:

(1) leave of court to discontinue the Counterclaim with liberty to file a fresh suit in respect of the Claimed Sum (Counterclaim) against the Plaintiff (Liberty); and

(2) costs to be paid by the Defendant to the Plaintiff.

[9] The Plaintiff did not object to the discontinuance of the Counterclaim but contended that, among others, the Defendant should not be given Liberty. The Plaintiff had advanced the following grounds to persuade the court not to grant Liberty to the Defendant:

(1) the Counterclaim had no merit because-

(a) the Defendant had withdrawn the Defence;

(b) the Plaintiff's Default Judgment had been entered by the court; and

(c) when the Defendant's documents were sent to the Plaintiff for the purpose of preparation of the "Common Bundle of Documents" to be used at the trial of this case, the Defendant had not produced any document which could support the Counterclaim;

(2) the Defendant was estopped from applying for Liberty because the Defendant should not be allowed to "blow hot and cold" by consenting to the Plaintiff's Default Judgment on the one hand and by seeking Liberty in Encl 62 on the other hand;

(3) the Plaintiff had obtained two di