Case Detail

HCA010369A/1997

HCA 10369/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10369 OF 1997

____________

BETWEEN
	LUK POR	Plaintiff

	AND

	CHAU KIM HUNG	Defendant

____________

Coram: Hon Reyes J in Chambers

Date of Hearing: 2 October 2003

Date of Decision: 2 October 2003

Date of Reasons for Decision: 8 October 2003

_________________________

REASONS FOR DECISION

_________________________

1. By Notice of Appeal dated 1 September 2003 the Defendant appealed against the Order of Master Rimsky Yuen SC ordering the Defendant to pay $1,322,000.00 ("the Sum") to the Defendant within 14 days together with interest at the judgment rate from 1 May 2003 until full payment. The Sum was payable pursuant to the Schedule to a Consent Order ("the Consent Order") dated 20 July 2001 in the Tomlin form.

Background

2. After the hearing on 2 October 2003 I dismissed the Defendant's appeal. This is a note of the reasons for my decision.

3. By Writ dated 30 September 1997 the Plaintiff claimed damages against the Defendant for breach of 2 agreements relating to land on Lamma Island. The Defendant counterclaimed. Eventually, the parties settled their disputes by the Consent Order which provided that:-

"all further proceedings in this action be stayed upon terms of settlement agreed between the parties and set forth in the Schedule hereto, except for the purpose of carrying this order and the said terns into effect with liberty to the parties to apply for the said purpose and that there be no order as to costs of this action including this application."

4. The Schedule included the following terms:-

"
(1) (Clause 1)
Without admission of liability, the Defendant do pay the Plaintiff a sum of HK$2,200,000.00 in full and final settlement of the Plaintiff's claims and the Defendant's counterclaims in this action and in High Court Action No.1653 of 2001.
(2) (Clause 2)
Subject to paragraph 5 below, the said sum of HK$2,200,000.00 shall be paid by the Defendant to the Plaintiff by twenty-two (22) equal monthly instalments of HK$100,000.00. The 1st instalment of HK$100,000.00 shall be paid on 1st August 2001 and the rest shall be respectively paid on the 1st day of each and every subsequent month until 1st May 2003, on which the 22nd instalment of HK$100,000.00 is payable.
(3) (Clause 3)
Upon execution of this Consent Order, the Defendant shall deliver to and deposit with the Plaintiff twenty-two (22) post-dated non-negotiable cheques corresponding to and for settlement of the instalments mentioned in paragraph 2 hereof in the aggregate sum of HK$2,200,000.00."

5. Upon execution of the Consent Order the Defendant delivered 22 post-dated cheques of $100,000.00 each to the Plaintiff. The Plaintiff presented 17 of the 22 cheques. Only 4 of the cheques so presented were honoured. To minimise loss, the Plaintiff demanded that the Defendant at least pay certain sums in partial reduction of the $2,200,000.00 debt. The Defendant accordingly paid a total of $478,000.00 in varying amounts on irregular dates between 11 February 2002 and 25 March 2003. That left the Sum outstanding (that is, $2,200,000.00-{$400,000.00 + $478,000.00}). By Summons dated 6 May 2003 the Plaintiff sought to enforce the Consent Order by applying for immediate payment of the Sum.

Discussion

6. Mr Paul Wu for the Defendant raised 2 grounds of appeal.

7. First, Mr Wu suggested that the Plaintiff had taken the wrong procedure. The Plaintiff (he said) ought to have started a fresh action for breach of the contract evidenced by the Schedule to the Consent Order.

8. Agreed terms scheduled to a Tomlin order do not form part of the order. One consequence of this is that the failure to observe a scheduled term does not constitute a contempt of court. But this does not mean that it is necessary to start a new action to enforce a scheduled term.

9. In E F Phillips & Sons Ltd v. Clarke [1970] Ch 322 Goff J stated:-

"The defendant ... is not represented, nor has he appeared in person; but counsel for the plaintiffs, has very properly drawn my attention to a number of cases in which the question of the mode of enforcing a Tomlin order has been considered, and to a statement in Daniell's Chancery Practice (8th ed.), at p.646, which reads:-

'... a consent order, embodying a new agreement between the parties beyond the scope of the action can only be enforced in a fresh suit ...'

for which the authority cited is Re Hearn, De Bertodano v. Hearn (No.1) (1913) 108 LT 452, 737.
There is no express authority that a Tomlin order can be enforced by an application in the same action. It is clearly settled by Dashwood v. Dashwood [1927] WN 276, that it cannot be enforced directly by committal proceedings; it is first necessary to obtain an order requiring the party in breach to perform his obligation under the compromise. But the question is, can such an order be obtained in the original action?
In the absence of authority I would have thought it clearly could have been even where, as in the present case, a compromise goes outside the ambit of the original action, which compromises often do, because it is part of the form of order that the proceedings are not absolutely stayed but are stayed except for the purpose of carrying the terms in effect, and liberty to apply as to carrying the terms into effect is expressly reserved.
...
In Re Hearn not only did the compromise go outside the ambit of the original action but, first, no liberty to apply had been reserved at all and the stay was absolute and unqualified, and secondly, the relief sought was not a mere enforcement of the agreed terms but sought to modify them to give effect to the original intention in changed circumstances. The prime ground for the decision in the Court of Appeal was that the applicant was seeking relief against trustees outside the ambit of the compromise itself, but Sir Herbert Cozens-Hardy MR said:-

'But apart from that, although that alone is a sufficient ground for dismissing this appeal, there is also this further ground - namely, that this is an attempt to enforce, not a title under the will, which alone was dealt with by the trustees' summons, but an entirely new and independent bargain between the husband and the wife, and that could not be done in the old proceedings.'

That is not a dictum: it is expressly a ground for the decision, albeit one which the court thought unnecessary because of the strength of their first ground. That being so, in a case on all fours it is binding on me. But Re Hearn in my judgment is distinguishable from the ordinary form of Tomlin order case by the circumstance to which I have already adverted that there was an unqualified stay and no liberty to apply, and it is also distinguishable from this particular case, and, I apprehend, from most applications to enforce a Tomlin order, in that the relief sought in Re Hearn was not mere enforcement but variation. I therefore distinguish it on those grounds.
That being so, in my judgment it is not an authority for the bald proposition stated in Daniell's Chancery Practice which I have read. In my judgment provided an order is in the normally appropriate form with a qualified stay and a liberty to apply, and provided the application is strictly to enforce the terms embodied in the order and the schedule, and does not depart from the agreed terms, an order giving effect to the terms may be obtained under the liberty to apply in the original action, notwithstanding the compromise itself goes beyond the ambit of the original dispute and the provision sought to be enforced is something which could not have been enforced in the original action and which, indeed, is an obligation which did not then exist but arose for the first time under the compromise."

10. Goff J's criteria enabling enforcement of scheduled terms in an original (as opposed to fresh) action are all met in this case. There is here a qualified stay with liberty to apply and the Plaintiff simply wishes to enforce the scheduled terms.

11. As a result, I rejected Mr Wu's 1st ground of appeal. A new action is not required.

12. Second, Mr Wu submitted that, by accepting smaller payments from the Defendant between February 2002 to March 2003 without taking enforcement proceedings, the Plaintiff induced the Defendant to believe that strict compliance with the agreed payment timetable would not be required. Hence (Mr Wu suggested) it would be inequitable now to allow the Plaintiff to resile from this position and insist on strict compliance with the terms scheduled to the Consent Order.

13. That the Plaintiff, to mitigate loss, was prepared to accept lesser sums from the Defendant from time to time cannot of itself amount to a representation that the Plaintiff would not insist on enforcing his strict legal rights at some stage. Nor is it apparent from the evidence filed on his behalf, how the Defendant claims to have relied on any alleged representation or why it would be inequitable to allow the Plaintiff now to enforce his rights. The Defendant has failed to condescend to any particulars of this line of defence. There is simply no basis for it in fact or law.

14. As a result, I rejected Mr Wu's 2nd ground of appeal.

15. I record here that in his Skeleton Mr Wu raised a 3rd ground of appeal, namely that, prior to the execution of the Consent Order, the Plaintiff allegedly represented to the Defendant that the Plaintiff would refund $1,100,000.00 after full compliance with the terms in the Schedule to the Consent Order. But Mr Wu abandoned that ground as untenable at the hearing before me.

Conclusion

16. For the above reasons, I dismissed the Defendant's appeal and awarded costs to the Plaintiff to be taxed if not agreed.

	(A T Reyes)
	Judge of the Court of First Instance
	High Court

Representation:

Mr Bernard Mak, instructed by Messrs David Y Y Fung & Co., for the Plaintiff

Mr Paul Wu, instructed by Messrs Li, Wong & Lam, for the Defendant

HCA010369/1997

HCA 10369/1997

Headnote

Practice and Procedure. Master's appeal against order granting plaintiff leave to amend statement of claim. Amendment introduced a new cause of action based on settlement agreement between the parties compromising the claims in the original action. The new cause of action did not exist at the time when the original statement of claim was issued. Held, the amendment should not be allowed. The plaintiff should bring a fresh action to litigate the matters concerning the settlement agreement. Appeal allowed.

HCA 10369/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10369 OF 1997

BETWEEN
	LUK POR	Plaintiff

	AND

	CHAU KIM HUNG	Defendant

Coram: Hon. Sakhrani J in Chambers

Date of Hearing: 22 March 2001

Date of Judgment: 22 March 2001

_____________________

JUDGMENT

_____________________

1. This is an appeal against the order of Master Jones given on 19 February 2001 granting the plaintiff leave to amend his statement of claim. Pursuant to that order the amended statement of claim was filed on the 20 February 2001.

2. The original claim by the plaintiff against the defendant is in respect of two separate agreements made between them in June 1992 and in October 1992 respectively. The plaintiff is and was an investor. The defendant is and was a local builder of small village houses on Lamma Island. The plaintiff and the defendant together invested in small village houses on Lamma Island. They entered into, inter alia, two separate agreements.

3. Under the first agreement, the plaintiff was to provide funds for the purchase of a plot of land on Lamma Island. The defendant was to procure the land owners of that plot to sell the same to the plaintiff and the defendant. The land would then be exchanged and used for residential development with the plaintiff and the defendant sharing the profit and loss from the proceeds of sale of the building to be erected. The plaintiff claims that the defendant was in breach of his obligations under the first agreement and claims damages. There is also a claim for damages for fraudulent misrepresentation alternatively, negligent misrepresentation.

4. Under the second amendment, the plaintiff was to pay the purchase price in respect of another plot of land on Lamma Island. The defendant was to demolish the existing house on that plot and to construct the new house thereon. The plaintiff claims that the defendant was in breach of the second agreement and claims damages. There is a defence and counterclaim by the defendant who counterclaims for reimbursement of sums expended by him under the second agreement.

5. By the amended statement of claim, the plaintiff introduced a new cause of action. There is also an amendment to the prayers for relief, namely in prayers 1, 2 and 3 by adding the words "to be assessed" after the word "damages".

6. I will deal with the second amendment first as this can be disposed of shortly. This simply adds the words "to be assessed" to make it plain that the damages sought under the relevant paragraphs in the amended statement of claim are to be assessed. No particulars are given of special damages but general damages which are claimed are to be assessed. I can see no objection to this amendment as it simply makes it plain that the damages that the plaintiff seeks under the relevant paragraphs are to be assessed.

7. I turn to the more substantial amendment which introduces a new cause of action. By paras 28 to 33, the plaintiff pleads that the plaintiff and the defendant on 11 June 1999 reached an agreement whereby the plaintiff's claims in this action have been settled ("the settlement agreement"). It is pleaded that by the settlement agreement the defendant agreed to pay HK$2,233,320.00 to the plaintiff by instalments and the plaintiff would transfer his title in the two plots of land to the defendant. After the last instalment payment to be made by the defendant to the plaintiff, the plaintiff would discontinue his claims in this action and the defendant would then discontinue his counterclaim. It is pleaded that the defendant has been in breach of the settlement agreement by failing to pay the second to sixth instalments and the plaintiff claims the sum of HK$2,133,320.00, i.e. the total of the second to sixth instalments, being the damages claimed under prayer 3a.

8. I have been informed by Mr Cheung, counsel for the defendant, that the defendant denies that there has been a settlement agreement reached between the parties. This is an issue between the parties but at this stage I have to assume the facts as pleaded to be true and that the plaintiff will establish the same at trial. Even though this new claim is pleaded in the alternative, the fact remains that it is the plaintiff's contention as pleaded that the plaintiff's claims in the action have been compromised by the settlement agreement. And the plaintiff seeks the enforcement of that settlement agreement by seeking the damages claimed in the said sum of HK$2,133,320 by prayer 3a. That being so, it seems to me that this is the sort of situation which requires the plaintiff to bring a fresh action to seek redress under the compromise between the parties.

9. It is stated in Foskett's "The Law and Practice of Compromise" 4th Edn in appendix 6 at p. 561 as follows :

"The juridical basis for the requirement for a fresh action in these circumstances is clear and well-established : once a compromise has been concluded, it puts an end to the previous disputation between the parties (and to the causes of action being maintained or intimated by one against the other) and represents a new legal relationship between them giving rise to new causes of action. Any such cause of action (for example one seeking enforcement of the compromise or one seeking its judicial rescission) requires fresh proceedings in the form of a fresh action."

In my judgment, the plaintiff should bring a fresh action to litigate the matters concerning the settlement agreement rather than to amend the statement of claim to plead the same in this action.

10. A further consideration is the fact that in this case the contents of "without prejudice" negotiations will have to be considered by the court as there will be an issue raised as to whether or not an agreement has been concluded. It will be necessary for the court to lift the veil of privilege to determine whether an agreement had in fact been reached. If the result of that determination is that no such agreement had been reached, then the veil of privilege is drawn again over the contents of the negotiations (para 9-28 Foskett's "The Law and Practice of Compromise", 4th Edn). It is most undesirable that evidence of the "without prejudice" negotiations should be admitted at the trial of the original action as it might well prejudice the defendant. The defendant might also be cross-examined on the settlement terms.

11. In the circumstances, in my judgment, the amendments in relation to the plaintiff's claim under the settlement agreement ought not to be allowed. The plaintiff should start a fresh action in respect of this claim.

12. There is a further reason why the said amendment should not be allowed. It must be remembered that an amendment duly made takes effect, not from the date when the amendment is made, but from the date of the original document which it amends. The original statement of claim is dated 30 September 1997. As at that date the cause of action based on the new claim under the settlement agreement did not even exist. The settlement agreement is said to be made on 11 June 1999. As is stated in marginal note 20/8/2 of the Hong Kong White Book 2001 :

"The rule as to the effect of an amendment is the reason why a plaintiff may not amend his writ by adding a cause of action which has accrued to him since the issue of the writ. (see Eshelby v Federated European Bank Limited [1932] 1 KB 254, affirmed that p. 423; see also, Halliard Property Company Limited v Jack Segal Limited [1978] 1 WLR 377; [1978] 3 ALL ER 1219)"

13. For that reason also, I do not think that the amendments to raise the claim under the settlement agreement ought to be allowed.

14. The appeal is allowed. The order of Master Jones is varied to the extent that the amendments as contained in paragraphs 28 to 33 and prayer 3a of the amended statement of claim ought not to be allowed.

	(Arjan H Sakhrani)
	Judge of the Court of First Instance

Representation:

Mr Daniel S H Tang instructed by Messrs David Y Y Fung & Co, for the plaintiff

Mr Wallace Cheung instructed by Messrs Li, Wong & Lam, for the defendant

LUK POR v. CHAU KIM HUNG

Files (2)

"	(1)	(Clause 1)
		Without admission of liability, the Defendant do pay the Plaintiff a sum of HK$2,200,000.00 in full and final settlement of the Plaintiff's claims and the Defendant's counterclaims in this action and in High Court Action No.1653 of 2001.

	(2)	(Clause 2)
		Subject to paragraph 5 below, the said sum of HK$2,200,000.00 shall be paid by the Defendant to the Plaintiff by twenty-two (22) equal monthly instalments of HK$100,000.00. The 1st instalment of HK$100,000.00 shall be paid on 1st August 2001 and the rest shall be respectively paid on the 1st day of each and every subsequent month until 1st May 2003, on which the 22nd instalment of HK$100,000.00 is payable.

	(3)	(Clause 3)
		Upon execution of this Consent Order, the Defendant shall deliver to and deposit with the Plaintiff twenty-two (22) post-dated non-negotiable cheques corresponding to and for settlement of the instalments mentioned in paragraph 2 hereof in the aggregate sum of HK$2,200,000.00."