TSUI WAN SHAN v. CHOY KAM CHEUNG AND OTHERS

HCA589/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.589 OF 2005

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R E A S O N S   F O R   J U D G M E N T

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Introduction

1. On 4 April 2005, the plaintiff commenced the present action against the defendants for injunctive relief and damages.  On 4 April 2005, he obtained an order from Nguyen J granting various interim injunctions against the 1^st and 2^nd defendants (“the Injunction”).  The Injunction was then continued by Stone J on 15 April 2005.

2. The 1^st defendant alleged that he and the plaintiff had reached a settlement agreement evidenced in writing dated 18 April 2005 whereby, among other things, the plaintiff agreed to buy the 1^st defendant’s shares in 3 companies, including the 2^nd and 3^rd defendants (“the 3 Companies”) at HK$1,010,000 to be paid by 3 instalments; and to immediately withdraw the present action and injunction against the 1^st defendant (“the Settlement Agreement”).  But the plaintiff had failed to withdraw the present action and injunction accordingly.  The 1^st defendant therefore applied by summons dated 10 May 2005 for a stay of the proceedings against him and discharge of the Injunction.

3. On 15 July 2005, I directed that a trial be conducted on the 7 preliminary issues arising from the 1^st defendant’s said application as identified in the list prepared by the 1^st defendant dated 14 July 2005.

4. On 2 November 2005, after trial, I made my determination on the preliminary issues and allowed the 1^st defendant’s said application with costs.

5. These are my reasons.

No substance in the plaintiff’s objections

6. There is no dispute that the parties did enter into the Settlement Agreement on 18 April 2005.

7. However, the plaintiff objected to the Settlement Agreement by taking essentially two points.

8. First, it was raised in his former solicitors’ letter dated 6 May 2005 that it was a condition precedent that the 1^st defendant should have sold all the shares in the 3 Companies at HK$1,100,000 and that the 1^st defendant had refused to transfer the shares to him.  Second, in another letter dated 9 May 2005, the plaintiff’s former solicitors alleged that besides the Settlement Agreement, there was an oral agreement to be made that :

(1)	Before the 1st instalment payment made on 22 April 2005, the 1st defendant should have transferred the shares and resigned as director on 20 April 2005;
(2)	The consideration of HK$1,010,000 under the Settlement Agreement included the shareholder’s loan due to the 1st defendant (which is exactly HK$1,010,000).  In other words, the 1st defendant agreed to waive his right to recover the shareholder’s loan.

9. I note that the solicitors used the phrase “an oral agreement to be made”.  But for all intents and purposes, the plaintiff relied on an oral agreement, as opposed to an oral agreement to be made.  I will proceed on this basis accordingly.

10. The plaintiff gave oral evidence to support his case.

11. Having carefully considered his case and all the evidence, I find the plaintiff untruthful and reliable.  And I reject his version of the events for a number of reasons.

12. First, he cannot explain why if the alleged condition precedent or oral agreement were so important, they were not reduced into writing in the Settlement Agreement.

13. Second, the alleged condition precedent and oral agreement were flatly contradicted by the Settlement Agreement.

14. Third, the plaintiff’s solicitors did not raise any objection to the Settlement Agreement until 6 May 2005.  According to the plaintiff’s evidence, he had already told his solicitors on either 19 April 2005 or 20 April 2005 to the effect that the Settlement Agreement did not cover all the points agreed.  If that were the case, the plaintiff’s solicitors should have raised the complaint in the earlier correspondence dated 20 and 21 April 2005 with the 1^st defendant’s solicitors.  But they did not.  That is incredible.

15. Fourth, even in the letter dated 6 May 2005, the plaintiff’s solicitors did not say that the consideration included the shareholder’s loan due to the 1^st defendant.  By then, they were fully aware of the plaintiff’s version of the events.  But they just sought clarification from the 1^st defendant if that was the case.  That is again incredible.

16. Fifth, the plaintiff alleged that when the parties signed on the Settlement Agreement, the 1^st defendant was in a hurry and wanted to leave as soon as possible.  So the plaintiff did not go through the draft prepared by the 1^st defendant carefully before signing on it.  It was but a lame excuse.  For the evidence before me clearly shows that the parties were careful enough to go through the clauses and made amendments where appropriate.

17. For the above reasons, there is no substance in the plaintiff’s objections.  The Settlement Agreement is binding on the parties.  The plaintiff cannot now withdraw from it unilaterally.

Oral agreement

18. I further find the 1^st defendant an honest and reliable witness.  I accept his evidence and find that there was an oral agreement between the parties reached at the time of the Settlement Agreement that he would transfer the shares in the 3 Companies to the plaintiff immediately after (a) the plaintiff had withdrawn this action and discharge the Injunction and (b) the plaintiff had made the 1^st instalment of payment under the Settlement Agreement.

Answering the preliminary issues

19. I therefore answer the preliminary issues as follows :

(1)	Whether the plaintiff and the 1st defendant had agreed to compromise this action on the terms of the Settlement Agreement.  In particular :
	(a)	Whether the 1st defendant had agreed to sell to the plaintiff all shares of the 3 Companies at HK$1,010,000.
	(b)	Whether the plaintiff had agreed to pay the 1st defendant :
		(i)	HK$250,000 by 22 April 2005;
		(ii)	HK$260,000 by 17 June 2005;
		(iii)	HK$500,000 by 17 October 2005.
	(c)	Whether the plaintiff agreed to withdraw the Injunction against the 1st defendant immediately and agreed to withdraw any court order and claim against the 1st defendant immediately, and agreed not to take any future court action or claim against the 1st defendant for whatsoever reason.
	Answer : Yes.
(2)	Whether, as alleged by the plaintiff, there was a “condition precedent” as stipulated in paragraph 1 of the Settlement Agreement that the 1st defendant should have sold and transferred all shares of the 3 Companies before the plaintiff would pay $HK250,000 to the 1st defendant on 22 April 2005 and that once the shares of the 1st defendant were transferred to the plaintiff and the said HK$250,000 was paid, the plaintiff would then apply to the court to discharge the injunction orders against the 1st defendant.
	Answer : No.
(3)	Whether, as alleged by the 1st defendant, he and the plaintiff had orally agreed that the shares would be transferred to the plaintiff immediately after :
	(a)	the plaintiff has withdrawn this action and discharge the Injunction; and
	(b)	the plaintiff made the 1st instalment of payment of HK$250,000 on 22 April 2005.
	Answer : Yes.
(4)	Whether the 1st defendant and the plaintiff had agreed that the 1st defendant’s agreement to sell his shares to the plaintiff for HK$1,010,000 included the cancellation of the shareholder’s loan.
	Answer : No.
(5)	Whether, as alleged by the plaintiff, there was an oral agreement to be made that :
	(a)	before the 1st instalment payment made on 22 April 2005, the 1st defendant should have transferred the shares and resigned as the director on 20 April 2005; and
	(b)	the consideration of HK$1,010,000 for all shares of the 3 Companies included the shareholder’s loan.
	Answer : No.

20. There are two further issues.  However, they are not required for the determination of the 1^st defendant’s application.  I will therefore leave them aside and make no determination on them.

Allowing the application

21. The court has power to order the stay of proceedings where the parties have concluded an agreement for the compromise or settlement of a pending action : Eden v. Nais [1878] 7 Ch D 781; Halsbury’s Laws of England, 4^th Edn, Vol. 37, para. 442.  Insofar as injunction is concerned, discharge would be granted as a mater of course because the claimant no longer has the cause of action to which the injunction was ancillary : Gee’s Commercial Injunction, 2004, para. 23.004.

22. Applying these principles, I allow the 1^st defendant’s application for stay of the present action and discharge of the Injunction with costs.

The Plaintiff, in person