XCHRX WING LUNG BANK LTD. v. SINO SENIOR LTD. AND OTHERS

HCA 10038/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10038 OF 1998

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J U D G M E N T

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1. These are the Plaintiff's applications to strike out the Defendants' Notices of Appeal respectively in HCA 10038/1998 and HCA 10039/1998.

2. The Notices of Appeal were dated 12 June 2000 and asked inter alia for an extension of time to appeal against the judgments entered against the Defendants on 9 November 1998 (about 20 months after the date of the applications).

3. No issue is raised as to the court's inherent jurisdiction to strike out Notices of Appeal from Master in Chambers to Judge in Chambers. It is common ground that the court will only strike out Notices of Appeal in clear and obvious cases.

4. The court observed in Chiu Sin-chung v. Yu Yan-yan [1993] 1 HKLR 225 at 227-228 that: -

"The Court's discretion to extend the time for appealing an order of a Master to a Judge in Chambers under O. 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 timetable for the conduct of litigation".....

(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 ....."

(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 .....

(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" .....

(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 .....

(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 .....".

5. Thus in the context of these applications, the Plaintiff has to show that this is a clear and obvious case that: -

(1) there is no merit in the Defendants' proposed defence,

(2) there has been undue delay in taking out the applications for extension of time to appeal,

(3) it is otherwise proper to strike out the Notices of Appeal.

6. In relation to the Defendants' application in HCA 10038/1998, it is in essence based on two grounds: -

(1) there are merits in the proposed defence which were not raised in the proceedings before the date of the judgments;

(2) the delay in raising the proposed defence was caused by:

(a) the Defendants' earlier failure to learn of the alleged breach of the loan agreement by the Plaintiff; and

(b) since the Defendants became aware of the proposed defence, they failed to adopt the proper procedure (that is, appeal against the judgments of 9 November 1998) because of the advice given by their former legal advisers.

7. The merits of the proposed defence can be found in the affirmation of Lau Sai Leung dated 1 December 2000 especially at para. 7 to 9 thereof. In short, it is alleged that the Plaintiff had breached the loan agreement at about the beginning of 1998 by failing to advance to the 1st Defendant the trench A part of the loans. This allegedly brought about the failure of the business of the 1st Defendant. At para. 9 of Lau's affirmation, he alleged that the breach was only known to the Defendants later because they resided in Mainland China. It is unclear as to exactly when they knew of the breach but according to paras 16 and 17 of Lau's affirmation, they informed their legal advisers of this complaint sometime at the end of 1999 (about 1 year after the date of the judgments). According to Lau, a writ was issued in HCA 15962/1999 on 8 October 1999 for the purpose of suing the Plaintiff for this alleged breach. This writ was struck out by Sakhrani J on 21 February 2000.

8. Several observations can be made regarding the proposed defence: -

(a) it was first raised about a year after the date of the judgments;

(b) there is no satisfactory explanation as to why the proposed defence was not raised before October 1999. The alleged breach related not to some trivial matters but was said to be the direct cause of the failure of the 1st Defendant's only business. The alleged non-performance of the trench A part of the loan agreement was of course a matter fundamental to the loan agreement;

(c) it was first raised at a time when the Plaintiff was seeking to enforce its right under the loan agreement and/or the judgments by selling the piece of real property belonging to the Defendants.

9. In these circumstances, I conclude that the allegations put forward by Mr Lau on the Defendants' behalf regarding the proposed defence is so inherently implausible that it is clearly and obviously unbelievable and should be rejected. It is unbelievable that such a serious breach of the loan agreement could be unknown to the Defendants for a long time; (if it were known to them earlier) it is also unbelievable that such a breach was only told to the legal advisers so long after the judgments were entered.

10. Further, I conclude that this is a clear and obvious case of undue delay. I am prepared to approach this aspect of the applications counting from the date of the judgments, that is November 1998 (instead of the date of the alleged breach, that is, around the beginning of 1998) to the date of the writ in HCA 15962/1999, that is October 1999. The period of delay was about 11 months. The only explanation given for the delay in evidence is the Defendants' claim that they did not make the complaint before October 1999 because they did not know it before then. As stated earlier, I find this to be unbelievable.

11. I am also satisfied that there is otherwise no other material or reason to show that this is not a clear and obvious case for a striking out order to be made. I will therefore make an order in terms of para. 1 of the Plaintiff's summons in HCA 10038/1998.

12. No evidence has been filed by the Defendants in relation to the application in HCA 10039/1998. There is otherwise no material or basis to justify the exercise of my discretion to extend the time of appeal. Further, at the beginning of today's hearing, Mr Sham for the Defendants informed me that the Defendants will not pursue the Notice of Appeal in HCA 10039/1998 and will not oppose the Plaintiff's application to have it struck out. There will accordingly be an order in terms of para. 1 of the Plaintiff's summons in HCA 10039/1998.

[Submissions on costs made]

13. The Plaintiff asks for the costs of its applications in HCA 10038/1998 and 10039/1998 on an indemnity basis. The Defendants do not resist the costs sought but oppose that costs be taxed on an indemnity basis. I agree with the Plaintiff's submissions that the Defendants have sought to appeal against the matter after judgments have been entered a long time ago. Further, various unsuccessful court applications were made earlier. It was only in the more recent time that serious allegations of misconduct on the Plaintiff's part were raised. I already found them to be unbelievable.

14. In these circumstances, I agree with the Plaintiff's argument that the Defendants' conduct amounts to an abuse in process and an affront to the court. Indemnity costs are justified and will be ordered. The Defendants are to pay the costs of and occasioned by the Notices of Appeal including the costs of the Plaintiff's applications on an indemnity basis.