Gch (International) Ltd v. Wong Fung Wai, Henry and Others

HCA 1538/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1538 OF 2012

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R E A S O N S   F O R   J U D G M E N T

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1.By an order made by Master de Souza on 11 December 2013 upon the application of the plaintiff by summons filed on 30 July 2013 it was ordered that the general stay of proceedings be uplifted. An order for costs was also made in favour of the plaintiff.

2.By a notice of appeal dated 24 December 2013, the defendants gave notice that they intended to appeal against the order of the master to seek an order that the master’s order be set aside and that the plaintiff’s summons be dismissed with costs in favour of the defendants.

3.After hearing submissions I made an order on 3 July 2014 that the appeal be allowed and that the master’s order be set aside.  I also made an order that the plaintiff’s summons be dismissed with costs to the defendants.  I also ordered that the costs of the appeal be costs to the defendants with a certificate for two counsel and that there be no order as to costs in respect of the hearing before the master.

4.I indicated at the time that written reasons would be given later. This I now do.

5.The plaintiff is a company incorporated in Hong Kong with limited liability.

6.By a shareholders’ agreement dated 17 April 2009 (“the shareholders’ agreement”) made between Will Top Ltd (“Will Top”) as the vendor and Wang Fu Group Ltd (“Wang Fu”) as the purchaser, Wang Fu purchased 500 shares of HK$1.00 each of the plaintiff from Will Top and became a 50% shareholder of the plaintiff with Will Top holding the remaining 500 shares of HK$1.00 each, the other 50% shareholding in the plaintiff.

7.The 1^st and 2^nd defendants, who are husband and wife, were at all material times the beneficial owners and directors of Will Top, a BVI company.

8.Wang Fu is a company incorporated in Hong Kong with limited liability.  Pong Yuen Man, Tam Che Ming and Pong Tat Shing were at all material times the directors of Wang Fu.

9.On or about 26 August 2011 the plaintiff allotted 250 shares of HK$1.00 each to Wang Fu.  After the allotment Wang Fu and Will Top held 60% and 40% of the shareholding in the plaintiff, respectively.

10.The plaintiff brought these proceedings against the defendants on 28 August 2012.  The statement of claim fully pleads with particulars the claims of the plaintiff against the defendants. 

11.This action was  settled by a settlement agreement dated 13 December 2012 (“the settlement agreement”) made between the plaintiff, Pong Yuen Man and Wang Fu as Parties A (“Parties A”) and the 1^st defendant, the 2^nd defendant and Will Top as Parties B (“Parties B”) upon the terms and conditions contained in the settlement agreement.

12.The relevant background facts are set out in the recitals to the settlement agreement.

13.Recital 2 states that Wang Fu is and was a company in which Pong Yuen Man has a substantial shareholding.  At the invitation of the 1^st and 2^nd defendants, Wang Fu agreed to invest in the plaintiff which was involved in the trade of building materials in Hong Kong and the Mainland by itself and through its wholly owned subsidiary in Shanghai (“GCH Shanghai”) and controlled by the 1^st and 2^nd defendants through Will Top.  The terms of the venture were set out in the shareholders’ agreement.

14.Recital 3 states that since the co-operation between the parties, the plaintiff and GCH Shanghai have been involved in various transactions including projects with Dalian Wanda Commercial Properties Co Ltd (“Wanda”) for the provision of building materials to Wanda for its construction projects in various parts of the Mainland.  The first contract was awarded by Wanda in 2011 for the construction works of 2012 (“the Wanda 2012 project”) whilst the second contract was awarded by Wanda in 2012 for the construction works of 2013 (“the Wanda 2013 project”).  It was the understanding of the parties to the settlement agreement that the total contract sum of Wanda 2012 project was about RMB256 million.

15.Recital 4 states that at the time of executing the settlement agreement the Wanda 2012 project had come to the completion stage with 9 out of the 12 sub‑projects being completed.  The contract sum received was about RMB130 million.

16.Recital 5 recorded that this action concerns, among others, allegations of breaches on the part of the 1^st and 2^nd defendants of their duties and obligations as directors of the plaintiff as well as under the shareholders’ agreement.  All the disputes covered by this action were referred to as “the Subject Disputes”.

17.Recital 6 recorded that the plaintiff and GCH Shanghai have been suffering loss and damage and various difficulties including difficulties in disposing of the overstocks of the Wanda 2012 project (“the overstocks”).  Parties A estimated the disposable price of the overstocks was about RMB28 million.

18.And importantly, recital 7 recorded that the parties agreed to settle all the Subject Disputes “in the manner hereinafter mentioned”.

19.The obligations, undertakings and warranties of Parties B to Parties A under the settlement agreement are set out in clause 2(a) to (e).

20.The obligations and undertakings of Parties A are set out in clause 3(a) to (c).

21.Clause 1 provided that:

“The parties shall perform all the acts and execute such documents as provided herein for a global settlement of the Subject Disputes”

22.Undoubtedly, the settlement agreement was to be a global settlement of the Subject Disputes.

23.Clause 2(a) required Parties B to provide a letter of apology signed by the 1^st defendant in favour of Pong Yuen Man at the time when the settlement agreement was to be executed.  This was provided by Parties B in accordance with clause 2(a) and the letter of apology signed by the 1^st defendant to Pong Yuen Man is marked as Exhibit A to the settlement agreement.

24.By clause 2(d)(i) Parties B were required to transfer all the shares in the plaintiff held by any of Parties B namely, 500 shares representing 40% of the entire issued share capital of the plaintiff, as legal and beneficial owners to a nominee to be nominated by Parties A at a nominal consideration of HK$100 (“the share transfer”).

25.The share transfer took place on 14 December 2012.  500 shares in the plaintiff representing 40% of the entire issued share capital of the plaintiff were transferred by Will Top to Wang Fu.  Wang Fu therefore held 100% shareholding in the plaintiff after the transfer on 14 December 2012. 

26.By clause 2(e) of the settlement agreement, Parties B agreed to pay to the plaintiff the total sum of HK$1,188,650 as the agreed costs and expenses (“the agreed costs”) of Parties A before and after the commencement of this action by way of 10 equal instalments, the first instalment to be paid on the date of signing of the settlement agreement with all subsequent instalments to be paid on or before the 12^th day of each subsequent calendar month.  It was further provided that:

“In the event that Parties B fail to punctually pay any of the installments in full, all the difference between the said sum of HK$1,188,650.00 and the sum(s) paid pursuant to this clause shall immediately become due and payable to [the plaintiff]. [The 1^st defendant] shall provide 9 post-dated cheques for the said installments (all made payable to [the plaintiff]) upon signing of this Settlement Agreement.”

27.Parties B were required to pay the agreed costs by 10 equal instalments of HK$118,865.  In accordance with clause 2(e), the first instalment was paid on signing of the settlement agreement and 9 post‑dated cheques each for  HK$118,865 were provided for the remaining 9 instalments.

28.The cheque dated 12 July 2013 for the July instalment was dishonoured upon presentation for payment.  There is no dispute that there was a breach by Parties B of clause 2(e) of the settlement agreement as there was no punctual payment of the July instalment.

29.Clause 4(a) of the settlement agreement provided that within 7 days Parties A and Parties B should jointly make application to the court for a stay of this action with no order as to costs and that Parties B should procure the 3^rd to 5^th defendants in this action to consent to such an application. 

30.Pursuant to clause 4(a) the plaintiff and the defendants issued a consent summons on 20 December 2012 asking for an order that there be a general stay of proceedings of this action and that any party do have liberty to apply for uplift of the stay of proceedings, with no order as to costs of the application.

31.The consent summons was accompanied by a joint letter to the court also dated 20 December 2012 signed by the solicitors for the plaintiff and the solicitors for the defendants explaining the circumstances leading to the filing of the consent summons and asking for an order in the terms of the consent summons.

32.By a consent order made by Master Li on 3 January 2013 it was ordered that:

“1. There be a stay of proceedings;

2. Any party do have liberty to apply for uplift of the stay of proceedings.

3. There be no order as to costs of this application.”

33.Clause 4(b) of the settlement agreement provided that:

“Upon fulfillment of all the obligations on the part of Parties B, Parties A and Parties B shall jointly apply to the Court for discontinuance of the Action with no order as to costs and Parties B shall procure the 3^rd and 5^th Defendants in the Action to agree and endorse on same joint application (if required by Parties A to do so).”

34.I would observe that it was only upon fulfilment of all the obligations on the part of Parties B that there would be a joint application to the court for the discontinuance of the action with no order as to costs.

35.And clause 4(c) provided that:

“Upon the discontinuance of the Action, and subject to the warranties given by Parties B in this Settlement Agreement do remain true and accurate and not misleading by that time,

(i) each of Parties A and each of Parties B shall waive and forgo all and any of their respective claims that any of them has or might have against each other in relation to the affairs of [the plaintiff] and/or GCH (Shanghai) (if any).

(ii) Parties B shall waive and forgo all and any of their claims that any of them have in relation to the affairs of [the plaintiff] and/or GCH (Shanghai) (if any).

(iii) Parties B shall also procure the 3^rd and 5^th [defendants] to waive and forgo all their claims (whether jointly and/or severally) against any party of Parties A (if any) by way of an undertaking in the form annexed hereto as Exhibit ‘B’.”

For the avoidance of doubt, notwithstanding the above, nothing in this Clause shall be construed as limiting or diminishing the right(s) of Parties A against Parties B arising out of any breach of the obligations and warranties as set out in this Settlement Agreement on the part of Parties B.”

36.Clause 4(d) provided that:

“In the event that Parties B fail to timely fulfill any of their obligations under this Settlement Agreement or the warranties given by Parties B in this Settlement Agreement do not remain true and accurate and not misleading in any material respect (the ‘said default’), Parties A and GCH (Shanghai) shall be entitled and at liberty to apply for uplift of the stay of the Action and proceed with the Action / commence and proceed with any other legal proceedings against Parties B and all other Defendants in the Action and as well as all other related parties (as the case may be) IN ADDITION AND WITHOUT PREJUDICE to any other rights and remedies that Parties A have or might have against Parties B or any other parties arising out of the said default as set out in this Settlement Agreement or otherwise.”

37.Clause 11 made time of the essence by providing that:

“Time shall be of the essence in respect of the obligations, warranties and undertakings of Parties A and Parties B in this Settlement Agreement. …”

38.The plaintiff applied to uplift the stay by summons dated 30 July 2013 with the supporting affirmation of Pong Yuen Man affirmed on the same day.  The plaintiff relied on the breach of the settlement agreement by Parties B by failing to make timely payment of the July instalment of the agreed costs as the post-dated cheque dated 12 July 2013 for HK$118,865 was dishonoured when presented for payment.  The plaintiff sought an order that the stay be uplifted (paragraphs 12 to 19 of the said affirmation of Pong Yuen Man).

39.The 12 July 2013 cheque was the 7^th post‑dated cheque delivered when the settlement agreement was executed.  Up until that time 6 instalments represented by the 6 post‑dated cheques for the months of January to June 2013 were all honoured upon presentation for payment.

40.I would observe that by that date the plaintiff had already received a substantial amount of the agreed costs of HK$1,188,650.  The plaintiff had received a total of 7 instalments (including the first instalment paid on the signing of the settlement agreement) amounting to HK$832,055.

41.It is not disputed that time was of the essence and that there was a breach by Parties B to punctually pay the 12 July 2013 instalment of the agreed costs and expenses. 

42.The defendants accept that they were in breach of the settlement agreement by failing to make timely payment of the 12 July 2013 instalment of the agreed costs. 

43.At paragraphs 24 to 29 of the affirmation of the 2^nd defendant filed on 3 October 2013 in opposition to the plaintiff’s application, the 2^nd defendant affirmed:

“24. …. We admit that we did not make the payment of the July Instalment on time. However, we must stress that such delay was never intentional but solely due to our inadvertent mistake in depositing the sum for the July Instalment into a wrong bank account. As a result, the cheque for the July instalment which the plaintiff deposited into its bank account was bounced. As soon as we discovered that our mistake, we have tried our best endeavour to rectify it, take immediate steps to minimize Parties A’s loss and offer to compensate them in full for all losses they incurred arisen out of the very short period of delay. ….

25. In accordance with Clause 2(e) of the Settlement Agreement, the 1^st Defendant provided 9 post‑dated cheques to the Plaintiff at the time of signing of the Settlement Agreement. Amongst those 9 cheques, 7 of them were drawn from Standard Chartered Bank and the last 2 were drawn from Hang Seng Bank. It was because the 1^st Defendant did not have sufficient cheques issued from the same bank at the time of settlement.

26. The 1^st Defendant was punctual in paying the first 6 instalment payments (i.e from January to June of 2013). On 3 July 2013, when the 1^st Defendant was arranging for the July Instalment (i.e. the third last instalment), I asked the 1^st Defendant to deposit a sum of $120,000 into our Hang Seng Bank account (which was later found out to be an incorrect account).

27. On 16 July 2013, Mr. Tam telephoned the 1^st Defendant and said the cheque of Standard Chartered Bank for the July instalment was bounced. The 1^st Defendant immediately checked with me and I then realized that I was mistaken when I advised him to deposit the fund into Hang Seng Bank (instead of Standard Chartered Bank). On the same day, the 1^st defendant apologized to Mr. Tam and informed him of our mistake. He assured Mr. Tam that he would immediately put fund into the Standard Chartered Bank account and asked Mr. Tam to present the cheque for payment again on 18 July 2013.

28. On 17 July 2013, I deposited the fund of HK$120,000 into the Standard Chartered Bank account through the assistance of my friend as both the 1^st defendant and myself were out of town at that time. The 1^st Defendant telephoned Mr. Tam informing him that the fund was ready in the Standard Chartered Bank account and they could present the cheque any time and there was no need to wait until 18 July 2013. But Mr. Tam replied that they had not received the returned cheque from their bank yet. The 1^st Defendant reminded him to present the cheque when he has received the same. At that time, Mr. Tam did not say he would not accept the payment.

29. On 22 July 2013, the 1^st Defendant noted that Mr. Tam still had not deposited the cheque and therefore called to remind him that there was sufficient fund in the Standard Chartered Bank account for payment of the July Instalment.  Mr. Tam replied that he was busy and would respond to the 1^st Defendant later.”

44.The above facts are undisputed.

45.It is clear that an inadvertent mistake was made by the 1^st and 2^nd defendants in relation to the 12 July 2013 cheque.  On 3 July 2013 HK$120,000 was deposited into the wrong bank account namely, the Hang Seng Bank account.  It should have been deposited into the Standard Chartered Bank account so that the 12 July 2013 cheque drawn on the Standard Chartered Bank would be honoured on presentation.  On 17 July 2013 HK$120,000 was deposited into the Standard Chartered Bank account so there was a delay of a few days in putting sufficient funds into that account to meet the 12 July 2013 cheque.  The 1^st defendant reminded Mr Tam of the plaintiff to present the cheque when he had received the same from their bank.  On 22 July 2013 after noticing that Mr Tam had not deposited the cheque for payment, the 1^st defendant called to remind him that there were sufficient funds in the Standard Chartered Bank account for payment of the July instalment. 

46.By a letter dated 26 July 2013 the plaintiff’s solicitors wrote to the defendants’ solicitors pointing out that the defendants had defaulted in paying the July instalment on or before 12 July 2013 and informing them that the plaintiff would proceed to apply for uplifting the stay of proceedings.

47.By a letter dated 29 July 2013 the defendants’ solicitors set out the sequence of events and made an offer to settle the remaining instalments for July, August and September 2013 by one payment within 7 days of acceptance, to pay interest for the July instalment up to date of payment, to pay the plaintiff’s bank charges and expenses in relation to the dishonoured cheque and to pay the plaintiff’s reasonable legal fees for the letter dated 26 July 2013 and all incidental attendances on the matter. 

48.There was no reply to the letter from the defendants’ solicitors. Instead, there was a meeting on 6 August 2013 between the 1^st and 2^nd defendants and Pong Yuen Man.

49.The 2^nd defendant affirms at paragraph 35 of her affirmation:

“On 6 August 2013, with a view to settle the matter, the 1^st Defendant and myself met Mr. Pong at his office. We explained the inadvertent mistake to Mr. Pong and rendered apology. We repeated our terms offered for settlement as mentioned in WMHY’s letter dated 29 July 2013 and also presented a cheque in a sum of $356,595 being the remaining last 3 instalment payments (i.e. July, August and September) to him for full payment of the sum of HK$1,188,650.00 in accordance with Clause 2(e) of the Settlement Agreement. However, Mr. Pong refused to accept our cheque and insisted such payment should be passed through our respective solicitors.”

50.Thereafter, by a letter dated 16 August 2013 from the plaintiff’s solicitors to the defendants’ solicitors, the defendants were informed by the plaintiff’s solicitors that by the defendants’ failure to pay the July instalment on or before 12 July 2013, the defendants had wrongfully repudiated the settlement agreement and that the plaintiff had accepted the defendants’ repudiation and that the settlement agreement was terminated.  They also alleged that the defendants were liable to pay damages to the plaintiff including all the remaining instalments due and payable under clause 2(e) of the settlement agreement.

51.By a letter dated 20 August 2013 from the defendants’ solicitors to the plaintiff’s solicitors, the defendants denied that they had repudiated the settlement agreement.  They also sent the plaintiff’s solicitors a cheque for HK$356,595 the amount of the remaining instalments which had remained unpaid. 

52.By a letter dated 26 August 2013 the plaintiff’s solicitors informed the defendants’ solicitors that the plaintiff accepted the cheque for HK$356,595. The plaintiff’s solicitors also stated:

“Please note that our clients accept your clients’ cheque for the sum of HK$356,595.00 being the sum representing the outstanding balance of the payment of HK$1,188,650.00, since our clients’ are entitled to such accelerated payment as liquidated damages pursuant to Clause 2(e) of the Settlement Agreement, upon your client’s breach in failing to pay the July instalment on or before 12 July 2013”.

53.The plaintiff’s solicitors also took the view that the acceptance of the HK$356,595 did not alter the plaintiff’s position that the defendants had wrongfully repudiated the settlement agreement and that the plaintiff had accepted the repudiation by the letter of 16 August 2013.

54.Whether or not the court should uplift the stay depends on the circumstances.  Undoubtedly the court has a discretion in the matter to be judicially exercised. 

55.Mr Wong SC, with Mr Ho, for the defendants, submitted that his primary submission was that by the settlement agreement the parties had agreed to settle the action on the basis that the action will be stayed.  That involved the obtaining of a court order to stay the action which was obtained by consent on 3 January 2013.  The parties agreed that if they were to apply to court to uplift the stay, the court would have an unfettered discretion in the matter bearing in mind all the circumstances of the case.

56.It was his primary submission that in the exercise of the court’s discretion taking into account all the circumstances of the case, the court should exercise its discretion by refusing the application to uplift the stay in the interests of justice.

57.Mr Wong’s secondary submission was that there has been substantial performance of the obligations of the defendants under the settlement agreement.  That being so, it was his secondary submission that a term in a contract may change from being a condition to a warranty when a party has received a substantial part of the consideration from the other party as has occurred here.  The result is that the party is not entitled to treat itself as discharged from the obligations under an agreement even if the other party has breached its terms. 

58.Dealing with the primary submission of Mr Wong, it seems to me to be abundantly clear that the court has a discretion in the matter.  Indeed Mr Li SC, with Mr Kwong, for the plaintiff, does not dispute that the court has a discretion in the matter.  Mr Li submitted, however, that the court’s discretion is limited and that the court could not consider circumstances arising after the making of the settlement agreement. It was his submission that the only circumstances that the court could consider in the exercise of the discretion were circumstances existing at the time of the making of the settlement agreement and whether there were vitiating factors affecting the making of the agreement.

59.On the proper construction of the settlement agreement it is plain, in my view, that the parties have agreed to invoke the court’s process in making an application to the court for a stay of this action (by clause 4(a)) and in making an application to uplift the stay (by clause 4(d)).

60.It is pertinent to observe that by clause 4(d) it was agreed that if Parties B fail to fulfil any of their obligations, Parties A “shall be entitled and at liberty to apply for uplift of the stay of the Action …”.  The parties did not agree that if Parties B failed to fulfill any of their obligations then the stay would automatically be uplifted.  What was agreed was that Parties A would be entitled to apply for the uplifting of the stay.  Thus, it is clear that the parties have agreed to invoke the court’s process in applying for the stay and in applying for the uplifting of the stay.

61.Where the court’s process is being invoked it is clear that the court is the master of its own process. 

62.As was said by Lord Diplock in Bremer Vulkan Schiffbau Und Maschinenfabrik v South India Shipping [1981] 1 All ER 289, there was a general power in the court to control its own procedure so as to prevent it being used to achieve an injustice.  He said at p 295:

“The High Court’s power to dismiss a pending action for want of prosecution is but an instance of a general power to control its own procedure so as to prevent its being used to achieve injustice. Such a power is inherent in its constitutional function as a court of justice …. So, it would stultify the constitutional role of the High Court as a court of justice if it were not armed with power to prevent its process being misused in such a way as to diminish its capability of arriving at a just decision of the dispute.”

63.As regards the test that the court should apply in deciding whether or not to lift a stay, I would refer to what Ward LJ said in Wagstaff v Colls [2003] EWCA Civ 469, 2 April 2003 at paragraphs 52 and 53 of his judgment:

“52. The test is established by Cooper v Williams [1963] 2 Q.B. 567. I have already cited Lord Denning’s judgment that the stay can be removed ‘if proper grounds are shown’. Danckwerts L.J. said at p. 582:-

‘I am quite satisfied that a stay of this kind is not equivalent to the position when a judgment has been given; but it is a process which can be removed for good cause. In my experience stays have often been removed when the facts required that step to be taken, and I would point out that it is also possible to set aside a consent order in proper conditions.’

Perhaps it goes without saying, but, as Fox L.J. held in Hollingsworth v Humphrey,

‘In deciding whether ‘proper grounds are shown’ (or ‘good cause’ is shown) for lifting the stay it is necessary to consider all the circumstances of the case.’

53. Thus the stay was lifted in Cooper v Williams to allow the widow to intervene in fatal accident proceedings which had dealt only with the child’s claim. The stay was not lifted in Hollingsworth v Humphrey. The circumstances were again very different in Lambert v Mainland Market Deliveries Ltd. where a claim for damages following a road accident was stayed on a payment into court being accepted. Unless lifted the insurers would not be able to pursue their proper claim. The County Court judge refused to allow the stay to be lifted. The Court of Appeal allowed an appeal against that order, Megaw L.J. saying at p. 833:-

‘In my judgment, relying particularly on the passage which I have cited from the judgment of Sir Wilfred Greene M.R. in Derrick v Williams, 55 T.L.R. 676, 678 and I think also as a matter of principle, where there has been a stay of proceedings as a result of a payment into court and the operation of Order 11 of the County Court Rules 1936, it is open to the court – the court has jurisdiction – to set aside that stay in a proper case. I would, however, say this also; that it is a jurisdiction which ought to be exercised with very great care and it may be that the cases in which it falls to be exercised should only be rare. It is desirable that litigation, once apparently finished – including litigation finished by means of a payment into court which is either of the full amount claimed or an amount accepted deliberately by a plaintiff – ought not lightly to be allowed to be re‑opened.’

It is not a surprise that the court will be slow to allow litigation, ostensibly between the same parties, to be re‑opened but that is not the case before us.”

64.Lam J (as he then was) in Chun Wo Construction & Engineering Co Ltd v China Win Engineering Limited (HCCT 37/2006, 12 June 2008) succinctly summarized the principles from Wagstaff at paragraph 71 of his judgment as follows:

“….

(a) A stay does not operate as a discontinuance or a judgment for the plaintiff or the defendant. Thus, the proceedings remain extant and the stay can be lifted or removed if proper grounds are shown;

(b) The extent of a stay depends on the context in which the stay was granted. In the context of a stay by consent for settlement of disputes, one should look at the agreement reached between the parties. ….

(c) As between parties to the agreement leading to the stay, the court will be slow to allow litigation between them to be re-opened.  This is particularly so when the stay is an integral part of the compromise.”

65.The court is always master of its own process.  This was emphasized by Finlay J in Lewis v Combell Constructions Pty Ltd (1989) 18 NSWLR 528 when he said at p 537:

“ Indeed this principle that the court is always master of its own process has been extended in appropriate cases to setting aside a consent order obtained without authority or as a result of a mistake on the basis that the court has an inherent jurisdiction to set aside the order if the interests of justice require it. In the New Zealand Court of Appeal in 1988 Casey J (with whom Cooke P and Bisson J agreed) said in Waitemata City Council v MacKenzie [1988] 2 NZLR 242 at 249:

‘ Fortified by the views of the Lord Chancellor to which I have referred in Neale v Gordon Lennox, I am disposed to accept that the Court in an action taken for that purpose does have an inherent jurisdiction to set aside a sealed consent order obtained without authority or as a result of a mistake if the interests of justice require it. While there are obvious reasons for upholding the indefeasibility of such orders, it seems unnecessary to go to the extreme limit of regarding them as absolutely inviolate (apart from the ‘slip rule’); to do so could transform procedures designed to further the ends of justice into instruments of injustice or oppression. So long as the rights of others have not been materially prejudiced, I can see no virtue in the formal operation of sealing sufficient in itself to constitute a bar to any prospect of restoring the parties to the position they should have been in all along.

Whatever the grounds for seeking to set aside the order, the ultimate question is whether such a step is called for in the interests of justice, having regard to all the circumstances of the case.’

This passage would suggest that the principle may be more extensive than thought by judges in earlier cases: cf Australian Direct Mail Advertising and Addressing Co Pty Ltd v Sukkar (Powell J, 28 October 1981, unreported): see also Easyfind (NSW) Pty Ltd v Paterson (Young J) (1987) 11 NSWLR 98 particularly at 107 and 108.

In the present case judgment has not been entered.  The defendant’s offer of the acceptance of compromise is, in my view, an agreement to a compromise of litigation which is subject to the procedures of this Court, such procedures including the possibility that the Court may consider it unjust to enforce the settlement or that it is in the interests of justice that the matter proceed to trial.”

66.And also at p 538 Finlay J said:

“ …. But I repeat my previous observation that whenever parties agree to a compromise of litigation they do so subject to the procedures of the court which include the possibility that the court may consider it unjust to enforce the terms of settlement or that it is in the interests of justice that the matter proceed to trial.

In my view the overriding principle with which the court is here concerned is the interests of justice in all the circumstances”.

67.It seems to me to be clear that the court should have regard to all the circumstances of the case when the application to lift the stay comes before the court.

68.As Ungoed‑Thomas J said in Slough Estates Ltd v Slough Borough Council and another [1968] Ch 299 at p 322:

“…. Nor is it established that once a stay is granted of one action for vexatious duplication of proceedings, a plaintiff is entitled to have that stay lifted by halting the other action. The lifting of the stay cannot be a matter of absolute right and it cannot be more, in my view, than a matter for judicial discretion, having regard to all the circumstances of the case when the application to lift it comes before the court. ….”

He also said at p 323:

“…. In any case, in the exercise of such a discretionary remedy as a stay, it seems to me that the court is entitled to and should consider the substance of the matter, including the relevant circumstances properly before it at the time of its decision.”

69.I am unable to accept Mr Li’s submission that the court’s discretion in deciding whether or not to uplift the stay in this case is fettered and limited to considering only the circumstances that existed at the time the settlement agreement was entered into namely, whether there were any vitiating factors affecting the making of the settlement agreement.  There is no merit in the submission that the court should not consider all the circumstances after the making of the settlement agreement.

70.In my judgment the court can and should consider all the circumstances properly before it when the application to uplift the stay is determined.

71.There is a dispute between the parties as to whether there was a repudiation of the settlement agreement and whether the same has been accepted by the plaintiff.  I would observe that at the time the plaintiff’s summons was taken out on 30 July 2013, the plaintiff had not yet regarded the defendants to be in repudiatory breach of the settlement agreement and had not yet purported to accept repudiation.

72.The question to consider is whether the court in the exercise of its discretion should allow or refuse the application to uplift the stay in all the circumstances at the time the application is to be determined and in the interests of justice. 

73.The defendants have provided the apology which was annexed to the settlement agreement as exhibit A.  The defendants have also caused to be transferred the remaining 40% of the shareholding in the plaintiff to Wang Fung on 14 December 2012. 

74.What is clear is that the breach was caused by an inadvertent mistake made by the defendants resulting in the slight delay in the payment of the July instalment.  There was also a slight delay in the payment of the accelerated payments under clause 2(e) of the settlement agreement as the payment was not made immediately.  However, by 26 August 2013 the plaintiff had received the full payment of the agreed costs. 

75.Parties A have also received the full benefit of the share transfer of the remaining 40% of the shares in the plaintiff.  Mr Li made it plain that these shares were not going to be returned to Parties B.

76.It is clear that by the end of August 2013 Parties B had completed their obligations under the settlement agreement. Parties A had already received all the benefits that they were entitled to under the settlement agreement. 

77.The stay of the action was an integral part of the compromise between the parties under the settlement agreement.  It would be unjust to allow the plaintiff to re‑open the litigation by uplifting the stay.  In the exercise of my discretion and in the interests of justice, I would refuse the application to uplift the stay.

78.As the defendants have succeeded on the primary submission of Mr Wong, it is not necessary to consider the secondary submission. 

79.For the above reasons, I allowed the appeal from the master, set aside his order and dismissed the plaintiff’s summons.

80.As the defendants succeeded in the appeal, costs should follow the event.  Costs of the appeal were, therefore, ordered in favour of the defendants with a certificate for two counsel. 

81.I made no order as to the costs of the hearing before the master as the defendants have succeeded on matters not argued below. 

Mr CY Li SC, leading Mr Jeremy Kwong, instructed by

Tsang, Chan & Woo, for the plaintiff

Mr Horace Wong SC, leading Mr Simon Ho, instructed by

Waller Ma Huang & Yeung, for the 1^st to 5^th defendants