Something must have gone wrong before parties commence civil litigation, whether the problem arises from breach of contract, unpaid invoices, or differing interpretations of terms of the contract. As civil litigation is costly, time-consuming, unpredictable, and at times excruciating for the parties' peace of mind, it is not uncommon for parties to compromise and settle the civil dispute midway in the litigation proceedings.
After years of advising and settling civil disputes, this series hope to shed light on the dos and don'ts for parties when they enter into settlement negotiations, and when they eventually sign and execute the settlement agreement.
An important piece of consideration is to consider settling the civil action in Hong Kong by way of Tomlin Order.
The nature of Tomlin Order
In Hong Kong, Tomlin Orders are governed by the Rules of the High Court (Cap. 4A) and the Rules of the District Court (Cap. 336H).
Provided under O.42 r.5A(2)(b)(iii) of the Rules of the High Court (Cap. 4A) and O.42 r.5A(2)(b)(iii) of the Rules of the District Court (Cap. 336H), Tomlin Order is a form of consent order which allows the parties to stay the proceedings upon the mutually agreed settlement terms which are scheduled to the Order but the terms of which do not otherwise form of the Order itself.
Accordingly, Tomlin Order enables the parties to stay the proceedings, preserving the option to return to Court to enforce the settlement terms if one party fails to comply. This avoids the need for new legal action, making it an attractive option for settling a civil dispute.
Further, the schedule, being a separate contractual agreement, can include terms that go beyond the ordinary terms typically ordered by the Court, and even go beyond the scope of the original dispute in the proceedings.
In the Hong Kong case Shum Ho Seung v. Shum Foo Hang (As the Administrator of the Estate of Shum Kwok Hang, Deceased (18/12/2017, HCMP 3134/2016) [2018] 1 HKLRD 434, the Court clarified that it lacks general power to vary the terms in the schedule unless specific provisions for variation are included in the Order itself, or contractual law justifies it. In practice, the standard wording of a Tomlin Order in Hong Kong may include phrases like "all further proceedings be stayed except for the purpose of carrying into effect the terms of settlement," with liberty to apply for enforcement.
Here are the key benefits of settling a case via a Tomlin Order in Hong Kong:
1. Enforceability without separate legal action
If one party breaches the settlement terms in the schedule, the
other can apply to the court to enforce the terms scheduled to the
Tomlin Order directly, without starting a new legal action.
For example, if a Defendant fails to pay an agreed sum as provided
under the schedule to the Tomlin Order, the Plaintiff can seek
enforcement by applying to a Judge/Master as appropriate.
This is a way a more efficient and costs-saving route than settling
the civil dispute by way of a separate settlement agreement,
whereby generally, if a party breaches the terms of the settlement
agreement, the other party will have to bring a fresh claim.
2. Flexibility in Settlement Terms
The schedule can include terms which go beyond what the Court would typically impose in a judgment, e.g. ceasing certain actions not directly related to the original proceedings. In contrast, the terms which parties could enter by way of Consent Judgment (without Court's leave) would be more limited under the straight statutory rules.
3. Preservation of Finality with Flexibility
The stay of proceedings means the case is "paused", but not dismissed. If the terms are fulfilled, the dispute ends without a full trial. On the other hand, if the settlement terms are breached, the innocent party can either enforce the scheduled terms or, in some cases, lift the stay to resume litigation (depending on how the Order is drafted). This balances closure with a safety net as opposed to a full withdrawal/dismissal, which may leave a party vulnerable if the other reneges.
Conclusion
The Tomlin Order must be carefully drafted to ensure enforceability and to prevent any pitfall compromising a party's rights and interest. In summary, a Tomlin Order in civil litigation offers enforceability without separate legal action, flexibility, and preservation of finality with flexibility, making it ideal for parties seeking a practical binding settlement. For specific advice, as each case depends on its own facts, please consult a solicitor.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
