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IN THE SUPREME COURT OF HONG KONG
(APPELLATE JURISDICTION)
CIVIL APPEAL NO. 45 OF 1971
(On appeal from C.J. Action No. 1010 of 1971)
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| BETWEEN |
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IP Cheng-tong alias Yet Fook Chu |
Plaintiff
(Appellant) |
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and
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Liu Yiu |
Defendant
(Respondent) |
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| Coram: Full Court (Blair-Kerr, S.P.J., Briggs and Huggins, JJ.) |
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JUDGMENT
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Blair-Kerr, S.P.J.:
1. The plaintiff’s claim is for possession of certain premises which, he alleges, were let to the defendant and used by him for business purposes. The defendant was given 6 months notice of termination under the Tenancy (Notice of Termination) Ordinance; but he refuses to deliver up vacant possession; and consequently this action was instituted on 11th May 1971.
2. The plaintiff then took out a summons under O.14 r.1 by which he gave notice of his intention to apply for final judgment. He filed an affirmation verifying the facts on which his claim was based; and the defendant filed an affirmation in which he alleged that the premises were let to him and used as domestic premises; and he claimed protection under the Rent Increase (Domestic Premises) Control Ordinance 1970.
3. On the hearing of the O.14 application on 3rd July 1971, the plaintiff was represented by counsel and the defendant was represented by a solicitor. On the affirmation evidence before the court, there was a clear issue of fact which could only be resolved after trial. However, the parties requested the court to make a consent order giving the defendant conditional leave to defend. The order, so far as relevant, reads:–
“.......... by consent It Is Ordered that:–
1. The defendant do have leave to defend this action conditional upon the defendant paying into court within 14 days all arrears of rent or mesne profits in respect of the premises in suit in the sum of $1,380 and thereafter $460 per month in advance commencing on the 1st day of August 1971;
2. Defence, conditional upon the above, be served in 14 days from the date hereof;
3. Reply, if any, be served in 10 days thereafter ...........................................................”
4. This order is not in the usual form. The defendant having attempted to show cause against the application pursuant to r.4(1), the court made its order under r.4(3); and the usual form of order when conditional leave to defend is given, is this:
“.......... it is ordered that unless the defendant pays $______ into court within ______F days, the plaintiff may enter final judgment ................................ and it is ordered that if that sum is so paid, the defendant may defend the action.” [vide Chitty and Jacob’s Queen’s Bench Forms 20th Ed. form 99 at p.77.]
5. In other words the order provides that the plaintiff may enter judgment if the defendant does not comply with the condition, and that if the condition is complied with, the defendant may defend.
6. The order of 3rd July 1971 was drawn up and entered in the records of the court. The defendant paid the $1,380 into court within the 14 days, a defence and counterclaim was filed on 23rd July 1971; and a reply and defence to the counterclaim was filed on 31st July 1971.
7. The $460, being mesne profits in respect of August 1971, was not paid into court on 1st August 1971; and the defendant’s offer to pay this sum on 5th August 1971 was refused by the court staff.
8. On 21st September the defendant took out a summons by which he gave notice of his intention to apply under O.3 r.5(1) for leave to pay the sum of $460 into court out of time; and on 28th September the plaintiff took out a summons by which he gave notice of his intention to apply for an order that (a) the defence and counterclaim be struck out and (b) the plaintiff have leave to sign final judgment. The two summonses were heard together; and, on 9th November, in a judgment delivered in open court, the learned judge granted the defendant’s application for leave to pay the $460 into court out of time and dismissed the plaintiff’s application to strike out the defence and counterclaim and for final judgment. This is an appeal by the plaintiff against that decision.
9. Before the judge the plaintiff relied, inter alia, on the decision of this court in HO Shiu-kwong v. On Chuen Kam Shoes Shop([1]). In that case the plaintiff’s allegation was that the defendants were trespassers. The defendants alleged that they were tenants. The plaintiff applied for final judgment under O.14; but, upon the application coming on for hearing, the court, at the request of the parties, made a consent order. It read:–
“.......... by consent It Is Ordered that unless the 2nd defendants pay the sum of $...... as part damages for trespass or as rent .................... (as the case may be) into court within 14 days ............. the plaintiff may enter final judgment against the 2nd defendants as claimed in the writ of summons herein. And it is ordered that if the said sums are so paid, both the 1st and 2nd defendants may defend the action .........”
This order was drawn up and entered in the records of the court. The 2nd defendants defaulted as regards their payments into court; and the plaintiff’s solicitors entered final judgment. The Assistant Registrar’s order was duly drawn up and entered in the records of the court. The defendants then applied for an order setting aside the judgment and for leave to make payments into court out of time. The matter eventually came up on appeal. On that occasion, I said (pp.40/41):–
“The order” (i.e. the order giving conditional leave to defend) “being a consent order, what the defendants were saying in effect was this: We consent to judgment being entered against us if we fail to comply with the conditions to which we have agreed. There is no suggestion of fraud or mistake in this case; and, ordinarily, a consent order cannot be extended or altered except by consent (vide Australasian Automatic Weighing Machine Co. v. Walter([2])). But, in any event, no application was made by the defendants to Mr. Justice Huggins to vary the consent order ...... which he could certainly have done by consent of the parties. Default having been made, the plaintiff was perfectly entitled to enter judgment ...... That judgment was a final concluded judgment of the court – a judgment by consent; and when such a judgment has been passed and entered, the court cannot set it aside, except in a fresh action brought for that purpose (vide Ainsworth v. Wilding([3])).”
10. However, the learned judge distinguished the instant case from HO Shiu-kwong’s case(1). He said:–
“Important distinctions between HO Shiu-kwong’s case(1) and the summonses before me are at once apparent. Most importantly the terms of the consent orders in question differed markedly. In HO Shiu-kwong’s case(1) the consent order stated that ‘unless the 2nd defendants pay ........... the plaintiff may enter final judgment as claimed.’ In this case the consent order does not empower the plaintiff to enter final judgment ........... It merely gives leave to defend conditional upon payment into court ......... Secondly, in HO Shiu-kwong’s case(1) the Full Court and the judge below were dealing with a judgment which had already been entered; and it seems clear from the language of the judgment of Blair-Kerr J. that that was the factor of paramount importance.”
The learned judge then went on to say this:–
“I consider that parties to interlocutory consent orders impliedly agree that they should receive different consideration and more liberal approach than should consent judgments. It would in my opinion be monstrous to decide that the parties when consenting to this order were agreeing that a delay of 2 days or even of 4 days in making an advance payment would debar the defendant from further defending the action. If they had been so agreeing, they could have said so and arranged that judgment could be entered without the intervention of the court so that the consent order would in effect be a final one. ........................................... In this case the consent order does not specifically authorise the plaintiff to enter final judgment nor even to apply to enter judgment. It is silent on the results of default. In agreeing to its terms the parties to it must be taken to have realised that on default and before judgment could be entered a further application to court would be necessary and that on consideration of such a further application the court would have regard to the precise nature of the default and would exercise a judicial function in deciding whether to grant such an application ............................ By omitting from the terms of the order any reference to the result of default the parties have left the time limit for the payment of mesne profits or rent ........ to some extent unfixed – or rather they have left it to the court to fix it having regard to O.3 r.5 which in my opinion can apply to an interlocutory consent order in such circumstances as arise here. That different considerations apply to interlocutory consent orders than apply to final ones appears clear from Mullins v. Howell(4) and from Ainsworth v. Wilding(3).”
11. In Ainsworth v. Wilding(3), the action came on for trial before Romer J. After some evidence had been called, a judgment was taken by consent of all parties. This judgment was duly passed and entered. Some 15 months later one of the defendants sought to set it aside on the ground that “the consent of the plaintiffs and defendants to such order was given by mistake.” Refusing the motion, Romer J. said:–
“I think that a fresh action must be brought and that I have no jurisdiction to hear the matter on motion, at any rate without the consent of the parties ......... the required consent has been refused ......... The court has no jurisdiction, after the judgment at the trial has been passed and entered, to rehear the case. That is clear .................. I am not now speaking of cases where the court acts by the consent of the parties; I think that with consent of the parties I should have had jurisdiction, but on the authorities that is not free from doubt; and I am not speaking now of merely interlocutory orders, even if drawn up, as to which different considerations probably apply as was pointed out .............. in Mullins v. Howell(4).”
12. In Mullins v. Howell(4), the headnote reads:–
“The Court has jurisdiction to discharge an order made on an interlocutory application by consent when it is proved to have been made under a mistake, though that mistake was on one side only.
Where on motion for a mandatory injunction an order was made by consent pursuant to the terms of a previous agreement by which the defendant gave an undertaking to remove certain obstructions, and it appeared that the defendant had by mistake consented to a more extensive undertaking than he intended to do, the Court refused to enforce that part of the undertaking which had been given by mistake.”
Sir George Jessel M.R. said (p.766):–
“I have no doubt that the Court has jurisdiction to discharge an order made on motion by consent when it is proved to have been made under a mistake, though that mistake was on one side only, the Court having a sort of general control over orders made on interlocutory applications. ............................ I do not think that the rules which have been laid down as the rules under which the Court will enforce agreements apply to enforcing orders of the Court, because the Court has jurisdiction over its own orders, and there is a larger discretion as to orders made on interlocutory applications than as to those which are final judgments.”
13. In Purcell v. F.C. Trigell Ltd.([5]), Buckley L.J., referring to the decision in Mullins v. Howell(4), said:–
“In that case the parties entered into an agreement that upon a defendant giving a certain undertaking on motion all further proceedings in the action should be stayed, so that, although the matter came before the court on motion, the relief which was granted was in fact relief which put an end to the action in its entirety, and perhaps it is not therefore really right to regard the case as one of an interlocutory nature. But, however that may be, it is quite clear, in my judgment, from the terms of Sir George Jessel M.R.’s observations in that case that he was not in any way disregarding the contractual effect of the arrangement arrived at between the parties. On the contrary, he was saying that there was an agreement but that it was an agreement which in the circumstances of the case the court would not enforce against the defendants; that is to say, he was saying that on equitable grounds, although there was a contract, it was one which ought not to be enforced in its specific terms. In my judgment, nothing in that case conflicts in any way with the view that I have expressed, that a consent order must be given its full contractual effect even if it relates to an interlocutory step in the action.”
14. Purcell v. F.C. Trigell Ltd.(5) was an action for personal injuries. There were 2 defendants viz. the plaintiff’s employer, Trigell Ltd., and one Davies, who was working with Purcell and who was said to be responsible for the accident. There was a long delay by the defendants in putting in their defence. Eventually, to gain further time, their solicitors delivered what was a called a “blanket” defence. The plaintiff obtained an order for interrogatories on the defendants to be answered within 14 days. They were not answered. The plaintiff then took out a summons asking for judgment on the ground that the defendants had not complied with the order for interrogatories. The parties then agreed upon a consent order in the following terms:–
“It is ordered that as agreed the defence of both defendants be struck out unless answers to the interrogatories ordered be delivered within 10 days ..........”
Trigell Ltd. answered their interrogatories; but Davies did not answer his interrogatories properly. There was further correspondence between the solicitors and the defendants’ solicitors were given further time; but they still failed to answer all the interrogatories. Therefore the plaintiff continued with his summons for judgment because of the default of the defendants in complying with the consent order; and the registrar ordered judgment to be entered accordingly.
15. The defendants then applied to a judge (Shaw J.) asking him to extend the time for appealing from the original consent order. The judge allowed that appeal. In his judgment, Shaw J. said:–
“Mr. submitted that the inference to be drawn was that where an order made by consent had been drawn up it was inviolable and not amenable to variations by the court. This is no doubt true where the consent order is one which defines and determines the substantive rights and obligations between the parties. I see a distinction where the consent relates to a matter which is in essence procedural and does not purport to touch directly upon the definition of the substantive rights and liabilities of the parties.”
Shaw J.’s decision was reversed on appeal. Winn L.J. said (p.889):–
“......... there is no fundamental distinction in law between a consent order made in interlocutory proceedings and a consent order made on a final judgment. However, there is this to be said, that apparently the court would prefer to keep closer control over its interlocutory proceedings than it would over its final orders if satisfied that they had been agreed to by fully advised and competent parties. ............................ if a consent order is to be set aside, it can really only be set aside on grounds which would justify the setting aside of a contract entered into with knowledge of the material matters by legally competent persons.”
Buckley L.J. said (890):–
“On the question of the contractual effect of an agreed order relating to some procedural matter in an action, I can see no valid distinction in principle between a consent order of that nature and a consent order of a final nature. .............................. The terms of the order were terms which were arrived at by bargaining between the parties.......and the order must in my judgment have contractual effect. Why that aspect of the order should be less effective than if the subject-matter had been not an interlocutory step in the action but some final order I do not myself follow. ...... the order in this case was one which led directly to the liability on the part of the defendants to have judgment entered against them if they failed to comply with the order, for if their defence was struck out it would follow that the plaintiffs would be in a position to obtain judgment, ............ In my judgment, this order should be regarded as having a binding contractual effect which the plaintiffs were perfectly entitled to insist upon.”
16. Counsel for the plaintiff referred the court to a passage in Vol.2 of the 1970 Supreme Court Practice at p.559. It reads:–
“An order by consent in an action is not a contract, but it is sufficient evidence of the contract upon which it is based, and such contract is not less a contract and subject to the incidents of a contract because there is superadded the command of a judge [Wentworth v. Bullen 9 B and C 840 .......... Conolan v. Leyland (1884) 27 Ch. D. 638]. The contract is one by which all parties to the order are bound.”
In Hoffman-La Roche & Co. v. T.W. Wu & Co. (H.K.) Ltd.([6]), my brother, Mr. Justice Huggins, said:–
“..... it seems clear that the ratio decidendi of the Australasian Automatic Weighing Machine Case(2) is that by altering a consent judgment the Court would indirectly be altering the terms of the contract of which the judgment was evidence. Thus whilst in general it is possible to extend the time limited by a judgment or order it would appear that such a time limit in a consent order cannot be extended except by consent of both parties”.
In the light of these authorities, the distinction drawn by the learned judge in this case between consent orders made in interlocutory proceedings and consent orders made in final judgments, cannot be supported. As Buckley L.J. said, there is no valid distinction in principle. I also find myself unable to agree with that passage in the judgment under which reads:–
“By omitting from the terms of the order any reference to the result of default the parties have left the time limit for the payment of mesne profits or rent .... to some extent unfixed – or rather they have left it to the court to fix it having regard to 0.3 r.5 which in my opinion can apply to an interlocutory consent order in such circumstances as arise here.”
As counsel for the plaintiff said, the parties did not leave it to the court to fix the time limit for payment of mesne profits. They themselves fixed the time limits in the clearest possible language; and if it is to be said that the court should intervene if a party is 2 or 3 days late with his payments, what if he is 3 months late? Where is the court to draw the line?
In seeking a consent order, what the parties were, in effect, saying to the court was this: We have agreed that the defendant shall have leave to defend the action provided he pays into court ...... $460 per month in advance commencing on 1st August. He must file a defence within 14 days; but there again, the validity of this step in the action is conditional upon his making the payments as set out in this order.
On the face of it, I can see nothing unlawful in such an agreement; and a court of law does not weigh the provisions of a contract in the scales, so to speak, and express a view as to whether one party, in the opinion of the court, has been unfairly treated by the other party to the contract. The court may, in certain cases, construe the terms of a contract strictly as against one or other of the parties to it. It may, in equity, refuse to enforce an agreement as against a party if it is satisfied that that party, in good faith, agreed to something which he did not intend to agree to i.e. bona fide mistake, albeit unilateral mistake [Mullins v. Howell(4)]. Indeed, contracts may be set aside or varied on such grounds as fraud, mistake, misrepresentation, and so forth. But there is no evidence of anything of that kind in this case. The defendant does not allege that he misunderstood the terms of the order which his solicitor consented to on his behalf; and, as Mills-Owens J. said in the Ho Shiu-kwong case(1), courts have never assumed a general power to vary time limits fixed by the parties themselves in their contract on some basis of doing equity. Or, putting it in another way: a court will not act so as to force a party to a contract to agree to something against his will.
True, the order of 3rd July 1971 was not in the usual form in that it did not provide for the consequences of any default on the part of the defendant. Upon such default the plaintiff could not have entered judgment. But he was perfectly entitled to apply to have the defence struck out. The defendant was given leave to file a defence, but only on condition that the mesne profits for August were paid into court on 1st August; and, once the defence was struck out, what possible ground was there for the court to refuse leave to the plaintiff to enter final judgment? For myself, I can see no ground, at any rate not in the circumstances of the instant case.
Counsel for the plaintiff submitted that the law on this matter might be summarised in the following propositions:–
(a) A consent judgment or order is evidence of an agreement between the parties. The fact that there is superadded the command of a judge does not make it any the less a contract; and it is subject to all the incidents of a contract.
(b) A consent judgment or order may not be set aside or varied without the consent of the parties.
(c) The court has jurisdiction to set aside a consent judgment or order upon any ground which would invalidate an agreement between the parties e.g. fraud or mistake.
(d) If the consent judgment or order sought to be set aside (i.e. on any ground which would invalidate an agreement) has been passed and entered, it may not be set aside in the same proceedings in which the judgment or order was given. A new action must be instituted for that purpose.
(e) If the consent judgment or order has not been passed and entered, it may be set aside in the same action, but only on such a ground as would invalidate an agreement.
(f) If there is nothing which would invalidate an agreement, the court has no jurisdiction to vary or set aside a consent judgment or order without the consent of the parties.
I do not wish to say anything more than is necessary for the decision in this case. However, I would say that I find myself in general agreement with counsel’s propositions.
For these reasons, I would allow this appeal with costs here and in the court below, including the proceedings before the Registrar. The effect of this decision would be that the defendant’s application for an extension of time would stand dismissed and the plaintiff would have leave to enter final judgment for possession and for mesne profits.
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(W.A. Blair-Kerr)
President |
Martin Lee (instructed by C.Y. Kwan & Co.) for the Appellant.
A.H. Suffiad (instructed by H.H. Lau & W.S. Lo) for the Respondent.
([1]) [1971] H.K.L.R. p.34.
([2]) [1891] 36 Solicitors Journal p.42; (1891) W.N. p.170.
([3]) [1896] 1 Ch. p.673.
([4]) [1879] 11 Ch. D. p.763.
([5]) [1970] 3 W.L.R. 884.
([6]) [1966] H.K.L.R. p. 306 at p. 308.
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