XCHRX LUK POR v. CHAU KIM HUNG

HCA 10369/1997

Headnote

Practice and Procedure. Master's appeal against order granting plaintiff leave to amend statement of claim. Amendment introduced a new cause of action based on settlement agreement between the parties compromising the claims in the original action. The new cause of action did not exist at the time when the original statement of claim was issued. Held, the amendment should not be allowed. The plaintiff should bring a fresh action to litigate the matters concerning the settlement agreement. Appeal allowed.

HCA 10369/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10369 OF 1997

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JUDGMENT

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1. This is an appeal against the order of Master Jones given on 19 February 2001 granting the plaintiff leave to amend his statement of claim. Pursuant to that order the amended statement of claim was filed on the 20 February 2001.

2. The original claim by the plaintiff against the defendant is in respect of two separate agreements made between them in June 1992 and in October 1992 respectively. The plaintiff is and was an investor. The defendant is and was a local builder of small village houses on Lamma Island. The plaintiff and the defendant together invested in small village houses on Lamma Island. They entered into, inter alia, two separate agreements.

3. Under the first agreement, the plaintiff was to provide funds for the purchase of a plot of land on Lamma Island. The defendant was to procure the land owners of that plot to sell the same to the plaintiff and the defendant. The land would then be exchanged and used for residential development with the plaintiff and the defendant sharing the profit and loss from the proceeds of sale of the building to be erected. The plaintiff claims that the defendant was in breach of his obligations under the first agreement and claims damages. There is also a claim for damages for fraudulent misrepresentation alternatively, negligent misrepresentation.

4. Under the second amendment, the plaintiff was to pay the purchase price in respect of another plot of land on Lamma Island. The defendant was to demolish the existing house on that plot and to construct the new house thereon. The plaintiff claims that the defendant was in breach of the second agreement and claims damages. There is a defence and counterclaim by the defendant who counterclaims for reimbursement of sums expended by him under the second agreement.

5. By the amended statement of claim, the plaintiff introduced a new cause of action. There is also an amendment to the prayers for relief, namely in prayers 1, 2 and 3 by adding the words "to be assessed" after the word "damages".

6. I will deal with the second amendment first as this can be disposed of shortly. This simply adds the words "to be assessed" to make it plain that the damages sought under the relevant paragraphs in the amended statement of claim are to be assessed. No particulars are given of special damages but general damages which are claimed are to be assessed. I can see no objection to this amendment as it simply makes it plain that the damages that the plaintiff seeks under the relevant paragraphs are to be assessed.

7. I turn to the more substantial amendment which introduces a new cause of action. By paras 28 to 33, the plaintiff pleads that the plaintiff and the defendant on 11 June 1999 reached an agreement whereby the plaintiff's claims in this action have been settled ("the settlement agreement"). It is pleaded that by the settlement agreement the defendant agreed to pay HK$2,233,320.00 to the plaintiff by instalments and the plaintiff would transfer his title in the two plots of land to the defendant. After the last instalment payment to be made by the defendant to the plaintiff, the plaintiff would discontinue his claims in this action and the defendant would then discontinue his counterclaim. It is pleaded that the defendant has been in breach of the settlement agreement by failing to pay the second to sixth instalments and the plaintiff claims the sum of HK$2,133,320.00, i.e. the total of the second to sixth instalments, being the damages claimed under prayer 3a.

8. I have been informed by Mr Cheung, counsel for the defendant, that the defendant denies that there has been a settlement agreement reached between the parties. This is an issue between the parties but at this stage I have to assume the facts as pleaded to be true and that the plaintiff will establish the same at trial. Even though this new claim is pleaded in the alternative, the fact remains that it is the plaintiff's contention as pleaded that the plaintiff's claims in the action have been compromised by the settlement agreement. And the plaintiff seeks the enforcement of that settlement agreement by seeking the damages claimed in the said sum of HK$2,133,320 by prayer 3a. That being so, it seems to me that this is the sort of situation which requires the plaintiff to bring a fresh action to seek redress under the compromise between the parties.

9. It is stated in Foskett's "The Law and Practice of Compromise" 4th Edn in appendix 6 at p. 561 as follows :

In my judgment, the plaintiff should bring a fresh action to litigate the matters concerning the settlement agreement rather than to amend the statement of claim to plead the same in this action.

10. A further consideration is the fact that in this case the contents of "without prejudice" negotiations will have to be considered by the court as there will be an issue raised as to whether or not an agreement has been concluded. It will be necessary for the court to lift the veil of privilege to determine whether an agreement had in fact been reached. If the result of that determination is that no such agreement had been reached, then the veil of privilege is drawn again over the contents of the negotiations (para 9-28 Foskett's "The Law and Practice of Compromise", 4th Edn). It is most undesirable that evidence of the "without prejudice" negotiations should be admitted at the trial of the original action as it might well prejudice the defendant. The defendant might also be cross-examined on the settlement terms.

11. In the circumstances, in my judgment, the amendments in relation to the plaintiff's claim under the settlement agreement ought not to be allowed. The plaintiff should start a fresh action in respect of this claim.

12. There is a further reason why the said amendment should not be allowed. It must be remembered that an amendment duly made takes effect, not from the date when the amendment is made, but from the date of the original document which it amends. The original statement of claim is dated 30 September 1997. As at that date the cause of action based on the new claim under the settlement agreement did not even exist. The settlement agreement is said to be made on 11 June 1999. As is stated in marginal note 20/8/2 of the Hong Kong White Book 2001 :

13. For that reason also, I do not think that the amendments to raise the claim under the settlement agreement ought to be allowed.

14. The appeal is allowed. The order of Master Jones is varied to the extent that the amendments as contained in paragraphs 28 to 33 and prayer 3a of the amended statement of claim ought not to be allowed.