HANG HEUNG CAKE SHOP COMPANY LTD v. TSOI CHIK SANG LAWRENCE AND ANOTHER

HCA 988/2004, HCA 989/2004,
HCA 1075/2004 and HCA 1327/2013
(Consolidated) and HCA 2061/2018

[2025] HKCFI 2634

HCA 988/2004, HCA 989/2004,
HCA 1075/2004 and HCA 1327/2013

(Consolidated)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS 988 OF 2004, 989 OF 2004, 1075 OF 2004 AND 1327 OF 2013

__________________

__________________

(Consolidated pursuant to the Order of
Master Phoebe Man dated 7 September 2021

AND

HCA 2061/2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2061 OF 2018

__________________

__________________

(Heard Together)

__________________

D E C I S I O N

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I.  INTRODUCTION

1.  On 6 May 2025, Tsoi Chik Sang Lawrence (“Lawrence Tsoi”) filed a Summons issued in HCA 988/2004, HCA 989/2004, HCA 1075/2004 and HCA 1327/2013 (the “Consolidated Action”) (where Lawrence Tsoi is the 1^st and 2^nd Defendants in his personal capacity and in his capacity of the Administrator of the estate of Choi Chong Ip, deceased) and a Summons in HCA 2061/2018 (“HCA 2061”) (where Lawrence Tsoi is the Plaintiff), for, in essence an Order that the Consolidated Action and HCA 2061 shall be consolidated or heard together.

2.  At the second hearing of these Summonses on 22 May 2025, I dismissed the two summonses (the “Summonses”) in the absence of Lawrence Tsoi. Ms Joyce Leung (leading Ms Kelly Cheng), counsel for the Plaintiff in the Consolidated Action (“HHCS”) and the Defendant in HCA 2061 (“Tardi”), sought costs at the end of the hearing. Therefore, I directed the parties to file and serve affirmation evidence in relation to costs. This is my Decision on costs having considered the evidence and the submissions of Ms Leung and the submissions of Mr Kwok Kam Kwan, counsel for Lawrence Tsoi.

II.  BACKGROUND

3.  The trial of the Consolidated Action was originally scheduled to commence on 2 June 2025.

4.  By letter dated 23 April 2025, the Solicitors of the Plaintiff in the Consolidated Action (“HHCS”) made a sanctioned offer (the “Sanctioned Offer”) under Order 22 rule 5 of the Rules of the High Court (Cap.4A) in the following terms:-

“Solely with a view to saving time and costs, we are instructed to make a Sanctioned Offer under Order 22 rule 5 of the Rules of the High Court (Cap.4A) to accept a total sum of HK$5,000,000 (inclusive of interest) in settlement of our client (“HHCS”)’s claim in these proceedings, as follows, for the 1^st and 2^nd Defendants’ acceptance:

(1) As against the 1^st Defendant, our client is prepared to accept in satisfaction of the whole of our claims, including the 1^st Defendant’s counterclaim:

(a) the amount of HK$2,000,000 (inclusive of interest), in relation to our client’s claims of the Outstanding Cake Money and the Outstanding Loan as stated in Sections B and C of the Consolidated Statement of Claim dated 20 December 2021 (“CSOC”); and

(b) an undertaking to the Court on your part not to infringe the Plaintiff’s Trade Marks (as defined in paragraph 19 of the CSOC), refrain from acts of passing off of HHCS’s products by the use of any marks the same as or confusingly similar to the Plaintiff’s Trade Marks and/or packaging, get-ups the same as or confusingly similar to the Plaintiff’s Get-Ups (as defined in paragraph 20 of the CSOC), or otherwise infringe the intellectual property rights of HHCS, in relation to our client’s claim of infringement of intellectual property rights and breach of fiduciary duties as stated in Sections D and E of the CSOC).

(2) As against the 2^nd Defendant, our client is prepared to accept the sum of HK$3,000,000 (inclusive of interest), in settlement of the whole of our claims.

(collectively, “Sanctioned Offer”)

By virtue of Order 22 rule 25 of the Rules of the High Court (Cap.4A), this Sanctioned Offer is treated as “without prejudice save as to costs”…”

5.  On 5 May 2025 (just 28 days before the commencement of the trial), Lawrence Tsoi signed the following letter to the Plaintiff (“Lawrence Tsoi’s 5 May 2025 Letter”):-

“關於：HCA 988/2004, HCA 989/2004, HCA 1075/2004 及 HCA 1327/2013（合併案件）

本人，蔡植生 (Tsoi Chik Sang Lawrence)，為上述合併案件的第一及第二被告人，現同意該合併案件的原告人，即恆香老餅家 (Hang Heung Cake Shop Company Limited)，於2025年4月23日提出的「附帶條款和解提議」，條款如下:-

(1) 本人作為第一被告人，同意

(a) 以HK$2,000,000（包括利息）償清原告人就本人尚未償還的餅數及債項的申索；及

(b) 向法庭承諾不會會侵犯原告人的商標及知識產權。

(2) 本人作為第二被告人，即蔡創業的遺產執行人，同意以HK$3,000,000（包括利息）償清原告人的申索。

本人將與原告人再簽訂和解協議以確立上述的和解方案。

(signed)   Tsoi Lawrence Chik Sang   [Lawrence Tsoi’s ID no.]   May 5 2025

Witness: (signed) Lee Maggie [Lee Maggie’s ID no.] 5-5-2025”

6.  Lawrence Tsoi was acting in person in the Consolidated Action at that time. He did not file the notice of acceptance. Instead, by letter dated 7 May 2025, the Plaintiff’s Solicitors wrote to the Court, enclosing therewith Lawrence Tsoi’s 5 May 2025 Letter and informing the Court that Lawrence Tsoi had accepted the Plaintiff’s Sanctioned Offer. Further, by letter dated 8 May 2025, the Plaintiff’s Solicitors sent to the Court a copy of the Sanctioned Offer.

7.  Meanwhile, on 6 May 2025, in the Consolidated Action and HCA 2061, Lawrence Tsoi, acting in person, filed the Summonses in typed English, supported by his typed English Affirmation dated 3 May 2025 without any interpretation clause, affirmed before a Solicitor (“Lawrence Tsoi’s 3 May 2025 Affirmation”). This Affirmation contains a few paragraphs only, mainly exhibiting a draft Amended Writ of Summons and a draft Amended Statement of Claim in HCA 2061 and then seeking an order that “all these actions be tried or heard together”.

8.  The essence of the amendments proposed to the Statement of Claim in HCA 2061, insofar as relevant for the present purposes, were:-

(1)  A share transfer agreement dated 20 February 2017 (the “Share Transfer Agreement”) between Lawrence Tsoi and Tardi Holdings Limited (that is, Tardi, the Defendant in HCA 2061) was entered into whereby Lawrence Tsoi agreed to sell Tardi his shares in Fonduet Industrial Limited (“Fonduet”), holding 5,000 shares in HHCS;

(2)  The parties shall cause an application to be made for appointing receivers in respect of, among others, HHCS shares in order to protect its interest;

(3)  Tardi would bear all the legal expenses of various legal proceedings in which HHCS was involved, including the application for appointing receivers, that were necessary to the parties’ agreement to develop and expand, among others, HHCS’ products and services (see §12(12) of the Statement of Claim in HCA 2061);

(4)  “The Share Transfer Agreement constituted champerty arranged by the 1^st to 4^th Defendants with the Plaintiff, under which the 1^st and/or 2^nd Defendants funded various litigations including such mentioned in paragraph 12(12) above (especially HCMP 812/2017 for getting a Receiving Order for the accountants of KPMG nominated by the 1^st and 2^nd Defendants to receive and manage all the assets and business of HHCS) as a means to enable the 1^st and 2^nd Defendants to gain commercial benefits… which enabled [Desmond Wong] to be appointed as Acting General Manager of HHCS so as to acquire control and manage the finance, assets, money and business of HHCS to the exclusion of [Lawrence Tsoi]”: see §26 of the draft Amended Statement of Claim in HCA 2061; and

(5)  The Share Transfer Agreement is therefore illegal and so the benefits obtained under it could not be retained, and so the appointment of Desmond Wong should be undone.

9.  There has never been any application for leave to amend the Statement of Claim in HCA 2061 as per the draft Amended Statement of Claim.

10.  Pending the first directions hearing of the Summonses to take place on 12 May 2025, Lawrence Tsoi sent to the Court a handwritten Chinese letter dated 8 May 2025 explaining why he issued the Summonses and seeking an Order to vacate the trial dates of the Consolidated Action so that the authority of Desmond Wong raised in the draft Amended Statement of Claim in HCA 2601 could be resolved first.

11.  On 9 May 2025, Messrs Krishnan & Tsang filed a Notice to Act in HCA 2061.

12.  Despite his Solicitors on record, there was yet another handwritten Chinese letter before the first directions hearing. By letter dated 10 May 2025 to the Court (“Lawrence Tsoi’s 10 May 2025 Letter”), Lawrence Tsoi wrote, among others:-

“Lee Maggie 說同情我年事已高受官司困擾，主動幫助我找黃偉樑（ Desmond ）（稱為恒香老餅家有限公司之經理）商討和解官司方案，她向我出示預先打好的信（一式三份）叫我簽署，她表示可根據Johnny KK Leung & Co. [HHCS’s Solicitors] 提議的條件替我與Desmond再商議討論實際的和解條件如何，Lee Maggie向我強調信的尾段寫明「本人將與原告人再簽訂和解協議以確立上述的和解方案」意思即我與原告人「恒香餅家有限公司」仍未簽訂和解協議，雙方仍未確立和解方案，Lee Maggie告訴我她可替我要求或說服Desmond同意我可分期達至十年清付建議方案之HK$2,000,000和HK$3,000,000，我相信Lee Maggie下才簽署該信，其後我就等待Maggie與Desmond商討結果如何，才決定以什麼條件和解這綜合案官司，為了保障自己的權利，我在2025年5月6日存檔發出Summons傳票申請HCA 2061/2018增加申索Desmond、Ian Huang和Pauline Ang和修改申索陳述書…如果我在HCA 2061/2018的修改申索成功勝訴，Desmond被任為恒香經理便無效，他代表恒香指示或授權Johnny KK Leung & Co.進行這綜合審訊也無效，Johnny KK Leung & Co. 亦無權代表恒香餅家有限公司出信建議任何和解方案，更無權發出2025年4月23日信件建議以HK$2,000,000及HK$3,000,000和解這綜合案，我與恒香老餅家有限公司根本無法有效達成任何和解協議…”

13.  On 12 May 2025, in HCA 2061, Lawrence Tsoi was legally represented, but in the Consolidated Action, he still acted in person. During the hearing, the first issue I raised with the parties was whether the Consolidated Action had been settled by the 5 May 2025 Letter purporting to accept the Sanctioned Offer. I raised this because if the Consolidated Action had been settled, then the Summonses should be dismissed in limine because HCA 2061 simply could not be heard together with the Consolidated Action. Lawrence Tsoi was present at the hearing as the litigant-in-person in the Consolidated Action. I asked him directly, in Cantonese, whether he had accepted the Sanctioned Offer. His answer was “yes”. But then a person sitting next to him, purporting to be his friend, pulled his sleeve and told him to say “no”, and then Lawrence Tsoi changed his answer to “no”. I asked Lawrence Tsoi again, and he answered “no” again.

14.  On that basis, I asked Lawrence Tsoi’s then counsel in HCA 2061 what was the basis for saying that, despite the 5 May 2025 Letter, there was no acceptance of the Sanctioned Offer. Lawrence Tsoi’s counsel answered that he did not have instructions on that. Therefore, I directed Lawrence Tsoi to file affirmation to explain the basis, and adjourned the matter for another directions hearing on 22 May 2025.

15.  Pending the second directions hearing to take place on 22 May 2025, two affirmations were filed: (1) Lawrence Tsoi’s Chinese Affirmation dated 16 May 2025 affirmed in the Home Affairs Department in Kowloon City (“Lawrence Tsoi’s 16 May 2025 Affirmation”); and (2) Maggie Lee’s affirmation of even dated also affirmed in the Home Affairs Department in Kowloon City (“Maggie Lee’s Affirmation”).

16.  In Lawrence Tsoi’s 16 May 2025 Affirmation, there is one line in Chinese: “附屬證物編號（甲）之內容乃是真實及正確的”. The exhibit mentioned in a one-page Chinese typed as follows:-

“Lee Maggie 於2025年5月5日並沒有誤導本人簽署恒香老餅家有限公司和解文件，以上和解文件當天由Desmond安排打印好並帶去九龍香格里拉酒店大堂咖啡室

本人亦沒有同意或簽署2025年5月10日提交高等法院暫委法官Gary CC Lam的文件，內容關於Lee Maggie誤導下簽署一封中文信及她向我出示預先打好的信（一式三份）叫我簽署。”

17.  Maggie Lee’s Affirmation stated that she witnessed Lawrence Tsoi’s signing of the 5 May 2025 Letter. She also stated that as to Lawrence Tsoi’s request for payments by instalment during a 10-year period, this would later be arranged by lawyers.

18.  On 19 May 2025, an unsigned affirmation was sent to the Court without service on the Plaintiff. The unsigned affirmation was in English, purported to be “Affirmation of Tsoi Chik Sang Lawrence” and dated 19 May 2025. It was sent under a cover letter purportedly signed by Lawrence Tsoi himself stating that Maggie Lee prevented him from filing the affirmation and so he requested his friend’s assistance in sending the affirmation to the Court.

19.  Also on 19 May 2025, Lawrence Tsoi issued a Notice to Act in Person in HCA 2061.

20.  I cannot but pause here to note the obvious – Lawrence Tsoi could issue a Notice to Act on 19 May 2025, the very date of the cover letter for the unsigned affirmation sent to the Court alleging that Lawrence Tsoi had been prevented from filing the affirmation.

21.  The second directions hearing of 22 May 2025 came. However, at 4:49pm on 21 May 2025, Lawrence Tsoi’s son sent a letter to the Registry claiming that Lawrence Tsoi was ill and could not attend the hearing. Enclosed with that letter were an image of a referral letter issued by a doctor for Lawrence Tsoi addressed to hospital dated 21 May 2025, an image of a receipt issued by Pok Oi Hospital dated 21 May 2025 for Lawrence Tsoi and an image of a wristband apparently of a hospital showing that Lawrence Tsoi had been admitted to hospital.

22.  Lawrence Tsoi did not attend the hearing. I proceeded with the hearing under Order 32 rule 5. I dismissed the Summons with extempore reasons given, in essence:-

(1)  I relied upon Lawrence Tsoi’s 16 May 2025 Affirmation. I stressed to Ms Leung, for HHCS and Tardi, that I relied upon this affirmation because it was an affirmation affirmed in the Home Affairs Department in Kowloon City, and I might well not rely on it had it been purported to be affirmed before Solicitors given the circumstances.

(2)  While Lawrence Tsoi’s 5 May 2025 Letter did express that further agreement would be signed, in my view, it was like the situation of sale and purchase of property where a provisional agreement is signed first expecting that there would be a formal sale and purchase agreement to be executed, but the provisional agreement is still legally binding given the clear intention of agreement. The “further agreement” to be signed would be concerning how the payments would be made, etc.

(3)  In the circumstances, the Consolidated Action had been settled, and there was nothing for HCA 2061 to be heard together with.

(4)  Therefore, I dismissed the Summonses, and vacated the trial dates of the Consolidated Action.

23.  At the end of that hearing, Ms Leung, for HHCS and Tardi, sought costs of the two Summonses. Given the circumstances of Lawrence Tsoi’s changing position, I expressed my concern that Lawrence Tsoi may have been improperly influenced by other people and if appropriate, costs order against third party may be considered. Thus, to be fair to Lawrence Tsoi, I granted leave for him to file and serve affirmation to explain his position on costs. I adjourned costs for argument on 10 June 2025, thus this hearing.

24.  On 30 May 2025, Lawrence Tsoi, still acting in person, filed, without service, a Chinese affirmation (“Lawrence Tsoi’s 30 May 2025 Affirmation”). In essence, he reiterated the contents of Lawrence Tsoi’s 10 May 2025 Letter, and again explained his absence of the hearing on 22 May 2025 with reference to his medical records as explained earlier on. In §21, he said that my decision on 22 May 2025 that there was a valid settlement agreement deprived his right to dispute the validity of Lawrence Tsoi’s 5 May 2025 Letter, and asked the Court to vary the decision and re-fix the trial of the Consolidated Action.

25.  On 9 June 2025 (just one day before the hearing), Lawrence Tsoi’s current Solicitors filed a Notice to Act. Mr Kwok also filed Skeleton Submissions on the same day.

III.  LAWRENCE TSOI’S GROUNDS

26.  With the untraversed medical evidence, I have to accept that there was a good reason for Lawrence Tsoi’s absence from the hearing of 22 May 2025. Be that as it may, there is no formal application to vary my order of 22 May 2025. At first glance, Order 32 rule 5(4) may be applicable because I dismissed the Summonses in Lawrence Tsoi’s absence. However, per my extempore reasons for the dismissal summarised above, I dismissed the Summonses not “by reason of the failure of [Lawrence Tsoi] who took out the summons to attend the hearing”: seeOrder 32 rule 5(4). Therefore, Order 32 rule 5(4) is apparently not applicable. In any event, there is no application before me to vary my Order.

27.  That said, Mr Kwok’s submissions on liability on costs almost amounted to submissions that the decision should be set aside and the matter should be considered afresh. The following submissions are worth quoting:-

“B. If the settlement was not valid

5. On the flip side, if the settlement was not complete, valid and binding and trial was only called off at the instance of the plaintiffs in the Four cases, the court has discretion not to allow costs because the summonses were only rendered futile and meaningless by an invalid settlement.

7. The question is whether the settlement was not impeccable.

The problematic settlement

9. The Settlement Agreement was problematic and probably not valid in that the Document (1) clearly provided for further negotiation and signing to confirm the terms of settlement, (2) amounted only to an expression of Choi’s intention to settle when read in context, (3) was not addressed to JKKL nor the plaintiffs though JKKL was mentioned and (4) fell short of an acceptance for the purpose of Order 22, rule 16(1) in that no filing was done (See the requirement of acceptance provided in Order 22, rule 16, (DLOA#6). Hence there was no valid acceptance of the sanction offer for the purpose of Order 22, rule 16(1) and possibly no valid settlement.

10. An agreement to agree (or to sign an agreement to confirm terms) is not a binding agreement at all…

11. Without a binding agreement, there was no settlement and trial was only called off at the instance of the plaintiffs in the Four cases at the eleventh hour, thereby rendering the consolidation summonses meaningless and impossible.

12. In the premises, it would be unfair to penalise Choi on the costs of the summons for consolidation taken out under the Four cases.

13. It would also be unfair to penalise Choi on costs of the summons for consolidation taken out in HCA2061/2018 which was also rendered meaningless by the plaintiffs’ act to stall trial at the eleventh hour. Costs of the consolidation summons taken out in HCA2061/2018 ought to be reserved or made the plaintiff’s costs in the cause of HCA2061/2018.

14. In respect of the other terms of the summons under HCA2061/2018 (also dismissed), the defendant was severely interfered with in filing further affirmation to explain why the Settlement Agreement was invalid and not of Choi’s own will.

15. As consequence, Choi was not able to file his affirmation [HB/32-43] to explain why the settlement was not valid and regrettably, he also fell ill and was not able to attend hearing on 22 May 2025.

16. Choi should not be penalised on costs of the summons and to have the rest of the terms in the summons (including the joinder) entertained afresh.”

28.  Therefore, the main plank for Mr Kwok’s submissions is that there is no settlement agreement in the Consolidated Action, and therefore, the dismissal of the Summonses was not warranted (put mildly) or wrong.

29.  Given the way the written submissions were put, at the start of this hearing, I gave time for Mr Kwok to take instructions on whether Lawrence Tsoi would like to make any application under Order 32 rule 5(4), without ruling whether this rule is applicable. Having taken instructions, Mr Kwok told me that Lawrence Tsoi would like to apply for an adjournment so that he would have need more time to decide. I refused to adjourn and decided to proceed with the hearing as it had been scheduled for costs.

30.  In Mr Kwok’s submissions, the main basis for his stance that Lawrence Tsoi should not be ordered to pay costs is that there was no valid acceptance of the Sanctioned Offer, and therefore, there is no settlement agreement. I have serious doubt whether this matter, having been ruled upon during the hearing of 22 May 2025, could be re-argued as if this matter could be considered afresh when deciding on costs. Be that as it may, given the chequered procedural history and various changes of Lawrence Tsoi’s position, I am prepared to deal with these submissions first – if these submissions cannot get off the ground, then I would determine costs on that basis. Difficulty may arise only if I would find these submissions valid, and there and then I would have to determine whether I could re-open the matter.

31.  From Lawrence Tsoi’s various affirmations and Mr Kwok’s submissions, I ascertain the following grounds raised in support of Lawrence Tsoi’s stance that there was no valid settlement agreement:-

(1)  There was no intention to accept the Sanctioned Offer and/or enter into any legally binding agreement, as evidenced by the last sentence of Lawrence Tsoi’s 5 May 2025 Letter, that is, “本人將與原告人再簽訂和解協議以確立上述的和解方案。”;

(2)  Alternatively, if there were any legally binding agreement, Lawrence Tsoi was misled by Maggie Lee who told him that there would not be any legally binding agreement and further negotiation as to how the payments would be made and other matters would have to complete first, and thus any agreement would be invalidated;

(3)  HHCS had no authority to conduct the Consolidated Action and no authority to make the Sanctioned Offer; and

(4)  Lawrence Tsoi was subjected to Maggie Lee’s undue influence and/or unlawful interference.

IV.  NO INTENTION?

32.  To understand whether Lawrence Tsoi had any intention to accept the Sanctioned Offer, one must understand that Order 22 is a set of self-contained statutory code which is not affected by the general law of contract and which, in order to achieve certainty, “must be understood and followed by ordinary citizens who wish to conduct their own litigation”: see Asahi Iwasawa & Associates Management Consultants Ltd v Shibakawa (Hong Kong) Ltd, HCA 969/2014, 12 September 2023 at §§17-19 per DHCJ Le Pichon, and therefore, “the parties’ contractual intention (an exercise that necessarily creates uncertainty) is irrelevant” and the Court is not required to ascertain the parties’ intention: see Asahi Iwasawa & Associates Management Consultants Ltd v Shibakawa (Hong Kong) Ltd, supra at §§29-30.

33.  In this regard, Order 22 rule 12 provides:-

“Time when sanctioned offer or sanctioned payment is made and accepted

(5) A sanctioned offer or a sanctioned payment is accepted when notice of its acceptance is served on the offeror.” (emphasis added)

34.  It is convenient here to refer to the terms of Lawrence Tsoi’s 5 May 2025 Letter again:-

“關於：HCA 988/2004, HCA 989/2004, HCA 1075/2004 及 HCA 1327/2013 （合併案件）

本人，蔡植生 (Tsoi Chik Sang Lawrence)，為上述合併案件的第一及第二被告人，現同意該合併案件的原告人，即恆香老餅家 (Hang Heung Cake Shop Company Limited)，於2025年4月23日提出的「附帶條款和解提議」，條款如下:-

(1) 本人作為第一被告人，同意

(a) 以HK$2,000,000（包括利息）償清原告人就本人尚未償還的餅數及債項的申索；及

(b) 向法庭承諾不會會侵犯原告人的商標及知識產權。

(2) 本人作為第二被告人，即蔡創業的遺產執行人，同意以HK$3,000,000（包括利息）償清原告人的申索。

本人將與原告人再簽訂和解協議以確立上述的和解方案。” (emphasis added)

35.  Was this a notice of acceptance of the Sanctioned Offer? It referred to the Consolidated Action. Lawrence Tsoi then said that he “agreed” (同意) to the Sanctioned Offer. It is clear to me that this agreement was acceptance of the Sanctioned Offer. It was still so despite the last sentence. Because all the terms of the Sanctioned Offer had been accepted, there was nothing further to agree upon or vary. The last sentence, properly understood in context, just means that the parties would “further”, “again” or “repeatedly” (再) sign a settlement agreement for the accepted terms. The “further”, “again” or “repeatedly” means what it means – there had already been an agreement, and any agreement to be signed would be a “further”, “again” or “repeated” agreement. Why would there still be a “further”, “again” or “repeated” agreement? This may well be because the parties would like to work out the details of payment, for example, how to pay, who would be the recipient, and so on. However, one cannot say that without such details, there was no acceptance of the Sanctioned Offer – the Sanctioned Offer in the first place did not contain such details.

36.  There is no dispute that Lawrence Tsoi’s 5 May 2025 Letter was served to HHCS on 5 May 2025 because even according to Lawrence Tsoi (consistent with Desmond Wong’s and Maggie Lee’s evidence), he signed it in front of Desmond Wong of HHCS (whose authority to represent HHCS I shall deal with below) who then got the signed copy.

37.  One may argue that to accept a sanctioned offer, Order 22 rule 16 requires filing of the notice of acceptance as well. It provides that:-

“Time for acceptance of plaintiff’s sanctioned offer

(1) Subject to rule 7(3), a defendant may accept a sanctioned offer made not less than 28 days before the commencement of the trial without requiring the leave of the Court if he files with the Court and serves on the plaintiff a written notice of acceptance not later than 28 days after the offer was made.

(2) If (b) the defendant does not accept it within the period specified in paragraph (1), then the defendant may:

(i) if the parties agree on the liability for costs, accept the offer without the leave of the Court; and

(ii) if the parties do not agree on the liability for costs, only accept the offer with the leave of the Court.

(3) Where the leave of the Court is required under paragraph (2), the Court shall, if it grants leave, make an order as to costs.” (emphasis added)

38.  However, read together with Order 22 rule 12, the heading of Order 22 rule 16 and the contents of Order 22 rule 16, in my view, Order 22 rule 16(1) is concerned with the time when a defendant may accept a sanctioned offer without the leave of the Court, and the consequence of accepting a sanctioned offer within the prescribed time is not that there is no acceptance of the sanctioned offer in question, but that in general the Court should decide on the liability of costs (if not agreed) first. This, in my view, is not a rule prescribing that an offer can only be accepted by filing and service of the notice of acceptance. Such cumulative requirements would not sit well with Order 22 rule 12, which is the rule prescribing how a sanctioned offer can be accepted.

39.  Since Lawrence Tsoi’s 5 May 2025 Letter was, as I have found, a notice of acceptance, and since the notice of acceptance was served on 5 May 2025, the Sanctioned Offer was accepted on 5 May 2025.

40.  For the sake of completeness, insofar as any contention that contractual intention would still be relevant, I would reject any contention that the last sentence would mean that Lawrence Tsoi’s 5 May 2025 Letter was just an agreement to agree, which would constitute no binding agreement at all. I would so reject for the following reasons:-

(1)  The terms of the Sanctioned Offer were complete and self-contained. One could add more details (for example, as explained above, how to pay, who to receive and so on). However, the terms were complete in the sense that the parties would know what to perform and there would be no certainty as to what to perform.

(2)  As I explained in my extempore reasoning for my decision on 22 May 2025, it was like a situation where a provisional agreement of sale and purchase in respect of a land is signed, agreeing that there would be a formal agreement. The provisional agreement, containing all the essential terms, would still be valid and binding on its own. For this trite proposition, I only have to refer to KSDY International Company Limited & Anor v Honway (China) Limited, HCA 4514/2002, 23 March 2006 at §§44-46 per DHCJ Muttrie.

V.  INVALIDATION BY MAGGIE LEE’S MISREPRESENTATION?

41.  For the present purpose, I assume, without finding, that Maggie Lee did make representation to Lawrence Tsoi to the effect that Lawrence Tsoi’s 5 May 2025 Letter would have no legal effect. Even so, I would still uphold the validity of the acceptance of the Sanctioned Offer.

42.  First, as mentioned above, Order 22 is a self-contained rule for achieving certainty, not affected by the substantive contractual law. Therefore, misrepresentation should in general have no effect.

43.  Second, I can see injustice of strict application of the rules in situations where for example, the plaintiff deliberately misleads the defendant to accept a sanctioned offer. In such situations, the Court may have jurisdiction, implied or inherent, in setting aside the notice of acceptance. However, I do not need to express any definitive view on this because the present case is not such a situation. The misrepresentation was made by Maggie Lee, a third party, whom Lawrence Tsoi came to know in a social event. Mr Kwok, for Lawrence Tsoi, also fairly conceded during hearing that Maggie Lee was not HHCS’s employee. Further, Lawrence Tsoi makes no allegation that Maggie Lee, in making the misrepresentation, represented HHCS (actually, impliedly, apparently or ostensibly), or that HHCS had knowledge that Lawrence Tsoi, in signing Lawrence Tsoi 5 May Letter, had been misled to its binding effect. The only allegation which Lawrence Tsoi made about Maggie Lee helping Desmond Wong is found at §19 of Lawrence Tsoi 30 May 2025 Affirmation, where he said that Maggie Lee refused to help him but helped Desmond Wong to prevent him from filing any affirmation for the hearing of 22 May 2025.

44.  Third and in any event, even if contract law would apply, a misrepresentation by a third party would not lead to rescission, unless that third party represents the contractual party at the time of the contract or the contractual party has knowledge of the misrepresentation at the time of the contract: see Misrepresentation, Mistake and Non-Disclosure (7^th ed) §§4-78 – 4-82; Chitty on Contracts (35^th ed) Vol 1 §10-132 and Northern Bank Finance Corp Ltd Charlton [1979] IR 149.

45.  Therefore, given that the assumed misrepresentation was made by a third party, the acceptance of the Sanctioned Offer would not be invalidated.

46.  The above analysis is made on the assumption that there was the misrepresentation as Lawrence Tsoi alleges. However, in my view, on the evidence available before me, I would in any event conclude that the allegation of Maggie Lee’s misrepresentation is inherently unbelievable because:-

(1)  It was at a point Lawrence Tsoi’s own evidence that Maggie Lee did not mislead him: see Lawrence Tsoi’s 16 May 2025 Affirmation quoted in §16 above. There is no explanation before me why Lawrence Tsoi took that stance in that affirmation, but took a diametrically opposite stance before and after that affirmation. His evidence in this aspect is incredible on its own.

(2)  There is no evidence to suggest that Maggie Lee had any motive or was incentivised to mislead Lawrence Tsoi.

VI.  HHCS’S AUTHORITY IN THE CONSOILDATED ACTION

47.  Lastly, insofar as Lawrence Tsoi challenges HHCS’s authority on the ground of lack of properly constituted board, the answer is that:-

(1)  In §§80-81 of his Consolidated Defence in the Consolidated Action, he only challenged HHCS’s authority to commence HCA 1327/2013 (one of the four actions consolidated in the Consolidated Action);

(2)  Insofar as that challenge is concerned, as pleaded in §41 of HHCS’s Consolidated Reply, Lawrence Tsoi on his own initiative applied to discontinue a similar challenge in HCMP 832/2018 on 4 January 2019, and leave was granted by consent on 30 January 2019; and

(3)  At the Pre-trial Review on 12 March 2025, Lawrence Tsoi’s then counsel confirmed to the Court that this authority issue would not be taken at trial.

48.  Insofar as Lawrence Tsoi’s challenge to the validity of Desmond Wong’s appointment, such challenge is, in my view, barking at the wrong tree. As Ms Leung points out, the authority to commence and continue the Consolidated Action came and comes not from Desmond Wong, but from the board. Even assuming that Desmond Wong was invalidly appointed, so long as the board, properly constituted, authorized and authorizes Desmond Wong to give instructions to HHCS’s solicitors and to commence and continue the Consolidated Action, the validity of his appointment is irrelevant. In any event, absent any injunction or interlocutory injunction restraining Desmond Wong from acting as an Acting General Manager under the appointment, one cannot simply raise that there is dispute over his authority and based on this dispute, seeks a stay of the Consolidated Action: see Hang Heung Cake Shop Company Ltd v Cheng Hung Kit [2024] HKCFI 1982 at §25 per Lok J. This proposition is consistent with the general principle that as against outsiders, the company’s act is valid and binding despite any internal management dispute or dispute over validity of appointment of directors.

49.  It remains for me to add that Desmond Wong is effectively interested, directly and indirectly, in HHCS as to more than 75%. This means that whatever the challenge there would be, the irregularity principle would likely apply to cure any procedural defect, and that any challenge would not make any real difference.

50.  Further and in any event, I do not see how the Share Transfer Agreement constituted any illegal champerty. Tardi, purchasing the interests in Fonduet, which in turn is interested in HHCS, of course would have an interest in the litigation. Similarly, Desmond Wong is interested in Tardi, and thus is also interested in HHCS. There is no champerty by them funding litigation in which Tardi is interested. There is also no champerty or illegality in Tardi and Desmond Wong gaining benefits to enable his appointment in HHCS, in which he is interested.

51.  Still further and in any event, under the trilogy approach of the Court of Appeal towards illegality under Monat Investment Ltd v All Person(s) in Occupation of Part of the Remaining Portion of Lot No 591 in Mui Wo DD 4 No 16 Ma Po Tsuen [2023] 2 HKLRD 1311, I do not see how the (assumed) champerty agreement would invalidate the appointment of Desmond Wong when taking into account that there is no evidence to suggest that HHCS’s board has actually disapproving the Consolidated Action. Invalidating Desmond Wong’s appointment and the authority to conduct the Consolidated Action would in the circumstances not achieve the objective of the rule against champerty (to avoid a disinterested person encouraging litigation or funding litigation for the purpose of winning the litigation so that the funder may get some benefit) and if necessary, would be out of proportion or “overkill”.

52.  Therefore, there is no merit in this authority ground.

VII.  MAGGIE LEE’S UNDUE INFLUENCE AND/OR UNLAWFUL INTERFERENCE?

53.  At one point during the oral submissions, Mr Kwok, for Lawrence Tsoi, submitted that Lawrence Tsoi was subject to Maggie Lee’s undue influence in the acceptance of the Sanctioned Offer.

54.  There is no evidence of undue influence. In any event, assuming that general contract law applies to Order 22, to avoid a contract on the ground of undue influence by a third party like Maggie Lee, Lawrence Tsoi would have to prove that Maggie Lee was HHCS’s agent or HHCS had actual or constructive knowledge of the undue influence: see Chitty on Contract, supra §11-148. There is no such evidence at all. Mr Kwok, rightly, abandoned undue influence in the course of the submissions.

55.  As regards Mr Kwok’s submissions that Lawrence Tsoi was subjected to unlawful interference, the only evidence he relies upon is what happened on 12 May 2025, namely, (1) Maggie Lee refused Lawrence Tsoi’s request that she should make an affirmation that there was no acceptance of the Sanctioned Offer, and (2) Maggie Lee prevented him from preparing and filing affirmation. However, as pointed out by Ms Leung, this alleged event took place after the acceptance of the Sanctioned Offer, and in any event, if there were any unlawful interference, it would be a matter as between Lawrence Tsoi and Maggie Lee, which would not affect the settlement agreement.

56.  There is nothing in this last ground.

VIII.  CONCLUSION

57.  In the circumstances, I do not accept Lawrence Tsoi’s stance that there was no valid settlement agreement as a result of the acceptance of the Sanctioned Offer. The above analysis only reinforces my view, as I took during the 22 May 2025 hearing, that there was a valid settlement agreement as a result of the valid acceptance of the Sanctioned Offer.

IX.  COSTS

58.  While I have doubt whether Lawrence Tsoi has been under improper influence from third party, I should not allow my doubt to enter my judgment and decision. There is no sufficient evidence to sustain my doubt. As I have found that there was a valid settlement agreement, I see no reason to depart from the general rule that costs should follow the event.

59.  Ms Leung seeks for indemnity costs. As I have no evidence to sustain my doubt that Lawrence Tsoi has been under improper influence from third parties, logically, his conduct of the proceedings must be taken as his own. Having considered the following conduct of his own, I agree with Ms Leung that Lawrence Tsoi had been abusive of the court process in conducting the Summonses:-

(1)  After he accepted the Sanctioned Offer, he issued the Summonses the next day or so. It shows that he used the court procedure in an attempt to allow him to go back on his acceptance – he may regret having entered into a deal which may not look good to him in his afterthought. But he could not use court procedure in this abusive way.

(2)  In his supporting affirmation, he suggested that the trial dates of the Consolidated Action should be vacated so that HCA 2061 could be heard together with it. At the Pre-trial Review on 12 March 2025, his counsel confirmed that the matter was ready for trial. At the eleventh hour, Lawrence Tsoi then issued the Summonses. There has been no explanation on why these were not done earlier. In HCA 2061, although there was no application for amendment to his Statement of Claim there, in his draft Amended Statement of Claim, he would join Desmond Wong and other parties as new Defendants which would otherwise have no relevance to HCA 2061. The amendment basically amounted to a new claim. Nevertheless, Lawrence Tsoi saw fit to add these persons so as to establish an apparently tenuous link for him to say that HCA 2061 should be heard together with the Consolidated Action. This is an abuse of court process.

(3)  Lawrence Tsoi, as can be seen from the procedural history recounted above, changed his positions a few times by way of affirmation. An affirmation must contain the truth and only the truth. However, he saw fit to change his story from (a) he was misled and there was no acceptance of the Sanctioned Offer, to (b) he was not misled (in Lawrence Tsoi’s 16 May 2025 Affirmation), and back to (c) he was misled and there was no acceptance of the Sanctioned Offer. Worse, he has not given any explanation for why he made Lawrence Tsoi’s 16 May 2025 Affirmation. This is another abuse of court process.

60.  In the circumstances, it is an appropriate case to order indemnity costs.

61.  Having considered the statement of costs and Mr Kwok’s objections, I order that (1) Lawrence Tsoi as the 1^st Defendant and he as the 2^nd Defendant do jointly and severally pay HHCS costs of the Summons in the Consolidated Action summarily assessed at HK$190,000, payable forthwith, and (2) Lawrence Tsoi do pay Tardi costs of the Summons in HCA 2061 summarily assessed at HK$190,000, payable forthwith. I make it clear that I grant certificate for one counsel only.

62.  I thank counsel for their assistance.