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Lam Fung Ying v Ho Tung Sing And Another

Judgment Cited authorities 20 Cited in Precedent Map Related
Vincent
Judgment Date30 June 1992
Year1992
Judgement NumberHCA2329/1992
Subject MatterCivil Action
CourtHigh Court (Hong Kong)
HCA002329/1992 LAM FUNG YING v. HO TUNG SING AND ANOTHER

HCA002329/1992

Headnote

Compromise - effect on original cause of action.

Election - requisite knowledge.

Practice - default judgment - burden of proof - striking out.

1992 No. A2329

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

____________

BETWEEN

MADAM LAM FUNG YING

Plaintiff
AND

MR. HO TUNG SING

 1st Defendant

MADAM LI KAM LAN

 2nd Defendant

_______________

Coram: Deputy Judge Tong, Q.C. (in chambers)

Dates of hearing: 22 May 1992

Date of handing down of judgment: 30 June 1992

______________

J U D G M E N T

______________

1. The facts of this case are not in dispute. I have before me two applications by the Defendants : one to set aside default judgment entered against them on 8th May 1992 and another to appeal from an order of Master Yam who refused to strike out the Statement of Claim herein. These summonses arose in this way. On 17th April 1991, the Plaintiff issued a writ of summons in High Court Action No. A2704 of 1991 ("the 1st Action") against the Defendants seeking, inter alia, damages in the sum of HK$159,450.94. On 1st June 1991, the Defendants served and filed a Defence and Counterclaim. On 28th June 1991, the Plaintiff sought certain further and better particulars of the Defence and Counterclaim. A summons seeking these particulars was taken out on 26th July 1991.

2. Negotiations for the settlement of the 1st Action thereafter commenced as a result of which the hearing of the summons for particulars was adjourned sine die with liberty to restore by the Master. The negotiations did not reach fruition. The summons for particulars was restored but before the matter could be heard, the respective solicitors of the parties reached a compromise of the 1st Action on 5th December 1991.

The Settlement Agreement

3. The terms of the settlement agreement are not in issue here. They are pleaded in paragraph 3 of the Statement of Claim herein :-

"(1) Judgment be entered in favour of the Plaintiff against the Defendants for the sum of HK $110,000.00 in full and final settlement;

(2) the Defendants do have leave to withdraw their counterclaim;

(3) there be a stay of execution on the Judgment so long as the Defendants pay the Plaintiff the sum of HK$110,000.00 by six installments (sic) in the following manner:-

(a) the first instalment of HK$20,000.00 to be paid on the date of execution of a Consent Summons;

(b) the second to fifth instalments of HK$20,000.00 each and the sixth instalment of HK$10,000.00 to be paid by post-dated cheques on the same date as the date of the Consent Summons in (sic) each and every succeeding month;

(4) if the Defendants shall default in paying the said instalments or any part thereof on the due dates or any one thereof, the stay of execution shall be immediatley removed in respect of the whole outstanding balance at the time of such default and the Plaintiff shall be at liberty to levy execution forthwith;

(5) the Plaintiff shall transfer the 20 ft. trailer No. 10095T to the Defendants and shall execute all necessary documents to effect such transfer;

(6) the Defendants shall transfer the 40 ft. trailer M. 98797 to the Plaintiff and shall execute all necessary documents to effect such transfer; and

(7) there be no order as to costs."

4. At the hearing of the summons for particulars, Master Cannon was informed of the settlement and the summons was adjourned.

5. Pursuant to the terms of the settlement agreement, the Plaintiff's solicitors sent to the Defendants' solicitors a draft consent summons for the latter's endorsement. The Defendants' solicitors never endorsed this consent summons. Instead, they came off the record.

6. The new solicitors for the Defendants then indicated to the Plaintiff that the settlement was reached without "the express authority of the 2nd Defendant" and therefore "not binding upon her". This second firm of solicitors, however, was subsequently also discharged by the Defendants. Before a new firm of solicitors was instructed by the Defendants, the. Plaintiff took out a summons for judgment against the Defendants in terms of the settlement agreement. This is, if I may say so, a wholly misguided attempt to resolve the dispute then arising between the parties.

7. I have been referred to paragraph 5 of Atkin's Court Forms, 2nd edn, vol. 12 (1990 Issue) at p. 11 :

"If one party disputes that a binding agreement has been made to compromise or settle the pending proceedings, or denies the making of such an agreement, or repudiates the agreement, the other party is entitled to apply to the Court to stay all further proceedings and to enforce the agreed terms. The ground of the application is the making of the compromise or settlement agreements and the court may entertain the application in the pending proceedings themselves; or on the application of a party, the court may direct an issue to be tried as to whether a binding agreement or settlement has been concluded between the parties, and, if satisfied that it has, the court may stay all further proceedings and enforce the agreed terms."

8. I have no doubt that the procedure recommended by the editors of Atkin's is the correct one. Here, the Defendants have agreed to consent to a summons by which judgment is to be entered against them in accordance with the terms agreed. The Defendants, however, reneged from their agreement. They claimed that there was no true agreement. If so, there is an issue between the parties as to whether a binding agreement had been made. I cannot see how in these circumstances the Plaintiff could hope to bulldoze through a judgment against the Defendants in the same terms as the settlement agreement.

9. The summons for judgment, not surprisingly, was dismissed by Master Wooley. Instead of persisting with her contention that the 1st Action had been settled by either appealing Master Woolley's order, or more correctly, by issuing another summons following the procedure recommended in Atkin's, the Plaintiff restored the summons for particulars.

10. On 12th February 1992, the Plaintiff obtained an order from Master Bokhary ordering the Defendants to supply the further and better particulars sought with costs to the Plaintiff in any event. It is said that this is a consent order but the order itself does not bear out this fact.

11. The particulars were not supplied and on 6th March 1992, the Plaintiff took out a summons for an unless order. This summons resulted in a consent order whereby again the Plaintiff obtained an order of costs against the Defendants. The particulars were eventually supplied on 11th March 1992.

The Present Proceedings

12. On 1st April 1992, the Plaintiff issued the writ of summons in these proceedings and claimed damages in the sum of HK$110,000 in respect of the breach of the settlement agreement.

13. Instead of putting in a defence, the Defendants by summons dated 14th April 1992 applied to strike out the Statement of Claim herein under the various grounds of 0. 18 r. 19. Master Yam dismissed this summons with costs on 29th April 1992. Notice of appeal against this decision was filed on 1st May 1992.

14. The Plaintiff in the meantime pressed for an acknowledgment of service and a defence. This was ignored by the Defendants' solicitor, Mr. Chan Man Hon, who in an affirmation dated 18th May 1992 frankly admitted that he thought that since the Defendants were seeking to strike out the claim, there was no need to file a defence. He said :-

"I deliberately instructed our clerk to serve the Notice of Appeal on the solicitors for the Plaintiff before [the deadline for the defence] because I had two assumptions :

(i) I thought that once the Notice of Appeal was filed, the Clerk of Court would not entertain as (sic) application for default judgment;

(ii) Once, the solicitors for the Plaintiff received our Notice of Appeal, they would wait until the outcome of the appeal before they would proceed to enter judgment in default of defence."

15. I shall not comment on whether these assumptions are reasonable suffice to say that they are wrong and Mr. Chan now also realises they are wrong. Mr. Chan, quite rightly I think, hastened to add that he had to take full responsibilities for making the above false assumptions.

16. Judgment in default against the Defendants was entered on 8th May 1992. The application to set aside the default judgment now comes before me together with the Defendants' appeal from Master Yam's decision of 29th April 1992.

Burden of A Defaulting Defendant

17. Miss Wong who appears for the Defendants accepted that the judgment was a regular judgment and that she had to show merits in the defence under O. 13 r. 9. She does not dispute the right test to apply in these circumstances is that laid down in The "Saudi Eagle" (1986] 2 Lloyd's Rep. 221 (C.A.) that a defendant must show he has a defence which has "a real prospect of success". But what does this mean in practical terms ? Does it mean that a defendant must show a defence with better than 50/50 chance of success?

18. It will not be overlooked that 0. 13 r. 9 gives a wide discretion to the Court. That discretion, on the language of the rule, is wholly unfettered. In Evans V. Bartlam [1937] A.C. 473 (H.L.). Lord Atkin thought (at p. 480) that even the rule on the requirement of an affidavit of merits "could, in no doubt rare but appropriate cases, be departed from".

19. When a similar question came before the English Court of Appeal in The "Saudi Eagle" [1986] 2 Lloyd's Rep. 221, Sir Roger Ormrod who delivered the judgment of the Court, said (atp. 223) :-

"In the course of his argument Mr. Clarke, Q.C., used the phrase 'an arguable case' and it, or an equivalent, occurs in some...

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