GCH (INTERNATIONAL) LTD v. WONG FUNG WAI, HENRY AND OTHERS

HCMP 2914/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 2914OF 2014

(ON AN INTENDED APPEAL FROM HCA NO. 1538 of 2012)

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REASONS FOR JUDGMENT
AND DECISION ON COSTS

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Hon Lam VP (giving the Reasons for Judgment and Decision on Costs of the Court):

1.  The Plaintiff applies for leave to appeal against the decision of Deputy High Court Judge Sakhrani of 3 July 2014. The learned judge had refused leave to appeal on 31 October 2014. After hearing counsel, we dismissed the application for leave. The following are our reasons for refusing leave.

2.  The decision of the judge was, in substance, the refusal to lift a general stay of the action ordered pursuant to a Consent Summons of 20 December 2012.  The Consent Summons was filed pursuant to the terms of a settlement agreement of 13 December 2012.  

3.  The reason why the Plaintiff sought a lift of the stay is that Parties B to the settlement agreement was inadvertently late in one of the instalment payment.  Since then Parties B had made the payment and indeed accelerated payment of all other instalments.  Apart from that, the relevant share transfers provided for under the settlement agreement had been completed well before the late payment.  As found by the judge, Parties B had by the time of the hearing before the judge fully performed their obligations under the agreement.  Further, as noted by the judge, Parties A had no intention of re-transferring the shares back to Parties B.   There was also no intention on the part of Parties A to repay the sums paid by Parties B under the agreement.  Actually, solicitors for Parties A (including the Plaintiff) accepted the accelerated payment in August 2013 on behalf of their clients. The acceptance was said to be made pursuant to Clause 2(e) of the agreement. Thus, Parties A acted on the basis that the settlement agreement was in place notwithstanding that there was a late payment for the July 2013 instalment.   

4.  The fundamental premise of Mr Li SC (appearing for the Plaintiff together with Mr Kwong) is that the Plaintiff had a right to have the stay lifted once there was a late payment since the agreement provided for time being of the essence. In the course of his oral submission, Mr Li, placing emphasis on the words “IN ADDITION AND WITHOUT PREJUDICE to any other rights and remedies”, contended that Clause 4(d) of the agreement gave an additional contractual right to the Plaintiff to pursue with the underlying claims in the event of late performance by Parties B. 

5.  With respect, we cannot accept this argument.  Clause 4(d) of the agreement only provided for a liberty to the Plaintiff to apply to court for the lifting of the stay.  It is still subject to the discretion of the court in considering whether the stay should be lifted. We agree with Mr Li that, in the exercise of such discretion, the court should not rewrite the bargain between the parties as embodied in the settlement agreement (a proposition which we do not think Mr Horace Wong SC, appearing together with Mr Ho for the Defendants, disputed). However, the contract must be construed in context. The failure of Parties B in complying with the payment schedule strictly and the provision of time being of essence are matters the court must have regard to.  But in the context of this agreement, in light of Clause 2(e), we are of the view that the judge could exercise his discretion by taking account of what happened after the late payment. 

6.  In so doing, the judge did not rewrite the bargain as set out in the agreement.  The judge did have regard to the terms of the agreement and he also took account of the subsequent payment and acceptance of the balance pursuant to Clause 2(e).  Clause 2(e) (relied upon by the Plaintiff to justify Parties A’s retention of the accelerated payment) shows that it was not the parties’ intention that a delay in payment would automatically revoke the settlement. Having taken the benefit of the accelerated payment, it is difficult to see how Parties A, including the Plaintiff, could now come to court to re-open the litigation as if there had not been any settlement. 

7.  We do not think the latter part of Clause 4(d) (even considered together with Clauses 7, 8 and 10) relied upon by Mr Li could be construed as giving the Plaintiff an additional right to pursue the underlying claims in HCA No 1538 of 2012 whenever there is a late performance of any obligations under the agreement by Parties B notwithstanding its subsequent remedy by compliance with Clause 2(e). The wordings are simply not clear enough to ascribe such an unnatural intention to the parties who had made the agreement to achieve a global settlement of all disputes, including those in HCA No 1538 of 2012. It would have been otherwise if a clear mandatory lifting of stay is provided in Clause 4(d). But the clause did not so provide.

8.  There is also no abnormality as suggested by Mr Li: that the action could not be discontinued pursuant to Clause 4(b) due to the default in the July payment.  With respect, notwithstanding the late payment, once Parties A accepted the accelerated payment, there had been a fulfilment of all the obligations by Parties B and the corresponding duty to discontinue the action comes into play.  Likewise, there is no merit in Mr Li’s submission that Parties A can start fresh action on the same claims under Clause 4(d) due to the late payment.  For the reasons set out above, the settlement (which the judge found to be a full settlement between the parties) is still in place and the settlement has the effect of replacing whatever claims a party to the settlement may have in the underlying matters with the obligations under the settlement agreement.  It would be an abuse of process for any new claims on the underlying matters to be commenced. 

9.  In short, though we placed more emphasis on the contractual context in our reasoning as to why the stay should not be lifted after a full performance of the obligations by Parties B (albeit partly late and then accelerated pursuant to Clause 2(e)), we are of the view that the judge had reached the right conclusion.

10.  We therefore refused to grant leave to appeal.  We have also ordered the Plaintiff to pay the costs of the Defendants in this application.  

11.  Solicitors for the Defendants have submitted a costs statement on 6 February 2015 in the total sum of $500,700, of which counsel fees run up to $430,000. Solicitors for the Plaintiff submitted a list of objection on 12 February 2015 challenging those claims as excessive and duplication. They also challenge counsel fees and suggested a total figure of $205,000 for counsel fees. After considering these documents, we agree that there is room for taxing down the costs of the defendants. Leave applications are not meant to be the occasion for full threshed arguments and as pointed out on behalf of the Plaintiff, counsel drafting the statement in opposition to leave were counsel appearing below and were familiar with the case. It is a party’s privilege to be extravagant in his choice of counsel. But he must not expect to recover the full amount charged by counsel in that situation by way of party and party costs from the other side. Though Mr Wong had been very helpful, we agree that on party to party basis, counsel fees in the present application should be $205,000. As regards the fees charged by the solicitor, bearing in mind substantial works were undertaken by counsel, we would only give $15,000 for item D.  Thus, the total for items B, C, D and G is $45,700.  Therefore, we fix the costs at $250,700.