SCHINDLER LIFTS (HONG KONG) LTD v. NIKKO SERVICES LTD

CACV 250/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 250 OF 2010

(ON APPEAL FROM DCCJ NO. 1569 OF 2008)

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REASONS FOR JUDGMENT AND DECISION ON COSTS

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1.  This is an application for the stay of the appeal on the ground that the appeal had been settled. There is no dispute that parties signed a settlement agreement which was made on 8 November 2012 [“the Agreement”]. There is however a dispute whether the Defendant can resume with the prosecution of the appeal pursuant to a clause in the agreement.

2.  That dispute is the subject of litigation in the District Court in DCCJ 2263 of 2013 [“the New Action”].  The Plaintiff commenced the New Action on 21 June 2013 seeking damages for breach of the settlement agreement and a declaration that the Defendant is obliged to consent to the withdrawal of the appeal and a mandatory injunction to that effect.

3.  In its defence dated 5 July 2013 filed in the New Action, the Defendant placed reliance on the following clause in the Agreement and contended that as the dismissal of HCCW 251 of 2010 was not materialized on 8 May 2013, the Defendant could proceed with the appeal. The clause [“Clause  4”] reads,

“If any of the events referred to in paragraph 2(a), (b), (c) and (d) above fails to materialize within six months from the date of this settlement agreement, or if Schindler acts in breach of paragraph 2(e) above, Nikko and/or Mr Lau may, at its/his absolute discretion, enforce this settlement agreement or treat this settlement agreement as repudiated and Schindler shall return the $50,000 to Nikko forthwith.”

4.  The event specified at paragraph 2 includes the withdrawal of the appeal and the dismissal of HCCW 251 of 2010 with no order as to costs, save that Nikko will pay the costs of the Official Receiver.

5.  There are disputes of facts as regards why the events in paragraph 2, viz the withdrawal of the appeal and the dismissal of HCCW 251 of 2010 were not procured by 8 May 2013 with each party blaming the other for the same.  The situation was complicated by the cessation of the solicitors for the Defendant to act for it.  Mr Lau told this court that the solicitor even suggested he would join in HCCW 251 of 2010 as a petitioner.  It is not for this court in the context of this application to resolve those issues.

6.  In the circumstances, there are real issues as to whether the Defendant can rely on Clause 4 on the basis that it could treat the Agreement as being “repudiated” by the Plaintiff.   Repudiation involves the failure to perform on the Plaintiff. In the present case, Mr Shaw contended that the failure was on the part of the Defendant to withdraw the appeal and that, on proper construction of the Agreement, the withdrawal of the appeal should happen at the same time with the dismissal of the winding-up proceedings.

7.  In its summons, the Plaintiff also sought the revocation of leave to Mr Lau Chun Ming to represent the Defendant.  The leave was granted by a master on 14 March 2013. An application of the same nature was made in December 2011 and it was refused by Chu JA on 30 March 2012.  The Plaintiff said there are now new materials supporting the application which had not been placed before Chu JA.

8.  In the judgment handed down on 30 March 2012, Chu JA held that, despite the doubt expressed by Yuen JA in Hondon Development Ltd v Powerise Investments Ltd  CACV 296 of 2003, 11 December 2003, she was bound by the decision of the full court in Kone Elevator (HK) Ltd v Senfield Ltd CACV 216 of 2002, 24 Feb 2003 on the jurisdiction of the master to grant such leave.  Chu JA further said,

“It would also appear that the word ‘proceedings’ in rule 6(2) is sufficiently wide to include appeal proceedings. Further, I consider that in the absence of clear and explicit expressions, the court should be slow in concluding that the legislature intends that corporate litigant may only appeal by solicitors, having regard to the right of access to court inherent in Article 10 of the Hong Kong Bill of Rights Cap 383, which prima facie applies to a corporation, as much as it applies to a natural person. Although the right of access to court is by its nature not absolute and may be subject to limitations, any restriction, including a requirement that corporate litigants have to be represented by solicitors in appeals, should only be in pursuance of a legitimate aim, proportionate to that aim and not such as to defeat the very essence of the a corporate litigant’s right of access to court.”

9.  Her Ladyship also dealt with the other basis for revoking leave granted to Mr Lau to represent the Defendant.  Mr Shaw contended that with the additional materials before the court, it can now be demonstrated that the master granted leave because the Defendant said it could not afford the legal fees.  That, as held in Hondon Development Ltd v Powerise Investments Ltd  CACV 296 of 2003, 11 December 2003, is not a good reason for granting leave.

10.  However, in the affidavit in support of the application before the Master, other reasons were also relied upon.  There is no evidence before me as to what those other reasons were.

11.  In my judgment, given my conclusion below, it is not necessary for me to deal with the application for revocation of leave at this hearing.  In view of the deficiency in evidence as stated in paragraph 9 above and the lack of proper assistance on the law (in particular, the law on access to court in respect of corporate litigation) bearing in mind that Mr Lau is not a lawyer and Mr Shaw has not referred this court to the jurisprudence on Article 10 in this respect, I was not minded to decide on the application to revoke leave at this stage.  Instead, I simply adjourned that part of the summons to be dealt with if the stay I granted is lifted.

12.  There were applications by the Plaintiff and the Defendant for leave to admit late evidence.  I granted leave accordingly at the hearing. I also dismissed a summons of 8 November 2013 taken out by the Defendant for the reasons I gave at the hearing.

13.  Coming back to the stay application, I can take the law on the effect of a compromise from Foskett, The Law and Practice of Compromise 7^th Edn, p.111 at para 6-01,

“An unimpeached compromise represents the end of the dispute or disputes from which it arose. Such issues of fact or law as may have formed the subject matter of the original disputation are buried beneath the surface of the compromise. The court will not permit them to be raised afresh in the context of a new action. If the parties have agreed that their original dispute may be resurrected in certain circumstances then, of course, the position may be different.”

14.  A stay of the original action or proceedings can be granted if a party wishes to proceed in breach of a settlement agreement: see Foskett, The Law and Practice of Compromise 7^th Edn, p.111 at para 11-03.

15.  If a party claims that a settlement agreement should be set aside or rescinded, it has to be litigated in a fresh action, see para 6-35 of Foskett, The Law and Practice of Compromise 7^th Edn.

16.  In the circumstances of the present case, I cannot see anything wrong for the Plaintiff to start the New Action in order to resolve the disputes on the enforceability of the Agreement and the effect of Clause 4.

17.  There cannot be any dispute that there had been a compromise.  However, the issue here is whether the Defendant can rely on Clause 4.  It is not simply a matter of construction of that clause because the dispute revolves around the facts and circumstances surrounding the failure to procure the withdrawal of the appeal and the dismissal of HCCW 251 of 2010.  Further, there are arguments with regards to an implied duty on the part of the Defendant to co-operate in that process flowing from the doctrine of prevention, see Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381.  Notwithstanding the liberty given to the parties to restore the appeal in November 2012 and the submission of counsel to the court on 8 November 2012, the Plaintiff and the Defendant are bound by the terms of the Agreement.  On the materials before me, the disputes between them out of the implementation of the Agreement cannot be resolved in the context of an interlocutory hearing in this appeal.

18.  Parties are litigating about these disputes in the New Action. If a stay is granted, there will not be any prejudice to the Defendant as it could canvass its case on Clause 4 fully in the New Action. Admittedly the progress of the appeal would inevitably be delayed. But that is because the Defendant and the Plaintiff had signed the Agreement and there are disputes on the implementation of it. On the other hand, if the Defendant were allowed to proceed with the appeal, it would pre-empt the adjudication of those issues in the New Action and deprive the Plaintiff of its right to enforce the Agreement by mandatory injunction.

19.  On the materials before me, there is room for argument as to whether the failure to procure a dismissal of HCCW 251 of 2010 by 8 May 2013 was caused by the unwillingness of the Defendant in withdrawing the appeal.  Without a trial, it is premature to hold that the Defendant is now entitled to proceed with the appeal by reason of Clause 4.

20.  In the circumstances, I granted a stay of this appeal pending the final determination of the New Action. 

21.  Mr Shaw asked for costs of the stay application.  On the other hand, Mr Lau submitted that the costs of the stay application should be in the cause of the New Action.  In my judgment, there should be a distinction between the costs of the stay application in terms of the costs incurred generally and the costs incurred at the hearing.  In respect of the costs incurred generally for the stay application other than those for the hearing before me, I think it would be fair to order such costs to follow the event in the New Action in terms of the Plaintiff’s claim for declaration and mandatory injunction regarding the withdrawal of the appeal.  In other words, if the Plaintiff shall succeed in getting those reliefs in the New Action, it would also get the general costs for the stay application.  On the other hand, if the Defendant shall succeed in resisting those reliefs in the New Action, it would get the general costs for the stay application.

22.  However, the costs of the hearing call for different treatment. It should have been apparent by the time of the hearing that the disputes on the implementation of the Agreement should be litigated in the New Action and that action has made substantial progress since the issue of the summons for stay.  In such circumstances, the Defendant should not have resisted the stay application.  I order the Defendant to pay the costs of the Plaintiff in respect of the hearing in terms of the application for stay.  That should not be the whole of the costs of the hearing as part of the costs was spent (in terms of preparation) on the application for revoking the leave to Mr Lau to represent the Defendant.      

23.  I also see no reason to depart from the rule of costs following event in respect of the summons of 8 November.  Therefore, the Defendant should also pay the costs of that summons to the Plaintiff.

24.  Mr Shaw indicated that he would seek a gross sum assessment.  I will make an assessment by way of order nisi fixing all the costs I ordered in favour of the Plaintiff at $28,000.  This sum shall be payable forthwith.  If any party wishes to vary that assessment, it can write to this court within 7 days setting out grounds for variation.  The other party will have 7 days to respond in writing.  And the court will deal with such application on paper.