Chan Wan Chuen Snaky also known as Chan Wan Chuen v. Express Tourist Bus Co Ltd and Others
Read the full judgment text of HCA 1875/2015 on BabelCite. This High Court CFI judgment was delivered on 21 September 2018.
1. This is the 4 th Defendant’s application to strike out the Statement of Claim or alternatively stay the Plaintiff’s claim therein as against the 4 th Defendant pursuant to Order 18, rule 19 of the Rules of the High Court and the inherent jurisdiction of the Court (“ Application ”).
Cited by 1 case · Cites 3 cases
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HCA 1875/2015 [2018] HKCFI 2107 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1875 OF 2015 _____________
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_______________ JUDGMENT _______________ INTRODUCTION 1.This is the 4thDefendant’s application to strike out the Statement of Claim or alternatively stay the Plaintiff’s claim therein as against the 4thDefendant pursuant to Order 18, rule 19 of the Rules of the High Court and the inherent jurisdiction of the Court (“Application”). 2.The Application is made on the basis that the 4thDefendant and the Plaintiff have reached a settlement agreement which has the effect of compromising all the claims made by the Plaintiff against the 4thDefendant in this action. The Plaintiff however disputes the validity of such settlement agreement. 3.The following three summonses are to be determined immediately after the determination of the Application:
BACKGROUND 4.In this action, the Plaintiff claims against the Defendants for, inter alia, vacant possession of certain property at 13 Tam Kung Temple Road Shipyard (“Property”). 5.The Plaintiff’s right to possession of the Property originated from a tenancy agreement dated 6 March 1990 between the Plaintiff as the tenant and the then Governor of Hong Kong as the landlord (“Tenancy Agreement”). 6.It is not in dispute that the Plaintiff now still remains on recorda tenant of the Tenancy Agreement. However, it is the 4thDefendant’s case that the Plaintiff had long transferred his entire interest in the Tenancy Agreement to one Mr Liu who subsequently transferred it in favour of the 4thDefendant. THE RESPECTIVE CASES OF THE PLAINTIFF AND THE 4THDEFENDANT FOR THE PURPOSES OF THE APPLICATION 7.The settlement agreement relied upon by the 4thDefendant is an agreement in Chinese between the 4thDefendant and the Plaintiff, dated 25 November 2017 and titled “合作協議” (“Co-operation Agreement”). It contains, inter alia, the following provisions[1]:
8.According to the Plaintiff, during his meeting with the 4thDefendant on 25November 2017, the 4thDefendant verbally demandedthat the Plaintiff should pay HK$10,000.00 per month to the 4thDefendant as rent for the right to reside in the Property as set out in Clause 6 of the Co-operation Agreement. The Plaintiff refused and hence Clause 6 was deleted. 9.It is the Plaintiff’s case[2] that by the time he was asked to sign the Co-operation Agreement on 25 November 2017, it was around 1 pm and therefore past the usual office hours on a Saturday. He was therefore unable to seek legal advice and naturally reluctant to sign the Co-operation Agreement. When he expressed his reservations, the 4thDefendant represented to him that the Co-operation Agreement was merely provisionaland subject to contract. The 4thDefendant told him he was free to take a copy to consult with his lawyers before a formal agreement was entered into. In reliance on such representation, he signed the Co-operation Agreement. 10.It is not necessary for the Court to consider how and why the Plaintiff would be able to use the legal expression “subject to contract”. The Plaintiff clarified at the hearing that “the actual [r]epresentation was the conduct on the part of [the 4thDefendant] in telling the Plaintiff that he ‘was free to take a copy to consult with [his] lawyers before a formal agreement [was] entered into’” (“Representation”).[3] 11.The Plaintiff submitted that, in view of the Representation, he was led to believe that the Co-operation Agreement is only provisional and is not immediately binding.[4] 12.Alternatively, the Plaintiff submitted that in view of the 4thDefendant’s denial in making the Representation, “the Representation may be shown to be false at the time it was made, rendering the Co-operation Agreement voidable (and avoided) for misrepresentation”.[5] 13.The Plaintiff further submitted[6] that the Co-operation Agreement is void for uncertainty in the following respects (collectively “Remaining Details”):
14.On the other hand, the 4thDefendant contended that the Co-operation Agreement is immediately binding and is not void for uncertainty. 15.Further, the 4thDefendant denied having made the Representation and also submitted that evidence of the Representation is not admissible in view of the parol evidence rule. 16.It is not in dispute that the Co-operation Agreement, if held valid, will have the effect of compromising all the claims made by the Plaintiff against the 4thDefendant in this action. APPLICABLE PRINCIPLES ON STRIKING OUT 17.The legal principles on striking out are helpfully set out in the recent case of Ming Chik Property Investment Co Ltd v Good Team Investment Ltd & Anor[2018] HKCFI 157, paragraphs 9 – 11 per Au‑Yeung J:
18.Pursuing an action after it has already been settled is an abuse of process of the court.[7] THE ISSUES 19.The Court has to determine the following issues:
Whether extrinsic evidence of the Representation is admissible despite the parol evidence rule 20.The parol evidence rule is succinctly set out in Chitty on Contracts, Vol.1, 32nd edition, paragraph 13-099:
21.However, it is trite that extrinsic evidence is admissible as to the validity rather than the contents of a written contract:
22.The Plaintiff seeks to challenge the validity of the Co-operation Agreement by the Representation on two limbs: absence of contractual intention and misrepresentation. The law is clear. Extrinsic evidence of the Representation is admissible despite the parol evidence rule. Whether the Co-operation Agreement was not intended to be immediately binding in view of the Representation 23.Disputed facts are to be taken in favour of the party whose pleading is sought to be struck out. For the purposes of the Application, the Representation is regarded as made despite the 4th Defendant’s denial. 24.The Representation in gist is that the Plaintiff “was free to take a copy to consult with [his] lawyers before a formal agreement [was] entered into”. 25.Whether there is a binding agreement between the parties depends not upon their subjective state of mind, but upon their words or conduct, and whether those words or conduct leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms essential for a binding agreement.[11] 26.Hence, the starting point is to look at the terms of the Co‑operation Agreement.[12] 27.It is observed in the decision of the New South Wales Court of Appeal in G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, 634 that [13] :
28.As observed by Harris J in Yau Shik Yin, at paragraphs 21 and 22, there are four possible permutations to the purpose and effect of an agreement that envisages a more formal agreement to follow[15]:
29.The following terms of the Co-operation Agreement strongly suggest that it was intended to be immediately binding despite the Representation:
30.The following features of the Co-operation Agreement also strongly suggest that it was intended to be immediately binding despite the Representation:
31.The subsequent conduct of the parties, i.e. the Plaintiff and the 4th Defendant, also strongly suggests that the Co-operation Agreement, signed on 25 November 2017, was intended to be immediately binding despite the Representation:
32.It is permissible for the purpose of ascertaining whether or not there was a contractual intention to enter into a binding agreement to have regard to the conduct of the parties after the alleged agreement was reached.[17] 33.In view of the matters set out in paragraphs 29 to 31 above, it is clear that the Co-operation Agreement was intended to be immediately binding despite the Representation. Whether the Co-operation Agreement is voidable for misrepresentation in view of the 4th Defendant’s denial in making the Representation 34.No authority has been cited by the Plaintiff in support of his submission that denial or wrongful denial of making a representation is tantamount to misrepresentation. 35.On the other hand, it is trite law that there is misrepresentation if (1) there is a representation of fact; and (2) that fact turned out to be untrue. 36.Looking at the facts contained in the Representation, they are not untrue because no one could have stopped the Plaintiff from consulting his lawyers on the copy. There is no “misrepresentation”. 37.The Plaintiff did not make the assertion with conviction himself. He merely said “the Representation may have been false …”. 38.The Plaintiff’s submission on misrepresentation does not hold water. 39.The Plaintiff’s written submissions also alluded to an estoppel argument that the 4th Defendant “is likely to be estopped” from relying on the Co-operation Agreement because the Plaintiff had signed it in the belief that it is only provisional.[18] In view of the Court’s conclusion that the Co-operation Agreement was intended to be binding, the estoppel argument has no basis. Whether the Co-operation Agreement is void for uncertainty 40.As a general principle, courts are reluctant to strike down what are obviously intended to be commercial agreements for uncertainty.[19] 41.Even if certain terms of economic or other significance to theparties have not been finalized, an objective appraisal of the parties’ wordsand conduct may lead to the conclusion that they did not intend agreement of such terms to be a pre-condition to a concluded and legally binding agreement.[20] 42.In the present case, in my view, the matters set out in paragraphs 29 to 31 above lead to the conclusion that the Plaintiff and the 4thDefendant did not intend agreement of the Remaining Details to be a pre-condition to a concluded and legally binding agreement. 43.Moreover, an agreement may be complete where the remaining details can be determined by the standard of reasonableness or by law.[21] 44.The standard of reasonableness could be applied to give sufficient certainty to an otherwise vague provision provided that there is an objective standard for assessing what would be reasonable.[22] 45.In the present case, the Plaintiff and the 4th Defendant have agreed that the New Company shall take the form of a company limited by shares. It is therefore beyond dispute that the New Company shall be managed by the Board. 46.As to the appointment of directors to the Board, it is trite that the first directors are appointed by the shareholders.[23] In the present case, they are the Plaintiff and the 4th Defendant. 47.The rest of the Remaining Details, apart from the Consequences of Breach, are all management matters that are apt to be resolved by the Board with an objective standard available for reference if necessary. 48.The agreement on equal shareholding provides an objective standard on the board seats. The reasonable arrangement is that the Plaintiff and the 4th Defendant should have rights to appoint an equal number of directors to the Board. 49.Similarly, the fact that the use of the Property is subject to the Tenancy Agreement also provides an objective standard as to what business may reasonably be undertaken by the New Company. 50.Shareholder loans or bank loans are also a reasonable source for funding the operation of the New Company and the amount required would depend upon its reasonable need. 51.The Plaintiff submitted that if he were in breach of the Co-operation Agreement, “[he] would have to forfeit all [his] rights to use, manage and profit from the [Property]. In other words, [he] would have to give up the Tenancy Agreement. It then follows that the 4th Defendant’s purported rights and entitlements under the [Co-operation Agreement] would also be forfeited because those rights depended on [his] continuing entitlements under the Tenancy Agreement”.[24] The Plaintiff submitted that the Consequences of Breach do not make sense and are uncertain. 52.However, as a matter of construction, it is clear that the forfeiture of the Plaintiff’s rights to use, manage and profit from the Property merely means forfeiture of his rights and entitlements under the Co-operation Agreement. It does not mean a forfeiture of his rights and entitlements under the Tenancy Agreement, which is a different agreement. There is no basis to say that the Consequences of Breach do not make sense and are uncertain. 53.The Co-operation Agreement is not void for uncertainty. Conclusion 54.The Co-operation Agreement is a valid and binding agreement which has the effect of compromising all the claims made by the Plaintiff against the 4th Defendant in this action. DISPOSITION 55.For the foregoing reasons, I allow the 4th Defendant’s application to strike out the Statement of Claim as against the 4thDefendant on the grounds that it is scandalous, frivolous and vexatious and that it is otherwise an abuse of the process of the Court. 56.In light of the above, it is unnecessary for me to canvass the 4thDefendant’s alternative application for a stay. Suffice it to say that had this been necessary, I would have granted the stay as pursuing a settled action is an abuse of process of the court. 57.I also make an order nisi that the Plaintiff shall pay the 4thDefendant the costs of this action including the costs of the Application, to be taxed if not agreed. 58.I also give liberty to the parties to restore the Statement of Damages Summons and the Expert Directions Summons for hearing before Master. No order is made on the Amendment Summons which is now rendered obsolete by the outcome of the Application. 59.Lastly, it remains for me to thank Counsel for their assistance.
Mr Jonathan Wong and Ms Jacquelyn Ng, instructed by Cheung, Chan & Chung, for the Plaintiff Mr Anthony P W Cheung, instructed by S W Tai & Co, for the 3rd and 4th Defendants [1] The English translation of the provisions are reproduced from the 2ndAffirmation of the Plaintiff,para 10. There is no material dispute on such translation save that the 4thDefendant adopts the expression “replace” instead of “take over” in Clause 1 as the translation of the word “取代”. Such difference does not have a material impact on the Application. The difference is over the translation of the word “取代”. There is no dispute as to the meaning of the word “取代” per se. [2] See 2ndAffirmation of the Plaintiff, paras 37 and 38. [3] See Plaintiff’s Further Submissions, para 11. [4] See Plaintiff’s Skeleton Submissions, para 12; and Plaintiff’s Further Submissions, para 12. [5] See Plaintiff’s Skeleton Submissions, para 17(2). [6] See Plaintiff’s Skeleton Submissions, paras 19 – 31. [7] Lucky Money Ltd & Others v Guangzhou Chung Kin Engineering Co & OthersHCA 542/2007 (unreported, 6 January 2011), para 61. [8] Treitel: The Law of Contract, 13thedition, para 6-015. [9] Chitty on Contracts, para 13-109. [10] Chitty on Contracts, para 13-115. [11] RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG [2010] 1 WLR 753, para 45. [12] Yau Shik Yin v Man Shing Electrical Manufactory Ltd & Ors HCCW 420, 421 and 422/2012 (unreported, 15 July 2015), para 19. [13] Cited with approval by Harris J in Yau Shik Yin, para 20. [14] (1929) 43 CLR 310. [15] The first three permutations are quoted from Masters v Cameron (1954) 91 CLR 353. The fourth permutation is quoted from Baulkham Hills. [16] The English translation is reproduced from the 2nd Affirmation of the Plaintiff, para 10. [17] Yau Shik Yin, para 27, citing Cacace v Bayside Operations Pty Ltd [2006] NSWSC 572, para 11, in support of such proposition. See also Treitel: The Law on Contract, para 6-025. [18] See Plaintiff’s Skeleton Submissions, para 17(3). [19] Chitty on Contracts, para 2-151, citing Durham Tees Valley Airport Ltd v BMI Baby Ltd [2010] EWCA Civ 485, para 54 in support of such proposition. [20] RTS Flexible Systems, para 45. [21] Chitty on Contracts, para 2-120. [22] Chitty on Contracts, para 2-150. [23] See sections 69 and 454(2) of the CompaniesOrdinance (Cap 622) and article 22 of model articles for private companies limited by shares. [24] See Plaintiff’s Skeleton Submissions, para 30 and 2ndAffirmation of the Plaintiff, para 26. | ||||||||||||||||||||||||||||
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