WONG TAK SING AND ANOTHER v. AMERTEX INTERNATIONAL LTD

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. This is an appeal from a Master's decision in which he ordered that proceedings in this matter be stayed, apart from the question of payment of funds out of court, on the basis that the parties had reached a settlement of the claim. I allowed the appeal and revoked the order and now give my reasons for doing so.

2. The chronology of this matter is that on the 28th of January 1985 the plaintiffs issued a writ claiming the sum of $342,533.60, being an amount alleged to be owing for textiles sold and delivered to the defendant. After service of the writ application was filed on the 11th February seeking summary judgment. Almostly immediately afterwards, on the 18th of February 1985, there was a payment of $137,635 into court by the defendant's solicitors. An affidavit was filed opposing the application for summary judgment and in support of the defendant's request for leave to defend. The application was adjourned on the 11th of March and the defendants who were represented by an assistant solicitor were awarded costs. That award of costs was subject to an appeal which was adjourned on the 18th of March; again the defendants were awarded costs. On the 21st of March, the plaintiff was given leave to withdraw the previous application and was again awarded costs. Again the defendants were represented by an assistant solicitor.

3. On the 18th of November 1985, the application for summary judgment was refused and leave was given to defend; there were the normal directions. The order was "costs since 21.3.85 and up to today's date to the defendant in any event and other costs to be costs in the cause". On the 4th of December 1985, a defence and counterclaim were filed and on the 19th of December, a reply and defence to that counterclaim. There was then the usual discovery and an exchange of correspondence. No further action was taken until on the 4th of April 1987 when the plaintiffs filed notice of intention to proceed.

4. One of the grounds in the defence was that the partnership with whom the contract had been made consisted of Mr Wong Tak Sing and Mr Wong Yuk Lam whereas the plaintiff were Mr Wong Tak Sing and Miss Yuen Heung Chun. On the 14th of May 1987 the plaintiffs applied to amend the title of the writ by suing in the name of the previous partners, which clearly was necessary.

5. On the 14th of May 1987 the defendant's solicitors received a letter from the plaintiffs' solicitors. The defendant's solicitor, Mr Stephen Wong, says in his affidavit that it was received at "about 5.30." However the date stamp on the letter, a copy of which has been exhibited, would appear to indicate that it was in fact at 6.00 p.m. This letter simply said:-

"We are instructed, in order to save time and costs, to propose to your client through your goodselves the following terms of settlement:-

 

We would be much obliged if you could seek your client's instructions and let us know at your earliest convenience whether the above settlement proposal is acceptable to your client."

 

6. Mr Wong says that he immediately contacted Miss Amy Ho, a director of the defendant company who had conduct of the proceedings on its behalf, and informed her of the contents of the plaintiffs' offer. Miss Ho travels a great deal and it was fortunate that she happened to be in Hong Kong at the time. He said that she was "fed up" about the matter which had been dragging on for over a year. Mr Wong said he discussed the question of how long the proceedings would take and the amount of costs involved and she instructed him to accept the offer. He makes no reference to the money paid into court. He immediately wrote to the plaintiffs' solicitors accepting the offer and the letter was sent round by hand that same evening. This letter simply says that the terms offered are accepted and the sum of $25,000.00, together with interest thereon at the rate of 7%, will be paid on the following day. On the same evening however, and it would seem at virtually the same time that the letter of acceptance was received by the plaintiffs' solicitors, it was realised that their letter contained a mistake and that instead of $25,000.00, it should have read $250,000.00. A further letter was therefore sent by the plaintiffs' solicitors referring to their previous letter and saying that the figure $250,000.00 should be substituted for $25,000.00. The following day the defendant's solicitors wrote to the plaintiffs' solicitors enclosing a cheque for $27,267.80, being $25,000.00 plus interest and stating that they regarded the first two letters of the previous day as constituting a binding contract which the plaintiffs could not repudiate. This cheque was returned by the plaintiffs' solicitors.

7. The defendant's solicitors then applied for an order that proceedings be stayed, apart from the question of payment out of court. The Master granted that application and made an order accordingly.

8. It is the case for the plaintiffs that the Master has made the order on the basis that the parties have settled their dispute. Leading Counsel for the plaintiff says that is simply not so. The plaintiffs solicitors have made a clear and obvious mistake which was corrected within 1 hour. The defendants have not been prejudised in any way and are simply seeking to take advantage of an obvious error. Why would anybody accept $25,000.00 when they knew that $132,000.00 had been paid into court and was available, subject to payment of the costs which had already been awarded to the defendants. These costs, however, consisted of three brief hearings before a blaster at which on two occasions the defendants had been represented by an assistant solicitor and once by an articled clerk. These costs could not in any way have been sufficient to make an offer of $25,000.00 reasonable. He argues that this was a unilateral mistake which must have been known to the other party and therefore, at common law, there is no binding contract. He relies on Hartog v. Colin and Shields ⁽¹⁾, a case involving negotiations for the sale and purchase of Argentinian hare skins in which all the prices quoted had been or so much per piece. The final offer however was expressed in so much per pound. This meant that the price for each piece was about 1/3 of what had previously been offered. It was held that this mistake must have been realised to be such by the other side and that therefore the contract was void.

9. Furthermore, even if the defendants solicitors did not realise that a mistake had been made, this was a matter in which equity would grant relief. The defendants have obtained specific performance of the contract contained in the two first letters of 14th of May by having an order for a stay of proceedings on the basis of that purported agreement. Specific performance is an equitable relief and equity will not grant such relief under these circumstances. The plaintiff relies for that on Burrow v. Scammell⁽²⁾. That was a case in which a lease had been granted which was to be renewable at the option of the lessee. When the time came for such renewal it was discovered that the lessor did not have the right to grant it because she only had a moiety. At 182 Bacon V.C. said:-

"It cannot be disputed that Courts of Equity have at all times relieved against honest mistakes in contracts where the literal effect and the specific performance of them would be to impose a burden not contemplated, and which it would be against all reason and justice to fix upon the person who, without the imputation of fraud, has inadvertently committed an accidental mistake; and also where not to correct the mistake would be to give an unconscionable advantage to either party."

10. Here the plaintiffs submits that to shut it out from its claim, which the present order does, is unjust and the courts should not allow this to happen.

11. It is the defendants' case that while there was a substantial payment into court, this has to be looked at in the light of the fact that there was first of all a preliminary issue as to the capacity of the plaintiff to sue, there having been a change in the partners, and that the amount must be looked at in the light of the orders for costs which had already been made in favour of the defendant. There was also the defendant's counterclaim. No application was made before the Master to have either Mr Stephen Wong, or Miss Amy Ho, cross-examined on their affidavits. Both have said that they did not realise that any mistake had been made and considered the offer made in the plaintiffs' solicitors letter as being a perfectly genuine one which, having been fully considered, was accepted. It was argued that if the writ had not been amended to take account of the change of partners, which were not done until April of 1987, there was a complete defence to the claim. While there certainly was a substantial amount paid into court, as that had not been accepted within 21 days leave would be required before it would be paid out to the plaintiffs. In Gaskins v. British Aluminum Co.⁽³⁾ Denning M.R. said that a court may refuse to order payment out to a plaintiff if circumstances have changed since the date the monies were paid into court. That may have been the position here following discovery which included the retirement deed relating to the old partnership. Application to amend the writ was not made until long after the defence was filed. In Riverlate Properties Ltd. v. Paul⁽⁴⁾ where a lease had been executed which omitted a clause providing that the lessee should pay for half the cost of exterior and structural repairs, it was held that since the lessee neither directly nor through her solicitor knew of the mistake and she was not guilty of sharp practice, there was no justification for a rectification. Here it is argued the defendant has also not been guilty of sharp practice and again there is no reason to void what is a perfectly clear and binding contract.

12. I find it somewhat remarkable that there is no reference in Mr Stephen Wong's affidavit to his having discussed with his client the question of the monies which had been paid into court. It seems to me that must, on any consideration of the offer made, have been a very important factor. There is also the somewhat extraordinary speed with which the plaintiffs' offer was accepted. However a solicitor's affidavit should not lightly be questioned and Mr Wong was not called to be cross-examined before the Master. However whether or not it was realised that a mistake had been made. I am satisfied that it would be wrong for specific performance to be ordered of the contract formed by the two first letters of 14th of May. I am satisfied that the first one was clearly an error, albeit a very negligent mistake as the figure of $25,000.00 was repeated in the letter, but that there has been no prejudice to the defendants whatever and relying on the principles laid down in Burrow v. Scammell⁽²⁾, there should not be an order granting specific performance by staying proceedings.

13. The appeal is therefore allowed and the Master's order is revoked. The plaintiffs are entitled to their costs here and before the Master. There will be certificate for one counsel.

(1) [1939] 3 All E.R. 566

(2) Vol. 19 Chancery 175

(3) [1976] Q.B. 524

(4) [1975] Ch. 133