TSUI CHI HUNG TONY v. HSIN CHONG CONSTRUCTION CO LTD AND OTHERS

HCPI 145/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 145 OF 2005

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J U D G M E N T

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This is the defendants’ application (a) to strike out the plaintiff’s claim, (b) alternatively to stay the proceedings and (c) further or alternatively to demand the plaintiff to return the sum of $676,000 already paid.

2   The plaintiff claims compensation for personal injuries arising out of an accident in a construction site which happened on 29 May 2001.  According to the pleadings, the plaintiff received a sum of $676,000.  It is not denied that the plaintiff had entered into an agreement with the insurers acting as agent for the defendants.

3   The defendants’ case is that the agreement is for full and final settlement of the claim and the plaintiff should not commence the action for the claim.  It is not challenged by the plaintiff and it is expressly stated in the agreement that the sum is for “the total final and complete settlement of all claims”.

4   The plaintiff, as I understand from Mr. Chung of counsel for him, raises three issues:

(a)  Non est factum;

(b)  Undue influence and unconscionable bargains;

and    (c)  Clause D in the agreement.

5. I must say in the skeleton argument of Mr. Chung he has not raised the last two issues.  I am a bit unprepared for it.  As Mr. Clough for the defendants does not object to it, I proceed to hear the issues.

Non est factum

6. The general principle of this equitable ground is that if a party considers he has signed a different kind of document which cannot be regarded as his deed, he is entitled to set aside the agreement.

7. In the present case, Mr. Raymond Wong, a staff of the insurers, negotiated with plaintiff and offered apart from the money already paid to pay $300,000 for the settlement.  The plaintiff’s wife suggested to have $50,000 more and the plaintiff made the counter offer.  Mr. Wong did not reply immediately and said that he would call the plaintiff which he did a few hours later.  Mr. Wong informed him the counter offer was accepted and asked him to go to the insurers’ office to sign certain documents.

8. On 25 March 2003, the agreement was signed.  According to the plaintiff’s affirmation at paragraph 21, Mr. Wong “read out the Settlement Agreement verbatim” to him and asked him to read the same.  Mr. Wong also asked him “if he had sought any legal advice before”.  The plaintiff replied that “he had only discussed this matter with my (his) sister before coming there”.

9. The plaintiff’s main complaints are:

(a) that “Mr. Raymond Wong did not explain the detailed contents or the meanings or the legal consequence of the Settlement Agreement” to him.  I doubt the other party owes him such duty.

(b) That “he was unemployed and suffered very much from the injuries and impecunious”.  He was lured into accepting the settlement.  I must say he fully understood that he was signing a settlement.  He cannot say that this was not what he intended to do.  He knew it was a settlement.

10. I do not think the equitable ground of non est factum is available to the plaintiff.

Undue influence and unconscionable bargains

11. Mr. Chung relies on a passage taken from the Law and Practice of Compromise, 1996 edition, by David Foskett and David Hodge, at Section 4-43 which reads as follows:

“A compromise which is manifestly disadvantageous to the party the subject of undue influence by the other may be set aside by the court under its equitable jurisdiction.  The court will intervene to prevent one party being victimized or dominated by the other.  The jurisdiction cannot be invoked to set aside agreements which may merely have been foolish or imprudent; it is available to prevent an unfair advantage being gained by one party over the other.”

12. I must say this passage does not help Mr. Wong very much.  Assuming for the purpose of this judgment the claim that could be established is $4 million and the fact being that the settlement is at $676,000, the compromise can be regarded as manifestly disadvantageous to the plaintiff.  Manifest disadvantage is only one of the factors the Court has to consider.  The key issue is whether the plaintiff is being victimized or dominated by the other.

13. I accept that there is great disparity in the ability of handling this type of case between the parties: on one hand Mr. Raymond Wong who was specially assigned by the insurers to conduct the negotiation must be very experienced in doing this type of work and on the other the plaintiff who has received education up to Form 2 did not have such experience before.  Can I by that assume because of such disparity that there must be victimization and domination?

14. According to the events that happened in the negotiation process and the two attendances to the insurers’ offices for signing the documents and receiving money as set out in the plaintiff’s affirmation, I find no evidence that supports the allegations, even if they were so pleaded.

15. As the case has reached the stage where it is ready for trial, Mr. Chung urges me to dismiss the application and let the case go for trial and the Court hear the evidence.  It is not right for me to adopt such a course.  The strike-out application could be taken “at any stage of the proceedings”.  I would be most irresponsible if knowing full well that the plaintiff has no case at all I allow it to continue.

16. Mr. Chung also refers me to a passage in the same section found in the book “the Law and Practice of Compromise” which states as follows:

“When the requisite matters are established, the onus will be upon the “influencer” to show that he practiced no domination upon the other party.  The existence of independent advice will undoubtedly be relevant in deciding whether this onus has been discharged.  It may be necessary to show that the full significance of the advice was appreciated.”

17. From that passage, Mr. Chung concludes that it is for the defendants to prove that there is no undue influence.  Mr. Chung seems to overlook the opening clause that “the requisite matters are established”.  Have the requisite matters been established in this case?  The requisite matters according to Lord Scarman, after reading the judgment as I see it, are the existence of the relationship and also the advantage taken.  I do not find the requisite matters have been established and I do not think the burden has shifted to the plaintiff in this case.

18. I understand that the common law on undue influence has quickly developed since the case of Barclays Bank Plc v O’Brien [1994] 1 AC 180 and further elaborated by Royal Bank of Scotland Plc v Etridge (No. 2) [2001] UKHL 44.  Rightly pointed out by Mr. Clough in his written submission by referring me to the same book, quoted by Mr. Chung but of 2005 edition, at Section 4-66 where the learned writers have changed and said:-

“The issue is essentially one of fact depending on “the nature of the alleged undue influence, the personality of the parties, their relationship, the extent to which the transaction cannot readily be accounted for by the ordinary motives or ordinary persons, and all the circumstances of the case”, presumptions in certain circumstances merely constituting tools in resolving the issue.  Recourse to the question whether a transaction is to the “manifest disadvantage” of the person influenced has also been said not to be helpful.”

The writers have somewhat modified their former view in 1996 edition.

19. The Hong Kong Court of Final Appeal has also decided on undue influence in Li Sau Ying v Bank of China (HK) Ltd. (2004) 7 HKCFAR 580 at D:

“Both courts below had over-complicated the undue influence issue.  P and Y’s relationship did not fall within the categories where undue influence was presumed as a matter of law.  In cases outside those categories, the parties should concentrate on whether the evidence justified the inference that, on a balance of probabilities, the impugned transaction was procured by undue influence.  References in such cases to, and attempts to invoke the assistance of, an alleged evidential presumption of undue influence were likely to be, as was the case here, a source of confusion.”

20. I must say I do not find any relationship arises between the plaintiff and the defendants or their insurers except as opposing parties in this litigation.  It does not give rise to any presumption.  As there is no such presumption, the onus of proof, as in any other ordinary civil proceeding, falls on the party who makes such allegation.  I do not find evidence of undue influence at all.

Clause D of the Agreement

21. Clause D reads as follows:

“If Tsui Chi Hung Tony still continues to claim for damages for the related industrial injury later, whether under Employee’s Compensation Ordinance and/or claiming damages for personal injury at the High Court, Tsui Chi Hung Tong must refund all of the received compensation of HK$676,000.00 to “Summit” plus interest.  And all legal expenses and related expenses of “Summit”, “Hsin Chong” and “Ready” shall all and completely be borne by Tsui Chi Hung Tony.”

22. Mr. Tsui Chi Hung Tony, the person referred to in that clause, is the plaintiff.  Mr. Chung construes that clause to mean that notwithstanding the agreement the plaintiff can at any time claim against the defendants as long as he is willing to repay the money.  It is difficult for me to accept such construction after considering the agreement as a whole.  The agreement is meant to be a full and final settlement and the plaintiff has agreed to renounce, withdraw and release completely and absolutely all claiming actions against the defendants.  In case the plaintiff is in breach of the agreement, because the defendants have never admitted liability, it is logical for the plaintiff to demand for refund of the money paid.  The clause does not confer any right on the plaintiff.  It is purely for the protection of the defendants and their insurers.

23. As I understand it, at that time the plaintiff had lodged certain claims with the Labour Department and he had to discontinue it.  I do not consider that this clause empowers the plaintiff to retract and to start all over again.

24. For the reasons above mentioned, I strike out the plaintiff’s claim in this action and dismiss the whole action.

25. Having reached such conclusion I do not intend to deal with the other parts of the application viz. to stay the proceeding or to demand the plaintiff to return the sum already paid.

26. I also make the following costs order nisi:

(a)  Cost of the action up to and including the close of pleadings i.e. 23 May 2005 be to the defendants, if not agreed, to be taxed;

(b)  Costs of and incidental to this application be to the defendants including all costs reserved in relation thereto;

and    (c)  as to costs relating to other parts of the action each party pays its own costs.

27.  Unless within 14 days after receipt of this decision any party applies to vary the aforesaid costs order, it will become absolute on expiry of the said period.