Ip Nga Sin v. Cheung Siu So

DCCJ 2019/2017

[2021] HKDC 601

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2019 OF 2017

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BETWEEN

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DECISION

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APPLICATION

1.In this action, the plaintiff sues her mother for a declaration that the interest in the property known as Flat 17 on 18^th Floor of Pok Tai House (Block 7) (Including the Planters/Planter Boxes Appertaining Thereto), Pok Hong Estate, No.6 Sha Kok Street, Shatin, New Territories, Hong Kong (“the Property”) registered in the name of the defendant is held on trust by the defendant for the plaintiff absolutely and that the plaintiff is the sole beneficial owner of the Property.  The plaintiff further asks for an order that, subject to the consent of the Hong Kong Housing Authority, the defendant do deliver and/or transfer any and all interest in the Property to the plaintiff.

2.On 31 August 2020, the defendant took out a summons (“the Summons”) for an order that the Re-Re-Amended Writ of Summons and the Re-Amended Statement of Claim herein be struck out on the grounds that a binding settlement agreement has been reached and that it is an abuse of process of the court for the plaintiff to proceed with the action herein. 

3.By consent, the Summons is disposed of on papers.

THE WITHOUT PREJUDICE CORRESPONDENCE

4.Ruling on this striking out application requires this court to consider, among other things, the questions of whether a valid settlement offer had been made by the plaintiff and whether the plaintiff’s settlement offer (if validly made) had been validly accepted by the defendant.  Parties’ arguments on these questions are basically made by reference to the contents of 3 letters.  It is therefore necessary to set them out in full below. 

5.The first letter was dated 12 March 2020 (“the March Letter”) which was sent by the defendant’s solicitors to the plaintiff’s solicitors.  This letter was marked “without prejudice save as to costs” and “subject to contract”.  It reads:

“1. We refer to the captioned case.

2. We have been instructed that our client is, on an entirely without prejudice basis, prepared to accept the following terms in full and final settlement of the disputes between the parties in respect of the captioned case:-

(1) Your client will pay to ours a sum of HK$1,500,000

(2) Your client will discontinue the captioned case against ours on the understanding that there will be no order as to costs

(3) Upon the performance of (1) and (2) above and subject to approval being given by the Hong Kong Housing Authority, our client shall within 12 months after your client’s performance aforesaid cause the Property (as defined in the Amended Statement of Claim filed herein on 17^th July 2017 (“Amended S/C”)) to be transferred to the Brother (as defined in the Amended S/C) and/or your client (“Conveyance”)

(4) The premium payment and/or the stamp duty arising out of the Conveyance will be borne by your client

(5) Each of your client and ours will bear her own costs in respect of the Conveyance

3. No doubt, you must be aware that the terms of settlement above will be subject to the approval by the Director of Legal Aid (as our client is on legal aid). As such, nothing herein shall be binding on our client unless and until a Consent Summons/Order with all terms thereof having been agreed shall have been signed by the parties’ respective solicitors.

4. The offer above is valid for acceptance within the next 14 days.  If we do not hear from you by 26 March 2020, the offer above will automatically lapse.”

6.I will refer the offer made in the March Letter as “the March Offer”.

7.The second letter was dated 17 April 2020 (“the April Letter”).  This was sent by the plaintiff’s solicitors to the defendant’s solicitors, and was marked “without prejudice save as to costs”. It reads:

“We write on behalf of our client, the Plaintiff, to make a sanctioned offer under Order 22 of the Rules of the District Court.

Having considered the documentary evidence already filed, we take the view that our client has a strong case as she can proof (sic) the transactions made to the Defendant in satisfying mortgage payments as well as the transactions made directly to the bank. The Plaintiff also has clear evidence of the agreement reached within the family and the arrangements put in place at the time of the purchase of the property in question.

In order to save time and costs and bring this litigation to an amicable close, we have been instructed to make this sanctioned offer made pursuant to Order 22 of the Rules of the District Court. In full and final settlement of her claim (inclusive of costs and interests) in the above-mentioned action, our client offers a sum of HK$500,000, payable in the schedule set out below.

Schedule of payment

HK$200,000 payable within 28 days of the consent order;

HK$12,500 payable on the first working day of each month for 24 months starting on 1 June, 2020.

This offer is open for acceptance for 28 days. If the offer is not accepted, it will automatically lapse. We look forward to your reply.

Your prompt attention to this matter is highly appreciated.”

8.I will refer the offer made in the April Letter as “the April Offer”.

9.The third letter is an open letter dated 15 May 2020 (“the May Letter”), in which the defendant’s solicitors replied to the plaintiff’s solicitors as follows:

“1. We refer to your letter dated 17 April 2020 marked “Without Prejudice save as to Costs” in which your client’s offer (“Offer”) is contained.

2. Our client accepts the Offer. We have prepared a Consent Order (in draft) incorporating the terms of the Offer. The said draft Consent Order is herewith enclosed.

3. Should the said draft Consent Order meet with your approval, please treat it as engrossment and endorse thereon, and then return the same duly endorsed by you to us for our further action.”

DISCUSSIONS

10.The defendant’s argument of striking out is straight forward.  It is submitted by the defendant that parties have already reached a binding settlement agreement by virtue of the April Letter and the May Letter, and as a result, it is an abuse of the court’s process for the plaintiff to proceed further with this action.

11.On the other hand, the plaintiff argued that:

(1) The April Offer was not a valid settlement offer[1];

(2) The April Offer lacked certainty[2];

(3) It is not plain and obvious that there was a settlement agreement reached between the parties[3];

(4) The Summons was improper[4].

12.I will deal with these arguments in turn below.

Validity of the settlement offer

13.The first argument raised by the plaintiff is that, for various reasons, no valid settlement offer had been made by her. 

14.It should be noted that she is not saying that she had made a mistake, nor that her solicitors had made a mistake when the April Letter was issued. 

15.To understand her case properly, it is necessary to quote her Affirmation filed in opposition of the Summons.  Under paragraph 8 thereof, the plaintiff referred to the March Letter and the terms of the March Offer, she then continued:

“9. After being advised by my solicitors about the strength of my case with the supporting evidence and considering it against the Defendant’s proposal for settlement stated in the [March Letter], I considered the sum of HK$1,500,000 to be too much and disproportionate to the strength of my case, and I was only prepared to offer HK$500,000 in return for the Defendant’s transfer of title of the Property back to me. In light of the above consideration, on 17 April 2020, [the Plaintiff’s solicitors] sent a ‘Without Prejudice Save as to Costs’ letter to [the Defendant’s solicitors] to point out the strength of my case and continued to negotiate on the amount of money to be paid to the Defendant for settlement and in return for the transfer of the Property title back to me, by lowering it from HK$1,500,000 to HK$500,000…

10. The Defendant alleges that the [April Letter] sent to [the Defendant’s solicitors] by [the Plaintiff’s solicitors] on my behalf was a sanctioned offer to pay HK$500,000 to the Defendant for the full and settlement of my claim (inclusive of costs and interests), and for nothing in return. This is again, completely untrue and misleading, because: -

a. By reading the [April Letter] together with the [March Letter] as a whole, the [April Letter] was clearly a development of the settlement negotiations began by the Defendant in its [March Letter], merely touching on the amount of money that I was willing to pay to the Defendant in return for the transfer of the property title back to me (and/or my brother), which was a term mentioned in the [March Letter] by [the Defendant’s solicitors’ firm] itself;

b. As the [April Letter] was only intended to be a continuation/development of the settlement negotiations initiated by the Defendant, it did not specifically mention the other settlement terms that were already contained in the [March Letter], including the transfer of the property title back to me. At that time, the [April Letter] only focused on the negotiation regarding the sum of money to be paid to the Defendant (as I did not agree with the proposed amount of HK$1,500,000), and it was intended that further negotiations regarding other settlement terms including the manner of which the Property title is to be transferred back to me and consequences of failure to do so would then follow after the settlement amount was agreed between the parties; and

c. The Defendant’s allegation (which is denied) simply would not make sense to any reasonable person, because it would mean that immediately after [the Plaintiff’s solicitors] pointed out in paragraph 2 of the [March Letter] (sic) in detail that I was aware that I have a strong case with clear supporting evidence, I then decided to settle my claim by paying HK$500,000 for nothing in return in the following paragraph, completely foregoing the matter regarding the transfer the Property title from the Defendant back to me, which is the main issue in dispute in the present action.”

16.It appears from the above that, in a gist, the plaintiff was saying that:

(1) The April Letter had to be read together with the March Letter, in other words, the April Offer should be interpreted by reference to the March Offer;

(2) Her intention was that further negotiations on, among other things, the transfer of the title of the Property from the defendant back to her would be conducted upon parties’ agreement on the settlement amount;

(3) The defendant’s interpretation of the April Letter does not make sense.

17.Relying on paragraphs 9 and 10(c) of the plaintiff’s Affirmation, Mr Chan submitted that no valid offer had been made by the plaintiff.  In his own words:

“Only due to and in light of the Purported Offer made by the Defendant, the Plaintiff be (sic) started to consider the option of reaching a settlement with the Defendant instead of brining (sic) the case to trial, after being properly advised by her legal representatives. After some deliberation, the Plaintiff was of the view that the sum of HK$1,500,000 offered by the Defendant was too much and disproportionate considering the strong merits of the Plaintiff’s case, afterwards the Plaintiff decided to counter-offer HK$500,000 in return for the Defendant’s transfer of title of the Property back to the Plaintiff [A/119/9].

In other words, the 17 April 2020 Offer was merely a development of the settlement negotiations began by the Defendant in the Purported Offer made by the Defendant but not a valid settlement offer. It is submitted, the major dispute in these proceedings is the beneficial ownership of the property in question. In that light, the [April Offer] without the subject matter of the proceedings in question, i.e., the Property, would be impossible to be treated as a valid settlement offer by the Plaintiff. In the words of the Plaintiff, the [April Offer] was merely ‘too good to be true’. [A/120/10c]”[5] (emphasis added)

18.Before I deal with the aforesaid arguments, I will set out the applicable legal principles.

19.In Shogun Finance Ltd v Hudson [2004] 1 AC 919, Lord Phillips had the following to say at paragraph 123:

“A contract is normally concluded when an offer made by one party (‘the offeror’) is accepted by the party to whom the offer has been made (‘the offeree’). Normally the contract is only concluded when the acceptance is communicated by the offeree to the offeror. A contract will not be concluded unless the parties are agreed as to its material terms. There must be ‘consensus ad idem’. Whether the parties have reached agreement on the terms is not determined by evidence of the subjective intention of each party. It is, in large measure, determined by making an objective appraisal of the exchanges between the parties. If an offeree understands an offer in accordance with its natural meaning and accepts it, the offeror cannot be heard to say that he intended the words of his offer to have a different meaning. The contract stands according to the natural meaning of the words used. There is one important exception to this principle. If the offeree knows that the offeror does not intend the terms of the offer to be those that the natural meaning of the words would suggest, he cannot, by purporting to accept the offer, bind the offeror to a contract: Hartog v Colin & Shields [1939] 3 All ER 566; Smith v Hughes (1871) LR 6 QB 597. Thus the task of ascertaining whether the parties have reached agreement as to the terms of a contract can involve quite a complex amalgam of the objective and the subjective and involve the application of a principle that bears close comparison with the doctrine of estoppel. Normally, however, the task involves no more than an objective analysis of the words used by the parties. The object of the exercise is to determine what each party intended, or must be deemed to have intended.” (emphasis added)

20.In RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG [2010] 1 WLR 753, Lord Clarke stated that:

“The general principles are not in doubt. Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement.” (at paragraph 45)

21.In Foskett on Compromise, 9^th edition (2020), the learned author stated at paragraph 3-22:

“In many instances the existence of a compromise will not be in doubt. Usually it will be found in, or evidenced by, an exchange of written communication, a written memorandum of agreement or a consent order or judgment. In some circumstances, however, it may be difficult to ascertain whether the parties have in fact concluded an agreement. The essential task is to determine whether the parties’ negotiation have crystallised into a contractually binding agreement. In order to achieve this the traditional approach, applying an objective test, is to seek to identify a definite offer by one party and a definite acceptance of that offer by the other party…Some examples taken from cases involving compromise will be considered below. Each involves the exercise of construing the parties’ negotiation objectively.

The court will look at the whole course of the negotiations to see whether agreement is reached at any point. If such a point is identified, the mere fact that negotiations are continued thereafter will not of itself affect the existence of the agreement already concluded…” (emphasis added)

22.Applying the above legal principles, I reject the plaintiff’s arguments for the following reasons:

(1) Whether it was the defendant who initiated the negotiation is neither here nor there, and I do not understand why the fact that there was a March Offer made by the defendant would affect the validity of the April Offer.  In any event, it can be seen that the April Letter has not referred to the March Letter at all.  Moreover, the April Letter was issued on 17 April 2020, which is after the date when the March Offer had lapsed (26 March 2020). 

(2) From the wordings of the April Letter, there is absolutely nothing which requires the defendant to read the April Letter together with the March Letter.

(3) It is crystal clear from the wordings of the April Letter that the plaintiff was minded to make a sanctioned offer pursuant to Order 22 of the Rules of the District Court (“RDC”).

(4) Any reasonable person, standing in the shoes of the defendant, would reasonably have construed the April Offer to mean that the plaintiff would not insist on having the Property transferred.  The plaintiff cannot be heard to say that his intention was to agree on the settlement amount first before proceeding to negotiate on the transfer of the Property.  The April Letter has plainly confirmed that payment of $500,000 was the only term to be agreed for the full and final settlement of the whole action.  Put it in another way, objectively construed, the April Offer does not contain any term other than the payment of $500,000.

(5) While the action indeed concerns the Property, I do not agree with the argument that it is impossible to treat the April Offer as a valid one simply by reason of the fact that “transfer of the Property” was not part of the offer.  The wordings of the April Offer are clear.  I have no doubt that the April Offer is capable to be accepted as an offer.

(6) The plaintiff’s assertion made in the April Letter that she had a strong case against the defendant does not assist the plaintiff.  It is all too common for lawyers, while making an offer to settle, to reiterate that their clients’ case is strong (which may or may not be mere bluff), in an attempt to cause the other side to accept the offer.  There is no basis to argue that, because of such an assertion, the defendant must know or ought to have known that the plaintiff would not settle the action without an agreement on transfer.

23.Mr Chan further submitted that the April Offer was not a valid settlement offer by reasons of the followings, namely:

“(a) The Consent Summons draft dated 15 May 2020 drafted by the Defendant’s Solicitors have not been approved by the Plaintiff nor her Solicitors;

(b) The Plaintiff had never agreed to and approved to withdraw the claim of the current action by way of Consent Summons or agreed otherwise; and

(c) The Plaintiff’s Solicitors have made ample attempts to clarify the position of the Plaintiff, i.e., in order for the Plaintiff to withdraw her claim, the starting point must be for the Defendant to transfer the name of the Property back to the Plaintiff.”

24.These arguments are also rejected. 

25.On reasons (a) and (b), I hold the view that, by the plaintiff’s making and the defendant’s acceptance of the April Offer, parties had reached agreement on the material terms, and such an agreement is binding despite the fact that they have not agreed on the precise terms of the Consent Summons.  While the defendants’ solicitors have attached a draft Consent Summons to the May Letter for the approval of the plaintiffs’ solicitors, the defendant’s solicitors did not say that, for the agreement to be binding, it was a prerequisite for the parties to agree on the terms of the Consent Summons (unlike what was provided in paragraph 3 of the March Letter[6]).  Hence, the defendant’s acceptance of the April Offer was unconditional. 

26.On reason (c), I am of the view that, after a binding agreement has been reached objectively, it is not up to the plaintiff to say subsequently that she intended to mean something else by the April Offer, or that there were in fact some other prerequisites to the settlement agreement between the parties.

27.Mr Chan then argued that the compromise which was insisted by the defendant was “not genuine” because “there was a concealment of essential information (e.g. the fruit of the current litigation, the Property) to the Court by saying that the [April Offer] was the settlement offer initiated by the Plaintiff”[7].

28.With greatest respect, this argument is totally without merits. As aforesaid, in my view, the existence of the March Offer is simply irrelevant.

29.Mr Chan further argued that the defendant had taken an “undue advantage which is contradictory to the interest of public policy consideration.  The so-called settlement offer without the fruit of the action insisted by the Defendant is simply unfair and unreasonable to the Plaintiff”[8].

30.Again, this argument is hopeless.  Parties are free to agree on whatever settlement terms they think fit.  Experience tells us that when considering how (if at all) to settle, parties would have to consider many factors and the merits of the case is just one of the matters which would be taken into account.  In cases, like the present one, where both parties are legally represented, it is for the legal advisors to advise their clients as to whether, and, if so, on what terms, a case should be settled. 

31.It is true that by making the April Offer, the plaintiff was in effect giving up her claim herein, and was accepting defeat. However, I do not think this is so unreasonable that a positive duty would have arisen and imposed on the defendant for her to make enquiry with the plaintiff on what she actually meant by virtue of the April Letter.

32.Finally, while Mr Chan accepted that the defendant has not acted in bad faith, he submitted that “the Defendant’s improper attitude in litigation process ought to attract the Court’s displeasure in doing justice to the parties and thus the [Summons] should be dismissed”[9].

33.I simply cannot tell how the defendant can be said to have adopted an “improper attitude” in the present litigation.  This argument is rejected.

Certainty of the terms of the settlement offer

34.Mr Chan argued that the April Offer lacked legal certainty and therefore is invalid, for the reason that it did not ask for the transfer of the Property by the defendant back to the plaintiff.  He seems to be suggesting also that a transfer of the Property is an essential term of the settlement offer, without which the offer cannot be valid.

35.As discussed above, I do not consider that for any settlement offer to be valid in the present case, it has to include a term stipulating the transfer of the Property.

36.This argument is therefore rejected.

Whether plain and obvious that an agreement has been reached

37.The plaintiff contended that as it is not plain and obvious that a settlement agreement had been reached, her action herein should not be struck out.

38.I do not agree. 

39.The documents clearly show that parties had reached a binding agreement.

40.Therefore, this argument is rejected.

Proprietary of the Summons

41.Finally, Mr Chan argued that:

“Even if the Court is of the view that the [April Offer] is a valid offer (for which the Plaintiff strongly opposes on the basis of the above), it is submitted that the Court has no jurisdiction to strike out the Plaintiff’s pleadings and/or indorsement of writ on the following grounds:-

“a. Considering the application under Order 18 rule 19(1)(a), since the Court cannot consider affidavit evidence even if the Defendant is making an application under Order 18 rule 19(1)(d), the pleadings of the Plaintiff clearly discloses reasonable cause of action, hence this particular rule must fail, see Order 18, rule 19(2) of RDC;

b. The Defendant’s Counsel has in nowhere addressed which part of the Plaintiff’s pleadings have satisfied any of the statutory grounds under Order 18, rule 19 amounts to striking out including abuse of court process under Order 18, rule 19(1)(d);

c. The Defendant’s Counsel has failed to enlighten the Court by any cases/statutory laws on, by reaching a settlement agreement between the parties, the Court could then have power to ‘strike out’ a party’s pleading.”[10]

42.The arguments made under sub-paragraph (a) and (b) above are misconceived, for the defendant is arguing that the Re-Re-Amended Writ of Summons and the Re-Amended Statement of Claim should be struck out not only because they “no longer disclose any reasonable cause of action”[11], but also because it is an abuse of the process of the court if the plaintiff proceeds with this action despite the binding settlement agreement. The defendant is therefore permitted to file an affidavit in support despite the provision under Order 18 rule 19(2) of the RDC.   Further, as the defendant is not taking a “pleading point” as such, it is unsurprising that the defendant has not identified any particular part of the Re-Amended Statement of Claim which is objectionable.

43.As for the argument made under sub-paragraph (c) above, Mr Wong for the defendant has referred this court to the cases of Lucky Money Limited & Others v Guangzhou Chung Kin Engineering Company & Others (HCA 542/2007, unreported, 6 January 2011) and Chan Wan Chuen Snaky also known as Chan Wan Chuen v Express Tourist Bus Company Limited & Others [2018] HKCFI 2107 in which the actions were struck out on the ground, among others, that it was an abuse of the process of the court to proceed with the action upon the reaching of a binding settlement agreement.

DISPOSITION

44.By reasons of the aforesaid, I order that the Re-Re-Amended Writ of Summons and the Re-Amended Statement of Claim herein be struck out on the ground that it is an abuse of the process of the court for the plaintiff to proceed with the action herein upon the reaching of a binding settlement agreement between the parties.

COSTS

45.In his written submissions, Mr Wong for the defendant asked this court to dismiss the plaintiff’s action with costs.

46.However, it is noted that according to the April Offer which I found to have been accepted by the defendant by virtue of the May Letter, the agreed payment of $500,000 was supposed to be inclusive of costs and interests.

47.In such circumstances, my preliminary view is that it would be unfair if the plaintiff were to be ordered to pay the defendant’s costs of the action despite the said binding agreement.

48.Having said that, it is apparent that the defendant has incurred extra costs by reason of the plaintiff’s insistence that there was no binding settlement agreement.  It all started with a letter dated 2 June 2020 issued by the plaintiff’s solicitors.

49.I therefore make a cost order nisi that subject to the followings, there shall be no order as to the costs of the action:

(1) The plaintiff shall bear the defendant’s costs of the action incurred on or after 2 June 2020, to be taxed if not agreed; and

(2) The plaintiff shall bear the defendant’s costs of the Summons, with certificate for counsel, to be taxed if not agreed.

50.The above order nisi shall become absolute in the absence of application to vary (which, if any, shall be made by letter, and will be disposed of on paper) within 14 days hereof.

Mr Kay K. W. Chan, instructed by Lo & Fung, for the plaintiff

Mr Wong Cho Lik, instructed by Raymond Siu & Lawyers, for the defendant