HUI TZE HA, the sole executrix of the estate of LAM YIM, deceased v. HO YUET LIN

CAMP 15/2022, [2024] HKCA 579

On an intended appeal from [2021] HKCFI 1901

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 15 OF 2022

(ON AN INTENDED APPEAL FROM HCA NO 1420 OF 2016)

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JUDGMENT

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

Introduction

1.  This is a renewed application by the defendant for extension of time to appeal the judgment of Deputy High Court Judge MK Liu (“the Judge”) given on 30 June 2021. By the judgment, the Judge entered judgment for the plaintiff for the sum of HK$1 million and interest; allowed the defendant’s counterclaim for an order vacating the registration of a sales and purchase agreement against the defendant’s property; but dismissed the counterclaim for declaration of his entitlement to forfeit the HK$1 million; and also ordered the defendant to pay the plaintiffs the costs of the proceedings on indemnity basis.

Background facts

2.  By a sale and purchase agreement dated 18 September 1992 (“the SPA”), the defendant agreed to sell and Lam Yim (“the Deceased”) agreed to purchase a residential property in Kowloon (“the Property”) registered in the defendant’s name.

3.  The SPA was prepared by solicitors. The main provisions include: (1) the purchase price is HK$1.2 million; (2) a sum of HK$1 million being deposit has already been paid; (3) the balance of the purchase price shall be paid on or before completion; (4) completion shall take place on or before 5:00 pm on 27 August 1993 (“Completion Date”); (5) at completion the defendant, and all other necessary parties, shall execute a proper assignment in favour of the Deceased or his nominee(s) or sub-purchaser(s); and (6) time shall in every respect be of the essence of the agreement.

4.  The SPA also contains a receipt clause under which the defendant acknowledged having received from the Deceased HK1 million as initial deposit before the date of the agreement.

5.  It is common ground that on the Completion Date, the Deceased did not pay the balance of the purchase price and the defendant did not tender an assignment to the Deceased for execution, and no completion has ever taken place.

6.  The Deceased passed away on 28 September 2001. Probate was granted to the plaintiff, who is the wife and sole executrix of the Deceased’s will.

7.  In July 2013, the defendant commenced HCMP 1690/2013 (“HCMP Proceedings”) seeking to vacate the registration of the SPA at the Land Registry. It is the plaintiff’s case that she only came to know about the SPA when she received the papers of the HCMP Proceedings. No further action has been taken in the HCMP proceedings.

HCA 1420/2016

8.  On 30 May 2016, the plaintiff commenced the action below (HCA 1420/2016) claiming for (1) specific performance of the SPA; and alternatively (2) the return of HK$1 million.

9.  On 22 March 2019, upon the defendant’s application, Master Man ordered that the claim for specific performance be struck out on the ground that it was time-barred. There was no appeal by the plaintiff against that order.

10.  On the pleading, the plaintiff’s claim for the return of HK$1 million was based on Quistclose trust or resulting trust, and alternatively on unjust enrichment. On the defendant’s pleading, her primary defence is non est factum, namely she only signed on a blank piece of paper and had not signed any agreement to sell the Property, and that she had not received the HK$1 million as stated in the SPA. Alternatively, she counterclaimed for a declaration that she is entitled to terminate the SPA and forfeit the HK$1 million by reason of the Deceased’s failure to complete the purchase of the Property by the Completion Date.

The Judge’s decision

11.  The trial went before the Judge. On the first day of the trial, as a result of exchanges between the bench and counsel for the defendant, as summarized in [14] to [16] and [17] to [19] respectively of the judgment, the defendant abandoned the plea of non est factum and also did not maintain her denial of the receipt of HK$ 1 million. No witnesses were called by either party. The Judge proceeded on the basis that the defendant admitted having signed the SPA and received HK$1 million from the Deceased. During closing submissions, the Judge put to counsel four scenarios and invited submissions on them :

(1)  Scenario A: Both the Deceased and the defendant have been in breach of the SPA by not performing their respective obligations on the Completion Date, and the contract remains on foot. However, specific performance of the SPA is impossible as the claim has been struck out.

(2)  Scenario B: The Deceased repudiated the SPA by failing to tender the balance of the purchase price on the Completion Date, but there has been no unequivocal acceptance of the repudiation by the defendant such that the SPA remains on foot. However, specific performance of the SPA is impossible as the claim has been struck out.

(3)  Scenario C: The Deceased repudiated the SPA by failing to tender the balance of the purchase price on the Completion Date. The repudiation was accepted by the defendant by the commencement of the HCMP Proceedings.

(4)  Scenario D: The Deceased repudiated the SPA by failing to tender the balance of the purchase price on the Completion Date. The defendant accepted the repudiation by the service of her Defence and Counterclaim in the action below.

12.  Mr Tam, who appeared for the defendant, put forward a fifth scenario, which he argued was the true scenario :

Scenario E: The defendant was the party in breach of the SPA by failing to tender an assignment to the Deceased on the Completion Date or within a reasonable time thereafter. The SPA was terminated upon the Deceased failing to pay the balance of the purchase price on the Completion Date. The unjust enrichment claim also arose on that date and has become time-barred.

13.  The Judge found that Scenario D represented the true position. He held that the plaintiff was entitled to recover HK$1 million from the defendant by reason of unjust enrichment. His findings and reasons may be summarized as follows:

(1)  The SPA was terminated on 19 October 2016 by the service of the Defence and Counterclaim as a result of the defendant’s plea in [19] of the Defence and Counterclaim (see [29] below), which showed clearly and unequivocally that she treated the SPA as coming to an end.

(2)  The claim of unjust enrichment was made out in that : (a) the sum of HK$1 million was not a true deposit but an advance payment made by the Deceased; (b) there was no dispute that the defendant was enriched at the expense of the Deceased; (c) as the SPA was terminated on 19 October 2016, the unjust enrichment claim accrued on that day and not earlier, and is not time-barred; and (d) the defendant failed to put forward any defence or evidence to dispute the unjust enrichment claim.

(3)  Although the unjust enrichment claim is a post-writ claim, the court’s discretion should be exercised to allow the plaintiff to rely on it, having regard to the fact that : (a) the defendant was aware of the issue before trial and had ample opportunities to deal with it; (b) it would be a waste of resources to disallow the claim and to require the plaintiff to commence a fresh action to pursue the claim; and (c) a flexible approach should be adopted notwithstanding the Eshelby rule: Chan Mei Ling v Lee Hong (unreported) CACV 44/2015, 3 December 2015, at [25], and Qianhai Xinhuakang Financial Holdings (Shenzhen) Ltd v Chen Jiarong [2020] HKCFI 823 at [61].

14.  In consequence, the Judge (1) entered judgment for the plaintiff for HK$1 million; (2) did not deal with the trust claim since he had found in favour of the unjust enrichment claim; (3) dismissed the counterclaim for the forfeiture of HK$1 million; and (3) allowed the counterclaim for an order vacating the registration of the SPA since the SPA was terminated on 19 October 2016. As to costs, the Judge ordered indemnity costs against the defendant, accepting the plaintiff’s submission that the defendant’s allegation on the non est factum defence is completely untrue and the plaintiff have spent much time and costs to meet this untrue allegation.

The application for extension of time to appeal

15.  On 1 November 2021, the defendant applied to the Judge for extension of time to appeal his judgment. The events leading to the application may be summarized as below:

(1)  The defendant was legally aided in the proceedings below. On 7 July 2021, she met with her legal representatives and decided to appeal the judgment. On the same day, her solicitors wrote to inform the Director of Legal Aid of her intention to appeal.

(2)  On 22 July 2021, the defendant put in her application for legal aid for the intended appeal together with an advice of her counsel provided on pro bono basis. On the same day, the Director of Legal Aid issued the Notice of an Application for Legal Aid which was served on the plaintiff’s solicitors. This triggered the 42-day statutory stay, as a result of which the time for appeal expired on 8 September 2021.

(3)  On 21 September 2021, the defendant’s solicitors wrote to the Director of Appeal to enquire the progress of the legal aid application.

(4)  On 5 October 2021, legal aid certificate for the appeal was issued which was received by the defendant and her solicitors on 7 October 2021.

(5)  On 22 October 2021, the defendant’s solicitors issued a summons accompanied by an affirmation to apply for leave to appeal out of time, but erroneously filed them in the Court of Appeal instead of in the Court of First Instance. The papers were served on the plaintiff’s solicitors.

(6)  On 28 October 2021, the Registrar for Civil Appeals pointed out the mistake. On the same day, the Director of Legal Aid issued notice assigning counsel to represent the defendant in the appeal,

(7)  On 29 October 2021, the defendant withdrew the summons filed erroneously in the Court of Appeal. On 1 November 2021, the defendant issued the summons in the Court of First Instance.

(8)  The Judge dismissed the application and ordered costs against the defendant on indemnity basis. In short, the Judge considered that the delay was substantial and inexcusable and that none of the intended grounds of appeal had merit.

Delay

16.  There is no dispute, and the law is trite, that in an application for extension of time to appeal, the court will have regard to: (1) the length of delay; (2) the reasons for the delay; (3) the merits of the intended appeal; and (4) the prejudice to the other party if the extension is granted.

17.  Mr Tam, for the defendant, also referred to Tridant Engineering Co Ltd v Mansion Holdings Ltd [2001] 1 HKLRD 783 at 789J-790E in which Keith JA held that, “where the circumstances are exceptional, time may be extended without a consideration of the merits if, in order to assess the merits, a lengthy and time-consuming hearing is necessary.” The sort of circumstances that Keith JA was referring to were, as explained by Lord Donaldson of Lymington MR in Norwich & Peterborough Building Society v Steed [1991] 1 WLR 449 at 456F-G (cited by Keith JA at 790B-D):

“… [the court] found that it could not evaluate the chances of success without, in effect, hearing a lengthy mini-appeal. In those circumstances it was impossible to be sure that the merits were not sufficient to counterbalance the excusable delay which had occurred; and in that sort of situation, quite clearly, justice required an extension of time for appealing in order that the matter might be explored further.”

We do not considered that the principle applies to this case.

18.  In the present case, the defendant’s delay (from 8 September to 1 November 2021) was in excess of seven weeks. This is a significant delay, in light of the 28-day appeal period. The defendant primarily attributes the delay to the time required for processing her legal aid application. Mr Tam also submits that, as a result of correspondence between solicitors, the plaintiff has been made aware of the defendant’s intention to appeal, and the plaintiff does not suffer any real prejudice from the delay.

19.  We are prepared to accept that part of the delay is attributable to the processing of the defendant’s legal aid application and the time required by the legal representatives to formulate the draft grounds of appeal. We will, however, add that it would have been more prudent for the defendant while waiting for the outcome of her legal aid application, to seek a consent order for extension of time to appeal or to make a time extension application.

20.  As to the delay caused by the mistake in issuing the application in the Court of Appeal, it is inexcusable. Given that the inexcusable portion of delay is relatively brief, we would proceed to consider the merits of the intended appeal.

Intended grounds of appeal

21.  The defendant puts forward two intended grounds of appeal:

(1)  Ground 1:  The Judge erred in finding that the SPA was terminated on 19 October 2016 in that: (a) as both parties have failed to perform their contractual obligations, there has been no repudiation of the SPA, applying Chong kai Tai Ringo v Lee Gee Kee [1997] HKLRD 461; (b) alternatively the Judge should have found that the SPA was terminated on around the Completion Date when the Deceased failed to tender the balance of the purchase price and the defendant accepted his repudiation by not redeeming the mortgage (which was a condition precedent of completion) and continuing to reside in the Property; and (c) [19] of the Defence and Counterclaim did not amount to a clear and unequivocal acceptance of the repudiation.

(2)  Ground 2:  The Judge erred in allowing the plaintiff to rely on unjust enrichment in that it is a post-writ claim that differs from her pleaded claim, and the defendant has been deprived of an opportunity to respond in pleadings and adduce evidence and also to rely on the defence of limitation.

Merits of the intended appeal

22.  For the reasons set out below, we are of the view that the intended grounds of appeal have no prospect of success.

(1)  Ground 1

23.  The defendant’s primary argument under this ground is that the Judge should have applied Chong Kai Tai Ringo and found that the SPA has not been repudiated. In that case, the Privy Council held that the vendors’ obligation to deliver an executed assignment on completion was concurrent with the purchasers’ obligation to tender payment for the purchase price on completion. Lord Hudson held (at 407A):

“… their Lordships consider it to be clear that as the obligations of both parties were concurrent and as the vendors were unable to deliver an executed assignment to the purchasers on 17 July, they were not entitled to claim that the purchasers had repudiated the contract by failing to pay the balance of the purchase money on that date. In those circumstances time ceased to be of the essence of the contract and the parties had a reasonable time in which to complete.”

24.  As the Judge pointed out in his decision on extension of time to appeal (at [18]), the defendant is effectively arguing that Scenario A (see [11] above) should apply. The Judge had in fact given consideration to this scenario and also the above passage in Chong Kai Tai Ringo, but took the view that it would not appropriate to decide the case on such basis because it had not been canvassed in the pleadings and no evidence relating to it was adduced.

25.  Mr Tam argues that the material facts to sustain a case of scenario A have been pleaded and that it is not necessary for the parties to also plead the legal result, relying on Suen Shu Tai v Tam Fung Tai [2014] 4 HKLRD 436. The legal proposition is supported by Lo Yuk Sui v Fubon Bank (Hong Kong) Ltd (2020) 23 HKCFAR 138 at [9] in which the Court of Final Appeal observed:

“The rules of pleading are set out in the Rules of the High Court and parties are protected against being taken by surprise on appeal by points of law not raised below by the well-established practice laid down in Flywin Co. Ltd. v Strong & Associates Ltd. There is no requirement in the RHC for a party to plead the legal consequences of particular facts and the rules are permissive as to the raising of points of law in pleadings. That this represents the present position is confirmed by its endorsement by the Chief Justice’s Working Party on Civil Justice Reform.”

(Footnotes omitted)

26.  While we accept that it is arguable that the application of Chong Kai Tai Ringo is not precluded by the pleadings, the real hurdle in the defendant’s way is that the case she now seeks to argue is very different from her case at the trial. Her case at trial is that she had repudiated the SPA by failing to tender an assignment to the Deceased on the Completion Date, and the SPA was terminated upon the Deceased’s failure to tender the balance of the purchase price, such that the plaintiff’s cause of action in unjust enrichment arose in 1993 (see [12] above). Having adopted that position at the trial, it is now not open to her to argue that the Judge should have applied Chong Kai Tai Ringo and found that the SPA has not been terminated. Moreover, it is not apparent to us how the application of Chong Kai Tai Ringo and a finding that the SPA has not been terminated would have entitled her to forfeit the HK$1 million. The defendant pleaded in [19] of the Re-Re-Re-Amended Defence and Counterclaim that by reason of the Deceased’s failure to complete the purchase of the property by the completion date, she is entitled by implied condition to forfeit the sum and she counterclaims for a declaration to that effect. The implied condition is, however, not particularized in the pleading, and it is not known what its basis is.

27.  The defendant’s alternative argument under this ground is that the SPA was terminated when the Deceased failed to tender the balance of the purchase price, which the defendant accepted by not redeeming the mortgage, which is a condition precedent of completion and by continuing to reside in the Property. The defendant points to the fact that she has failed to perform her obligations under the SPA for more than two decades. It is said that the long lapse of time qualifies as a special circumstance such that her failure to perform may only be explicable to a reasonable person in the position of the repudiating party as an election to accept the repudiation, relying on Vitol SA v Norelf Ltd [1996] AC 800 at 812D.

28.  This alternative argument faces the same hurdle of being contrary to the defendant’s case at the trial, in addition to being an unpleaded case. Further, while a failure to perform could in some special circumstances constitute an unequivocal acceptance of a repudiatory breach: Vitol SA v Norelf Ltd, supra, the conduct relied on as constituting acceptance of the repudiation must also unequivocally convey to the repudiating party that the aggrieved party is treating the contract at an end because of the repudiating party’s repudiatory breach of the contract: Kar Ho Development Co Ltd v Axis Investment [2001] 1 HKC 86, at 97D-F; and Chao Keh Lung v Don Xia [2004] 2 HKLRD 11, at [42]-[44] referred to in the judgment at [25]. As the Judge observed in refusing to extend the time to appeal, there is no evidence to show that it was in response to the Deceased’s breach that the defendant did not redeem the mortgage and continued to stay in the Property.

29.  The defendant’s third argument under Ground 1 challenges the Judge’s finding that she has accepted the Deceased’s repudiation, and the SPA was terminated, by the service of the Defence and Counterclaim on 19 October 2016. The Judge relied on [19] of the Defence and Counterclaim, the material part of which states as follows :

“… the Defendant avers that by reason of the failure of the Deceased and/or the Plaintiff to complete the purchase of the Property on or before the Completion Date, the Defendant is entitled to forfeit the deposit of HK$1,000,000 or such sum the Honourable Court thinks fit and appropriate and to terminate the Agreement.”

30.  The Judge found that by this averment, the defendant has clearly and unequivocally treated the SPA as coming to an end, and communicated her acceptance to the plaintiff by the service of the Defence and Counterclaim. We agree. The averment in [19] is a clear and unequivocal plea that the defendant accepted the Deceased’s breach and exercised her right to forfeit the deposit and terminate the SPA. That the defendant has treated the SPA as being terminated is reinforced by her counterclaiming for a declaration that she is entitled to forfeit the HK$1 million deposit and also damages to be assessed.

31.  The defendant argues that the forfeiture of the deposit averred in [19] is her alternative case and her primary case on pleading is non est factum. As such, it is contended that the service of the counterclaim cannot amount to an unequivocal communication of acceptance, relying on Luk Stanley Ho Chang v Fook Man Finance Co Ltd (unreported) CACV 131/2006, 15 December 2006. We do not think Luk Stanley Ho Chang assists the defendant as the facts of that case are rather different: see [43]. In the present case, whether or not the counterclaim is put forward as an alternative case does not matter because by its plain and clear language, [19] avers that the defendant is terminating the SPA. It clearly and unequivocally conveys to the plaintiff that the defendant is treating the SPA as coming to an end. After all, the communication does not have to be couched in the language of acceptance: Vitol SA v Norelf Ltd at 811A. In any event, the Defendant’s case on non est factum was abandoned by her.

32.  For the above reasons, Ground 1 is not arguable.

(2)  Ground 2

33.  Ground 2 is directed at the Judge’s acceptance of the plaintiff’s unjust enrichment claim. The gist of the defendant’s complaint is unfairness. It is not in dispute that this is a post-writ claim that has not been pleaded. The Judge’s reasons for allowing the plaintiff to rely on the claim are encapsulated in [45] of the judgement:

“(1) P’s unjust enrichment has been put forward in P’s pleadings. The unjust enrichment claim is an issue in the agreed list of issues submitted to the court before the commencement of the trial. D has never objected to the unjust enrichment claim based on the Eshelby rule until in D’s Opening. In these circumstances, I am of the view that before the commencement of the trial, D has agreed that the merits of the unjust enrichment claim should be resolved in these proceedings.

(2) D is unable to point out any prejudice to her if P is allowed to rely upon the unjust enrichment claim in these proceedings. The claim has been clearly put forward by P in P’s pleadings, and D has ample opportunities to deal with this claim in substance in these proceedings.

(3) It would be against effective case management and practical justice if the court refuses to allow the unjust enrichment claim merely because of the Eshelby rule. If such a ruling is made, this would simply force P to commence a fresh action before 19/10/2022 (ie within 6 years from the service of the D’s original counterclaim) to seek repayment of the HK$1m based on unjust enrichment. That would lead to unnecessary wastage of the parties’ and the court’s resources.”

34.  We do not think the Judge, for the reasons he has given, can be said to be plainly wrong in the exercise of his discretion such that the appellant court may interfere with it.

35.  As to the complaint that the defendant has been deprived of a limitation defence, given the Judge’s finding that Scenario D reflects the true position, which is that the defendant by the service of the Defence and Counterclaim accepted the Deceased’s repudiatory breach and terminated the SPA, the limitation defence will not arise. It is therefore not correct to say that the Judge’s discretion to allow the unjust enrichment claim has deprived the defendant of a limitation defence.

36.  In sum, Ground 2 is not made out.

Conclusion and costs

37.  As the intended appeal does not enjoy any prospect of success, it will be futile to extend the time to appeal. Accordingly, we refuse the application and dismiss the defendant’s summons.

38.  As the application is wholly without merits, we further make an order, pursuant to Order 59 rule 2A(8) of the Rules of the High Court, Cap. 4A that no party may under Order 59 rule 2A (7) request the determination to be reconsidered at an oral hearing inter partes.

39.  As to costs, there is no reason to depart from the normal rule of costs follow the event. We order the defendant to pay the plaintiff the costs of this application, to be summarily assessed.

40.  We have considered the statement of costs of the plaintiff. We take into account that the costs are assessed on a party-and-party basis, the documents involved in the application are not voluminous, both counsel and solicitors were involved in the trial and the time extension application below, and the vast majority of the documents as well as most of the arguments in this renewed application are the same as those in the application below the Judge. We are of the view that the time spent on items C1 (attendance on client), C2 (attendance on counsel) and D2 (perusal of documents) should be revised downward. In particular, the perusal of many of the documents listed under D2 has no apparent relevance or necessity. Further, the costs for preparing statement of costs (item 4 under D1) should be disallowed: see Practice Direction 14.3 at [13].

41.  Taking a broad-brush approach, we summarily assess the plaintiff’s costs of this application at HK$110,000.