CHAMPION CONCORD LTD AND ANOTHER v. LAU KOON FOO AND ANOTHER

FACV Nos. 16 and 17 of 2010

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 16 OF 2010 (CIVIL)

(ON APPEAL FROM CACV NO. 232 OF 2010)

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IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 17 OF 2010 (CIVIL)

(ON APPEALFROM CACV NO. 233 OF 2010)

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DECISION

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Mr Justice Ribeiro PJ:

1.  On 4 May 2011, the Appeal Committee dismissed the Appellants’ application for leave to adduce certain evidence with a view to introducing as a new issue, a claim for rectification.  We stated that we would give our reasons later and this we now do.

2.  On 10 March 2009, the appellants signed an agreement settling an action which they had brought as purchasers against the respondent as vendor for specific performance of a contract for the sale and purchase of a village house in Sai Kung.  It was a settlement reached after mediation and the agreement set out modified terms for the sale and purchase. As the respondent had built it as an indigenous villager, sale to the appellants required the consent of the District Lands Officer (DLO) who was to set a premium to be paid by the appellants. 

3.  The settlement agreement contained clauses dealing with the obtaining of such consent and laid down time limits by which the DLO’s consent had to be obtained, providing for automatic cancellation of the agreement in defined circumstances.

4.  The parties fell once more into a dispute when the respondent claimed that such automatic cancellation of the agreement had occurred, whereas the appellants continued to press for completion.  Proceedings were instituted by the parties against each other and, in each of those actions, summary judgment applications were made.

5.  Both before Stone J[1] and the Court of Appeal,[2] the appellants argued that on the true construction of the settlement agreement the respondent remains under an obligation to complete.  On each occasion, their argument failed, the Courts holding that the relevant clause had been triggered, discharging the agreement and requiring them to surrender vacant possession of the premises (occupied by them as lessees pending completion of the sale and purchase agreement).  However, the Court of Appeal granted the appellants leave to appeal to this Court.  The hearing of the appeal has been set down for November.

6.  The appellants now apply for leave to amend their pleadings and to adduce affidavit evidence with a view to introducing, for the first time, a claim for rectification of the settlement agreement. 

7.  They seek to rely first on an affidavit sworn by the appellants’ present solicitor, Mr Mark Philip Yeadon.  He suggests on information and belief that the settlement agreement does not accurately record the settlement actually reached in the mediation.  He blames the mediator for defective drafting and criticises the appellants’ then solicitors for failing to notice the alleged discrepancy between the document and the agreement reached.  Mr Yeadon also criticises leading counsel instructed for the appellants to appear before Stone J (not Mr Dykes SC) for advising that rectification should not be raised as it might undermine the construction argument. 

8.  Affirmations made by Mr Eric Kee Keah Huat are also sought to be adduced on behalf of the appellants.  He gives a detailed account of the mediation process and makes similar criticisms of the persons mentioned.  He also deposes to his belief that the settlement reached differs from that expressed in the agreement.

9.  The respondent and his solicitors have filed evidence in response.  It suffices to note that their position involves a denial of any variance between the agreement reached and the terms of the settlement document.

10.  It is obvious that a claim by the appellants for rectification would involve a very different case from that previously argued. It would require consideration of conflicting evidence on disputed questions of fact.  The Court of Final Appeal is obviously not an appropriate forum for dealing with such factual questions so that the best that the appellants could hope for, if leave were to be granted, is to have the whole matter remitted for trial at first instance, with no guarantee whatsoever as to the outcome and subject to an order that they pay all the respondent’s costs to date. 

11.  That is a course which no one could relish and one which this Court will not countenance.  This application is in truth nothing to do with any appeal.  The proposed claim for rectification does not involve alleging that the lower courts erred in any way.  It is merely an attempt to get the Court of Final Appeal to allow the appellants to start the litigation all over again, running a point which was deliberately not pursued at the trial. 

12.  Even if the point were properly a matter for appeal, the application falls foul of the well-known principle set out in Flywin Co Ltd v Strong & Associates Ltd:[3]

“... where a party has omitted to take a point at the trial and then seeks to raise that point on appeal, the position is as follows. He will be barred from doing so unless there is no reasonable possibility that the state of the evidence relevant to the point would have been materially more favourable to the other side if the point had been taken at the trial.”

13.  Applying that test, the applicationmust fail.  If the issue of rectification had been raised at the trial, the evidence on both sides would have been very different.

14.  Even if one were to treat the application as simply one to adduce new evidence for use on appeal, it has to fail.  Any evidence potentially relevant to rectification was available at first instance and a conscious decision was taken not to adduce it.  The applicants come nowhere near the threshold requiring exceptional circumstances to be shown for permitting new evidence to be admitted.

15.  Much reliance was placed by Mr Dykes SC on the reference in O.1A r2(2) to the Court having to exercise its procedural powers with a view to “the just resolution of disputes in accordance with the substantive rights of the parties.”  But for the reasons given above, the application violates almost all of the underlying objectives set out in O.1A r1 and can make no claims to the pursuit of justice.

16.  For these reasons, the application was dismissed with costs.

17.  Before leaving this matter, we wish to make it clear that we must not be taken to be accepting the appropriateness of the disclosures made by Mr Yeadon and Mr Kee regarding the mediation process.  The fundamental importance of confidentiality in mediation is universally acknowledged and it can only be in highly exceptional circumstances that evidence which invades such confidentiality will be permitted to be adduced. There was no argument as to whether the circumstances put forward by the appellants bring them within such an exception, and we wish expressly to keep that question open.

Mr Philip Dykes SC and Mr Edward Alder (instructed by Messrs Stephen Mok & Co) for the appellants

Mr Lawrence Ng (instructed by Messrs Leung, Tam & Wong) for the respondent