MINDA CONSULTANCY LTD v. CHINA OUTDOOR MEDIA GROUP LTD

HCA 1972/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1972 OF 2004

________________________

________________________

REASONS FOR JUDGMENT

________________________

1.  This action was compromised on 6 July 2009. The compromise is reflected in the order that I made by consent on 6 July 2009 at pages 1 to 4 of the hearing bundle (“the Order”).

2.  Paragraph 3 of the Order provided that the defendant do pay the plaintiff’s costs as set out therein such costs to be taxed if not agreed.

3.  Pursuant to paragraph 3 of the Order and in the absence of an agreement with the defendant as to the quantum of the costs ordered to be paid by the defendant to the plaintiff, the plaintiff on 3 February 2010 issued its notice of commencement of taxation and bill of costs which were served on the defendant.

4.  By a summons dated 2 March 2010 the defendant applied for an order that the plaintiff’s notice of commencement of taxation and bill of costs be dismissed and that paragraph 3 of the Order be discharged.

5.  The defendant’s said summons came before me for hearing on 25 August 2010.  I dismissed the summons with costs to the plaintiff to be taxed if not agreed.  I indicated at the time that reasons in writing would be given.  These are my reasons.

6.  This action was compromised on the first day of trial before me on 6 July 2009.  At the time the plaintiff was represented by Mr Maurellet and his instructing solicitors.  The defendant was represented by different counsel and solicitors than those who represented it at the hearing of the defendant’s summons.

7.  I made the Order by consent after the order had been signed by the solicitors for the parties and after I was invited by both counsel to make it an order of the Court.  On that basis the action was compromised.

8.  The Order provided that

“IT IS BY CONSENT ORDERED that:-

1. All proceedings herein be stayed save for the purpose of carrying the terms of the Schedule into effect;

2. Liberty to apply to carry such terms into effect; and

3.        The Defendant do pay the Plaintiff’s costs of this action (which, for the avoidance of doubt, includes all costs incurred by the Plaintiff in respect of this action including but not limited to the costs of this application, costs of the mediation and costs incurred by the Plaintiff in seeking summary judgment against the Defendant), such costs to be taxed if not agreed, the Defendant waving the costs orders, if any, made in its favour.”

9.  The Schedule contained in the Order provided that

“1. The Defendant shall pay to the Plaintiff the sum of HK$5,800,000 by way of 3 monthly instalments as follows:-

(1) The first instalment of HK$2,000,000 to be paid by not later than 10:00 a.m. on 20^th July 2009 by way of a cashier order drawn in favour of the Plaintiff;

(2) The second instalment of HK$2,000,000 to be paid by not later than 10:00 a.m. on 20^th August 2009; and the third instalment of HK$1,800,000 to be paid by not later than 10:00 a.m. on 18^th September 2009.

2. By not later than 5:00 p.m. on 6^th July 2009, the Defendant shall deliver to the Plaintiff 2 cheques drawn by the Defendant in favour of the Plaintiff, for the respective sums of HK$2,000,000 and HK$1,800,000 and post-dated to 20^th August 2009 and 18^th September 2009 respectively, which the Plaintiff will be entitled to present to the bank for payment in satisfaction of the remaining 2 instalments payable by the Defendant hereunder as and when the same falls due. Should any of the said cashier order or cheques be dishonoured upon presentation for payment or the Defendant fail to comply with any of the terms hereof, then the entire outstanding balance of the said sum of HK$5,800,000 mentioned in paragraph 1 above with interest thereon accruing from the date of default at 2% per month shall be payable forthwith and the Plaintiff shall be at liberty to take all such steps as it may see fit to enforce the terms herein.

3.    The foregoing shall be in full and final settlement of all claims, including claims for interest and legal costs of the action herein.”

10.  It was the defendant’s contention that upon payment of the sum of HK$5,800,000 by the defendant to the plaintiff the defendant was no longer liable to pay any costs to the plaintiff under paragraph 3 of the Order.  The defendant contended that for that reason the plaintiff’s notice of commencement of taxation and bill of costs should be dismissed and that paragraph 3 of the Order should be discharged.

11.  I am unable to accept the defendant’s contentions.

12.  In construing the Order which is a consensual agreement between the parties the Court must have regard to the relevant factual context in which the agreement was made.

13.  No contract is made in a vacuum.  In construing the Order the Court has to determine the common intention of the parties by reference to the Order itself but the Court must have regard to the relevant factual context in which the agreement was made. 

14.  Evidence of pre-contractual negotiations and the subjective intentions of the parties is not admissible as an aid to the construction of the Order.  Although in the affirmations before the Court there was evidence of pre-contractual negotiations and the subjective intentions of the parties I shall disregard this as being inadmissible for the purpose of the construction of the Order.

15.  In Sirius International Insurance Co (Publ) v FAI General Insurance Ltd and others [2004] 1 WLR 3251 the House of Lords held, inter alia, that the Tomlin order made in that case had to be construed objectively as a commercial instrument; that the question which had to be asked was what would a reasonable person, circumstanced as the actual parties were, have understood the parties to have meant by the use of specific language; that the answer to that question was to be gathered from the text under consideration and its relevant contextual scene; that there had been a shift from literal methods of interpretation towards a more commercial approach and that generally speaking, literalism should be resisted.

16.  The objective relevant factual context has been helpfully set out in the submissions of Mr Maurellet.  There is no dispute on the factual matters.

17.  The plaintiff was provided with a promissory note from the defendant dated 12 September 2002 together with a post dated cheque.  The promissory note and the cheque were for the sum of HK$2,500,000 for consultancy services provided by the plaintiff to the defendant.

18.  The cheque was dishonoured upon presentation for payment on 24 January 2003.

19.  Upon repeated requests and demands partial payment was made by the defendant to the plaintiff in the sum of HK$326,839.02 leaving a balance of HK$2,173,160.98 payable by the defendant to the plaintiff.

20.  In this action the plaintiff claimed the said sum of HK$2,173,160.98 from the defendant.  The plaintiff also claimed interest on the said sum at 2% per month pursuant to the terms of the promissory note.

21.  The defendant resisted the claim.  Its main defence to the claim was that there was no consideration for the cheque as the defendant contended that no consultancy services were provided.  Its other defence was that the cheque and promissory note were given for a different purpose.

22.  Although the plaintiff had applied for summary judgment against the defendant on its claim this was unsuccessful as the defendant had filed affidavit evidence raising factual issues between the parties.  The matter then proceeded to trial fixed to commence on 6 July 2009 before me for a trial estimated to last 4 days.

23.  There was a pre-trial review before me on 15 May 2009 which was adjourned to a later date on the defendant’s application.  Costs which were assessed were ordered to be paid by the defendant to the plaintiff.  

24.  At the pre-trial review on 15 May 2009 I also made certain observations.  This is set out clearly in the letter dated 15 May 2009 from the plaintiff’s solicitors to the defendant’s then solicitors Messrs Li, Wong, Lam & W. I. Cheung where the plaintiff’s solicitors said

“ Last but not least, we also put on record His Lordship’s remarks at this morning’s hearing that ‘this is a most peculiar case. Somebody is lying through their teeth’ and that His Lordship will have no hesitation in sending the papers to the Department of Justice at the end of the trial.”

25.  This was also re-iterated by the plaintiff’s solicitors in their letter dated 26 June 2009 to the defendant’s subsequent solicitors Messrs Lau, Kwong & Hung who remained the defendant’s solicitors when the Order was made on 6 July 2009.

26.  In compliance with directions given at an adjourned pre-trial review the defendant served its counsel’s opening submissions on 2 July 2009.  It was clear from those submissions that notwithstanding the defendant’s previous stance of resisting the plaintiff’s claim at long last the defendant was no longer resisting the plaintiff’s claim on the outstanding principal sum claimed.  It was, however, still resisting the claim for interest at 2% per month.  It was clear from the defendant’s opening submissions dated 2 July 2009 that the defendant was prepared to submit to judgment for the outstanding principal sum of HK$2,173,160.98 with interest thereon but not at the rate of 2% per month.

27.  The plaintiff’s supplemental opening submissions in reply were filed on 3 July 2009 explaining why the defendant’s contentions on the question of interest were misconceived.

28.  As I have said, the action was compromised on the first day of trial on 6 July 2009 when the parties agreed to the making of the Order which was made by consent.

29.  Ms Ho, for the defendant, submitted that by paragraph 3 of the Schedule the parties have agreed that paragraphs 1 and 2 of the Schedule shall be in full and final settlement of all claims including claims for interest and legal costs of the action and that by payment of the sums set out in paragraphs 1 and 2 of the Schedule there was no longer any obligation on the defendant to pay any costs to the plaintiff.  I am unable to accept this submission.  It completely ignores the fact that by paragraph 3 of the Order the defendant agreed and consented to an order for costs as provided for therein.  That is an order for costs.  It is not a claim for costs. Whatever claim for costs the plaintiff had before the Order was made was, in my view, clearly merged in the order for costs as set out in paragraph 3 of the Order.  By agreeing to an order for costs in paragraph 3 of the Order the defendant has, in my view, agreed that the plaintiff is entitled to the costs as particularised therein whether or not the defendant complies with its obligations under paragraphs 1 and 2 of the Schedule.  There is no question of reviving the claim for costs should the defendant fail to make the payment obligations as it had agreed to do so in paragraphs 1 and 2 of the Schedule.  The claim for costs was merged in the order for costs in paragraph 3 of the Order. In my judgement the plaintiff is entitled to tax those costs and to enforce that order.

30.  It is plain, in my view, that paragraph 3 of the Order is an order of the Court made by consent whereby the defendant agreed to pay the plaintiff’s costs of the action and which, for the avoidance of doubt, clearly particularised what those costs included.  The expression “such costs to be taxed if not agreed” is meant to cater for the situation where the costs need not be taxed if the quantum of those costs can be agreed but failing agreement as to the quantum of those costs, they are to be taxed.  As is also set out in paragraph 3 of the Order the defendant waived any costs order, if any, which had been made in its favour.

31.  To try and overcome the insurmountable difficulty of there being an order for costs made against it in paragraph 3 of the Order the defendant also asks for an order that paragraph 3 of the Order be discharged.  However, there is no valid basis for me to discharge paragraph 3 of the Order.  It is a consent order which has been drawn up and entered.  I have no jurisdiction to discharge paragraph 3 of the Order.

32.  Ms Ho also submitted that the words in paragraph 3 of the Schedule to the Order “The foregoing” refers only to paragraphs 1and 2 of the Schedule and not to anything before that.  Mr Maurellett submitted that those words refer to all that goes before that which includes the body of the Order namely, paragraphs 1, 2 and 3 which is an order for the payment by the defendant for costs.  In my judgment the Order must be construed as a whole.  There is no valid reason for treating the body of the Order and the Schedule as separate and distinct parts and to read the Schedule in isolation.  What constitutes the consensual agreement between the parties is the whole of the Order which includes the body of the Order and the Schedule not just the Schedule.  The body of the Order and the Schedule must be read together and not separately.

33.  In my judgment the words “The foregoing” in paragraph 3 of the Schedule must sensibly refer to what it says namely, the body of the Order and the Schedule.

34.  It is clear that the plaintiff and the defendant agreed that the defendant would pay the plaintiff the sum of HK$5,800,000 by 3 instalments as set out in paragraph 1 of the Schedule with the first instalment to be paid by a cashier’s order.  Paragraph 2 of the Schedule provided for the delivery of post dated cheques for the remaining two instalments.  It was also agreed that should any of the cashier order or cheques be dishonoured upon presentation for payment or if the defendant fails to comply with any of the terms then the entire outstanding balance of HK$5,800,000 with interest thereon from date of default at 2% per month was payable forthwith “and the Plaintiff shall be at liberty to take all such steps as it may see fit to enforce the terms herein”.

35.  It seems to me that on a proper construction of the Order the parties have agreed that if the defendant should default in the payment of the instalments then the plaintiff was at liberty to take steps to enforce the agreement namely, to seek to recover the outstanding balance of HK$5,800,000 with interest thereon accruing from the date of default at 2% per month.  The claim for costs has already been merged in the order for costs in paragraph 3 of the Order. 

36.  In the circumstances it seems to me that the defendant’s application by its summons is misconceived and for the above reasons I dismissed it.

37.  Although Mr Maurellet submitted that indemnity costs should be ordered against the defendant it seems to me that the cases on arbitral awards relied on are distinguishable.  The issue between the parties on this application was on a question of construction of the Order.  There is no special or unusual feature to justify an award of indemnity costs.  For that reason, I did not order costs to be paid by the defendant on an indemnity basis.