QUENTIN KEITH HILLS v. MARLENE RITA WITTMAN

HCMP 340/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 340 OF 2008

(ON AN INTENDED APPEAL FROM HCA NO. 2149 OF 2006)

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JUDGMENT

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Hon Tang VP (giving the judgment of the Court):

1.  Shortly after the plaintiff and the defendant broke off their engagement, the plaintiff sued the defendant for US$135,000 as money lent and applied for summary judgment.  On 26 April 2007, Master J Wong gave summary judgment in favourof the plaintiff.

2.  The defendant appealed.  On 23 October 2007, Suffiad J gave her leave to defend conditional upon her paying into the court US$135,000 within 21 days,

“45.   …

(a)   failing which the plaintiff be at liberty to enter judgment against the defendant.”

3.  Before the expiration of 21 days, bysummons dated 12 November 2007, the defendant applied for an order that time be extended by 28 days.

4.  By the same summons, the defendant also asked that the Garnishee Order Absolute dated 3 August 2007 be set aside.  It appeared that there was never a Garnishee Order Absolute dated 3 August 2007.  Rather, on 26 June 2007, the plaintiff had obtained a Garnishee Order nisi, whereby HSBC, the Garnishee, was ordered to attend before Master de Souza on 3 August 2007 to show cause.  On 3 August 2007, the Garnishee Order nisi was discharged with no order as to costs when HSBC showed that the defendant did not have a credit balance with HSBC.

5.  It appeared that the defendant’s then solicitors were unaware of the discharge of the charging order nisi.

6.  At the hearing of the summons dated 12 November 2007, on 16 November 2007, when the defendant’s then solicitor learned that the Garnishee Order nisi had been discharged, he withdrew the application and it was dismissed.

7.  By summons dated 11 January 2008 the defendant asked for an order that:-

“1. The Judgment entered herein on the 23^rd November 2007 be set aside.

2. The Defendant do have an extension of 7 days from the date hereof to comply with paragraph 1 of the Order dated 23^rd October 2007.”

8.  In support of the summons of 11 January 2008, the defendant in her 3^rd affidavit sworn on 15 January 2008, said:

“3. In light of (the order of 23 October 2007), I endeavoured to raise funds to enable me to make the required payment into court, however, due to the fact that a Garnishee Order to Show Cause dated 26^th June 2007 had been served on HSBC, with whom I hold two accounts, I was unable to utilise various banking (foreign exchange and overdraft) facilities that I had with HSBC prior to the Garnishee Order being served on the bank.  These facilities had been in place for and are a result of a longstanding (12 year) banking relationship with HSBC and are not easily replaced/duplicated at another bank in a short period of time.”

9.  She also said that she instructed her then solicitors to write to the plaintiff’s solicitors asking for an extension of time, which was refused by letter dated 9 November 2007, but in that letter there was no mention that the Garnishee Order had been discharged.  She then went on to say that she instructed her then solicitors to apply for an extension of time:

“on the grounds that because of the existence of the Garnishee Order I was, as described above, in the process of finalizing new banking facilities (outside HSBC), and this would require additional time.”

10.  She also claimed that she was informed by her then solicitor that it was on the hearing of the time summons that she learnt for the first time that the Garnishee Order had been discharged in July.  Then she claimed:

“6.  Had I known previously that a Garnishee Order had not been made absolute and had been discharged, I would have been able to raise the funds to satisfy the condition attached to the leave to defend.”

11.  Then she added that HSBC had not told her that the Garnishee Order nisi had been discharged or that the normal operation for her two accounts had resumed in July 2007. 

12.  In the meantime, on 23 November 2007, final judgment was entered against the defendant for the sum claimed with interests and costs.

13.  The summons of 11 January 2008 was dismissed by Suffiad J on 6 February 2008.  In his lordship’s judgment, he doubted whether having regard to the fact that the judgment had been sealed and perfected on 23 November 2007, he had the jurisdiction to entertain the application to set aside the judgment.  In any event, insofar as the application was said to be made pursuant to Order 13 rule 9, he was of the view that it was misconceived.  Furthermore, he thought the application was so devoid of merit that he ordered costs to be paid on an indemnity basis.

14.  Then, on 26 February 2008, the defendant, represented by her present solicitors, applied to Rogers VP for an extension of time to appeal against the judgment of 23 November 2007.

15.  On 10 March 2008 the learned Vice-President dismissed the application, and said in his judgment:

“5. In his judgment in that matter, the judge said, in effect, that he was only just persuaded to give conditional leave to defend and he did not exclude the possibility that it was a sham defence, and he considered the whole matter very shadowy.

6.  I say no more about that other than to say that I can see no reasonable prospect, on the evidence which has been filed to date, of the Court of Appeal coming to any other decision or allowing that appeal.

…..

10.    Be all that as it may, on the basic application I do not consider that it would be right for me to grant an extension of time which, in effect, is an extension of time for leave to appeal against the Order 14 proceedings, because, in my view, as I have already said, there is very little prospect, on what I have seen in this case, of any such appeal being allowed.”

16.  Mr Sakhrani, appearing for the plaintiff, submitted that the learned Vice-President had erred, because he had wrongly focused on the merits of the defendant’s defence.  He submitted that the defendant was not seeking to appeal the substance of Suffiad J’s order.  The defendant accepted that leave to defend should be conditional.  She applied for leave to appeal because Suffiad J had effectively refused to extend time.

17.  But it is not correct to say that that the learned judge had effectively refused to extend time.  The order of 23 October 2007 gave the defendant leave to defend conditional upon payment in within 21 days of the order.  There was one application for extension of time made on 12 November 2007, which was dismissed on 16 November 2007 when that application was not pursued.  There has been no appeal from the order of 16 November 2007.

18.  However, Mr Sakhrani’s primary submission is that the order of 23 October 2007 was in effect an unless order, and since the failure to make payment in was neither intentional or contumelious, Rogers VP should have granted an extension of time and set aside the judgment.

19.  Mr Sakhrani relied on the following notes in Hong Kong Civil Procedure 2008:

“42/2/6 - Setting aside judgment

The court has a discretion to set aside a judgment entered in default of an unless order if the non-compliant party can demonstrate that its breach of the order was neither intentional or contumelious, and that the failure to obey was because of extraneous circumstances (PT Bank Pembangunan Indonesia (Persero) v. Tan Eddy Tansil & Others [1997] H.K.L.R.D. 57).

42/2/7 – Solicitors’ conduct

Where the extraneous circumstances leading to default comprise an error or the misconduct of the legal advisers of the party in default, the court will generally set aside judgment provided that no injustice would be done to the other party. In assessing whether injustice will be done, the court will examine the legal advisers’ conduct, and its impact upon the litigation in exercising its discretion.”

20.  With respect, although the effect of the order of Suffiad J was that unless payment into court was made, judgment could be entered, it was not an unless order.  An unless order in the context is an order which provides for the consequence (often the dismissal of the claim or defence) in the event of the disobedience of a peremptory order of the court.

21.  In PT Bank Pembangunan Indonesia (Persero) v Tan Eddy Tansil and Ors [1997] HKLRD 57, the court was concerned with an order, given in aid of a Mareva injunction, whereby the defendant was ordered to make an affidavit, making an authorising disclosure in aid of the Mareva.  There, Godfrey JA (as he then was) explained:

“25.   … a mandatory order; an order in the nature of an injunction, a failure to comply with which would constitute a contempt of court.  It is not, then, merely a matter for an ‘unless’ order, leading inevitably to a judgment against the defendant in the event of a failure to comply with it.  It may well be a matter for punishment by committal or sequestration of assets. …”

22.  It was because of the peremptory nature of such order that In re Jokai Tea Holdings Ltd [1992] 1 WLR 1196, where the unless order concerned an order for further and better particulars of the defence provided that:

“… in default the points of defence should be struck out and the [Bank] should be at liberty to apply for the relief claimed. …”,

Sir Nicolas Browne-Wilkinson VC (as he then was) said at page 1203B:

“In my judgment, in cases in which the court has to decide what are the consequences of a failure to comply with an ‘unless’ order, the relevant question is whether such failure is intentional and contumelious. The court should not be astute to find excuses for such failure since obedience to orders of the court is the foundation on which its authority is founded. But if a party can clearly demonstrate that there was no intention to ignore or flout the order and that the failure to obey was due to extraneous circumstances, such failure to obey is not to be treated as contumelious and therefore does not disentitle the litigant to rights which he would otherwise have enjoyed.”

23.  A judgment giving leave to defend is not a peremptory order.  The defendant is not ordered to make payment in, although leave to defend depends on payment in.  Thus, failure to make payment into court would not be contumelious conduct even if it was deliberate.  The order of 23 October 2007 was not an unless order within the meaning of the notes which Mr Sakhrani relied on.

24.  Mr Sakhrani’s fall back position was that Rogers VP should have followed the approach commonly taken by this court when dealing with applications for extension of time (for in substance, this is an application for an extension of time), namely consider:-

A   whether the delay was excusable; and

B   if not, whether they were reasonable merits of the appeal

Secretary for Justice v Yaumati Ferry Company Ltd [2001] 1 HKC 125

25.  But, that was exactly what Rogers VP had done.

26.  Mr Sakhrani submitted that the judgment was the fault of the defendant’s then solicitors.  Even assuming that to be so, we are not satisfied that that was a reasonable excuse.  The court must not apply a rigid mechanistic approach in such matters.  Where the delay is caused by a mistake or omission by an applicant’s legal advicers, this may be a sufficient ground for justifying the court in granting an extension.  In Mobil Petroleum Co. Inc. and Anor v Registrar of Trade Marks [2001] 1 HKLRD 225 Hartmann J said at page 241 after reviewing the authorities that the correct principle to be adopted in the exercise of the court discretion under Order 3 rule 5 is that:

“53.  … all matters, including the adequacy of any reason for delay, must be considered, the one to be weighed against the other, in the exercise of the court’s discretion.”

27.  Nor are we satisfied (even on her own case) that the fault was entirely her then solicitors.  Obviously, the defendant was aware that on 23 October 2007 she was given 21 days to make payment into court.  She also knew she had not made payment in.  She claimed that she tried to obtain funds to make payment into court.  She made the bald statement that that was made more difficult by the Garnishee Order.  She also claimed that she only realised that judgment had been entered against her when she received the statutory demand dated 17 December 2007 from the plaintiff on 4 January 2008.  Even if we proceed on the basis that she had not been informed by her solicitors, we find it difficult to understand how the fact that she had not bothered to find out from her solicitors whether judgment had been entered against her, made her conduct excusable.  As for the application for an extension of time by summons dated 12 November 2007, it was not excusable conduct that she had not tried to find out from her then solicitors the result of that application.  So in our view there was no reasonable excuse for the delay.

28.  The court is entitled to take into consideration the merit of the defence.  It is obvious that no extension of time should be granted in a case where it is clear that, for example, the defence has no merit at all.  In this case, Suffiad J took the view that the defence was shadowy, that is why he imposed the condition of payment into court.

29.  We are of the view that the defence has no reasonable prospect of success.  It is true that the plaintiff has not appealed the order of 23 October 2007.  But that does not mean that when we are asked to “extend” time, we must necessarily proceed on the basis that there should be a trial.

30.  For the above reasons, the appeal is dismissed with costs.