Yan How Yee v. Yu Kin Sang Paul and Others

HCA 3050/2015

[2018] HKCFI 2511

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3050 OF 2015

________________

________________

________________

JUDGMENT

________________

1.This matter arises out of the dispute as to whether a valid and enforceable settlement agreement has been reached at a mediation on 18 March 2014.

2.The subject matter of this disputed settlement agreement is what I will define later in this Judgment as “the 2008 Action”.

3.The Plaintiff and the 1^st Defendant were business partners from about 1990 to around 2008.  They engaged in the wood and timber industry through a number of companies in Hong Kong and Mainland China.  

4.One of those companies was Haywood International Development Limited (“Haywood”). This company was incorporated in Hong Kong on 14 March 1997.

5.At all material times, the Plaintiff and the 1^st Defendant were the only two shareholders of Haywood, each holding 50% of its shares.  At all material times before 15 July 2008, the Plaintiff and the 1^stDefendant were the only two directors of Haywood.  On the registered records, the 1^stDefendant gave notice of his resignation as director of Haywood in July 2008.

6.Haywood used to be called by different names.  For present purposes, it suffices to note that it had associated itself with the name “Woodsland” and “活士” at various times.

7.Another company, Yenwa Limited (“Yenwa”), was incorporated in Hong Kong on 11 December 1990.  Yenwa was also engaged in the wood and timber industry.  Like Haywood, the Plaintiff and the 1^st Defendant were the only two shareholders of Yenwa, each holding 50% of its shares.  Also, at all material times, the Plaintiff and the 1^st Defendant were the only two directors of Yenwa.

8.Wos Building Materials (HK) Company Limited (“Wos”) is a limited company incorporated in Hong Kong on 15 May 2008.  At all material times this company was controlled and beneficially owned by the 1^stDefendant.  It is not disputed that Wos carried on the same business as Haywood.  The 1^stDefendant applied for the deregistration of Wos on 4 November 2010.  Wos was dissolved and deregistered on 25 March 2011.

9.The 2^nd Defendant was the accounting clerk of Haywood.  She resigned on 18 February 2008, with effect from 18 March 2008.  She became employed by Wos after she left Haywood.

10.The 3^rd Defendant was the sales executive of Haywood.  She resigned on 7 April 2008, with effect from 7 May 2008.  She also became employed by Wos after she left Haywood.

11.Both the 2^nd and 3^rd Defendants ceased to be employed by Wos after the Plaintiff obtained an injunction against Wos in the 2008 Action (defined below).

12.On 10 June 2008, the Plaintiff commenced a derivative action (HCA 1069/2008) (“the 2008 Action”) on behalf of Haywood against the 1^st to 3^rdDefendants as the first three defendants; one Mr Ho Keung Fai as the 4^thDefendant; Wos as the 5^thDefendant; and Haywood as the 6^thDefendant. 

13.In very broad terms, in the 2008 Action, the claim was that the 1^st Defendant had acted in breach of fiduciary duty as a director.  It was claimed that the 1^st Defendant carried on a rival wood product business under similar names, ie “Wosland”, “Wos” or “活士”.  It was also said that the 1^stDefendant siphoned off business from Haywood and enlisted the assistance of the 2^nd and 3^rdDefendants in the competing business. 

14.Again in very broad terms, the defence of the 1^st Defendant in the 2008 Action was that he had made known to Plaintiff about his immediate termination of directorship with Haywood in mid-August 2007 on the ground of a breakdown of trust and confidence in the Plaintiff; the Plaintiff acquiesced in his departure; and it was only because of the delay of the Plaintiff in effecting the formality that the registration of the resignation of the 1^st Defendant only took place in July 2008.  On that basis, it was said that the 1^stDefendant was not a director of Haywood and did not owe fiduciary duties to Haywood when the competing activities were undertaken.

15.The defence of the 2^nd and 3rd Defendants in the 2008 Action was, again in broad terms, that they had no knowledge, express or constructive, of the fact that the 1^stDefendant was still a director of Haywood when they took up employment with the allegedly competing business.  They also said that they had validly resigned from Haywood before they took up employment with Wos.

16.It is not necessary for me to recite the procedural history of the 2008 Action, save to note that on 11 September 2013, Deputy High Court Judge Whitehead SC granted leave for the parties to the 2008 Action to attempt mediation.

17.The correspondence leading up to the mediation shows that theparties were not able to reach an agreement on the identity of the mediator. Ultimately, the mediator was nominated by the mediation centre that the parties had chosen, ie Hong Kong Efficient Legal Professional Mediation Centre (“HKEMC”). HKEMC nominated one Mr Raymond Kong Hin Man, who duly became the mediator (“the Mediator”).

18.The relevance of how the Mediator was chosen is as follows.  Given that Mr Kong was not nominated by either party, it is clear that he was a neutral person and had no particular axe to grind for either side.

19.There is a copy of Mr Kong’s CV in the papers.  That was sent to the parties when HKEMC nominated him.  It could be seen from this CV that Mr Kong was a practising barrister who commenced practice as a barrister from April 2009.

20.In other words, at the time of the mediation, Mr Kong was a barrister of about five years’ experience.  It could also be seen from this CV that prior to qualifying as a barrister, Mr Kong had worked in various roles in the financial world since June 1999.

21.On 18 March 2014, the mediation took place at the premises of HKEMC.

22.The Plaintiff attended the mediation with her solicitor, one Mr Arthur Ho (“Mr Ho”).  Mr Ho was also accompanied by his assistant Ms Natasha Yu.  Mr Ho and Ms Yu were members of Messrs Rowdget W Young & Co (“RWY”).  RWY represented the Plaintiff in the 2008 Action.

23.The three Defendants attended the mediation themselves.  Although at that stage they were represented by solicitors (ie Messrs YH Yeung & Associates) (“YHY”) in the 2008 Action, the three Defendants were not accompanied by any solicitor or legal representative at the mediation. The evidence of the 1^st Defendant was that he understood that he could choose whether to bring a solicitor along to the mediation, and he chose not to.

24.One of the first things that the parties did at the mediation was to sign the mediation agreement (“the Mediation Agreement”) dated 18 March 2014. 

25.Mr Alan Ng (appearing with Ms Lai in this trial) has placed reliance on a number of terms in this agreement to show that the parties approached the mediation with a view to settle the case.  There were also a number of questions asked of the Defendants to the effect that they approached the mediation with some hope to settle the 2008 Action.

26.I must say that I have placed little weight on these terms in the Mediation Agreement, and that the Defendants approached the mediation with a hope to settle.  It appears to me clear that nobody is saying that they attended the mediation without any intent to even explore the possibility of a settlement.  But I do not think this means that a binding settlement agreement is more likely to have been concluded.  After all, whether to settle the case must depend on whether the terms are acceptable.

27.But there is one clause in the Mediation Agreement that I should mention. That is clause 11.3, which provides as follows:

“ The Parties shall not call the Mediator as the witness, nor require him to produce in evidence any records or notes relating to the Mediation, in any litigation, arbitration or other formal process arising from or in connection with the Dispute and the Mediation; nor will the Mediator act or agree to act as a witness, expert, arbitrator or consultant in any such process.”

28.Mr Ng informed me that the enforceability of such a clause is a subject of debate in English cases.  Fortunately, I am not called upon to adjudicate on this question, because neither side before me has attempted to call the Mediator as a witness.

29.This clause is however relevant because it provides a reason why neither party has called, or has subpoenaed, the Mediator as a witness.  Counsel agreed that I should not draw any adverse inference against either side for the absence of the Mediator as a witness.

30.As mentioned above, at the mediation, the Plaintiff was accompanied by Mr Ho and Ms Yu of RWY.  Both of them have taken attendance notes of what happened during the mediation.  Mr Keith Tam (for the Defendants in this trial) confirmed that the Defendants do not dispute the authenticity of these attendance notes, in particular it is not disputed that these handwritten notes were written on the day of the mediation.

31.There is no dispute that the mediation started with a joint session (“the 1^st Joint Session”).  There is also no dispute that after the 1^stJoint Session, there were a number of individual sessions where the Mediator met with the Plaintiff (and her legal representatives) and the Defendants separately in separate rooms.

32.There is some dispute about the number of such individual sessions, and what was discussed during such individual sessions.

33.It is common ground that at around lunchtime, the parties went into a second joint session (“the 2^nd Joint Session”) with everyone in the same room.

34.There is no dispute that at the 2^ndJoint Session, Mr Ho drafted (by hand) a document entitled “Settlement Agreement” (“the Settlement Agreement”).  This document was ultimately signed by the Plaintiff, the three Defendants, the Mediator and Mr Ho.

35.There is no dispute that the Mediator and Mr Ho signed as witnesses.  Their signatures appear directly below the words “witnessed by”.

36.The signatures of the 2^nd and 3^rd Defendants appear on the bottom right of the second page of the Settlement Agreement.  The Defendants’ case is that the 2^nd and 3^rd Defendants only signed as witnesses.  That is disputed by the Plaintiff.

37.Another significant feature of the Settlement Agreement is thatthere were two places where reasonably substantial amendments were made, and each of these two amendments was initialled by the Plaintiff and the three Defendants.  However, neither the Mediator nor Mr Ho initialled these amendments.

38.I have annexed to this Judgment the agreed type up version of the Settlement Agreement.

39.The Settlement Agreement essentially states that:

(1)   The three Defendants jointly and severally agreed to pay the Plaintiff a total sum of $1,260,000 by way of 15 postdated cheques, each in the sum of $84,000 commencing from 1 October 2014 “in full and final settlement of these proceedings[meaning the 2008 Action]”.

(2)   The three Defendants jointly and severally agreed to pay the Plaintiff $833,000 being the agreed costs of the 2008 Action.  These costs shall be paid by 5 postdated cheques, each in the sum of $166,000 commencing from 1 May 2014.

(3)   The two batches of cheques mentioned above are to be delivered to the Plaintiff's solicitors upon the signing of a consent summons.

(4)   The 1^st Defendant agreed to transfer his shareholding in Haywood and Yenwa to the Plaintiff at the nominal price of $1for each company by delivering signed bought and sold notes and Instrument of Transfer to the Plaintiff within 14 days of the Settlement Agreement.

(5)   The 1^st Defendant also waives all his interests in Haywood and Yenwa, and the three Defendants waived all their claims in the counterclaim and/or claims (if any) against Haywood and/or the Plaintiff personally.

(6)   There is a further provision whereunder the 1^st Defendant waives all the money which he had allegedly paid on behalf of Haywood.

(7)   Each party is to bear the costs of the mediation.

(8)   There is also express liberty to apply to enforce the settlement terms embodied in the Settlement Agreement.

40.It should be noted that:

(1)   The Settlement Agreement does not contain any obligation on the part of the Plaintiff to waive her claim in the 2008 Action, or to undertake to withdraw or discontinue that action. But it does say that the payment of $1,260,000 would be “in full and final settlement of these proceedings”.  It is clear that “these proceedings” refer to the 2008 Action.

(2)   There is no express provision in the Settlement Agreement as to precisely what dates should be written on the post-dated cheques.

(3)   There is also no express provision as to who should prepare the consent summons, and what it should say.

41.Be that as it may, there is no dispute that at the end of the 2^ndJoint Session, after the Settlement Agreement was signed, the 1^st Defendant told Mr Ho that he would be away from Hong Kong until endof March 2014, and that the Defendants were intending to change solicitors.

42.The 1^st Defendant has produced a copy of a section of his passport at the time as Exhibit D1, and has given evidence that he was away from Hong Kong between 21 March and 27 March 2014.  I do not understand this evidence to be in dispute.

43.Mr Ho has produced Exhibit P2, which demonstrates that he had caused Ms Yu to prepare, on 21 March 2014 (a Friday), a draft consentsummons broadly in accordance with the terms of the Settlement Agreement.  This evidence is also not challenged.

44.On 24 March 2014 (the following Monday), RWY wrote to YHY to the effect that since their respective clients had reached a settlement at the mediation, RWY had drafted a consent summons.  RWY therefore enquired whether YHY had instructions to approve such a draft consent summons.

45.On the next day, ie 25 March 2014, RWY send a draft Report on Mediation for the consideration of YHY.  The draft was essentially a report to the Court that the 2008 Action had been fully settled in mediation. 

46.YHY replied in a letter dated 31 March 2014.  It simply statedthat the 1^st Defendant was away from Hong Kong and would be back in the first week of April.  I should note here that this is not borne out by the copy of the passport of the 1^st Defendant produced at trial.  As noted above, the passport only shows the 1^stDefendant was in Japan between 21 and 27 March 2014.  In cross-examination, the 1^st Defendant said that he might have gone to Mainland China after returning from Japan, and his travels to Mainland China might not be recorded in his passport.

47.RWY wrote again on 15 April 2014.  It chased YHY for a “constructive reply” to the previous letters.

48.The next day, ie 16 April 2014, YHY stated that they were only able to take instructions from two of their three clients.  This letter, however, contained a complaint that Mr Ho Keung Fai (one of the other defendants in the 2008 Action) “had been let go”.  Mr Tam has confirmed that the Defendants are not maintaining this complaint in this trial.

49.On 23 April 2014, RWY wrote in answer to the complaint concerning the position of Mr Ho Keung Fai.  Since this issue is not relevant in the present trial, I do not propose to recite the contents of the arguments here.  Suffice it to say that in this letter, RWY again pressed for an answer to the earlier letters of 24 and 25 March 2014.

50.On 24 April 2014, YHY replied, and made a further point about the absence of Mr Ho Keung Fai in the Settlement Agreement.  It was also said that “[w]e have [sic] conference with two of our clients whose instruction was to contest the alleged Settlement Agreement.  We would meet the last one at the end of this week.  We would let you have a reply on coming Monday [sic].”  The basis of the “contest” of the Settlement Agreement was however not vouchsafed.

51.On 28 April 2014, YHY wrote in the following terms:

“ Having taken instruction [sic] from clients, we write to inform that our clients do not find the alleged Settlement Agreement having binding effect on them. Further or alternatively, without admitting the alleged Settlement Agreement as binding on our clients, even if the parties have shown intention to settle the action during the mediation session, our clients find the alleged Settlement Agreement not containing or reflecting true intending agreement [sic] on part of our clients if at all. At most, the alleged agreement bears the effect as an agreement to agree only. In support of our clients’ said contention, it is our instruction thatthe mediator had promised in the mediation session that he wouldprepared [sic] a detailed draft agreement for consideration of [sic] parties but one has not forthcoming [sic] thus far. That said, thesettlement negotiation has not been concluded. Therefore, if your client intends to enforce the said alleged Settlement Agreement,we have instruction to challenge the said document.”

52.For present purposes, it is to be noted that the version of events presently advanced by the Defendants as to what happened during the mediation was by no means clearly stated in this letter.

53.After receipt of this letter, it was clear that the Defendants were not going to approve any draft consent summons to deal with the 2008 Action.  Mr Ho gave evidence, which I accept, that that was the reason why he never sent through the draft consent summons that he had caused to be prepared on 21 March 2014.

54.Before commencing the present action, the Plaintiff had sought to enforce the Settlement Agreement within the 2008 Action.  The Defendants contended that that was the wrong procedure.  Ultimately the Plaintiff abandoned attempts to enforce the Settlement Agreement within the 2008 Action, and commenced the present action.

55.In the course of closing submissions, Mr Tam has confirmed (I think rightly) that if I resolve the essential factual questions against the Defendants (ie the hold in favour of the Plaintiff on the essence of her factual case which I will set out in the next paragraph), then judgment should be entered against the Defendants.

56.The essence of the Plaintiff's case is that by the time the 2^nd Joint Session was convened, the parties had already reached an agreement on the terms of the settlement.  The Settlement Agreement was then drafted by Mr Ho to record the agreement.  The Mediator had explained the contents to all present (including, in particular, the Defendants), and the Defendants signed as parties.

57.If this factual version is accepted, there can hardly be any argument as to whether the Settlement Agreement was a finalised agreement, objectively intended by all the parties to be an immediately enforceable agreement.

58.I now set out what I would regard as the essence of the Defendants’ factual case.  It is said that:

(1)   There was no agreement on the terms of any settlement of the 2008 Action.  At the 2^nd Joint Session, the 1^stDefendant had made clear to all that he had to check his own finances before agreeing to the compensation of $1,260,000; he had also made clear to all that he could only agree to any amount of legal costs to be paid to the Plaintiff after seeing supporting documents from RWY. 

(2)   There was never any agreement as to the dates to be put on any post-dated cheque.

(3)   The Mediator had never explained the contents of the Settlement Agreement.

(4)   Mr Ho had expressly said that the Settlement Agreement only recorded the terms of the Plaintiff’s proposals; and that the Mediator would prepare and produce a formal, typed up copyof the Settlement Agreement for the parties’ further consideration.

59.For the reasons that I will endeavour to set out below, I am of the firm view that the Plaintiff's essential factual case represents the truth.

60.First, I attach considerable importance to the attendance notes of Mr Ho and Ms Yu.  As noted above, the Defendants accept the authenticity of these notes, in particular that they were written by Mr Ho and Ms Yu on the day of the mediation.

61.I do not propose to set out the full contents of these notes.  The following, in my judgment, appears to be clear from these notes:

(1)   Even as early as in the 1^stJoint Session, the 1^st Defendant hadalready indicated that he would agree to transfer the shares in Haywood and Yenwa to the Plaintiff in any settlement.

(2)   It was understood by all that the 1^st Defendant led the discussions on behalf of the Defendants.  The 2^nd and 3^rd Defendants regarded the dispute as primarily one between the Plaintiff and the 1^stDefendant.

(3)   At early stages of the individual sessions, the Plaintiff suggestedthat the Defendants should pay $1 million by way of legal costs to her.  The Defendants’ response was simply that the $1 million should be apportioned between the various defendants in the 2008 Action.

(4)   In other words, there was no dispute even from an early stage of the individual sessions as to the quantum of legal costs claimed.  The argument simply concerned how it should be apportioned between the different defendants to the 2008 Action.

(5)   The Defendants’ first suggestion was that the $1 million should be divided by six (to account for the fact that there were six defendants in the 2008 Action), and the 1^st to 3^rd Defendants should only be liable for four of these six portions (ie for the 1^st to 3^rd Defendants plus Wos).  The Plaintiff then countered by suggesting that the Defendants should be liable for five of these six portions (ie for the 1^st to 3^rdDefendants, Wos and Mr Ho Keung Fai).  5/6 of $1,000,000 would come to $833,333.  And I accept the Plaintiff's evidence that the figure of $833,000 in the Settlement Agreement was rounded off from $833,333.

(6)   The Defendants then proceeded on the basis that this figure wasagreed, and then suggested that it should be paid by instalments.

(7)   In respect of the amount for compensation, likewise, there were a number of offers and counter offers, culminating ultimately in the figure of $1,260,000.  The Defendants then proceeded on the basis that this figure was agreed, and then there were negotiations on the terms of the instalments.

(8)   Ms Yu’s notes show that the basis of the parties’ negotiations and eventual agreement was that the instalments would be monthly instalments.

(9)   Ultimately, immediately before the 2^nd Joint Session was convened, the parties had, through the Mediator, agreed on thefigures on costs and compensation mentioned above, and thatsuch sums would be paid by a total of 20 consecutive monthly instalments starting from 1 May 2014.

(10)   At the beginning of the 2^ndJoint Session, the Mediator recited the agreement that he believed the parties had reached.

(11)   Mr Ho then drafted the Settlement Agreement on that basis.

62.Given that the authenticity and the contemporaneity of the attendance notes are not disputed, I consider that they strongly point in favour of the Plaintiff's factual case.

63.Secondly, I regard the wording of the Settlement Agreement itself to be transparently clear.  The terms of the Settlement Agreement (which the 1^st Defendant accepts he had read) bear all the hallmarks of a final binding agreement.  Indeed, the title of this document is “Settlement Agreement”.

64.The 1^stDefendant’s own affidavit evidence is that he had spotted these words before he signed the document, and was “alarmed” by them.  He further explained in oral evidence that he was alarmed because these words suggested a final agreement (“最終協議”).

65.The 1^st Defendant was conversant in English.  On his own evidence, he studied in England between 1979 and 1985.  He was also an experienced businessman accustomed to dealing with English speaking clients.

66.He was asked what happened between when he spotted the words “Settlement Agreement” (and was alarmed) and when he signed the document.  At one stage he said that he thought the whole business was very trivial (兒戲) and hence he had the impression that the document was only a draft.

67.At another stage, he said that he was relieved by the actual contents of the document, because many details had not been put in.  When asked what those “details” were, he gave the following answers:

(1)   the dates of the postdated cheques had not been put in;

(2)   there was no provision as to what would happen if the agreement was broken;

(3)   there was no provision for Mr Ho to provide him with supporting documents of the Plaintiff’s costs, which the 1^stDefendant said had been discussed;

(4)   the Settlement Agreement stated that the 1^st Defendant was to waive his dividends from Haywood, which was a sizeable sum of money, and he had never agreed to that.

68.I am of the view that none of these reasons could have removed the “alarm” caused by the words “Settlement Agreement” to the 1^stDefendant:

(1)   As to the first point, as mentioned above, the attendance notes show that the parties had proceeded with the negotiations on the clear basis that the instalments in question were to be in monthly intervals.

(2)   As to the second point, many contracts do not contain expressprovisions as to precisely what should happen if the terms are breached.  After all, a contract is intended to be performed rather than breached.  And I am totally not persuaded that the lack of provisions concerning what should happen upon breach would move an experienced businessman like the 1^st Defendant to think that the document cannot be binding.

(3)   I am fortified in this view by the 1^stDefendant's evidence that on the day of the mediation, upon seeing that the Plaintiff was accompanied by solicitors, he felt that he had to act more prudently.  Signing a document entitled “Settlement Agreement” when there was actually no agreement would be the very antithesis of prudence.

(4)   As to the third point, given my findings as to what had been agreed between the parties before the 2^nd Joint Sessions, for obvious reasons I do not accept that the 1^stDefendant’s explanation.

(5)   As to the fourth point, clause 5 of the Settlement Agreement expressly provides for a waiver of all the “interest, option and/or dividends (if any)” in Haywood and Yenwa.  If there was no final agreement, the presence of this clause should have caused the 1^stDefendant more, rather than less, alarm.

69.Therefore, I think it is overwhelmingly likely that the 1^st Defendant signed the Settlement Agreement, having seen the words “Settlement Agreement” (the import of which he fully understood), because at the time it was obvious to all that the document recorded the final agreement between the parties which had been reached in the process of the individual sessions.

70.Thirdly, I regard it as significant that the amendments to paragraphs 3 and 4 of the Settlement Agreement were initialled by the Plaintiff and the Defendants.  To me, it is plain that this fact is inconsistentwith any suggestion that the document was understood by the parties to be a draft document, or a document recording the Plaintiff’s latest proposals, with no legal effect.  The fact that the Defendants were asked to sign this document, and also to initial amendments, seems to me to demonstrate clearly that the understanding was that this was a document recording a final and immediately binding agreement.

71.Fourthly, I consider it important that the Mediator had also signed on the Settlement Agreement, albeit in the capacity of a witness.

72.As noted above, the Mediator was, at the time of the mediation, a barrister of five years’ standing. Although Mr Ho gave some evidence about the lack of litigation and mediation experience of the Mediator, in my view any barrister who professes to practise as a mediator in a civil case would appreciate that it is highly likely that if parties signed on a document entitled “Settlement Agreement” in such terms, there would at least be a very high risk that such a document would create legal obligations.

73.If the Defendants’ factual version were true, it would be extremely irresponsible, and hence extremely unlikely, for the Mediator not to amend the terms of the document, and then sign the document as a witness.

74.As noted above, the Mediator was nominated by a third party, and there is (and can be) no suggestion that he would have any reason to favour the Plaintiff.

75.In fact, the 1^stDefendant’s evidence is that immediately beforethe commencement of the 2^nd Joint Session, the Mediator gave a few wordsof kind reminder to the 1^st Defendant, essentially to the effect that he should be very careful about promising to give post-dated cheques; he should be very careful in giving up his rights to dividends in Haywood and Yenwa; and he should be very careful in agreeing to pay any sizeable sum of compensation given that his competitive activities only lasted for a short time.

76.I am therefore of the view that the Mediator had no reason to act irresponsibly or in any way favouring the Plaintiff.  Accordingly, the fact that he had affixed his signature as a witness to the Settlement Agreement is a strong factor pointing towards the Plaintiff’s factual version.

77.Fifthly, the contemporaneous correspondence between solicitors also casts copious doubt on the Defendants’ version of events.  As recited above, it took until end April 2014 for YHY to indicate that the Defendants were to challenge the validity of the Settlement Agreement as an enforceable agreement.

78.Also, even in the letters dated 24 and 28 April 2014, when it was plain that YHY was searching for every conceivable reason to contest the Settlement Agreement, there was no mention that the 1^st Defendant had made clear at the 2^ndJoint Session that he had not agreed to the amount and payment schedule for compensation (because he had to check his own finances), or that he had not agreed to the amount and payment schedule for legal costs (because he had to scrutinise the supporting documents from RWY first).

79.If the Defendants’ factual version were true, one would expect them to have told their solicitors very early on, at the very least before YHY’s letters contesting the validity of the Settlement Agreement.  And if YHY had been told about these events early on, there would be no reason for them not to rely on them in correspondence.

80.Any solicitor would appreciate that in the face of a signed written document, any assertion of collateral oral assurances or agreements would be treated with some circumspection, and it would be particularly important for any such assertion to be contained in solicitors’ correspondence at the earliest opportunity.  This is particularly so given that the Defendants’ own evidence is that when YHY first saw the Settlement Agreement shortly after the mediation, YHY had already advised them that it “looked like a final binding settlement agreement”.

81.I should add here that, as I understand it, ultimately the 1^st Defendant’s evidence was that he cannot remember when he first told YHY of his present version of events.  Hence I do not think that the fact that YHY have seen fit to continue to act for the Defendants means that they are standing by the 1^stDefendant’s suggestion at one stage of his cross-examination that he had given his present factual version to Mr Yeung of YHY one or two days after the actual mediation.

82.Sixthly, I think it is inherently extremely unlikely for Mr Ho, a solicitor qualified in 1996 whose practice has since focused on litigation, to have done what the Defendants allege that he has done.  Essentially, the Defendants accuse him of rather serious misconduct, ie to deliberately trick them into signing a document which appears to be a final and binding agreement, and then to proceed on the basis that a final and binding agreement was concluded, when it was obvious that no such agreement was reached.

83.On a related note, I do not think it is significant that the Settlement Agreement drafted by Mr Ho contains no express provision as tothe dates of the post-dated cheques, or the contents of the consent summons contemplated to be filed in due course.

84.As discussed above, the contemporaneous attendance notes demonstrate that the parties had proceeded with the negotiations on the basis that the instalments were to be monthly.  And I accept Mr Ho’s evidence that the parties knew what each other was talking about, and he drafted the Settlement Agreement in a rush, not really expecting that the Defendants would renege on it later.

85.Seventhly, the conduct of RWY also suggests that both Mr Hoand Ms Yu thought that a binding and final agreement had been reached atthe mediation.  As noted above, shortly after the mediation, Mr Ho causeda draft consent summons reflecting the terms of the Settlement Agreementto be prepared.  RWY also sought confirmation from YHY shortly after themediation as to their instructions to agree to the terms of a consent summons.  RWY also drafted a report to the court shortly after the mediation proposing to report that the case had been settled at mediation.  That would strongly indicate that to their understanding, a final and binding agreement had indeed been reached at the mediation.

86.Eighthly, even the 2^nd Defendant’s evidence in court was that at the beginning of the 2^ndJoint Session, the Mediator did say that the parties had reached an agreement.

87.For these reasons, I would reject the Defendants’ version of events, and would uphold the essence of the Plaintiff’s version of events.

88.Likewise, I reject the Defendants’ contention that the 2^nd and 3^rd Defendants only signed the Settlement Agreement as witnesses.

89.First, I regard the terms of the documents to be clear.  The 2^nd and 3^rd Defendants plainly signed as “D2” and “D3”.  They were parties of the 2008 Action, and as I have found above, it was clear during the 2^ndJoint Session that an agreement to settle the 2008 Action had been reached.  It would therefore be clear that as “D2” and “D3” they signed as parties, not witnesses.

90.Secondly, the 2^nd and 3^rdDefendants initialled the amendmentsto clauses 3 and 4 of the Settlement Agreement.  The Mediator and Mr Ho, who were plainly the actual witnesses to the Settlement Agreement, did not so initial.  Hence, it would have been clear that the capacity in which the 2^nd and 3^rdDefendants signed the Settlement Agreement was the same as the 1^stDefendant and the Plaintiff (ie the other persons who initialled the amendments), and not the Mediator and Mr Ho.

91.Thirdly, the evidence as to why the 2^nd and 3^rd Defendants thought they were signing as witnesses is inconsistent among the three Defendants.  The 1^stDefendant and 3^rdDefendant said in oral evidence that the 1^st Defendant told the 2^nd and 3^rd Defendants that they were signingas witnesses.  The 2^nd Defendant’s oral evidence is, however, that she wasnever told that she was signing as witness, and this was only something that she derived from the circumstances.  There are further inconsistencies between the oral evidence and the affidavit evidence, but I regard the inconsistencies between the oral evidence among the Defendants to be of itself sufficient as a reason to reject the Defendants’ version of events in this regard.

92.I must say that my distinct impression is that this argument that the 2^nd and 3^rd Defendants only signed as witnesses was only an opportunistic attempt to take advantage of the fortuity that their signatures happen to appear next to the signatures of the true witnesses, namely the Mediator and Mr Ho.

93.For the above reasons, I give judgment to the Plaintiff in terms of the order agreed between Mr Ng and Mr Tam.

94.I should also record my gratitude to counsel for their assistance.

Mr Ng Man Sang Alan and Ms Joyce Lai, instructed by Christopher K Y Wong, for the plaintiff

Mr Keith Tam, instructed by Y H Yeung and Associates, for the 1^st to 3^rd defendants

Annex