WOON KAY CHANG v. TAI HING (ENGINEERS & BUILDERS) LTD

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JUDGMENT

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1. This is an appeal by the Defendant from the Order of the Master entering summary judgment against the Defendant. The Defendant has a building contract claim against the Hong Kong Housing Authority under a 1987 Contract. The Plaintiff is a building construction consultant and his business activities might be characterized, by analogy to "ambulance chaser" of the American legal system of contingency fees, as building claims chaser. The Plaintiff agreed with the Defendant to manage and pursue the building contract claim on behalf of the Defendant and that for the Plaintiff's services, the Plaintiff would be paid 40% of the net amount (after deduction of legal expenses) which the Defendant eventually received from the Housing Authority as result of the work done by the Plaintiff. The Defendant said that the Plaintiff did not do any substantial work and that it was due to the Defendant's own efforts and negotiations that the Housing Authority eventually on the 21st November 1996 paid the Defendant $4,000,000 to settle the Defendant's building contract claim. The Plaintiff said that he did the work but it was not seriously disputed by the Plaintiff that the settlement with the Housing Authority was negotiated directly by the Defendant.

2. The Plaintiff sought from the Defendant his 40% of $4,000,000 namely $1,600,000 and rendered a Fee Note on 2nd December 1996 for that sum. But the Defendant disputed that demanded sum of $1,600,000 and refused to pay that sum. By an oral agreement made on the 16th of December 1996 between the Plaintiff and Mr. Luke on behalf of the Defendant, it was agreed that in full and final settlement of the Plaintiff's claim under the aforesaid building claims chaser agreement, the Plaintiff would be paid $1,200,000 within 7 days. Pursuant to the settlement agreement, the Plaintiff issued the next day 17th December 1996 a revised Fee Note for $1,200,000 and he was so paid on 19th December 1996 by the Defendant pursuant to that settlement agreement made on 16th December 1996. The Plaintiff however went back on the agreed settlement and now sues for $398,000 of what is alleged to be the remaining amount of the 40%. The simple question on this appeal is whether the amount paid was in settlement of a disputed claim for $1,600,000.

3. The law on this is simple. If the payment is only part payment of an admitted debt then the part payment is normally not a discharge of the whole debt and the debtor remains liable for the balance of the debt but that if the payment was in settlement of a disputed claim, then there is good consideration. What is important is the existence of the settlement arising from a bona fide dispute. There is no doubt that there was a settlement and that there was in fact a revised fee note to reflect this settlement. In the context of this case as made to appear to this Court by the evidence and by the submissions, the Defendant's case on settlement seems to me to be both reasonable and credible. Notwithstanding the dissecting of the Affidavit evidence and of the pleadings by Mr. Shaw (which the Court of Appeal had repeatedly discouraged the parties from doing on Order 14 applications), I remain of the firm view that it is possible for the Court to infer and to conclude in the context of all the surrounding circumstances that a triable case on settlement agreement had been raised. The full facts and circumstances surrounding this 16th December settlement must therefore be investigated at the trial. In my judgment, unconditional leave to defend ought to be given.

4. There is however an additional reason why summary judgment should not have been ordered and that is because it is inequitable for the Plaintiff to resile from the oral settlement agreement of which he had the full advantage by the receipt of $1.2 million within 3 days of the settlement. This aspect of the law is discussed in Chitty on Contract, 27th edition, Volume 1 at paragraphs 3-097 to 3-104. At paragraph 3-103, it is said that detriment is not necessary for the Court to apply the equitable principle. There is a contrary view against the applicability of the equitable principle expressed in Smith on Contract at page 89-90. In England the courts may have applied the Foakes v Beer but the point is neither clear nor easy. In my judgment, the equitable principle point is plainly arguable and it seems to me that this furnishes a further reason why in my judgment, the Court should refuse to enter summary judgment in favour of a Plaintiff who on his own case is seeking to resile from the settlement agreement made in December 1996.

5. In the course of the argument, a third point was discussed, namely that there is a defence to this building claims chaser contract because very little work was done by the Plaintiff and it was not the Plaintiff's work which apparently led to the payment of the $4 million, which was the result of negotiation undertaken directly by the Defendant with the Housing Authority. This question in turn depends on what are the express and implied terms of the contract and under what circumstances would the Plaintiff be entitled to this contingency fee payment and whether what the Plaintiff had done justified the full payment of $1.6 million. The claim is a contingency fee contract in nature and there might well be a public policy ground why public scrutiny should be given on the full enforceability of such a contract. This seems to me to give rise to "some other reasons" under Order 14 why unconditional leave to defend should be given.

6. The appeal is therefore allowed. The Order of the Master is set aside and the Defendant is to have unconditional leave to defend. The Plaintiff must pay the Defendant in any event the costs of the Appeal. The costs below should be costs in the cause.