LUCKY WEALTH CONSULTANTS LTD v. HORIZON TECHNOLOGIES INTERNATIONAL LTD

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JUDGMENT

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Fuad, V.-P.:

1. This is an appeal by Lucky Wealth Consultants Ltd. ("Lucky Wealth") who are dissatisfied with a decision reached by Liu, J. on 22nd February 1990 in relation to a Tomlin order by virtue of which all further proceedings in their action (H.C. Action A248 of 1989) against Horizon Technologies International Ltd. ("Horizon") were stayed.

2. The action in respect of which the Tomlin order was made was instituted by Lucky Wealth against Horizon by a Writ (accompanied by a Statement of Claim) issued on 16th January 1989. The Statement of Claim was amended in minor detail on 2nd March 1989. By their action, Lucky Wealth claimed HK$25,984,027.55 from Horizon as assignees of debts owed by Horizon to Flow Chart Investment Ltd. ("Flow Chart") and Quintuplet Trading Co. Ltd. ("Quintuplet").

3. On 9th May 1989, Lucky Wealth, Flow Chart, Quintuplet, Horizon and a Mr. Cheng Chee Tock, Theodore, entered into a Deed of Settlement ("the Deed"). The recitals in the Deed explain the differences between the parties which were intended to be resolved. It is not necessary to review all the recitals but I mention two. Paragraph (e) refers to "various reliefs', sought in China on 23rd January 1989 by Flow Chart through the China Legal Affairs Centre "including the arrest of Cheng and the freezing of his bank accounts in China." Paragraph (f) states that "on 22nd January 1989 Lucky Wealth laid a complaint with the authorities in Taiwan." I will return presently to other relevant terms of the Deed.

4. The Tomlin order out of which this appeal arises was made by Liu, J. on 9th May 1989 and was in the following terms:

5. In the papers before us there is a letter dated 22nd May 1989 from Horizon's solicitors under which a cheque for HK$1,000,000 was forwarded to Lucky Wealth's solicitors, said to have been the first instalment due under the Deed of Settlement.

6. On 7th July 1989 Horizon's solicitors addressed a letter in identical terms to Quintuplet, Flow Chart and Lucky Wealth, which was copied to Lucky Wealth's solicitors. The letter reads:

                        "Dear Sirs,

7. Lucky Wealth's solicitors responded by their letter of 20th July 1989 saying:

8. On 15th August 1989 Lucky Wealth took out a summons, stated to be under the inherent jurisdiction of the Court, praying for an order that final judgment be entered for them in terms that Horizon pay them HK$1,000,000 [paragraph (ii) of the Schedule to the Tomlin order] and RMB8,420,000 to China Precision Machinery Import and Export Corporation [paragraphs (iii) and (iv) of the Schedule to that order].

9. I now return to the terms of the Deed. After the recitals, in clause 1(a) of the Deed there is a provision that upon execution of the terms of settlement by all the parties, Lucky Wealth and Horizon have agreed jointly to apply to the Court for an order in the terms set out in clause 1(b). There is then set out, in identical terms, all that later appeared in the Tomlin order under the introduction: "TOMLIN ORDER HEREINBEFORE REFERRED TO:-“.

10. Clause 2 of the Deed concerned the disposal, by consent, of proceedings instituted by Lucky Wealth in April 1989 (M.P. No.740 of 1989) for a committal order against Mr. Cheng Chee Tock and for an order of sequestration against the property of Horizon. Liu, J. made a consent order to achieve this end following the execution of the Deed, and on toe same day. Clause 8 dealt with the confidentiality of the contents of the Deed.

11. The remainder of the clauses in the Deed (3, 4, 5, 6 and 7) were as follows:

12. For the purpose of the hearing of Lucky Wealth's summons, Mr. Cheng Chee Tock made an affirmation dated 3rd February 1990 which was before the judge. He affirmed as a director of Horizon. He said that on 22nd January 1989 Lucky Wealth had laid a complaint against a man named Mr. Randy Chang with the authorities in Taiwan alleging that Mr. Chang had assisted him in producing false documents for the purpose of these proceedings. He said that through their lawyers of the China Legal Affairs Centre, Lucky Wealth, Flow Chart and Quintuplet had also laid a complaint in China. He exhibited a copy of the complaint which made allegations about transactions between Lucky Wealth, Quintuplet and Horizon.

13. Mr. Cheng then referred to the Deed of Settlement of 9th May 1989 and to some of its terms.   He exhibited a letter dated 5th May 1989 written on behalf of Lucky Wealth, Flow Chart and Quintuplet to the Police Department in Taiwan seeking dismissal of the complaint they had lodged against Mr. Chang.

14. Mr. Cheng exhibited another letter which he said showed that it was perfectly legitimate under Taiwanese law for Lucky Wealth to withdraw their complaints against Mr. Chang and himself. Despite the settlement, he said, none of the other parties had made any attempt to do what they were bound to do, and had done in relation to Mr. Chang. Because of this, he had received a summons from the Taiwanese authorities in early July 1989 to answer the very complaints that had been laid by Lucky Wealth before those authorities.

15. As regards Lucky Wealth's complaints made in China, he said that he had been informed that it was perfectly legal for such complaints to be withdrawn under Chinese law.

16. Lucky Wealth's summons came on for hearing before Liu, J. on 22nd February 1990. As we have seen, he gave his decision on that day, and handed down his reasons on 28th February. After outlining the background of the matter and rehearsing the opposing arguments put to him, the learned judge noted that the Deed had preceded the Tomlin order; it had embodied the compromise reached between Lucky Wealth, Horizon and their associates. The terms in the Deed must, he said, have been intended to interlock and depend on its other provisions, including clause 6 which imposed a condition precedent to Lucky Wealth's right to payments or introduced a condition subsequent for relieving Horizon of their obligations to pay. He pointed out that Mr. Cheng's guarantee liabilities under clause 5 could also be said to interlock with, or depend upon, clause 6.

17. The judge went on to say that the rights of Lucky Wealth, and the obligations of Horizon and Mr. Cheng under the Deed were envisaged by clause 6 to be linked to Lucky Wealth's observance of the provisions of the Deed. In the mind of the parties, the terms as formulated bore that special meaning. The payment terms in clause 1(b) of the Deed for later incorporation into the Schedule to the proposed Tomlin order were intended to be read in the context of the other provisions of the Deed - they were never meant to be read in isolation. The Court could not ignore "the meaning so ascribed to these terms at the every inception when they were introduced." That special meaning had to be given weight to in the peculiar circumstances of the case. "These payment terms as finally scheduled to the Tomlin order must be read with this special meaning so assigned to them by tile parties."

18. The   learned judge concluded the reasons for his judgment, as follows:

19. The operative part of the order which reflected the judge's decision was drawn up in these terms:

20. On 23rd February 1990, the judge gave directions regarding the further conduct of the matter, dealing with such matters as what further affidavits could be filed; which deponents should attend for cross-examination and which evidence could be supplemented by further affidavits. Liberty was given to apply for further directions .

21. Lucky Wealth's Notice of Appeal asserts that upon the true construction of the Tomlin order, which did not incorporate the Deed or any of its terms, they were entitled to the order they had sought by their summons because Horizon had defaulted in the payments they were required to make under the Tomlin order. They say that the judge had erred in holding that Horizon could pray in aid the terms of the Deed since it ante-dated the Tomlin order and was thus superseded by it; the Tomlin order alone regulated the obligations by the parties.

22. By their Respondent's Notice Horizon say that Lucky Wealth were not entitled on its own case to seek immediate judgment and therefore their summons had been misconceived. They say that the Tomlin order was part of and evidenced the underlying agreement between the parties. The Tomlin order was the creature of that agreement as embodied in the Deed which had been executed on the same day.

23. Horizon go on to assert that on making the Tomlin order, clauses 6 and 7, inter alia, of the Deed came into force by virtue of clause 3 and governed Horizon's obligations to pay under the Schedule to the Tomlin order. In seeking to enforce the payment terms in the Schedule to the order, Lucky Wealth were, they say, seeking to enforce the agreement between the parties.  Therefore, the entirety of the agreement should be given effect to.

24. By their Notice, Horizon say that if this Court allows the appeal, a stay of execution should be granted them pending resolution of the question whether Horizon has been discharged under clause 7 of the Deed from its liability to pay the sums set out in the Schedule to the Tomlin order on the grounds that Lucky Wealth has acted in breach of clause 6 of the Deed.

25. It is common ground between the parties through their counsel, Mr. McCoy (who did not appear in the Court below) for Lucky Wealth and Mr. John Swaine, Q.C., for Horizon, that the effect of the Tomlin order we have to consider was to stay the action, while keeping it alive as between the parties, but only for the purpose of enabling either party to apply to the Court to enforce the terms scheduled to the order.

26. In one of the cases on Mr. McCoy's list, Green v. Rozen and Others [1955] 1 WLR 7y1, Slade, J. usefully discussed five methods (including an order in the Tomlin forces) of disposing of an action where terms of settlement had been arrived at when the action came on for trial or in the course of the hearing. These were apart from the formal way in which parties could get the terms of the compromise made a rule of court. The five methods,  which he recognised were not exhaustive, were:

27. The position about Tomlin orders was clarified by Goff, J. in E.F. Phillips & Sons Ltd. and Others. v. Clarke [1970] 1 Cn 322. There the parties had come to terms which were embodied in an order and schedule in the Tomlin form; all proceedings in the action, except for the purpose of carrying the terms into effect, were stayed, with the parties being at liberty to apply. Goff, J. held that an order to give effect to the scheduled terms could be obtained under the liberty to apply in the original action despite the fact that the compromise itself went beyond the ambit of the original dispute and the terms sought to be enforced could not have been enforced in the original action and reflected obligations which arose for the first time under the compromise.

28. Thus it is clear, questions of interpretation apart, that Lucky wealth adopted the correct procedure by taking out their summons dated 15th August 1989 to enforce the terms in the Schedule to the Tomlin order.

29. Among other cases dealing with Tomlin orders are Noel v. Becker (Practice Note) [1971] 1 WLR 355 (CA) where the Court emphasised that it is not the duty of the judge to concern himself with approving or disapproving the terms of a consent order in Tomlin terms; nor does he have power to make an order different in terms from those agreed to by the parties. And in Wilson & Whitworth Ltd. v. Express & Independent Newspapers Ltd. [1969] 1 WLR 197 Plowman, J. declined to grant an injunction to enforce certain terms in a Tomlin order where the Court originally making the order had refused to sanction an undertaking to the Court in those terms, although agreed by the parties, because they were too vague.

30. The task before the judge was, of course, to discover the true intention of the parties to the agreement evidenced by the Tomlin order.  The Court is entitled to start from the basic presumption that the parties meant what they said so that the meaning of the agreement is to be sought in the order itself. In the forefront of Mr. McCoy's case for Lucky Wealth in this appeal is the submission that the terms of the Tomlin order were absolutely clear and unambiguous and thus there was no need to look elsewhere for evidence to interpret or explain them. It was, said Mr. McCoy, an agreement only between the two parties to the action whereas the Deed involved other parties as well. He argued that no mistake had been suggested - the simple fact was that the Tomlin order, which could have included all the terms set out in the Deed had the parties so wished, did not incorporate those terms.

31. Mr. McCoy suggested that if Horizon felt that an undertaking given them in the Deed (not referred to in the Tomlin order) had been breached, their remedy was by separate action. The consequences of any breach by Lucky Wealth were spelt out in the Deed and not in the Tomlin order. There was no reason to suppose that this was not deliberate. After all, Mr. McCoy pointed out, the order was drawn up when the parties were both represented by leading counsel.

32. Mr. Swaine, in seeking to support the judge's decision, argued that Horizon had advanced a prima facie case that clause 6 of the Deed had been breached by Lucky wealth. Therefore, by virtue of clause 7, Horizon were relieved of all their obligations which also included the payments otherwise due under the Tomlin order. He submitted that if, as had been conceded, Horizon could bring a separate action for breach of a term of the Deed, it would be absurd if they could not rely on clause 7 of the Deed in resisting an order to enforce the terms of the Tomlin order.

33. Mr. Swaine contended that the Tomlin order was, in effect, the mere creature of the Deed and that the two documents must be read and applied together.  He relied upon the proposition (discussed in paragraph 824 of Chitty on. Contracts (26th Edition) Vol.1) that "Several instruments made to effect one object may be construed as one instrument, and be read together, but so that each shall have its distinct effect in carrying out the main design" and "'where several deeds form part of one transaction and are contemporaneously executed they have the same effect for all purposes such as are relevant to the case as if they were one deed'".

34. Mr. Swaine cited Smith v. Chadwick (1882) 20 Ch D 27 where the Court of Appeal held, on the facts, that a particular circular sent to the plaintiff by the defendants could not be read together with a prospectus of a company which had been sent him a few days earlier, for the purpose of explaining the prospectus on the faith of which the plaintiff had taken shares in the company, because the circular could not be regarded as a contemporaneous document with the prospectus. However, Jessel, M.R. at pp.62-63 had this to say:

35. As an example of this principle in operation Mr. Swaine cited Jacobs v. Batavia and General Plantations Trust Ltd. [1924] 2 Ch 329 where the Court of Appeal held that a prospectus which invited applications for deposit notes on certain terms could be read together with a deposit note from which one of those terms was absent. They concluded that it was not intended that the contract should be contained only in the deposit note; nor was the deposit note intended to constitute a merger or an alteration of the contract between the parties.  The entire contract between the parties was contained in those two written instruments, the terms of which the Court was able to reconcile by construing the promise in the prospectus as if it were inserted in the note. The plaintiff was also entitled to the relief he claimed oh the basis that the promise was a binding collateral contract, the consideration for which was the contract by the plaintiff to take up the notes.

36. The Tomlin order, as we have seen, is evidence of the fact that Horizon agreed with Lucky Wealth that they would, on the due dates, pay them the 2 sums set out in paragraphs (i) and (ii) of the Schedule to the order, and under paragraph (iii) that they would pay 7 further sums into a particular bank account in Beijing, by specified dates. There was nothing in the order that would relieve Horizon of these obligations. They were in absolute terms. All there was, was a provision - paragraph (iv) of the Schedule - which contained a "usual default clause" in Lucky wealth's favour. There was, indeed, a mention of the Deed in paragraph (iv) but the wording would not permit Horizon to rely on any breach of the Deed's provisions to resist payment oh the terms agreed. This seems to me to be significant for the parties clearly had the Deed in mind but chose to incorporate it into the Tomlin order arrangements only to the extent indicated. There is no reason to suppose that this was not deliberate. It would have been easy enough to provide, in the Tomlin order, that no payments would be due from Horizon if any of the terms in their favour in the Deed were breached, or to set them out in the order if that was what was intended. It will be recalled that the Tomlin order spoke of all proceedings in this action (No.A248 of 1989) being stayed "upon the terms of settlement agreed to between the parties set out in the Schedule hereto …." [Emphasis added].

37. It may be said, too, that compliance with paragraph 6 of the Deed was not likely to have been intended to be a condition precedent to the payment by Horizon of the sums in the Schedule to the Tomlin order since, as it happened (if Horizon's allegations can be established) the fact that paragraph 6 (a) was not complied with was not discovered until after HK$1,000,000 had been paid, and only just before the second instalment of HK$1,000,000 was due.  Surely, had the payments been subject to the performance by Lucky wealth of any such dependent promise, the parties would have provided in the Tomlin order that they would not start until satisfactory evidence was forthcoming that paragraph 6(a) of the Deed had been observed. Moreover, notionally, paragraph 6(b) could be breached after Horizon had paid all the sums set out in the schedule to the order and the order says nothing about refunding to Horizon payments already made. I observe here, in passing that we do not, of course, know what has since happened about he summons Mr. Cheng affirmed he received "in early July 1989" from the Taiwanese authorities.

38. In my view, clause 5 of the Deed is another example of an obligation assumed by a party to the Deed which was not carried over into the Tomlin order, one must assume, deliberately. Under that clause, it will be recalled, Mr. Cheng personally guaranteed to Lucky Wealth, all the sums due to be paid by Horizon under the Deed. Precisely the same sums are due to be paid by Horizon under the Tomlin order. But if Lucky Wealth ever needed to rely on Mr. Cheng's guarantee obligations, they could not do so by enforcing the Tomlin order but would have to institute another action for this purpose.

39. In my judgment, that is what Horizon must do if they wish to claim that Lucky Wealth has been in breach of clause 6 of the Deed, and in such proceedings seek what they are advised to be appropriate remedies. With very great respect to the judge, I do not think it was right to read the Deed and the terms in the Tomlin order together. I would not regard them as ralling into the category of a series of documents representing a single transaction between the same parties. They were, to my mind, separate and distinct contracts although having the same genesis. It may be that, in practical terms, the order Mr. Swaine sought to uphold would achieve the same effect, but I do not think that, for convenience, we should permit ourselves to re-write what the parties solemnly agreed.

40. I would, therefore, allow the appeal and set aside the judge's order of 22nd February 1990. In its place I would make an order that the Defendant do pay the sum of HK$1,000,000 as well as the sum of RMB￥8,420,000 in accordance with paragraphs (ii), (iii) and (iv) of the Schedule to the Tomlin order dated 9th May 1989. Since we are handing down these judgments, I would stay the order I am proposing should be made until the parties can be heard upon the question whether, and upon what terms, a further stay should be granted to Horizon.

Penlington, J.A.:

41. I agree with the judgment of Fuad, V.P. and the order he proposes.

42. The parties have stated in the Tomlin order in what Mr. Swaine, Q.C. concedes are clear and unambiguous words the exact terms upon which they have agreed that the action should be stayed. No further document can be looked at to contradict or add to those terms. The facts here are very different from Jacobs v. Batavia and General Plantations Trust Ltd.. Here the parties have stated in clear terms that their agreement is as set out in the Schedule to the Tomlin order and I see no justification for going outside those terms.

Saied, J.:

43. I agree that the appeal should be allowed for the reasons given by the Vice-President, and with the order he proposes.