Settlement Practice Update

There have been a number of recent cases that have dealt with some important issues with respect to the settlement of civil disputes.

Sanctioned Offers

  • A sanctioned offer that contains an alternative costs provision to that provided for in the rules (where the offer is accepted without requiring the permission of the court) is not a properly constituted offer under the regime for sanctioned offers (RHC/RDC O. 22). It is not unusual to see settlement offers contain a costs provision that there be “no order as to costs”. The weight of first instance authority in Hong Kong suggests that such offers (with inbuilt alternative costs provisions) are not compliant with the regime for sanctioned offers (Choi Tak Man v Chan Yuk Lan Didi, HCA 600/2015, 30 October 2017, applying Wong Yim Man Anthea v Wong Ho Ming Felix, HCA 352/2011, 22 April 2016). This is as true of a settlement offer made by a defendant as it is of one made by a plaintiff.
  • A sanctioned offer can contain a costs provision but that provision should not conflict with the costs consequences provided for in the court rules (re “MCC Jakarta”, HCAJ 48/2011, 30 November 2017).
  • A settlement offer that is not a properly constituted sanctioned offer can still be made (for example) on a “without prejudice save as to costs” basis (“Calderbank”) but whether it affects the outcome on costs is a matter for the court. Relevant cases are highly contextual and it is difficult to draw any firm conclusions. In short, an offeree should think very carefully before refusing a reasonable offer.
  • Those offers including alternative costs provisions have raised some interesting issues that (arguably) merit a more authoritative appeal judgment than exists at present in Hong Kong.

Settlement Agreements

  • As a matter of general legal principle, a solicitor does not owe another solicitor’s client a general duty to exercise reasonable skill and care or a general duty in tort with respect to the preparation of a settlement agreement (First Asia Finance International Ltd v Tso Au Yim & Yeung, HCA 2128/2013, 14 November 2017).
  • That said, solicitors should be careful in cases involving (for example) unrepresented parties. Furthermore, where another party is represented by lawyers they should be in attendance during any settlement discussions.

Tomlin Orders

  • The standard wording in a Tomlin Order that “these proceedings be stayed save for the purpose of carrying out this Order and giving effect to the terms set out in the schedule hereto, for which there is liberty to apply” does not provide the court with a general power to vary the terms of an agreement contained in the schedule to a Tomlin Order (Shum Ho Seung v Shum Foo Hang, HCMP 3134/2016, 18 December 2017).
  • The court does have jurisdiction to vary or revoke the terms of a Consent Order but would only do so in limited circumstances and on good grounds being shown.
  • For a court to vary the terms of an agreement contained in the schedule to a Tomlin Order (as opposed to the Order itself) there would have to be: (i) a specific power built into the Order; and (ii) circumstances justifying a variation of the agreement as a matter of contract law (which is likely to be unusual).

Senior Consultant, RPC