Chan Shu Gar and Others v. Chan Bo Hing

CACV000023A/1969

IN THE SUPREME COURT OF HONG KONG

APPELLATE JURISDICTION

CIVIL APPEAL NO. 23 OF 1969

(On Appeal from O.J. Action No.1219 of 1966)

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Coram: Hogan, C.J. and Huggins, J.

Date of Judgment: 4 December 1969

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JUDGMENT

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Huggins, J:

1. As my Lord has indicated, there was some argument as to the real basis of the learned judge's decision. This much is clear: he did not rule upon the admissibility of the "without prejudice" correspondence. The dispute relates to the question whether the correspondence (assuming it to be admissible) contains an admission of liability. The first sentence of the passage cited by my Lord from the judgment appears at first sight to be a finding of an admission but I am satisfied that that was not what the learned judge intended to convey. It may be that the sentence could have been more clearly expressed but I think the judgment as a whole shows that he found that the respondent agreed "to render herself liable" rather than "that she was liable". Indeed if he did think it was clear from the correspondence that she agreed she was liable he was manifestly wrong because (rightly or wrongly) the respondent maintained throughout the correspondence that the liability was not hers but that of Chan Shu-woon, the elder brother: for some reason which is not clear to me she says she felt herself to be under a moral obligation to pay the money although not under a legal obligation. I have not the least doubt that when the learned judge used the word "agreed" rather than "admitted" in this first sentence he had in mind that the respondent was prepared to assume a legal liability which she alleged was not hers if the appellants on their part would agree to certain terms. The succeeding sentence, in which he predicates the condition that the respondent's agreement "that she was liable" had been "the whole agreement", seems to me to demonstrate that the judge found the respondent merely to have made a conditional offer to assume liability. He goes on to say that he does not think the respondent's "admission of liability for the sum of $1.6 million can be looked at in isolation" and that the respondent was merely agreeing that "the terms of settlement should be embodied in a written agreement and that the action should be withdrawn". It is suggested that this passage is ambiguous. If the order of the words has any significance the judge found that a written agreement was to precede the withdrawal of the action, but counsel for the respondent says that the judgment does not bear that interpretation. He contends that the withdrawal of the action was in fact a condition precedent to the settlement and the contention is based upon the letter of 12th September 1966 from the respondent's solicitors wherein it was stated:

It must be remembered that both before and after this letter the appellants were insisting that the action should not be withdrawn at all but that judgment should be entered for the amount to be paid by the respondent. When the appellants finally decided not to press further for a judgment if a satisfactory settlement could be reached in all other respects, their solicitors prepared a draft agreement, which subsequently passed several times between the parties. Clause 4 of that agreement said:

That evidence is entirely consistent with what seems to me to be the true construction of the judgment. It is therefore not open to the respondent to insist that failure to withdraw the action would preclude the appellants from arguing that a settlement had been reached.

2. A further ambiguity is suggested in that it is questioned whether the learned judge found (a) that there was a concluded settlement which the parties desired should be reduced into writing or (b) that there was to be no concluded settlement until the terms had been reduced into writing. Counsel for the appellants contends that the former is the correct interpretation of the judgment. Then he seeks to argue, as I understand him, that the term set out in Clause 4 of the draft was never agreed to, because the respondent "frustrated" that agreement by failing to execute it. He cannot have it both ways: either the draft, although not executed, represents terms which have been agreed or the parties have never been ad idem. I think the correct interpretation of the learned judge's judgment is that he found there was to be no concluded settlement until the terms had been drawn up in a formal memorandum of agreement. In other words, he found that there was nothing more than an agreement to enter into an agreement. That was a finding amply justified by the evidence. On the other hand, if the learned judge found that there was a concluded settlement I do not think that finding was justified by the evidence, for at no time was the draft agreed as amended.

3. However, even if we assume that a final settlement was reached which could be made the subject of an action to enforce it and even if we assume that such a final settlement makes the "without prejudice" correspondence admissible in evidence, I do not think that helps the appellants upon their application for judgment upon an admission. At most the respondent's offer was to pay on certain terms. There was never any admission of liability but merely a promise to pay. If it were no more than arguable that there was no admission of liability it was right for the learned judge in the exercise of his discretion to refuse to enter judgment and this court would not lightly interfere. However strange it may seem to us on the papers before us that the respondent should be willing to pay over $1 1/2 million in circumstances which not only would appear not to create any legal obligation but which would not create even a moral obligation, in my view this was clearly not a case where the learned judge would have been justified in giving judgment and, a fortiori, it is not a case where we should interfere with his refusal to enter judgment.

4. That is enough to dispose of this appeal. Nevertheless we have heard argument concerning the admissibility of the correspondence and, if we do not decide now whether the "without prejudice" correspondence can properly be looked at at all, there is a danger that the issue may become the subject of an appeal against the decision at the trial. Accordingly, not without hesitation, I agree that we should express our views upon it. My hesitation stems not so much from a doubt as to the final result which ought to be reached but because we are not entirely agreed as to the proper route by which it should be reached.

5. In Walker v. Wilsher⁽¹⁾ Lindley, L.J. said at p.337:

I confess that I can see no necessity or other justification for interpretating the words "without prejudice" in this way. Their obvious meaning, and the meaning which I believe has always been attached to them by the profession at large as well as by others, is that the letter to which they relate shall under no circumstances whatsoever be used to the detriment of the writer in relation to the dispute in question. It is, as it were, an offer to make a contract, but it is an offer which cannot be accepted so as to make an immediate contract, but it is an offer which cannot be accepted so as to made an immediate contract because it is not itself intended to have any legal effect. Persons who carry on "without prejudice" correspondence as a rule intend that the correspondence should lead to a formal and legally binding expression of the terms of any agreement which may be reached, whether it be an indenture or an order of the court or a memorandum of agreement recorded on counsel's briefs and it is that expression of the terms of agreement which they intend to govern their relationship. That being so it is unnecessary that the correspondence itself should ever be subjected to scrutiny by a court. I would, therefore, have been disposed to hold that the privilege which the courts have always accorded to "without prejudice" correspondence as a matter of public policy (based upon the desirability of settling disputes) is an absolute and not a conditional privilege. That does not, of course, mean that it is not conditional in the very limited sense that, being a privilege, it can be waived by the party in whose favour it is granted, but merely that the other side can never produce the correspondence without consent. The only difficulties which could possibly arise from accepting this as the true basis of the privilege are (1) that where the parties fail to express the terms of their agreement aliunde the negotiations would be fruitless unless both parties consented to waive their privilege, and (2) that if they express the terms of their agreement but fail to do so unambiguously the "without prejudice" correspondence cannot be looked at to ascertain the true intention except with the consent of both sides. The possibility of such difficulties seems to me a small price to pay for a simple and otherwise most salutary rule. I say it is a salutary rule because, once it is conceded that an offer made without prejudice is privileged only if it is not accepted, one is faced with the possibility that the "without prejudice" correspondence will have to be looked at in order to find out whether it was accepted. Then if the court decides that the offer was not accepted the writer has suffered the very damage which he sought to avoid by use of the words "without prejudice", namely the revelation of the correspondence to the court. It is true that the judge is thereupon to put the correspondence out of his mind but the writer is bound to be left with a not unjustified sense of grievance and I would adopt the words of Lord Esher in Walker v. Wilsher⁽¹⁾ at p.337:

6. I think Wigmore is right when he says that a concession which, being made by way of offer to settle a claim, is hypothetical or conditional only can never be interpreted as an assertion representing the party's belief and therefore cannot be an admission: 4 Wigmore on Evidence (3rd Ed.) 26 (para. 1061). If it cannot be an admission it cannot be relevant and is inadmissible. The important thing to notice about this approach is that the admissibility of the correspondence is not made to depend upon the acceptance or rejection of the offer: if the concession is hypothetical or conditional at the time it is made it is not converted into an admission by acceptance of the offer. On this basis the "without prejudice" correspondence would clearly be inadmissible.

7. The English courts have adopted a different approach and one which Wigmore (as I think, with justification) describes as unsatisfactory. I have already cited a passage from the judgment of Lindley, L.J. in Walker v. Wilsher⁽¹⁾ and there are similar passages in the judgments in In re River Steamer Company⁽²⁾. If this be the principle which ought to be applied in Hong Kong then only provisional objection can be taken to the admission of "without prejudice" correspondence and a final ruling on admissibility can be made only after the correspondence has been admitted for the limited purpose of deciding the issue of admissibility. In the present case, as we have seen, the correspondence itself would show that there was no contract which would render the evidence admissible.

8. I think there is a further difficulty which faces the appellants. Assuming that the "without prejudice" correspondence were admissible because it did reveal a contract to settle the dispute, and assuming that the contract disclosed an unequivocal admission of some liability, in the absence of a term in the contract that the respondent would submit to judgment the respondent would be entitled to a stay of all further proceedings in the present action save for the purpose of carrying the terms of settlement into effect. Even though he were in breach of the contract I think he would be entitled to rely upon its existence. What then would be the purpose of allowing the appellants to adduce in this action evidence of the "without prejudice" correspondence? It seems to me that there would be none and, if there is no purpose to be served, then (adapting the words of Bowen, L.J. in Walker v. Wilsher⁽¹⁾ at p.339) the agreement that the correspondence is without prejudice ought to be carried out in its full integrity. To allow the appellants to rely upon an admission in the "without prejudice" correspondence would be to allow an abuse of the process of the court.

9. As my Lord, the Chief Justice, has drawn my attention to Tomlin v. Standard Telephones and Cables Ltd.⁽³⁾ I should perhaps add a word about that case, a case where there was a majority decision in the Court of Appeal and where leave was given to appeal to the House of Lords. What I have already said appears to be in harmony with the dissenting voice of Ormrod, J. and, with the greatest respect, I am not persuaded that the view of the majority is to be preferred.

10. For these reasons I agree that the appeal should be dismissed.

4th December, 1969.

(1) (1889) 23 Q.B.D. 335.

(2) (1871) 6 Ch. App. 822.

(3) 1969 3 All E.R. 201