LUK POR v. CHAU KIM HUNG

HCA 10369/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10369 OF 1997

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REASONS FOR DECISION

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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.