In-t Workshop Ltd v. Box Design Ltd

DCCJ 1176/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1176 OF 2015

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DECISION

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Introduction

1.The issue before the court concerns whether it has jurisdiction to revisit a consent order under the slip rule or on the ground of mistake.

2.A consent summons dated 3 July 2015 (“Consent Summons”) was filed by the parties to, inter alia, enter judgment in a part of the plaintiff’s claim in this action pursuant to Order 27, rule 3 of the Rules of District Court, Cap 336H (“RDC”), as a result of certain admissions made by the defendant in its defence.  The Consent Summons was approved by the court and a consent order (“Consent Order”) and a judgment (“Judgment”) both dated 3 July 2015 were subsequently drawn up, sealed and perfected in the usual way.

3.By summons dated 21 September 2015, the defendant now applies for leave to amend the Judgment and its defence, and the return of money overpaid as a result of the Judgment. Effectively, the defendant contends that, as a result of an arithmetical error, it has overstated in its defence the sum owed to the plaintiff.  Thereafter, the error was perpetuated through into the Consent Summons which was signed by the parties and which became the Consent Order and the Judgment.  The defendant says that as the said mistake is now discovered, it should be rectified by amending the Judgment and the defence.  On the other hand, the plaintiff says that as the Judgment has been perfected, it cannot be revisited as the court is already functus officio.

Background

4.The relevant background matters may be stated as follows.

5.The defendant is an interior design company.  It engaged the plaintiff to carry out certain fitting out works under two sub-contracts.  The plaintiff now claims for outstanding payments under the said two sub-contracts.

6.In paragraphs 4, 5, 7 and 8 of its defence, the defendant pleads that it is entitled to deduct and set off various sums as a result of outstanding works and defects.  However, the defendant also admits in the said paragraphs that even after taking into account all the alleged deductions and set offs, the defendant still owes certain amount of money to the plaintiff.

7.In paragraph 9 of its defence, the defendant therefore seeks to calculate the sum owed to the plaintiff as a result of the aforesaid admissions.  If the calculation had been done correctly, the admitted amount should have been $553,871.61.  Unfortunately, the defendant used a wrong formula for the calculation.  As a result, in paragraph 9 of the defence, $630,444.61 was admitted to be outstanding instead. As stated above, this overstated sum of $630,444.61 was perpetuated through into the Consent Summons, the Consent Order and the Judgment.

8.The Consent Order was in these terms:-

“BY CONSENT, IT IS ORDERED that:-

1. Judgment be entered in this action for the Plaintiff against the Defendant for HK$630,444.61 being a part of the claim herein by the Defendant’s admission as contained in Paragraph 9 of the Defence with costs to be taxed if not agreed;

2. The question of the interest on the said sum of HK$630,444.61 be reserved and to be determined by the Court if not agreed;

3. Leave be given to the Defendant to withdraw the Sanctioned Payment made on 29^th April 2015;

4. The sum of HK$630,444.61 paid into Court on the 29^th day of April 2015 be paid out to the Plaintiff in satisfaction of the Judgment debt for the judgment to be entered herein and the balance of the Sanctioned Payment paid into the Court on the 29^th day of April 2015 together with interest accrued thereon be paid to the Defendant;

5. The hearing of the Defendant’s Summons returnable on 7^th July 2015 be vacated with costs to the Plaintiff; and

6. The costs of this application be to the Plaintiff to be taxed if not agreed.”

9.The defendant soon became aware of the said error and by a letter dated 4 September 2015, the defendant’s solicitors pointed out the error to the plaintiff’s solicitors and requested for rectification of the Judgment and amendment of the defence.  Having received no reply, the defendant therefore took out the present applications. Thereafter, by a letter dated 26 September 2015, the plaintiff’s solicitors rejected the defendant’s said request (except in respect of a minor amendment of a date in paragraph 7 of the defence). 

The parties’ legal arguments

10.When the defendant’s summons came before me on 27 November 2015, Mr Anthony Lo, solicitor for the defendant, relied on the “slip rule” under Order 20, rule 11 RDC and argued that the error contained in paragraph 9 of the defence was purely a clerical or arithmetical error.  When judgment was entered against the Defendant, the intention of the court was to give a judgment according to what has been admitted in paragraphs 4, 5, 7 and 8 of the defence.  To allow rectification of the Judgment under the slip rule is just an exercise to reflect the intention of the court.  Further, Mr Lo argued that the Judgment was entered either as a result of mutual mistake or unilateral mistake on the part of the defendant which the plaintiff was aware of but had omitted to draw to the notice of the defendant.  As such, the Judgment should also be rectified.

11.On the other hand, Mr Yan Kwok Wing, counsel for the plaintiff, argued that the court is functus officio on the matter covered by the Judgment.  Mr Yan argued that the manifest intention of the court in the Judgment was to give effect to the admission in paragraph 9 of the defence.  Therefore, even though there is an error behind paragraph 9 of the defence, there is no error or ambiguity in expressing the manifest intention of the court.  Further, the defendant might have made a mistake in the calculation in paragraph 9 of the defence.  However, there is no evidence suggesting that the plaintiff was aware of such a mistake.

12.In summary, both parties argued that it is important to ascertain the court’s “manifest intention” at the time when the Consent Order was made.  At the hearing, I therefore asked the parties while it is easy to understand the application of manifest intention when the court has given a reasoned decision or judgment, how would the same be applied in a consent situation.  In particular, can a court be said to have any discernable intention when it simply approves on paper a consent summons that contains terms agreed by the parties, as in the present case?  As the parties were not then prepared for this question, I invited the parties to submit further written submissions accordingly.

13.Mr. Lo’s further submissions focus mainly on the ground of mistake.  He relies on Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 ALL ER 377 and Cathay Pacific Airways Flight Attendants Union v Cheung & Choy (A firm) (unrep., HCMP1863/2007, 3 February 2009) and argues that in the present case, there was an agreement between the parties to enter judgment for a specified sum.  The agreement was vitiated by mistake and therefore the Judgment ought to be rectified.

14.On the other hand, in his further submissions, Mr Yan argues that although the slip rule may entitle the court to amend or set aside an order or judgment, the pre-condition is that there must be “clerical mistakes in judgments or orders, or errors arising therein from any accidental slip or omission” and such mistakes or errors contradict the manifest intention of the court.  Even though there is an apparent mistake in the calculation behind paragraph 9 of the defence, the admission contained therein is clear. The court was not asked to work out or verify the underlying calculation.  The manifest intention of the court was to give effect to the admission in paragraph 9 of the defence, and no more.

15.In respect of mistake, Mr Yan accepts that an order or judgment may be amended or set aside based on normal contractual principles such as misrepresentation, mistake and fraud.  However, he argues that there is no evidence in the present case to support that there was any negotiation or compromise between the parties.  There is therefore no genuine agreement in the contractual sense.

16.Mr Yan therefore argues that the defendant can only rely on the slip rule but the rule does not help the defendant because there was no mistake or error in the Judgment and the manifest intention of the court was simply to give effect to the admission in paragraph 9 of the defence.

17.In summary, there are two main battle lines drawn by the parties.  The first is the determination of the manifest intention of the court when the Consent Order was made.  The second is whether there was an agreement at the time of the Consent Order, and if so, whether the same was vitiated by mistake.

Functus officio

18.The principle of functus officio is well established.  In Andayani v Chan Oi Ling [2000] 4 HKC 233, Keith JA made the following observations (at 237D):-

“There must, of course, come a time in any proceedings when the court must be regarded as having completed its task. When that time is reached, the court is said to be functus officio. Once that stage has arrived, the court has no further jurisdiction over the case. But when does that stage arrive? The answer given by the common law is when the judge’s order has been drawn up, entered or otherwise perfected. As Slesser LJ said in Millensted v Grosvenor House (Park lane) Ltd [1937] 1 KB 717 at 722:

‘It was not sought to be disputed ... ... ... that it is within the power of a judge at any time before judgment is entered and perfected to alter its terms.  This is the effect of two judgments, the case of In re St. Nazaire Company (1879) 12 Ch D 88, in which the case it was held, following in In re Australian Direct Steam Navigation Co. Millers’ case (1876) 3 Ch D 661, that a judge can always reconsider his decision until the order has been drawn up, and the case of In re Suffield & Watts ex parte Brown (1888) 20 QBD 693, to the effect that ‘so long as the order has not been perfected the judge has a power of reconsidering the matter, but, when once the order has been completed, the jurisdiction of the judge over it has come to an end’ ... ”

19.The same principles apply to a consent order.  In Moores Rowland (a Firm) v Grant Thornton (a firm) and Ors  (unrep., HCA 735/2010, HCA 1126/2010, HCA 1873/2010 and HCMP 1284/2011, 8 June 2012), Deputy Judge Lok (as he then was) held that (at paragraph 28):-

“28. Secondly, the principle of functus officio is equally applicable to an order made without any judicial determination or exercise of judicial discretion.  As I see it, whether the consent order is approved by the judge or master or entered pursuant to O 42 r 5A, the most important issue here is that there must “come a time in any proceedings when the court must be regarded as having completed its task”, beyond that the court has no further jurisdiction over the case.  For this purpose, why should there be a distinction between a case concluded by a consent order endorsed by the court and one concluded by way of a consent order under O 42 r 5A?  In my judgment, there should be no distinction between the two so far as the application of the principle of functus officio is concerned.”

The slip rule

20.Even though a court may, upon issue of an order or judgment, be functus officio, that does not extend to its ability, under Order 20, rule 11 of the RDC and its inherent jurisdiction, to correct an accidental slip or omission in the order or judgment so issued without any appeal. However, the error or omission must be an error in expressing the manifest intention of the court.  The court cannot correct a mistake of its own in law or otherwise, even though apparent on the face of the order.  If the order as drawn correctly expresses the intention, it cannot be corrected under this rule or the inherent jurisdiction, even if the decision of the court is procured by fraud or misrepresentation: see paragraph 20/11/1 of the White Book 2016.

21.In gist, the rule only applies to cases involving mechanical mistakes or errors arising from accidental slip or omission.  The error or omission must be an error in expressing the manifest intention of the court.  However, in a situation like the present case where the Consent Order was made on the basis of the agreement of the parties, had the court, instead of the parties, made any error?  It seems that the parties have not been able to unearth any authorities which can shed much light on this question.

Does slip rule apply

22.In Richardson Roofing Co Ltd v The Colman Partnership Ltd[2009] 4 Costs LR 521, the claimant's particulars of claim was struck out and the trial was adjourned.  The fourth party applied for costs and a consent order was entered into.  Under that order the claimant was to pay the fourth party's costs incurred and thrown away by the adjournment of the trial.  Three years later the fourth party served a draft bill of costs for its entire costs until the hearing.  The claimant objected saying those were not costs incurred and thrown away by the adjournment.  The fourth party therefore sought an order that the costs judge dealing with the assessment should be directed that such costs included the defendant's preparation for trial as there was no prospect that the claim would be revived.  The judge directed that an order be drawn up whereby the costs judge was directed to carry out his assessment using the guidance set out in six specified paragraphs of the judgment.

23.On appeal, the English Court of Appeal expressed serious reservations as to whether there was any jurisdiction of the judge to consider the question before him.  Jacob LJ stated that (at paragraph 13):-

“13. The judge thought he had jurisdiction. He dealt with it at paras 70 to 73. Although he seems to have thought that the parties were ad idem that there was jurisdiction, I am not convinced that was so. Richardson in particular seem to be accepting that there was only jurisdiction under the so-called slip rule order 40.12 . This reads as follows:

“(1) The court may, at any time, correct an accidental slip or omission in a judgment or order

(2) [...] a party may apply for a correction without notice”

14. There is a little amplication of this in the associated practice direction B under Part 40. Paragraph 4.5 of this practice direction says:

“The court has an inherent power to vary its own orders to make the meaning and intention of the court clear.”

I cannot think that this application was anything of the kind.  The order was a consent order.  There was no application to vary it.  It was an order which the parties themselves had in effect contractually agreed to. No slip was involved (emphasis added).”

24.Aikens LJ agreed with the said observations of Jacob LJ.  He added that (at paragraph 32):-

“32. I agree. Like my Lord, I have very grave doubts whether the judge had jurisdiction to entertain the application that was before him. It was certainly not a case of the court having to exercise its inherent power to vary its own order to make the meaning and intention of the court clear with regard to a paragraph in the order of HHJ Seymour dated 4 November 2003. That was a consent order. It had been drawn up by the parties. It was their draftsmanship and it was their meaning and intention that was in issue, not that of the court or the judge (emphasis added).

25.I respectfully agree with the observations of their Lordships.  The Consent Order, as drawn up, simply expressed what the parties consented to, and contained the very words consented to, instead of what the court decided or intended to decide.  The slip rule does not therefore, in my view, help to resolve the present case.  Instead, I think the real issue is whether the Consent Order evidences an agreement between the parties, and if so whether the same was vitiated by mistake.

Nature of consent order

26.A consent order may evidence a contract between the parties.  Thus, in Wentworth v Bullen (1829) 8 B & C 840, Parke J observed (at 850):-

“Now though there is no remedy for disobedience of a judge's order (as such) by one of the parties against another by action, but by attachment merely, yet if it be made by the consent of both, and is founded on a binding agreement, an action will not the less lie upon that agreement, though it have also the additional sanction of a judge's order. The contract of the parties is not the less a contract, and subject to the incidents of a contract, because there is superadded the command of the judge.”

27.On the other hand, it was pointed out by Lord Denning MR in Siebe Gorman & Co Ltd v Pneupac Ltd (above) that there is an ambiguity in expressing an order to be made “by consent”.  As he there said (at 380b):-

“We have had a discussion about “consent orders.” It should be clearly understood by the profession that, when an order is expressed to be made “by consent,” it is ambiguous. There are two meanings to the words “by consent.” That was observed by Lord Greene M.R. in Chandless-Chandless v. Nicholson [1942] 2 K.B. 321, 324. One meaning is this: the words “by consent” may evidence a real contract between the parties. In such a case the court will only interfere with such an order on the same grounds as it would with any other contract. The other meaning is this: the words “by consent” may mean “the parties hereto not objecting.” In such a case there is no real contract between the parties. The order can be altered or varied by the court in the same circumstances as any other order that is made by the court without the consent of the parties. In every case it is necessary to discover which meaning is used. Does the order evidence a real contract between the parties? Or does it only evidence an order made without objection?”

28.In Siebe Gorman, shortly before the parties appeared before a master for the hearing of a discovery application, the parties’ solicitors verbally agreed that, in return for the plaintiffs consenting to the order for discovery, the defendants would ask the master to extend by ten days the time limit for complying with the order.  The order was drawn up on that basis and expressed to be “by consent”.  It also included the provision that in default of compliance the plaintiffs’ claim would be struck out.  The English Court of Appeal held that the oral agreement between the parties’ solicitors was neither intended nor apt to create a contract and merely meant that the plaintiffs did not object to the order.

29.By contrast, in Cathay Pacific Airways Flight Attendants Union v. Cheung & Choy (A firm) (above), the court made a consent taxation order in relation to the taxation of seven invoices issued by the defendant solicitors for professional services rendered.  Later, the plaintiff made an application to vary the consent order by incorporating into the order the qualification that it was only part of the invoice amounts that should be subject to taxation.  Deputy High Court Judge Au (as he then was) took into account the negotiations between the parties’ legal advisersbefore entering into the consent order, and held that the consent order was made as a result of the parties consciously making a decision to agree to its terms after having fully considered and assessed their legal positions, rights and obligations.  It was not a case where the defendant simply not objecting to the order sought by the plaintiff.  Instead, it evidenced a genuine agreement between the parties.

Whether the Consent Order evidences an agreement

30.What is the correct conclusion based on those authorities, in relation to the Consent Order in the present case?

31.Mr Lo has filed an affirmation dated 18 September 2015 in support of the defendant’s application herein.  In the affirmation, Mr Lo explained the arithmetical error and also gave a brief chronology of the events leading to the present application.  However, he has not exhibited any correspondence regarding the discussion between the parties before the filing of the Consent Summons.

32.On the other hand, the plaintiff has not filed any affirmation in respect of this application. 

33.In my view, although I have not been provided with the relevant correspondence, the terms of the Consent Order, objectively analysed, clearly show that the order embodies the results of negotiations and evidences a real contract between the parties. Apart from entering partial judgment in favour of the plaintiff, the Consent Order also provides for various other matters such as the reservation for trial of the question of interest on the judgment sum, withdrawal and payment of sanctioned payment and the provision of costs.  All the aforesaid terms are clearly matters which required the express agreement of the parties, who were represented by legal representatives throughout and therefore obviously had taken a considered position by agreeing to the said terms in the Consent Order.  All these considerations, in my view, show that the Consent Order represents a genuine resolution of a part of the dispute between the parties, and is therefore very different from a case management decision made at the instance of one party to which the other party made no objection.  The Consent Order in the present case is therefore not a consent order in the technical sense.  Instead, it represents a true agreement between the parties.

34.As the Consent Order evidences an agreement between the parties, it can be set aside or rectified according to normal contractual principles: see Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] CD 273 and Purcell v F.C. Trigell Ltd [1971] 1 QB 358.  However, in the present case, there seems to be one procedural hurdle that the defendant has to overcome, which will be discussed next.

Procedural issue

35.The present application was made in the same action in which the Judgment was given.  It appears to be well established that after a judgment has been passed and entered, even where it has been taken by consent and under a mistake, the court cannot set it aside otherwise than in a fresh action: see Ainsworth v Wilding [1896] 1 Ch 673.

36.In Ng Shui Hing v Lai Hang [1983] 1 HKC 158, Fuad JA held that (at 162B):-

"It is well-settled that a judgment or order made by consent can be set aside on any of the grounds upon which an agreement can be set aside (Wilding v Sanderson [1897] 2 Ch 534) but that the only means open to a party to set aside such a judgment or order once it is passed and entered is to bring a fresh action for that purpose (Ainsworth v Wilding [1896] 1 Ch 673 and de Lasala v de Lasala [1980] AC 546)."

37.In Kwan Chui Kwok Ying & Another v Tao Wai Chun & Others (unrep., CACV 194/2002, 13 December 2002), the Court of Appeal observed that (at paragraphs 15 and 16) even in a case where a judgment or order has been obtained by fraud, the proper way to impeach it is by way of a fresh action or arguably on appeal.  Further, lack or excess of jurisdiction on the part of a court is not a ground for entitling the dissatisfied party to return to the judge to ask him to set aside the order which has already been perfected.

38.In Moores Rowland v Grant Thornton (above), after referring to Ng Shui Hing and Kwan Chui Kwok Ying,Deputy Judge Lok (as he then was) held that (at paragraph 30):-

“30. In my judgment, it is clear from the above authorities referred to me by Mr Chang, counsel for the majority partners, that the court is functus officio and has no jurisdiction to declare that the perfected Consent Orders are null and void. The only proper way to impeach the Consent Orders is to start a fresh action to set aside the same.”

39.More recently, in Kowloon Development Finance Ltd v Pendex Industries Ltd & Ors [2013] HKCFAR 336, the plaintiff commenced fresh proceedings to challenge two consent orders made in previous proceedings.  The plaintiff had actually made similar applications on summons in the previous proceedings but the applications were dismissed.  Lord Hoffman made the following observations (at paragraph 12):-

“12. On 13 September 2005 KDFL issued a summons in the 2003 action, seeking an amendment of Master Kwang's order by substituting something along the lines of the deleted para.7 from the draft of the 2004 order, or alternatively giving KDFL liberty to execute for the unpaid balance of the 2005 instalments, or alternatively setting aside the order for mistake or irregularity. None of these applications was very promising. It was hard to see how the Master could simply amend the consent order. Rectifying it or setting it aside would be a matter for a fresh action rather than a summons in the existing one.”

40.It therefore seems clear from the above authorities that if the defendant wants to challenge the Consent Order on the ground of mistake, it has to do so by way of a fresh action.

41.Before leaving this topic, however, I should deal with a case cited by Mr Lo.  In LPKP v PTPR (unrep., FCMC 11056/2005, 19 November 2009), the consent order provided that maintenance to be paid by the husband was to cease upon his remarriage.  The wife applied, on the ground of mistake, to amend the order so that maintenance should cease upon her remarriage.  After hearing evidence, HH Judge Melloy found the true bargain to be more likely than not to have been that the maintenance should last till the wife's remarriage.  If the husband signed the consent summons and later found out that a mistake had been made, then the mistake may be said to have been a mutual one.  Alternatively, the court found that the husband was aware of the wife’s error in the order but did not draw this to the attention of the wife until very late in the day.  The mistake was calculated to benefit the husband.  The application to amend was therefore granted. 

42.In the above decision, the family court was able to resolve the issue of mistake in the same proceedings in which the consent order was made.  Is the decision in conflict with the authorities stated above which held that a fresh action would be required in the circumstances?

43.In my view, the answer is no and the reason lies in the fact that, insofar as consent orders are concerned, the principles in ordinary civil cases and matrimonial cases are different.

44.The difference was succinctly explained in the recent case of Sharland v Sharland [2015] 3 WLR 1070. In that case, the Supreme Court was considering the impact of fraud on a financial settlement which was agreed between the divorcing husband and wife and embodied in a consent order.  Baroness Hale of Richmond DPSC explained that matrimonial cases are different from ordinary civil cases in that the binding effect of a settlement embodied in a consent order stems from the court’s order and not from the prior agreement of the parties (at paragraphs 19 and 27).

“19 ... it is now much more common for separating or divorcing spouses to negotiate with a view to embodying their agreed arrangements in a court order than to make a formal separation agreement. If they do this, the fundamental principle is that “an agreement to compromise an ancillary relief application does not give rise to a contract enforceable in law”. Furthermore, “the court does not either automatically or invariably grant the application to give the bargain [the] force of an order. The court conducts an independent assessment to enable it to discharge its statutory function to make such orders as reflect the criteria listed in section 25 of the Matrimonial Causes Act 1973 as amended”: see Xydhias v Xydhias [1999] 2 All ER 386 , 394, per Thorpe LJ.

... ... ...

27 Family proceedings are different from ordinary civil proceedings in two respects. First, in family proceedings it has been clear, at least since the House of Lords' decision in de Lasala v de Lasala [1980] AC 546, that a consent order derives its authority from the court and not from the consent of the parties, whereas in ordinary civil proceedings, a consent order derives its authority from the contract made between the parties: see, eg, Purcell v FC Trigell Ltd [1971] 1 QB 358 , CA. Second, in family proceedings there is always a duty of full and frank disclosure, whereas in civil proceedings this is not universal.”

45.Her Ladyship then explained the procedural problem about how a challenge to a sealed final order of a court in family proceedings can be brought (at paragraphs 38 and 39):-

“38 ... In L v L [2008] 1 FLR 26 , Munby J described this problem as “a procedural quagmire”. There are three possible routes: (i) a fresh action to set aside the order; (ii) an appeal against the order; or (iii) an application to a judge at first instance in the matrimonial proceedings. The difference is that permission is required for an appeal, and it may be required long after the time limit for appealing has expired, whereas the other two routes do not require permission. A further difference is that an appeal is not the most suitable vehicle for hearing evidence and resolving the factual issues which will often, although not invariably, arise on an application to set aside.

39 In Livesey [1985] AC 424, the matter was dealt with by way of permission to appeal out of time. But that was a simple case where the facts were clear. A fresh action would be the normal route in ordinary civil proceedings to challenge a final judgment on account of fraud: see Jonesco v Beard [1930] AC 298.”

46.Accordingly, family courts enjoy greater flexibility in these kinds of applications.  Unlike the court in LPKP v PTPR, in my view, this court has no jurisdiction to entertain the defendant’s present application to revisit the Consent Order.

The exercise of discretion (if I had it)

47.However, if I were wrong and in fact I had jurisdiction, is there any valid ground on mistake to rectify the Consent Order? 

48.The remedy of rectification is one permitted by the court, not for the purpose of altering the terms of an agreement entered into between two or more parties, but for that of correcting a written instrument which, by a mistake in verbal expression, does not accurately reflect their true agreement: see Agip SpA v Navigazione Alta Italia SpA [1984] 1 Lloyd’s Rep. 353, 359.  In this application, the defendant relies on both mutual and unilateral mistake to support its claim for rectification.

49.In Kowloon Development Finance Ltd v Pendex Industries Ltd & Ors (above), Lord Hoffman NPJ explained the difference between rectification for mutual and unilateral mistake.  He noted that the difference is not simply that in one case the mistaken belief was shared by both parties and in the other it was held by only one (at paragraphs 19 and 20):-

“19. I will come in a moment to the judge's findings of fact, but first I should say something about the legal requirements of mutual and unilateral mistake in an action for rectification. They sound like two varieties of mistake about the same thing, made in the one case by both parties and in the other by only one of them. But they are actually the expression of quite different principles. They deal with different kinds of mistakes. In the case of mutual or common mistake - the adjectives are in this context interchangeable - the mistake is about whether a written document correctly reflects what the parties had, on an objective assessment, agreed it should contain. As Denning LJ said in the well-known case of Frederick E Rose (London) Ltd v William H Pim Jnr & Co Ltd [1953] 2 QB 450, 461: "Rectification [for mutual mistake] is concerned with contracts and documents, not with intentions". In Lovell & Christmas Ltd v Wall (1911) 104 LT 85, 88, Cozens-Hardy MR described rectification for common mistake as "a branch of the doctrine of specific performance". By this he meant that if parties have agreed to execute a document in certain terms and by mistake it contains different terms, the court can specifically perform the prior agreement by rectifying the document. There was accordingly at one time a view that the remedy of rectification was available only if the prior agreement was itself actionable (like an agreement to grant a lease) and not, for example, an agreement subject to contract. But this was disavowed by the Court of Appeal in Joscelyne v Nissen [1970] 2 QB 86. Nevertheless, it is true to say that the concept of rectification for common mistake involves carrying into effect what the parties appear to have actually agreed that the document should say. And in deciding what the parties have agreed, the common law adopts its usual objective stance, looking at what a reasonable observer would have understood the parties to mean and not concerning itself with their uncommunicated states of mind: Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101.

20. Rectification for unilateral mistake, on the other hand, is very much concerned with the subjective states of mind of the parties. If the contract contains a provision which one party knows that the other party thinks is not there, or knows that the other party is mistaken about its meaning, the court may, as a matter of discretion, either refuse to allow him to enforce the contract as it would ordinarily be construed (Hartog v Colin & Shields [1939] 3 All ER 566) or go further and rectify the written agreement to give effect to what the mistaken party thought had been agreed (A Roberts & Co Ltd v Leicestershire County Council [1961] Ch 555). A civilian system of law would deal with such a case as a breach of the principle of good faith in contractual negotiations. To claim to enforce a contract in terms to which you know the other party never meant to agree is a breach of good faith. The common law has no such general doctrine of good faith in negotiation but a number of individual rules which provide remedies against specific forms of bad faith. Rectification for unilateral mistake is one of these: compare Bingham LJ in Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433.”

50.He then went on (at paragraph 23):-

“23. ... In mutual mistake, the mistake is about whether the document correctly reflects the terms previously agreed. In unilateral mistake, it is about the mistaken belief of one of the parties, known to the other, about what the contract said or meant.”

51.In the present case, the defendant has pleaded in paragraphs 4, 5, 7 and 8 the deductions that should be made to the plaintiff’s claim.  Unfortunately, paragraph 9 of the defence fails to encapsulate the concept or rationale in the calculation of the admitted outstanding sum.  There is no dispute that such a mistake has been made.  On an objective interpretation, the agreement of the parties was clearly to enter judgment in an amount that has taken into account the various deductions in paragraphs 4, 5, 7 and 8.  As the Consent Order failed to accurately record such an agreement, there was a common mistake which ought to be rectified.  I would therefore have been prepared to exercise my discretion in favour of the defendant were it not for my view that it is not open to me to do so.

52.In view of my above finding, it is not necessary for me to find whether the Consent Order should also be rectified on the ground of unilateral mistake.  However, if I had to, I would hold that there is insufficient evidence to support such a finding.  As stated above, evidence in this case is scarce.  The affirmation filed on behalf of the defendant is brief and the plaintiff has filed no affirmation at all.  Unlike the court in LPKP v PTPR, I do not have the benefit of oral evidence.  In the circumstances, I do not think there is enough evidence to show that the plaintiff had knowledge of the defendant’s unilateral mistake at the material time.

Conclusion

53.In conclusion I therefore refuse the defendant’s application to rectify the Judgment.  Accordingly, I also refuse its application to amend the defence (save that I give leave to amend paragraph 7 of the defence by consent).  I do so on the ground that this court does not have power to grant the requested orders.  I should like, if possible, to find a way to overcome the procedural problem in the present case where there appears to be an obvious mistake.  However, I think the authorities prevent me from putting the matter right on an application in the present form.

54.The plaintiff is the successful party and should normally be entitled to costs.  However, in the present case, while the defendant has explained how the mistake in the relevant documents was made, the plaintiff has not filed any affirmation to explain its side of the story.  As a result, the plaintiff has not even stated whether it had made the same mistake as the defendant or it was actually aware of the defendant’s unilateral mistake at the material time.  Although I have not found it appropriate to draw any adverse inference against the plaintiff simply because of its failure to state its position, its failure to do so has led me to conclude that the fairest costs order in this case is no order as to costs.

Mr Yan Kwok Wing, instructed by Fung Wong Ng & Lam, for the plaintiff

Mr Anthony Lo, of Wong, Hui & Co, for the defendant