CHIU SIN CHUNG v. YU YAN YAN ANGELA AND ANOTHER

[Extension of time for appealing to Judge in Chambers - relevant principles]

1991 No. A4089

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

BETWEEN

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J U D G M E N T

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Introduction

1. By a summons dated 9th July 1991, the Plaintiff sought an order, pursuant to Ord. 86 of the Rules of the Supreme Court, for specific performance of an agreement dated 18th March 1991 between the Plaintiff and the Defendants. That summons was heard by Master Woolley on 4th September. He granted specific performance of the agreement, and made various consequential orders. By virtue of Ord.58 r.1(3), the Defendants' time for appealing from that order expired on 10th September. The Defendants failed to file a Notice of Appeal by that date, and on 19th September the Defendants issued a summons for leave to file out of time a Notice of Appeal from Master Woolley's order. That summons was heard by Master Bokharv on 31st October. She refused the Defendants leave to file their Notice of Appeal out of time. From that refusal, the Defendants now appeal.

The Reasons for the Delay

2. In an Affirmation made on 18th September on her own behalf and on behalf of D2, D1 set out the reasons for their failure to file the Notice of Appeal in time:

"When I learnt of the outcome of the hearing on 4th September,... I told my solicitor ... over the telephone that I wanted to appeal the decision. [He] told me that I had 14 days in which to appeal and told me to think carefully first because of the substantial legal costs involved. I then asked [him] to give me a written report of how the case was lost so that I could know the reason why and decide on what grounds I should appeal against the decision. I only received a summary of the arguments advanced before Master Woolley on 12th September, ...on which date I handed the summary to my present firm of solicitors who in turn on 16th September... requested (my former solicitor) to send them all the relevant papers so that they could more properly assess the merits of the case. Having received the case papers, my solicitors arranged for me to have conference with Counsel to advise on my proposed appeal. On 17th September, ... I had conference with Counsel and it was then that I came to know that in fact I had only 5 days and not 14 days from 4th September ... in which to appeal against Master Woolley's order."

3. Three points can be made in favour of the Defendants. First, the Defendants themselves are wholly blameless for what occurred. Secondly, if the advice which D1 received from their solicitors had been correct, the Notice of Appeal would have been lodged in time. Thirdly, as soon as D1 knew that the advice had been incorrect, immediate steps were taken on behalf of the Defendants to seek the leave of the court for an extension of time. Mr. Wong for the Plaintiff has criticized the Defendants' new solicitors for not issuing the summons for leave to file the Notice of Appeal out of time as soon as they were instructed on 12th September: they have given no explanation as to why they waited until 19th September to issue the summons, especially as there was no difficulty about drafting the Notice of Appeal to be annexed to the summons because the Notice of Appeal did not have to identify any grounds of appeal. I acquit the Defendants' new solicitors of that criticism. By the time that they were instructed, the time for filing the Notice of Appeal had already expired, and they were entitled to wait just a few days more for counsel's advice on the merits of an appeal - advice which counsel gave on 17th September.

The Relevant Principles

4. The Court's discretion to extend the time for appealing an order of a Master to a Judge in Chambers under Ord.3 r.5(1) is unfettered, but in my view the following principles can be extracted from the various cases cited to me:

(i)    "The rules of court must prima facie be obeyed, and in order to justify a court in extending the time during which some step in procedure requires to be taken there must be some material upon which the court can exercise its discretion. If the law were otherwise, a party in breach would have an unqualified right to an extension of time which would defeat the purpose of the rules, which is to provide a time table for the conduct of litigation" : Thamboo Ratnam v. Thamboo Cumarasamy & Cumarasamy Ariamany [1965] 1 WLR 8 at p. 12A-B, applied in Revici v. Prentice Hall Inc. [1969] 1 WLR 157 and in Re Adhiguna Meranti [1988) 1 HKLR 410.

(ii)     Accordingly, the prerequisite of an application to extend time is a clear statement as to the reasons for the time limits not having been observed and for any delay in then applying for an extension.

(iii)    "Once the time for appealing has elapsed, the respondent who was successful in the court below is entitled to regard the judgment in his favour as being final. If he is to be deprived of this entitlement, it can only be on the basis of a discretionary balancing exercise, however blameless may be the delay on the part of the would-be appellant": Norwich & Peterborough Building Society v. Steed [1991] 1 WLR 449 at p. 454G.

(iv)     The factors which are normally to be taken into account in that balancing exercise are (a) the length of the delay, (b) the reasons for the delay, (c) the chances of the appeal succeeding if an extension of time for appealing is granted, and (d) the degree of prejudice to the would-be respondent if the application for an extension is granted: Steed, p. 454H.

(v)     As for the reasons for the delay, "the fact that the omission to appeal in due time was due to a mistake on the part of the legal adviser, may be a sufficient cause to justify the court in exercising its discretion": Gatti v. Shoosmith [1939] 3 All E.R. 916 at p. 919G. Indeed, in that case, the Court of Appeal extended the time without consideration of the merits at all: the period involved was only a matter of a few days, the appellant's solicitors had informed the respondent's solicitors within time of the appellant's intention to appeal, and the mistake was one "which, to anyone who was reading the rule without having the authorities in mind, might very well have arisen".

(vi)     Although the existence of prejudice to a would-be respondent is a ground for refusing an extension of time, the absence of prejudice to a would-be respondent is not a ground for extending the time: Re Adhiguna Meranti, p. 411H.

(vii)     As for the merits, they will play little part in the balancing exercise if the delay is short and is wholly excusable, but where the delay is substantial and is not wholly excusable, much more merit is required to overcome it: Steed, p. 455G-H, distinguishing Palata Investments Ltd. v. Burt & Sinfield Ltd. [1985] 1 WLR 942 from Rawasdeh v. Lane (Court of Appeal (Civil Division) Transcript No. 327 of 1988).

5. Mr. Wong for the Plaintiff argued that if the Defendants have to show merits, it would not be enough for them to show that they had a good arguable defence: they would have to show that they have a real prospect of success. In support of that proposition, he relied on an obiter dictum of Godfrey J. in Attornev General v. Watson (1989) 1 HKLR 386, which was an appeal from a Master's refusal to set aside a default judgment. That obiter dictum, which was based on the approach of the Court of Appeal in Alpine Bulk Transport Co. Inc. v. Saudi Eagle Shipping Co. Inc. (1986] 2 Lloyd's Rep. 221, was not criticized when Watson was overruled on other grounds in Honour Finance Co. Ltd. v. Chui Mei-mei (1989] 2 HKLR 146. Mr. Wong argued that the need for a litigant who seeks an extension of time to file a Notice of Appeal to show a real prospect of success on the merits is greater than for a defendant who seeks to set aside a default judgment because the former has at least had his day in court whereas the latter has not. I do not think that Mr. Wong's submission takes sufficient account of principle (vii) above that the greater the delay and the more inexcusable it is, the greater the merit required to overcome it. In my view, a litigant who seeks an extension of time to file a Notice of Appeal must show a real prospect of success on the merits if the delay is substantial and not wholly excusable. Even then, the delay and the reasons for it may still be such as to justify a refusal to extend the time. On the other hand, if the delay is small and excusable, he needs to show at the most only that he has a good arguable chance of success on his appeal

The Application of These Principles

6. The delay in this case was short: only 9 days elapsed between the date when the Notice of Appeal should have been filed and the date when the Defendants' solicitors took steps to have the Notice of Appeal filed. However, that delay was inexcusable. The facts that the Defendants themselves were wholly blameless and the delay has been explained do not mean that the solicitors' error (and the delay caused by it) can be excused. In my view, it cannot.

7. The question of prejudice is more difficult. The Defendants' solicitors took an unusual course when they discovered that the time for filing the Notice of Appeal had expired. The usual practice is set out in the Supreme Court Practice, 1991, at 3/5/3: "An application for extension of time for appealing to a Judge in Chambers should be made at the same time as the appeal, and the extension asked for in the notice of appeal ..." Instead, the Defendants' solicitors in this case issued a summons returnable before a Master seeking an extension of time. The inevitable consequence was that the hearing of the Defendants' substantive appeal (if leave to extend time was granted whether by the Master or on appeal) would be further delayed. That is significant: the agreement of which Master Woolley ordered specific performance was an agreement under which the Defendants agreed to sell their flat to the Plaintiff. If Master Woollev's order is eventually set aside, the Plaintiff will have to find another flat to buy. The longer he has to wait to know whether he has to do that, the more he may have to pay for such a flat depending on the current state of the property market. Moreover, the additional period of uncertainty is prejudice in itself.

8. However, in my view, the Defendants have a complete answer to this point. One of the Defendants' defences to the claim for specific performance is that the agreement provided for the parties' remedies in the event of a breach to the exclusion of any other common law or equitable remedies, including the remedy of specific performance. That defence, in relation to agreements similar to the agreement in this case, has been the subject of recent scrutiny by the Court of Appeal. I was told that an appeal from the decision of Mayo J. in Wong Lai Fan v. Lee Ha (MP 1024 of 1991) was heard on 19th December 1991, judgment was reserved, and has not yet been given. Moreover, other cases have been held up: the hearing of an appeal from the decision of Godfrey J. in Fong Yee Lan v. Yin Yan Ping (3299 of 1991) has been adjourned pending the Court of Appeal's decision in Wong Lai Fan, and the hearing of an action before Leonard J. has been adjourned pending the Court of Appeal's decisions in Wong Lai Fan and Fong Yee Lan. Accordingly, even if the Defendants' Notice of Appeal had been lodged in time, it could not have been disposed of when it would have come on for hearing in the normal course of events, and cannot even be disposed of today, because it is plainly right to defer consideration of this part of the case until the view of the Court of Appeal on agreements of this kind is known.

9. In the event, because the Defendants are blameless for the delay and because the delay was for such a short time, it would be right, in my view, to extend the Defendants' time for appealing provided that there is merit in their appeal. However, because the delay was inexcusable, the balancing exercise, in my judgment, requires me to extend the Defendants' time only if there is a real prospect of success on the merits. As it is, I have considered each of the Defendants' defences (apart, of course, from the defence upon which consideration has to be deferred) as if I was hearing the appeal.

The Merits of the Appeal

10. The relevant facts are as follows. The Defendants are the registered owners of Flat 7, 22/F, Block D, Trend Plaza, Tuen Mun, N.T. ("the flat"). On 18th March 1991, they entered into a written agreement in Chinese with the Plaintiff. By that agreement, which was entitled "Provisional Agreement for Sale and Purchase", the Defendants agreed to sell the flat to the Plaintiff for the sum of $1,060,000.00. The Plaintiff was to pay a provisional deposit of $30,000.00 immediately, a formal Agreement for the Sale and Purchase of the flat was to be executed bv both parties by 22nd April, by which date a further deposit of $76,000.00 had to be paid by the Plaintiff, and completion was to take place on 31st July when vacant possession of the flat was to be given to the Plaintiff. The Provisional Agreement also provided for what was to happen in the event of default:

(i)    If the Defendants did not execute the formal Agreement or did not fulfill the terms of the Provisional Agreement, they would be obliged to pay to the Plaintiff a sum equal to twice the provisional deposit, i.e. S60,000.00.

(ii)     If the Plaintiff did not execute the formal Agreement or did not fulfill the terms of the Provisional Agreement, he would forfeit the provisional deposit and the Defendants would be entitled to keep it.

11. On 18th March, the Plaintiff paid the sum of 530,000.00 to the Defendants by a cheque in that amount drawn in favour of D1. A further sum of S76,000.00 was paid by the Plaintiff to the Defendants on 8th April by a cheque in that amount drawn by the Plaintiff's solicitors in favour of the Defendants' solicitors. However, on the following day, 9th April, the Defendants' solicitors wrote to the Plaintiff's solicitors informing them that the Defendants had decided not to sell the flat to the Plaintiff, and returning the sum of $76,000.00.

(1)    Was D2 a party to the Provisional Agreement?

12. The Defendants contend that D2 was not a party to the Provisional Agreement. If D2 was not a party to the Provisional Agreement, it is not disputed that the Defendants have a complete defence to the Plaintiff's claim. That is because (a) the Defendants owned the flat as joint tenants, and (b) one joint tenant cannot enter into an agreement to sell the whole of the jointly-owned property unless authorised by the other to do so: Leek & Moorlands Building Societv v. Clark [1952] 1 QB 788.

13. In an Affirmation made only on 8th January 1992, D2 asserts that she never authorised D1 to sell the flat on her behalf, and Mr. Thong for the Defendants points out that the agreement was only signed by D1. However, it is common ground that the test for granting a defendant unconditional leave to defend an action in Ord. 86 proceedings is similar to that in Ord. 14 proceedings. Ord. 86 r.3, like Ord.14 r.3, puts an onus upon the Defendant to satisfv the Court "that there is an issue or question in dispute which ought to be tried." Thus,

"...the mere assertion in an affidavit of a given situation which is to be the basis of a defence does not, ipso facto, provide leave to defend ... the court must look at the whole situation and ask itself whether the defendant has satisfied the Court that there is a fair or reasonable probability of the defendant having a real or bona fide defence" : Banque de Paris v. de Narav [1984] 1 Lloyd's Rep. 21 at p. 23, approved in Murjani v. Bank of India [19901 1 HKLR 586 at pp. 588I-589A.

14. The Defendants have not satisfied me that there is a fair or reasonable probability of them establishing at trial that D2 had not authorised D1 to sign the Provisional Agreement on her behalf. The Defendants do not dispute that on or about 17th March 1991 the Plaintiff and the two Defendants went to the office of the estate agent, where both Defendants agreed to sell the flat to the Plaintiff. Nor do they dispute that the reason why the Provisional Agreement was not signed that day was because the Plaintiff did not have his cheque book with him or sufficient cash on him to pay the provisional deposit of $30,000.00. Despite the fact that the Provisional Agreement named both Defendants as vendors of the flat, Mr. Thong submits that it cannot reasonablv be assumed that D2's intention to sell the flat (clearly expressed on 17th March) remained unchanged on 18th March when the Provisional Agreement was signed by D1. However, D2 has not deposed to that effect; all she has asserted (at the 59th minute of the 11th hour, be it noted) is that she had never authorised D1 to sell the flat on her behalf. She has not asserted that her willingness to sell the flat to the Plaintiff on 17th March (which is consistent only with an implied authority to D1 to sign on behalf of both of them any agreement putting that into effect) did not continue to 18th March. Since the Defendants have not satisfied me that there is a fair or reasonable probability of them establishing at trial that D2 had not impliedly authorised D1 to sign the agreement on her behalf, I need not consider Mr. Thong's arquments that. (a) there is no evidence of apparent authority or (b) that the words "lawfully authorised" in Section 3(1) of the Convevancing and Property Ordinance (Cap. 219) does not include apparent authority. The words, in my view, are clearly wide enough to include implied authority.

(2)    Misrepresentation

15. The Defendants contend that D1 was induced to enter into the Provisional Agreement by reason of false representations made to them by the Plaintiff. The Plaintiff does not deny that when he first went to the flat on or about 17th March, he told the Defendants that he was going to marry soon, that he wanted the flat as his matrimonial home and that he had a very tight budget. The Defendants say that but for that representation, D1 would not have agreed to sell the flat for the price agreed, which was "well below the current market price". What is in dispute is whether that representation was false. D1 says that she decided not to go ahead with the sale after a visit to the flat by the Plaintiff on 24th March. He came with a couple, he showed them the flat, and "tried to persuade" them to buy it. D1 then realized, she says, that the Plaintiff did not intend to live in the flat himself, but that he proposedf to sell it for a quick profit. The Plaintiff for his part admits the visit  24th March, but claims that the couple he brought to the flat were friends of his who were going to advise him how to decorate the flat.

16. The Defendants have not satisfied me that there is a fair or reasonable probability of them establishing at trial that on discovering the alleged falsity of the representation, they did not lose the right to rescind the Provisional Agreement. I have reached that conclusion for the following reasons:

(i)     Although D1 claims that she told the Plaintiff prior to 3rd April that she was not going to sell the flat to him (a fact denied by the Plaintiff), it is plain that the Defendants' solicitors had not been informed by then that the Defendants wanted to pull out of the sale, because on 3rd April they wrote to the Plaintiff's solicitors enclosing a draft of the formal Agreement for Sale and Purchase.

(ii)     Even if the Defendants' solicitors' instructions came from the estate agent rather than from the Defendants, there is no evidence before me that the Defendants told the estate agent prior to 3rd April that the deal was off.

(iii)     Although D1 claims to have told the Defendants' solicitors on 3rd April that she was not going to sell the flat to the Plaintiff, the Defendants' solicitors did not write to the Plaintiff's solicitors to that effect until 9th April.

(iv)     Most significantly of all, at some time (and I read the Defence as suggesting that it was some time before 3rd April) D1 told the Plaintiff that she would pay him "a sum of S30,000.00 as compensation money according to the terms of the Provisional Agreement". That shows that although she wanted to pull out of the sale, she was not pulling out of the Agreement, because she was agreeing to pay to the Plaintiff the sum which the Agreement provided she had to pay in the event of default. It may be that she was unaware of her right to rescind for misrepresentation, and that therefore she had not, in law, affirmed the Agreement (see Pevman v. Lanjani [19851 Ch. 457). A defendant "may, however, be held estopped from rescinding or avoiding the contract even where he does not know the facts or his rights, but in this event, he must have led the other to believe, by unequivocal statements or actions, that he does intend to affirm the contract, and the other party must show that he has acted on the statement or conduct to his prejudice": Chittv on Contracts, Vol. 1, 26th ed., para. 474. In my view, D1 must have led the Plaintiff to believe that she intended to affirm the Provisional Agreement by telling him that she would pay the sums due under it, and the Plaintiff acted on Dl's assertion that the Agreement was continuing by pressing for specific performance of it.

17. Indeed, it is that proposal of D1 which has resulted in my not being satisfied that there is a fair or reasonable probability of the Defendants establishing at trial that the representation was false, and known it to be false by the Defendants: if it had been, it is inherently unlikely that the Defendants would have allowed the Plaintiff to have the windfall of $30,000.00 as compensation, which common sense should have told them they needed not to have paid to the Plaintiff at all.

(3)    Compromise

18. The Defendants contend that on the evening of 5th April the Plaintiff and D1 agreed to cancel the sale in consideration of a payment of $30,000.00 (plus the return of the initial deposit of $30,000.00) to be made to the Plaintiff on 10th April at the office of the estate agent. They claim that on 8th April the estate agent told D1 that the Plaintiff had changed his mind and was insisting on the sale going through. The Plaintiff for his he met Dl on 5th April. She wanted him to agree to cancel the sale. He agreed to think about it, but eventually he decided that he wanted the sale to go ahead.

19. The Defendants have not satisfied me that there is a fair or reasonable probability of this defence succeeding at trial. If an agreement in the terms contended for by Dl had been reached, I would have expected her to tell the Defendants' solicitors of it. After all, she was, on her own case, already in touch with them, because in para. 3 of the Defence it is asserted that she had been in touch with them on 3rd April. In my view, it is inherently unlikely that she would not have told them, either on 6th or 8th April, of the agreement she had reached with the Plaintiff on 5th April. Yet it is plain that she had not, because their letter of 9th April to the Plaintiff's solicitors makes no reference at all to the alleged cancellation agreement. In any event, I do not see why the Plaintiff would have come to the agreement for which D1 contends. That agreement gave him no more than what he would have thought the Provisional Agreement entitled him to. The Provisional Agreement did not stipulate a time for the return of the initial deposit. or the payment of the $30,000.00 as compensation, but I should be very surprised if he had been alive to that fact.

Conclusion

20. For these reasons, I do not think that the Defendants have shown a real prospect of success on the appeal on the merits. But for the defence upon which consideration is being deferred, I would have dismissed appeal from Master Bokhary's Order, and refused the Defendants leave to extend the time for filing a Notice of Appeal from Master Woolley's Order. Again, but for the defence upon which consideration is being deferred, if I had found that the Defendants had merely to show a good arguable chance of success on the appeal, I would have allowed the appeal from Master Bokhary's Order, and granted the Defendants leave to extend their time, but I would have dismissed the appeal from Master Woolley's Order.

21. However, I cannot take either of those courses because of the defence upon which consideration is being deferred. The right course for me to take, therefore, is to adjourn further consideration of this appeal to a date  to be fixed after consultation with counsel's diaries, but not to be listed until after the Court of Appeal has delivered judgment in Wong Lai Fan. For the avoidance of doubt, the fact that the only order I am making today is to adjourn the hearing means that the time for lodging a Notice of Appeal by the ultimately unsuccessful party challenging any of the views expressed in this judgment does not begin to run until judgment is given at the adjourned hearing. Since this appeal has not been concluded, the interim stay on Master Woolley's Order continues for the time being. I make an order nisi that the costs of the hearing before me be reserved to the final determination of the appeal.

22. Finally, since this judgment contains a review of the authorities on extending time for appealing, it is desirable that this judgment should be made publicly available. I had been informed by the parties that they have no objection to such a course.