LUI CHE WOO v. WONG SI LING

HCA 13805/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 13805 OF 1997

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DECISION

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Background

1. This matter originates from an application by the defendant for a stay of the proceedings on the ground that the parties had reached a settlement agreement. The summons was issued the day before the 5 days' trial is scheduled to commence.

2. The defendant's case is that the parties had agreed to a full and final settlement agreement on term that the defendant pays the plaintiff the costs of this action. The plaintiff denies the existence of such an agreement. Various affirmations had been filed by the parties.

3. On the first day of the trial, the defendant applied for a trial of the issue regarding the existence of the settlement agreement and for an interim stay of the action pending the trial of the said issue together with other directions. The plaintiff opposed and moved for the summons to be dismissed with costs. After hearing submissions, I ordered that there should be a trial of the issue as to whether there is a binding settlement agreement, but reserved the question of an interim stay pending clarifications as to the availability of a witness involved in the settlement discussion. I had given brief oral reasons at the time of the decision, I now reduce the reasons into writing.

Reasons for Ordering a Trial of the Issue

4. There is no dispute that the Court has the power to order a stay of proceedings where the parties have concluded an agreement for the compromise or settlement of a pending action and that the Court's discretion in this regard is discretionary : Halsbury Laws of England (4th ed) para. 437, King Prosper Trading Limited v. Tenbase Trading Limited HCA 263 of 1996 (unreported) and CA 244 of 1997.

5. Before deciding whether to exercise the discretion of staying the proceedings, the Court has to be satisfied beyond all reasonable doubt that there is in existence a binding settlement agreement : King Prosper Trading Limited v. Tenbase Trading Limited, supra. Where one party disputes the existence of a binding settlement agreement, the Court may direct for the issue to be tried.

6. In this case, the defendant contends that the plaintiff had, during a meeting on 1 March 2000, agreed with a Mr Liu Xin Xian, who acted as the defendant's representative, to settle this action on the condition that the defendant pays the plaintiff the costs of this action. Mr Liu had also given a statement to confirm this. For the plaintiff, he denied reaching such an agreement, although he accepted that he had spoken to Mr Liu.

7. It is evident from the affirmations filed by the parties that there are substantial disputes as to the meeting and discussions that had taken place between the plaintiff and Mr Liu. The accounts of events as related by the plaintiff and Mr Liu are diametrically different from each other. There is no question of resolving such a conflict of evidence on affidavits. Cross-examinations of the persons involved is inevitable if this dispute of fact is to be properly resolved.

8. The plaintiff, in opposing to an interim stay, relied essentially on 2 matters. The first is that taking the defendant's evidence in its entirety and to its highest, no binding settlement agreement had been made out. Secondly, the matter could have and should have been disposed of as part of the trial by having the defendant pleading the settlement agreement as a defence.

9. On the first point, I agree that it has to be shown that it is plain and obvious that the defendant's affidavit evidence fails to disclose a binding settlement agreement, such that no useful purpose can be served by having a trial of the issue. If the evidence is capable of supporting a binding settlement agreement, then irrespective of what provisional view one may form of the probability or veracity of the evidence or allegations, the Court cannot deny the defendant his opportunity to make good his assertion that there is a binding agreement.

10. The plaintiff had referred to paragraphs 4 to 6 of the Chinese statement of Mr Liu in support of this point. It was submitted that what was disclosed does not amount to a binding agreement, that the so-called agreement lacks certainty and that it has not been shown that there was intention to create a legally binding agreement. I accept that the descriptions of the events as contained in those paragraphs are indeed rather brief and sketchy. However, it is plain that some parts of it are capable of more than one meanings and interpretations. While it is open to the plaintiff to say that at best Mr Liu had only achieved an agreement to agree on a settlement with the condition precedent that the defendants pays the plaintiff his costs of the action, it is also open to the defendant to say that the account given by Mr Liu indicates that the plaintiff had, on the understanding that the defendant will pay his costs, agreed to settle the action. To arrive at a conclusion as to whether there is a binding settlement agreement will require a close and detailed examination of the actual conversations between the plaintiff and Mr Liu. This is not a matter that can be summarily disposed of by reading the affirmations or statement. The statement of Mr Liu is not such that one can say that it is plainly incapable of supporting a binding settlement agreement.

11. As to the second point that this can be made an issue in the trial, really the whole trouble underlying this matter is the unavailability of Mr Liu to testify in Court. He is said to have been engaged in some political session which renders it impossible for him to leave Jiangmen, his place of residence until 5 May 2000. Had he been able to attend Court today, the Court could have proceeded to deal with the factual dispute and resolve the main application for stay. There is then no issue or need for any interim stay. By making the issue part of the defence and leaving it to be dealt with in the trial proper, it does not alleviate the plaintiff's concern, which is not totally unjustified, that the trial dates set down some 10 months ago may have to be vacated or may not be properly utilized. Clearly, to say the least, at some point in the trial, the matter has to be adjourned to enable Mr Liu to attend Court and to give evidence. As I see it, there is little to be achieved by having the matter of a compromise resolved in the trial proper. On the other hand, by having the issue resolved before the trial, then depending on the outcome of it, it may be that the costs and expenses of a full trial can be saved, which must be a major factor influencing a compromise settlement.

12. The plaintiff had also referred to 2 minor points. The first relates to the fear that by allowing the defendant's present application, the Court may be seen to be opening a floodgate and encouraging abuse of court process. But each case must depend on its own facts. A proper balance has to be struck between safeguarding against possible abuses of the court process through unnecessary delay and exercising the discretion judicially and fairly as demanded by the circumstances. The Court will not be encouraging abuse of the process through last minute applications for stay by granting stay of proceedings in the appropriate cases.

13. The second small point relates to the issue of delay and prejudice. It is inevitable that there will be delay in the action by having to vacate or defer the trial dates in order to accommodate the availability of Mr Liu. This is particularly so if the trial of the issue cannot take place within the next few days. It is also recognized that delay will necessitate prejudice to the plaintiff. But the question is whether, over and above the ordinary prejudice generated by a delay of the trial, there is any additional prejudice which cannot be adequately compensated by costs.

14. Miss Eu in the course of her submissions had alluded to the financial position of the defendant and his group of companies. There is however no evidence before me as to the financial strength or otherwise of the defendant, whether present or future. I am therefore not in a position to take this into account in deciding the matter.

15. Finally, if at the end of the day, the issue of settlement agreement is resolved in favour of the plaintiff, it is open to the plaintiff to seek not only the costs of the application for stay, but also costs thrown away as a result of the trial not being able to proceed as scheduled.

16. Having regard to the above reasons and balancing the various factors, I am driven to the conclusion that there ought to be a trial of the issue as to whether there is a binding settlement agreement and I so order. As to whether there will be an interim stay pending the trial and determination of the issue will depend on when the trial is to take place. That can only be decided after ascertaining the availability of Mr Liu and the feasibility of conducting his evidence without him having to leave Jiangmen. It follows that the question of an interim stay and the giving of directions have to be reserved to await the outcome of the enquiries to be undertaken by the defendant's solicitors before this Court resumes tomorrow.