CHOI KWOK WAI v. TSE KAI LEE

DCCJ 2430/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2430 OF 2014

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DECISION
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1. This is the plaintiff’s application for summary disposal on a question of law pursuant to Order 14A Rules of District Court (Cap 336H) (“RDC”). The question posed is as follows:

(1)  “As a matter of law, whether the Chinese document dated 10 May 2014 as referred to in the Statement of Claim date 2rd June 2014 as “Settlement Agreement” is legally binding and enforceable contract between the parties of this [sic] proceedings.”

2. In the alternative, the plaintiff seeks a summary judgment pursuant to Order 14 RDC.

3. For the purposes of this application, the plaintiff filed an affirmation in support and the defendant filed an affirmation in opposition. The plaintiff did not file an affirmation in reply.

BACKGROUND OF THE CASE

4. The plaintiff and defendant are parties to the action DCCJ 2860/2013.  It is not disputed between the parties that an agreement to mediate as exhibited in TKL-1 (“Agreement to Mediate”) was signed and agreed between the parties. It is also not disputed between the parties the Agreement to Mediate is an enforceable contract in itself which binds the parties.

5. The Agreement to Mediate contains, inter alia, the following terms:-

“ SETTLEMENT OF DISPUTE

19. If settlement is reached at the Mediation, the terms of the settlement will be written down and signed by the Parties.

20. The parties agree to sign the agreement and make it binding between them to the extent that the law may allow, including allowing it to be disclosed.

21. The parties agree to accept it as a “without prejudice” memorandum of understanding upon which each party can consult their lawyer. The parties’ lawyers will thereafter be responsible for concluding binding terms of settlement between the parties although a further meeting with the Mediator may be required.”

6. The plaintiff and defendant, in absence of any legal representatives, conducted mediation in respect of DCCJ 2860/2013 on 10 May 2014.  At the mediation session, the parties signed a Chinese agreement setting out the terms of the settlement (“Settlement Agreement”).  The recital of the agreement states: “甲乙雙方經過調解後現訂立此具法律約束力之和解協議, 和解條款如下： . . . ”  (The meaning in English is as follows: “After mediation Party A and Party B both agree to this settlement agreement which is of legal binding effect, the terms of settlement are as follows . . .”).

7. The defendant failed to pay the settlement sum pursuant to the Settlement Agreement and the plaintiff brought the present action to enforce the terms therein.

8. The defendant denies he is bound by the Settlement Agreement for two reasons:-

(1) Firstly, pursuant to Clause 21 of the Agreement to Mediate, the Settlement Agreement was only a “without prejudice memorandum of understanding” to be finalized by the parties’ respective legal representatives.  (See paragraphs 4 to 7 of the Defence); and

(2) Secondly, at the mediation session, the defendant repeatedly indicated to the plaintiff the terms of the Settlement Agreement are subject to the final approval by his solicitors and will only be binding after final conclusion of a binding agreement by the parties’ legal representatives.  See paragraph 4 of the Affirmation of Tse Kai Lee.

APPLICATION FOR SUMMARY DETERMINATION ON A QUESTION OF LAW (ORDER 14A RDC)

9. Paragraph 14A/2/4 of the Hong Kong Civil Procedure 2015 sets out clearly the matters the court is to consider before making a determination on law summarily.  I shall not repeat those principles.

10. I am of the view that this case is not suitable for a summary determination of the legal question as drafted by the plaintiff.

11. Firstly, the defendant raises an issue of fact as stated in paragraph 9(2) hereinabove which is not refuted by the plaintiff.

12. According to the defendant’s version of facts, at the time they signed the Settlement Agreement, the parties knew the agreement would not be binding until the parties’ solicitors concluded a binding agreement as stipulated in Clause 21 of the Agreement to Mediate. Based on the defendant’s version of facts and in absence of any evidence from the plaintiff to the contrary, the Settlement Agreement cannot be enforced until the defendant’s solicitors approved of the terms of agreement and the parties’ solicitors conclude a binding agreement.

13. Plaintiff’s Counsel does not accept the defendant’s version of facts and submitted that the defendant’s version is inherently improbable. Despite the plaintiff’s unexplained failure to file an affirmation in reply, it is evident from Counsel’s submissions the plaintiff does not accept the defendant’s version of facts and there is a factual dispute between the parties on this matter.

14. Secondly, arising from the factual dispute between the parties are the following issues to be resolve before the court can determine whether the Settlement Agreement is binding and enforceable:

(1) What is the proper interpretation of Clauses 19 – 21 of the Agreement to Mediate;

(2) Whether the Settlement Agreement is conditional on Clause 21 of the Agreement to Mediate; and

15. On the face of it, Clause 19 and 20 read together suggests that once the parties reach an agreement at the mediation, they could sign an agreement and such an agreement will be binding on the parties. However Clause 21 qualifies any settlement agreement to be construed as a “memorandum of understanding” and the parties’ legal representatives are responsible for concluding the binding terms of settlement. Therefore the Court must interpret the overall meaning and effect of Clauses 19 – 21 must be before a determination can be made on whether the Settlement Agreement is conditional on Clause 21 of the Agreement to Mediate.

16. The Court must also resolve what the parties meant by inserting the phrase “具法律約束力之和解協議”into the Settlement Agreement. 

17. One of the matters to be considered in construing the Agreement to Mediate and the Settlement Agreement is the intention of the parties.

18. I note the parole evidence rule does not apply to exclude evidence adduced for the purposes of interpreting the terms of the Settlement Agreement and to prove the Settlement Agreement is conditional.  Hence the court is entitled to hear and receive evidence on the intention of the parties as to the meaning and effect of Clause 21 of the Agreement to Mediate and whether the Settlement Agreement is conditional on the said clause.  

19. It is evident that the question of enforceability of the Settlement Agreement is interwoven with issues of fact.

20. In the case of Shell Hong Kong Ltd v Yeung Wai Man Kiu Yip Co and anor (2003) 6 HKCFAR 222, the Court of Final Appeal stated, “It must also be noted that it is inappropriate to use this procedure if the issues of facts are interwoven with the legal issues to be determined.  For obvious reasons, the question of law or construction of document cannot be dealt with on assumed or hypothetical facts.  And if it is necessary for the court to hear evidence to resolve a factual dispute in order to come to a determination on the question of law or construction of document, it would not normally be suitable to invoke Order 14A.”

21. I am of the view this present case falls squarely in the scenario described by the Court of Final Appeal. 

22. By reason of the issues of fact being intertwined with the question of law as posed by the plaintiff in his summons, it would be pre-mature and unjust to make a determination on the question posed without the benefit of hearing evidence on the issues raised by the defendant.  Hence, I decline to make a determination as sought.

APPLICATION FOR SUMMARY JUDGMENT (ORDER 14 RDC)

23. The plaintiff seeks alternative relief under Order 14 RDC for summary judgment.

24. It is trite law that in applications for summary judgment, the defendant must show he has a bona fide defence such that there is a triable issue or there ought to be a trial for some other reason.

25. As previously explained, the plaintiff has not refuted the defendant’s assertion that the defendant repeatedly made it known to the plaintiff that the terms of the Settlement Agreement were subject to the approval of the defendant’s lawyer.  

26. The plaintiff’s Counsel submitted the defendant’s allegation is inherently improbable because the defendant did not delete the words which state the Settlement Agreement was of legal effect. It was further submitted these facts now asserted by the defendant had not been pleaded in his Defence.

27. Despite the defendant’s failure to plead in his Defence the salient facts he now relies on, I do not agree the defendant’s version of events is inherently improbable.

28. I note the defendant’s version is consistent with his understanding of Clause 21 of the Agreement to Mediate. I further note the plaintiff has neither refuted, by way of affirmation, the interpretation of Clause 21 as put forward by the defendant, nor refuted the defendant’s allegation that he made known to the plaintiff the enforcement of the Settlement Agreement was conditional. As stated above, the facts before the Court at this stage suggest the Settlement Agreement is not immediately enforceable.

29. Hence I am satisfied the defendant has shown he has a bona fide defence against the plaintiff.

30. For reasons given hereinabove, I also find there is a triable issue as to whether the Settlement Agreement is conditional on the approval by the defendant’s solicitors and Clause 21 of the Agreement to Mediate. 

31. I therefore dismiss the plaintiff’s summons and grant the defendant unconditional leave to defend.  

32. I make a costs order nisi that the costs of the plaintiff’s application be to the defendant to be taxed if not agreed.

33. The costs order nisi shall become absolute unless the parties apply to vary the costs order nisi within 14 days from the date of this decision.