FOK CHUN YUE BENJAMIN (in his capacity as a co-executor of the estate of Fok Ying Tung Henry, deceased and in his personal capacity) (Plaintiff) v FOK CHUN WAN IAN (in his personal capacity and as an executor of the estate of Fok Ying Tung Henry, deceased) (1st Defendant)

Read the full judgment text of HCA 2155/2011 on BabelCite. This Court of First Instance judgment was delivered on 3 January 2014 before Poon J.

Civil procedure – stay of proceedings – settlement agreement – executor disputes – proper construction – repudiatory breach – rescission ab initio – multi-party global compromise – Fok Ying Tung estate – HCA 2155/2011 – The plaintiff, Fok Chun Yue Benjamin, brought an action in his capacity as co-executor and beneficiary of the estate of Mr Fok Ying Tung to remove the 1st defendant (Ian) and 2nd defendant (the Aunt) as executors, alleging that Ian had misappropriated 350 HFE shares held by Waterborne, the entire shareholding in three offshore companies, and the JAOS Funds. The plaintiff also commenced HCMP 2621/2011 (a Beddoe application) and HCA 569/2012. A global Settlement Agreement dated 3 August 2012 was entered into by 31 parties, under which the Order 14 Application for removal of the executors was adjourned for 6 months for the sole purpose of perfecting and implementing the Settlement Agreement. The plaintiff subsequently applied to restore the Order 14 Application principally because of an alleged failure by Ian and the 4th defendant (Tim) to honour Clause 19(e) of the Settlement Agreement concerning the Yau Wing Option – an option granted by FYTF to Yau Wing in 1997 to repurchase a share in Panyu Development, which had lapsed after 30 June 2007. Ian and the Aunt applied for a stay of the entire action (or alternatively the Order 14 Application) save for implementing the Settlement Agreement. Held, allowing the Stay Applications: (1) The court has inherent jurisdiction, preserved by section 16(3) of the High Court Ordinance (Cap 4), to order a stay of proceedings; a stay is not equivalent to a discontinuance or dismissal and the proceedings remain in being (Cooper v Williams [1963] 2 QB 567; Rofa Sport Management AG v DHL International (UK) Ltd [1989] 1 WLR 902). (2) The court may stay proceedings based on a settlement agreement even if the agreement contains no express provision for a stay and is not made a court order (Eden v Naish (1878) 7 Ch 781; King Prosper Trading Limited v Tenbase Trading Limited, HCA163/1996). (3) On a proper construction of Recital B and Clause 48, the 6 months' adjournment is not an adjournment simpliciter or a hard time limit for performance, and the present action and the Order 14 Application are kept in abeyance pending the perfecting and implementation of the Settlement Agreement; expiry of the 6 months without more does not entitle a party to revive the underlying proceedings while the Settlement Agreement remains valid and capable of being performed. (4) The proper approach in dealing with a stay application opposed on the ground that the settlement should be set aside or rescinded is to direct a fresh action to determine that question, while in the meantime ordering a stay of the underlying main action; the court may determine the question on affidavit evidence alone only if satisfied beyond doubt that the underlying action ought not to go on (Shackleton v Swift [1913] 2 KB 304; Foskett on Compromise). The phrase 'beyond doubt' is not a criminal standard but reflects the seriousness of denying a party a trial on the merits. (5) Clause 19(e) of the Settlement Agreement, properly construed against the relevant background, covers only an existing option and not an expired option, the share covered by it, or the underlying interest; it does not contemplate the re-execution of the expired Yau Wing Option (Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896; BCCI v Ali [2002] 1 AC 251). KPMG's investigation found the Yau Wing Option had expired and no other option was identified, so Clause 19(e) was not engaged and there was no repudiatory breach by Ian and Tim. (6) The plaintiff cannot rescind the Settlement Agreement vis-à-vis Ian and Tim only while holding it valid against all other contracting parties; rescission ab initio is an all-or-nothing remedy (Cartwright on Misrepresentation, Mistake and Non-Disclosure; cf. Hurst v Bryk [2002] 1 AC 185, which concerned repudiatory breach, not rescission). (7) The plaintiff's complaints of material non-disclosure and breach of equitable duty by Ian could not be resolved on the affidavit evidence and required a proper trial. (8) The Aunt's application succeeded in its own right as the Settlement Agreement remained an unimpeached compromise binding on her and the plaintiff. Disposition: Stay Applications allowed; the present action including the Order 14 Application stayed save for the purpose of perfecting and implementing the Settlement Agreement in full as expeditiously as possible; parties to report to the court in writing within 3 months; costs to be agreed, failing which submissions to be lodged and exchanged within 42 days and costs disposed of on paper.

Legal issues: Jurisdiction to order stay of proceedings under Para 1 and Para 2 · Stay in absence of express provision · Construction of Recital B and Clause 48 · Proper approach to stay applications · Construction of Clause 19(e) – Yau Wing Option · Repudiatory breach of Clause 19(e) · Discharge vis-à-vis Ian and Tim only · Material non-disclosure and/or unfair dealing by Ian · Rescission vis-à-vis Ian and Tim only · Whether Ian's stay application should be allowed · Whether the Aunt's stay application should be allowed in its own right · Conditions to be imposed on the stay

Outcome: Stay Applications allowed. The present action including the Order 14 Application is stayed save for the purpose of perfecting and implementing the Settlement Agreement in full as expeditiously as possible.

Cites 4 cases