SHING SHU CHIU and Others v. KAN CHOI MING and Another

1998, No. 47
(Civil)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

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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 Yam, J., made on 20 January 1998, affirming an order made by Master Chung on 3 December 1997. The master's order was an order for damages to be assessed in relation to a trespass on the plaintiffs' land. The plaintiffs had sued two defendants, one Kan Choi Ming, and his company Kan Ming Construction Investment Limited, for the alleged trespass. The plaintiffs obtained judgment from the master against both of them on the footing of admissions which the plaintiffs claimed had been made, by Mr. Kan for himself and for the company, as to the alleged trespass. The defendants, having appealed unsuccessfully to the judge, now appeal to this court.

Judgment on admissions

2. The procedure for obtaining a judgment on admissions is prescribed by Order 27, rule 3 of the Rules of the High Court. Order 27, rule 3 provides that where admissions are made by a party to a cause or matter either by his pleadings or otherwise, any other party to the cause or matter may apply to the court for such judgment or order as upon those admissions he may be entitled to, without waiting for the determination of any other question between the parties, and the court may give such judgment or make such other order on the application as it thinks just. The admission may be one made before or after action brought, and it may be one made orally. It must, however, be clear.

3. This jurisdiction, to give judgment on admissions, is discretionary. No doubt, in the absence of reasons to the contrary, the court will make such an order, so as to save time and costs; but if there is reason to the contrary, the court will exercise its discretion against making such an order.

The background

4. Some time in June 1995 the plaintiffs discovered that soil had been dumped on their land in the course of operations on the adjoining land. The plaintiffs complained about this to Mr. Kan and to the company, who are apparently co-tenants of that land.

5. In a telephone conversation, on or about 30 June 1995, Mr. Kan is said to have agreed to reinstate the land by the end of July. This was not done.

6. On 25 August 1995, the plaintiffs received a letter from the company, apologising for what had happened, and stating that it would deal with the matter when it received permission from the Town Planning Department.

The plaintiffs' case

7. It is said for the plaintiffs that there are here clear admissions, by both Mr. Kan and the company, as to the trespass, which justify the order which the master made.

The defendants' case

8. It is said for Mr. Kan that, whatever the position may be so far as the company is concerned, there was no such admission made by him personally: the company itself accepts that it has admitted liability.

9. However, it is said, for both defendants, that the parties compromised the plaintiffs' claim for damages for trespass by agreeing in September 1995 for a lease (which both parties have executed), of the property on which the trespass was said have occurred, to be granted by the plaintiffs to Mr. Kan, against a deposit of $120,000. That sum was tendered by cheque, which was dishonoured. Later, a second cheque was tendered which was also dishonoured, but, on an action brought on the second cheque, the defendants made a payment into court of $90,000, which the plaintiffs took out.

Can the defendants rely on the compromise?

10. Since this compromise, a question has arisen as to whether the compromise itself has been repudiated. This issue has yet to be resolved.

The judgments below

11. The master (upheld by the judge) exercised his discretion in favour of the plaintiffs. He gave judgment for the plaintiffs on the admissions said to have been made by the defendants.

Can the judgment stand?

12. In my judgment, the master was wrong to do so. The court's discretion to give judgment on admissions ought not, as it seems to me, to be exercised against a defendant who sets up by way of defence an agreement of compromise which may, arguably, have taken effect so as to extinguish the plaintiffs' original cause of action. That is this case.

The result

13. So far as Mr. Kan is concerned, it seems to me that there was no clear admission made by him here. I would therefore discharge the master's order, so far as it relates to him, on that ground alone. So far as the company is concerned, the position is that although it adumbrated its defence based on the alleged compromise in its evidence on the plaintiffs' application for judgment on admissions, it has never asked for, or been given, the opportunity formally to raise this defence. It ought now to be given that opportunity. I would propose therefore that the company be given leave to amend its defence so as to allege that the plaintiffs' cause of action against it has been extinguished by the agreement of compromise on which it relies. The judgment against it must be set aside to enable it to do so. If however it fails to do so, after, say, 28 days from today, then the plaintiffs should be at liberty to apply for an order that the judgment on admissions made against it should be restored.

14. To summarise therefore, I would dispose of this appeal as follows. I would set aside the judgment on admissions obtained against the defendants. So far as the company is concerned, I would give leave to the company to serve and file a defence within 28 days from today, alleging by way of defence that the plaintiffs' cause of action has been extinguished by the agreement to compromise. Failing service and filing of such a defence within 28 days from today, the plaintiffs are to be at liberty to apply to restore the judgment on admissions against the company.

Conclusion

15. We will in due course have to deal with costs, but as to the substance of the appeal there is nothing further I wish to add.

Rogers, J.A. :

16. I agree.

17. Since it is clear that the Defendants wish to set up a compromise which is alleged to extinguish the cause of action, they should be given an opportunity to do so. There are, of course, a number of questions which would obviously arise :-

18. First, what was the compromise agreement? What were its terms and what was its effect? Secondly, what was the effect on the tenancy agreement of the failure to pay the $30,000 deposit under Clause 6 of the agreement? Did the tenancy agreement ever take effect and is the tenancy agreement, if it did take effect, still in existence? What was the effect of the acceptance of the payment into court of $90,000 with the defendants not insisting on obtaining a tenancy agreement, particularly in the light of the Defence and the Reply in the first action? Then there is the question as to there was a repudiation of the compromise agreement by the Plaintiff and, if so, what was the effect of acceptance of such repudiation?

19. These are all matters which will have to be investigated and decided upon, but this cannot be done on an application for judgment on admissions. I would accordingly agree with the Order proposed.

Mortimer, V.-P.:

20. I agree that this appeal must be allowed in part.

21. The judge below had before him an affidavit from the defendants setting out a compromise agreement. That was not pleaded but in the face of his knowledge that this was a matter which could be raised in defence of the action, the judge wrongly exercised his discretion to grant judgment on the basis of admissions.

22. So far as the 1st defendant is concerned, there were no admissions upon which the judge ought to have given judgment. So his appeal must be allowed and judgment set aside.

23. So far as the 2nd defendant is concerned, there are clear admissions upon which - subject to the defence intimated - would have enabled the judge properly to enter judgment.

24. However, it has now been shown that there is a defence to be advanced. I agree that the defendant should be permitted to raise the defence to the action. I agree that with the order proposed. There are, of course, many issues on that defence which may arise, but happily they are not the concern of this Court.

25. In these circumstances, so far as the 1st defendant is concerned, his appeal is allowed. So far as the 2nd defendant is concerned, the appeal in its case will be allowed in part. There will be leave to file and serve an amended defence to raise the compromise agreement. Provided that an amended defence is filed and served within 28 days, then judgment against the 2nd defendant will be set aside but not otherwise.

26. So far as the 1st defendant is concerned, he should have his costs here and below with the exception of the costs relating to the summons dated 13 October 1997 which will be to the plaintiffs.

27. So far as the 2nd defendant is concerned, the 2nd defendant's costs will be here and below, will be costs in the cause of the action.

28. There is one further matter which we wish to raise. Unless we set aside the judgment, that may cause difficulty in filing and serving the defence, which we have given leave to. So our order will be that we set aside the judgment and give leave to serve and file the defence as we have indicated within 28 days. Failing that happening, we give liberty to apply to restore the judgment.