JOTZ, KLAUS BERNHARD MARKUS v. HAMAWY, TAREK MAHMOUD AND ANOTHER

CAMP 16/2017

[2018] HKCA 144

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 16 OF 2017

(ON AN INTENDED APPEAL FROM HCA NO 1150 OF 2013

(CONSOLIDATED WITH HCA 345 OF 2014))

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J U D G M E N T

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Hon Kwan JA (giving the judgment of the court):

The summons

1.  We are concerned with a summons issued on 21 August 2017 by the 1^st defendant and purportedly on behalf of the 2^nd defendant, a body corporate.  The 1^st defendant is the sole shareholder and director of the 2^nd defendant.  The summons sought an extension of time for the defendants to appeal against the judgment of Deputy High Court Judge N Francis handed down on 19 June 2017.  They were five weeks late when the summons was issued.

2.  On 24 August 2017, the Registrar of Civil Appeals gave directions and reminded the defendants of the need to make an ex parte application under Order 5 rule 6(3) of the Rules of the High Court for leave for 1^st defendant to represent the 2^nd defendant in the present proceedings.  The parties were also directed to comply with Practice Direction 4.1 §36 regarding the filing of evidence and lodging of submissions for the present summons.

3.  There was no compliance with the Practice Direction by both the plaintiff and the defendants.  On 12 October 2017, the Registrar of Civil Appeals extended time for the plaintiff to file an affirmation in opposition within seven days and directed that upon the plaintiff’s compliance, the parties should proceed to comply with the rest of Practice Direction 4.1 §36.  The plaintiff filed an affirmation in opposition made by his solicitor Chan Lai Hung on 19 October 2017, but the defendants did not serve an affirmation in reply within seven days thereafter notwithstanding they had permission to do so.

4.  On 6 November 2017, the 2^nd defendant filed an ex parte application for leave for a director to represent it in these proceedings.  This was refused by Master K Lo on 24 November 2017, as no reasons were given by the sole shareholder for not funding the litigation and it was not shown that the 2^nd defendant has a meritorious case.  On 29 December 2017, the 2^nd defendant filed a notice of appeal against the order of Master K Lo.  This notice of appeal is irregular and was ordered to be struck out by Kwan JA on 5 January 2018, as it is provided in Order 5 rule 6(4) that no appeal shall lie from an order of the Registrar under rule 6(3) refusing leave to a body corporate to be represented by a director.

5.  We shall therefore treat the present summons as taken out by the 1^st defendant only.

6.  After the time for the 1^st defendant to lodge the application bundle and written submission pursuant to Practice Direction 4.1 §36(5) had expired, on 16 November 2017, the Registrar of Civil Appeals made a further direction that unless the defendants (this was before leave for the 2^nd defendant to be represented by a director was refused) were to lodge the application bundle and written submission in compliance with the Practice Direction within three days from the receipt of the further direction, they would be barred from lodging any written submission and the plaintiff should take over and lodge the application bundle and his submission in opposition within 14 days thereafter.  The Registrar further directed that in the event the plaintiff should choose to adopt the contents of his affirmation in opposition as his written representation, he should do so within the aforesaid time.

7.  The 1^st defendant did not comply with the further direction.  He did not lodge an application bundle or any submission for the present summons.  On 6 December 2017, the plaintiff lodged the application bundle and a submission stating that he would just adopt the contents of the affirmation of Chan Lai Hung filed on 19 October 2017 as his submission. A statement of costs was filed by the plaintiff on 15 December.

8.  Having considered the documents lodged in this summons, we consider it appropriate to determine the application on paper without an oral hearing.  We do so in the knowledge that the 1^st defendant has not filed a submission.  He had notice of the time for lodging a submission from the directions given by the Registrar of Civil Appeals on 24 August 2017, 12 October 2017 and 16 November 2017.  He was given ample opportunity to lodge a submission but chose not to do so.  We do not think he would suffer any prejudice for the court to deal with his summons on paper, as the plaintiff has merely relied on his affirmation in opposition without making any further submission and the 1^st defendant has chosen not to file an affirmation in reply.

The applicable principles

9.  The Court of Appeal has discretion to grant or refuse an extension of time for appealing.  The applicable principles were stated in Secretary for Justice v Hong Kong & Yaumatei Ferry Co Ltd [2001] 1 HKC 125.  The factors normally taken into account are: (1) the length of the delay; (2) the reasons for the delay; (3) the chances of the appeal succeeding if time for appealing is to be extended; and (4) the degree of prejudice to the potential respondent if time is extended.

10.  Where the delay is inexcusable although insubstantial, the party seeking an extension of time must show a real prospect of success on the merits, not just a reasonable prospect of success.

11.  Although prejudice to the potential respondent is a ground for refusing to extend time, the absence of prejudice is not a ground for extending time.

Delay and reasons for the delay

12.  As mentioned earlier, the 1^st defendant was five weeks late when the summons was issued.

13.  He explained in his supporting affirmation filed on 21 August 2017 that the delay was due to these reasons.  He was not legally represented and was absent at the trial.  He did not receive the order of the judge immediately after its pronouncement.  He did not realise he had to lodge an appeal within 28 days from the date of the judgment.  He also mistakenly believed that the plaintiff had to serve an order on him other than the judgment.

14.  None of the reasons provided by the 1^st defendant would excuse his delay.  He knew about the date of the trial.  He attended the High Court on the first day of the trial before 10 a.m. and had communication with the plaintiff but chose to be absent when the trial commenced.  He could have inquired from the plaintiff’s solicitors afterwards as to the outcome of the trial but did not do so.  The reasons for judgment were sent to him by the court by post on 30 June 2017.  His lack of knowledge of the time for lodging an appeal is not a justifiable excuse.

15.  As the delay in this instance is inexcusable, the 1^st defendant is required to show a real prospect of success on the merits of the proposed appeal, not just reasonable prospects of success.

If there is a real prospect of success on the merits

16.  We do not propose to set out the detailed reasons of the judge in giving judgment for the plaintiff in the amount claimed of HK$3,150,000.  It was not in dispute that monies were advanced by the plaintiff to the defendants on six occasions between 2009 and 2010: (1) US$22,000; (2) HK$1 million; (3) HK$500,000; (4) HK$500,000; (5) HK$150,000; and (6) HK$200,000.  Except for (1), which was made to the 2^nd defendant and not the subject of an agreement in writing, the other five advances were made to the 1^st defendant pursuant to loan agreements in writing, with the performance of the 1^st defendant effectively guaranteed by the 2^nd defendant.

17.  The plaintiff brought proceedings in the District Court when the defendants failed to repay and the parties, after mediation, made a formal settlement agreement on 25 November 2011 in full and final settlement of their dispute.  The defendants made payment under the settlement agreement until 20 December 2012.  The plaintiff then brought an action in the High Court to enforce the settlement agreement, claiming the outstanding sum of HK$3,150,000.

18.  A draft notice of appeal was annexed to the 1^st defendant’s supporting affirmation with four grounds of appeal.

19.  Firstly, he complained that the judge erred in finding that the six advances were loans repayable by the defendants, rather than the plaintiff’s capital injection into a partnership business with the defendants.  It was contended that the judge did not give sufficient weight to the admitted evidence the 1^st defendant had sent a partnership proposal to the plaintiff by email dated 26 February 2010, and failed to give sufficient weight to the evidence that the 1^st defendant never took any personal loan from any bank or other person as it is against his religious belief to pay interest for personal loan.

20.  Secondly, he contended that the judge was wrong in holding that the aforesaid issues or matters were superseded by the settlement agreement, and failed to give sufficient weight to the fact that the six advances were described as “capital” and “profits” rather than “loan” and “interest” in the settlement agreement.

21.  Thirdly, he contended that the judge did not deal with sufficiently or give any analysis to his central pleaded issue, namely, whether the six advances were advances of capital or loans.

22.  Fourthly, he complained that the judge was wrong in giving judgment for HK$3,150,000 without taking into account the previous repayments by the defendants to the plaintiff.

23.  We are firmly of the view that none of the grounds of appeal are of any merit.

24.  The judge is clearly right in taking the view in §7 of the judgment that while previously there was a dispute between the parties regarding the terms on which the monies were advanced, with the defendants alleging that they were provided as part of the plaintiff’s participation in a partnership and not as loans, any such dispute and all matters then in dispute between the parties were superseded by the settlement agreement.  This finding cannot be faulted.

25.  As noted by the judge in §20 of the judgment, the defendants in their re‑amended consolidated defence have admitted the key paragraphs of the plaintiff’s pleading regarding the background to, entering into, the binding nature and terms of the settlement agreement.  The defendants’ only plea to the plaintiff’s allegation of failure to make payment due under the settlement agreement is a bare denial.

26.  The fact that paragraph (1) of the settlement agreement stated the parties’ agreement of the total outstanding “capital” and “profit” as a result of the six loan agreements is immaterial.  What matters is that the settlement agreement provided in paragraph (2) that the 1^st defendant agreed to repay the plaintiff the outstanding amount in accordance with a repayment schedule, and in paragraph (3) the 1^st defendant agreed to pay an additional HK$250,000 to the plaintiff on 15 December 2014.  These terms of the settlement agreement are all admitted in the defence.

27.  The judge has in §19 of the judgment taken into account the previous repayments made by the defendants to the plaintiff in arriving at the outstanding sum of HK$3,150,000.  In the defence, the defendants did not challenge the amounts repaid as pleaded by the plaintiff were inaccurate.  Moreover, they did not attend trial to give evidence to rebut the plaintiff’s testimony regarding the amounts outstanding, which the judge accepted as truthful.

28.  The 1^st defendant does not even meet the requirement that the proposed appeal should have reasonable prospects of success, let alone real prospects of success.

29.  We refuse to extend time for the 1^st defendant to appeal against the judgment of 19 June 2017.  His summons is dismissed.

30.  Costs of this summons should follow the event.  We make an order nisi that the 1^st defendant should pay the plaintiff’s costs of this summons.  We have considered the statement of costs submitted by the plaintiff.  We assess the reasonable costs due to the plaintiff at HK$18,320.

31.  If no application is made by any party to vary the costs order nisi or the gross sum assessment, the order will be made absolute 14 days after the handing down of this judgment.