King Prosper Trading Ltd. v. Tenbase Trading Ltd.

IN THE COURT OF APPEAL

1996, No. 244 &
1997, No. 48
(Civil)

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J U D G M E N T

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Godfrey, J.A. :

Introduction

1. This is an appeal from an order of Le Pichon, J. made in chambers on 25 February 1997, staying the plaintiff's action at the instance of the defendant. The defendant's objection is based on an agreement for compromise of the action which the defendant contends was made in correspondence between the parties' solicitors during February 1996.

The action

2. The action concerned the balance of the price of goods (namely, 100 Mitsubishi jeeps) sold and delivered by the plaintiff to the defendant. The price of the goods was $16,200,000, of which $10,000,000 has been paid. The dispute concerns the unpaid balance of the purchase price, namely $6,200,000.

The negotiations for compromise

3. The parties attempted to negotiate a compromise of the plaintiff's claim for this sum. The judge fully and helpfully reviewed in her judgment all the correspondence between the parties' solicitors. I do not propose in this judgment to set out all this correspondence at length.

The question : Was an agreement for compromise concluded?

4. The question is, as so often, whether the parties arrived at a concluded compromise as a result of this negotiation. The judge was of the opinion that it was plain beyond argument that they had done so. If that conclusion was correct, then the judge was quite right to stay the action. If, however, it was clear that there was no concluded agreement, or even that there may not have been a concluded agreement, then as it seems to me, she was wrong to stay the action. What she should have done in those circumstances was to direct the trial of an issue as to the disputed compromise.

The correspondence

5. The correspondence to which I have referred resulted in a proposal that $1,530,000 be paid by the defendant to the plaintiff in full and final settlement of the plaintiff's claim. The payment was to be made by a cashier order on or before 14 February 1996. The compromise was to be embodied in a consent order. The defendant's solicitors' letter of 9 February 1996, after asking whether this was acceptable, went on "If so, please let us have a draft consent order for our approval." I would construe this letter as indicating that the parties were proposing to make an agreement on the terms, and only on the terms, of a consent order the form of which remained to be agreed between the parties.

6. By their letter of 12 February 1996 the plaintiff's solicitors responded, attaching a copy of the proposed consent order, and adding "The original will be forwarded to you for your endorsement." This confirms, in my view, that the parties were intending their negotiation to culminate only in a form of order, endorsed by both of them, for submission to and approval by the court. The consent order, or rather the draft of it, attached to this letter referred in paragraph 1 to the agreement which it suggested had been made as to the terms on which the action was to be compromised, that is to say, the payment by the defendant to the plaintiff of the sum of $1,530,000 by way of a cashier order on before 14 February 1996. The draft order continued, in paragraph 2, with this :

"Upon payment in full of the aforesaid amount, the Defendant shall be discharged from all liabilities under the action herein and the Plaintiff shall file a Notice of Discontinuance within 3 clear working days."

7. There does not appear to have been any preceding agreement between the parties as to this piece of machinery (no doubt that is all it was) for the filing of a notice of discontinuance but nevertheless, that is a term of the consent order. The consent order concludes with an order for vacation of a hearing of a summons by the plaintiff and a provision making no order as to costs; this was one of the terms mentioned during the course of the parties' negotiations. But, in the end, the plaintiff withdrew or purported to withdraw its offer of compromise, before the parties had endorsed the consent order.

Conclusion

8. All this leaves with us, as I think, with the necessity of referring once again to the way in which the familiar question of agreement or no agreement must be approached :

"..... it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognise a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored."

9. The citation is from the well-known judgment of Parker, J. in Von Hatzfeldt-Wildenburg v. Alexander [1912] 1 Ch. 284, at p.288. In our case, the "further contract" was the consent order; was its endorsement by both parties a "term of the bargain"?

10. In deciding that the point was plain beyond argument, the judge seems to me to have gone too far.

11. I am anxious not to say anything which may prejudice any further hearing of the case but I would state that in my provisional view there is at least some considerable doubt as to whether this exchange of correspondence resulted in a final and binding agreement between the parties.

12. That being so, I am of the opinion that the right course for the judge to have taken (and, subject to submission by counsel, I would suggest it would still be the right course to take) would be to refer this issue to the High Court for determination. If of course the parties are prepared to agree that we in this court might decide this point now, without any reference back to the High Court, we would of course be prepared to do it, since it turns only on the construction of a few letters passing between the parties' solicitors. But, I do not think we should say anything more without further hearing counsel, and there is nothing further I would wish to add at this stage.

Bokhary, J.A. :

13. I agree.

Litton, V.-P. :

14. The consent order was clearly the contemplated means by which the compromise was to be finalised. This is apparent from the defendant's solicitors' letter of 14 February 1996 where in tendering the cashier order they said:

"We therefore enclose herewith a cashier order in the sum of HK$1,530,000 payable to your client subject to your firm's undertaking that you shall endorse and file the said Consent Order (the original of which, duly signed by us on behalf of our client, is enclosed herewith) on or before close of business on Friday the 16th of February 1996. In the meantime all our client's rights are reserved."

15. As can be seen, the defendant itself is here saying that until the consent order is "endorsed and filed" its rights are reserved. If the defendant's rights are reserved, so are the plaintiffs. I too would allow this appeal. We should now hear counsel as to the precise form of order we should make.

[After further argument]

Litton, V.-P. :

16. We are concerned on this appeal with an Order of Leong J dated 13th November 1996. It is made in High Court Action No. A263 of 1996 in which the plaintiff sued for the balance of the purchase price of goods sold and delivered. The goods were 100 Mitsubishi jeeps which had been delivered to the defendant some 18 months ago. There is no denial that the balance of $6.2 million has been outstanding since about August 1995. The substantial issue between the parties is whether that claim has been compromised by the plaintiff agreeing to accept a lesser sum, namely $1.53 million.

17. The action, despite the alleged settlement of the claim, proceeded for some time and the plaintiff then took out a summons under Order 29 r12(c) Rules of the Supreme Court Cap 4 for interim payment. This Rule reads:

"If, on the hearing of an application under rule 10, the Court is satisfied -

(c) that, if the action proceeded to trial, the plaintiff would obtain judgment against the defendant for a substantial sum of money apart from any damages or costs,

the Court may, if it thinks fit, and without prejudice to any contentions of the parties as to the nature or character of the sum to be paid by the defendant, order the defendant to make an interim payment ...."

18. Has the plaintiff shown that it comes within this Rule? The defence in paragraphs 11 and 12 reads:

"11. The Defendant through its solicitors ... tendered a cashier's order in the sum of $1,530,000 to the Plaintiff's solicitors on 14th February, 1996, which payment was however rejected by the Plaintiff's solicitors.

12. By reason of matters pleaded in paragraph 11, the Plaintiff is not entitled to receive any amount other than the sum of HK$1,530,000."

19. Apart from a purported defence based upon s23 of the Money Lenders Ordinance, which appears to be wholly insubstantial, there is no defence to the claim other than from the compromise as pleaded. And under this, the plaintiff is entitled to "a substantial sum", namely $1.53 million.

20. The judge in rejecting the plaintiff's application said this:

"There is a strong arguable case in favour of finding that a settlement had been reached by the parties to settle this case for HK$1.53 million. If there was such a settlement then the Plaintiff would not get judgment in its favour at any trial in the action."

21. The second sentence must be in error. The judge must have meant to say "the plaintiff would not get any judgment beyond the sum of $1.53 million" in this paragraph.

22. In these circumstances it seems to me inescapable that the judge had erred and that she ought upon this application to have ordered interim payment in the sum as admitted in paragraph 12.

23. Arising out of the Order made by Mrs Justice Le Pichon on 25 February there is now a sum of $1.53 million paid into court by the defendant. In these circumstances the proper order would be as follows:

(1) That the appeal be allowed and Leong J's order of 13 November 1996 be discharged.

(2) That the sum of $1.53 million now in the court should be paid out to the plaintiff.

Bokhary, J.A. :

24. I agree.

Godfrey, J.A. :

25. The order now proposed by my Lord, the Vice-President is one in which I would concur. But to do justice to the argument of Mr. Ambrose Ho for the defendant, I would add this.

26. Order 29 r.12 entitles the court, if satisfied that, if the action proceeded to trial, the plaintiff would obtain judgment against the defendant for substantial sum of money, to make an order for interim payment. I am, for my part, so satisfied. I am satisfied that if this action were to proceed to trial, the plaintiff would recover judgment for $6,200,000, the amount of the unpaid balance outstanding in relation to the goods sold by the plaintiff to the defendant. That being so, we have jurisdiction to order an interim payment. But of what sum? The good sense of making an award for $1.53m, a sum which is presently in court, and a sum which on the defendant's own case it will have to pay to the plaintiff eventually, is obvious. There may be some justification for awarding a greater or lesser sum, but we need not, I think, go into that. It is sufficient to say that an order for the interim payment of $1.53m seems to be not only justified but clearly appropriate.

27. For these reasons, I concur in the order which my Lord has proposed.