XCHRX LAM YUN WAH DOMINIC AND ANOTHER v. CHAN KAN HEI AND ANOHTER

HCA7545/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.7545 OF 1998

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J U D G M E N T

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1. There is before the court today a master's appeal. It is in the form of a Notice of Appeal dated 19 May 2000. There is also a summons of like date but, so far as I can see, this merely duplicates paragraph (a) of the Notice of Appeal.

2. The defendants herein seek to appeal against the order of Registrar Chu dated 15 April 1999. In this judgment, Registrar Chu adjudged and declared that the sale and purchase agreement entered into between the parties dated 28 October 1997 had been duly rescinded, and that, inter alia, the defendants do pay the plaintiffs the sum of HK$250,000 by way of repayment of deposits. There were various other monetary orders on the face of her Order. Moreover, she ordered that the costs of the action be to the plaintiffs, to be taxed if not agreed, together with a certificate for counsel.

3. How did this all come about? I am indebted to both Ms Ma, who appears for the defendants today, and Mr Ho, for the plaintiffs, for doing their best to fill me in on what is an unusual case. Matters arose this way. The defendants are the owners of a property at Cameo Court, Tai Po. They wished to sell this property. Accordingly, they entered into a sale and purchase agreement dated 28 October 1997 with the plaintiffs. The consideration, Mr Ho tells me, was $2.5 million. Unfortunately, this sale did not go through. The reason, in broad terms, was that it was said that the defendants had not been able to show good title in answer to requisitions raised by the plaintiffs' solicitors. The precise details do not greatly matter. Suffice to say that the property in question comprised three lots of land in the New Territories, and in particular it is Lot No.1593 RP which gives rise to most of the present problems because, in a nutshell, the defendants were unable to provide to the satisfaction of the plaintiffs' solicitors anything other than purely secondary evidence in terms of root of title.

4. At this stage it is worth noting that the solicitors previously acting for the defendants were not always of that view, maintaining that they had satisfactorily answered the plaintiffs' requisitions. I note that by letter dated 12 January 1998, Messrs Ng, Tam, Ko & Chan, then solicitors for the defendants, themselves purported to rescind the agreement for sale and purchase and to forfeit the initial deposit in the sum of $250,000. This apparently was the catalyst for the litigation that followed.

5. The plaintiffs commenced proceedings in HCA7545 of 1998 by writ dated 12 May 1998. A Defence and Counterclaim followed on 3 July 1998 and on that date, also, third party proceedings were commenced, seeking indemnification from the solicitors who had, I am told, acted for the defendants in purchasing this property in the first place. There is no need for present purposes to go into the details of the two sets of proceedings. Suffice it to say that the plaintiffs' relief in its Statement of Claim sought, inter alia, an order for rescission of the said sale and purchase agreement and repayment of the deposit, together with repayment of other sums, such as the agency fee and the stamp duty fee.

6. The onset of the litigation was followed by a summons taken out by the plaintiffs on 22 October 1998 pursuant to Order 14A and Order 86, Rules of the High Court, and it is the resolution of this summons which was effected by the judgment of Registrar Chu of 15 April 1999, the judgment rescinding the sale and purchase agreement to which I have earlier referred.

7. At this point, the facts begin to be relevant in terms of the present application because, after the judgment of the Registrar, no appeal was filed. I am told by Mr B.K. Ho, who appeared before the Registrar on the Order 14A / Order 86 argument, that at that hearing he relied upon a number of cases in his argument on behalf of the plaintiffs the effort of which was essentially to preclude resort to secondary evidence in terms of proving a document of title.

8. At this stage, therefore, the position the defendants found themselves in was that the head action had now been determined pursuant to the judgment of Registrar Chu, although the third party proceedings in negligence brought by the defendants against the solicitors initially responsible for purchasing the property remained ongoing. There the matter stayed until the end of February 2000, albeit I note in passing that although Registrar Chu had ordered restitution by the defendants to the plaintiffs of the full deposit figure of $250,000, I am told by Mr Ho that in fact only $50,000 has actually been returned. Be that as it may.

9. What therefore happened to change the position at the end of February this year? After some considerable delay, this was the time for the exchange of witness statements in these third party proceedings, and a witness statement filed by the third parties on 23 February 2000 had a dramatic effect upon the defendants' view of their situation. In the statement of Ng Wai Hee, a senior partner of Messrs Ng, Tam, Ko & Chan (at paragraph 20) this proposed witness says as follows :-

" It was the standard practice and the standard of care of the profession at the material time when the Defendants purchased the Property to accept title upon production of secondary evidence of the grant of the Crown Lease and of the terms thereof in the absence of any certified copy of the complete Government Lease and in the absence of the subsequent court decisions strictly requiring the production of a certified copy of the complete Crown Lease. EWN [which I understand stands for Edward Wong & Ng] had handled the Defendants' purchase with due diligence and they had fully discharged their duty of care towards the Defendants. Such comments and indeed what EWN had done, have since been vindicated by the Court of Appeal decision in Wu Wing Kuen v. Leung Kwai Lin; Ip Foo Keung Michael & Anor. v. Chan Pak Kai [1999] 4 HKC 565, ruling that secondary evidence is admissible for proving the contents and due execution of lost title deeds and documents. In the Judgment of Godfrey J.A., he expressly stated that 'these six cases insofar as they decided that secondary evidence of a document of title was, because of section 13(1), not admissible, were all wrongly decided and, in my judgment, we should now overrule them. They all proceed on the unspoken assumption that s.13(1) was calculated to make life harder for vendors, not easier. The opposite is the case."

10. This decision in Wu Wing Kuen v. Leung Kwai Lin & Anor. in late 1999, as the report makes clear, specifically overruled the cases - I understand there to be at least six in number - which had been relied upon by Mr B.K. Ho in his successful argument on behalf of the plaintiffs in obtaining summary relief before the learned registrar. This situation placed the defendants in a considerable dilemma. In colloquial terms, the defendants found themselves between a rock and a hard place. They had lost the head action against the plaintiffs in a summary fashion on the basis of established case law, which was now at a fell swoop overruled by the Court of Appeal. So that if this was correct, they had lost the head action on one basis, and now stood to lose the third party proceedings on quite the contrary basis, namely, the overruling of the cases which had been the foundation of the plaintiffs' success in the head action.

11. The common law throws up some unusual circumstances and situations, but this surely must be one of the most curious. Having taken the view not to appeal the decision of Registrar Chu, which appeared to be in line with established authority, it was now clear that there was considerable hope or, at its lowest, some reasonable degree of hope, not only in terms of the substantive action against the plaintiffs, given the decision of the Court of Appeal, but also, on the basis of this appellate judgment, it was evident that Registrar Chu's decision, through no fault of her own, plainly had been rendered incorrect.

12. Now I do not know how long this matter was brooded on, but I am prepared to accept at face value that these matters had not come to the attention of the defendants until they had sight of the relevant witness statement of 23 February 2000. Thereafter there appears to have been a three-month hiatus until the formal application to enlarge time for appealing against the judgment of Registrar Chu was filed on 19 May. Were time to be so enlarged, it is important to note that in terms of whether or not that appeal will be successful, Mr Ho, appropriately in my view, has conceded that the matter is essentially triable and that this case is not subject to summary determination.

13. With regard to the ambit of the present appeal, there is no doubt about the general principles that have been laid down in the cases, some as long ago as the nineteenth century, dealing with appeals out of time and the upsetting of judgments by reason of a change in the law. Ms Ma has usefully and helpfully taken me through the leading case law, which I do not intend to recite here. This culminated in the Hong Kong Court of Appeal decision in Birkenhead Properties & Investments Ltd v. Leung Yiu & Others [1998] 1 HKLRD 527. It is clear from the judgments of their Lordships in the Court of Appeal that they followed the usual principles as laid out in Norwich and Peterborough Building Society v. Steed [1991] 1 WLR 449 and considered four distinct matters : first, the issue of delay, second, the reasons for that delay, third, the chance of succeeding if the application was granted, and fourth, the degree of prejudice to the respondent if the application were to be granted.

14. I have considered all four categories. As I have said, if time is enlarged, Mr Ho has conceded that in these particular circumstances, if the defendants are to be let back in, Registrar Chu's judgment cannot stand and the matter must go to trial. Mr Ho voices more reservations about the defendants' prospects of success at trial, given the requirements of Wu King Kuen as to the necessity for "clear and cogent secondary evidence" but that, it seems to me, whilst a permissible comment in itself does not greatly impact at this stage, given that the appeal that is presently being sought to be made is that against Registrar Chu's judgment.

15. This is a most unusual case. I have been particularly concerned about the public policy aspect, and the well-known desire of the courts in administer justice in order to achieve finality between litigants. However, in the very particular circumstances of this case, after putting all the facts into the discretionary 'mix' and after taking into account the excellent submissions on each side, I have decided to accede to the application, and to permit this appeal against the judgment of Registrar Chu to proceed out of time.

16. I apprehend in these circumstances, given Mr Ho's concession, that this matter will now proceed to trial. After reflecting on the entirety of the situation as it has arisen, I am in no doubt whatever that it is just in these very unusual circumstances that there should be a trial of the head action and of the third party proceedings. The very issue concerning the clarity and cogency of the secondary evidence that Ms Ma wishes to put forward against the plaintiffs is clearly precisely the subject-matter of the argument raised, inter alia, on behalf of the third parties' solicitors in the third party action (in which, I am told, subrogated insurers are fighting their corner very vigorously).

17. So there is going to be a trial. By that time, of course, if trial there be, this particular highly contentious matter as to the adequacy of secondary evidence may well have been ventilated in the Court of Final Appeal. I am led to believe (I hasten to add that I have nothing concrete in this regard) that there is at least a possibility that the judgment of Wu King Kuen v. Leung Kwai Lin Cindy & Others may indeed find its way to the Court of Final Appeal, which will then no doubt grasp this particular nettle and settle this issue once and for all. That however is by the by. At the moment, it is clear in my judgment that time should be enlarged, and that in the circumstances the judgment of Registrar Chu should not be permitted to stand.

18. I will now hear counsel as to costs and as to the form of the order, and indeed as to any other consequential matters. I understand in this latter context that there is a taxation of costs fixed for June, which, in the circumstances, obviously cannot proceed.

[Brief submissions from counsel]

19. I have heard counsel on costs and related matters. There appears to be a substantial degree of agreement between counsel as to the appropriate course to follow. I am, however, very much aware that counsel and those instructing them, have just received an extemporary judgment, and that the implications of what has been said may need to be fully thought out. In the circumstances, I will leave counsel to agree a form of order consequent upon this appeal. I suggest they can do that over the course of the next few days. If the matter can be fully agreed, including the question of costs, so much the better. I shall simply initial the order as presented by consent. If on the other hand, any matter remains outstanding, then counsel or solicitors can return before me at 9:30 at some stage in the next week or so (before, I hope, I forget completely about this case), and deal with any contentious issue that cannot be agreed. This is, perhaps, an unusual course, but I think, in this instance, I will do that. For the avoidance of doubt, however, in terms of the Notice of Appeal, I shall be making an order in terms of (a) and (b) in the Notice of Appeal, the balance of that order (which I hope may be agreed) being for costs and procedural directions. So that the first two parts of the order, would, subject to anything Mr Ho says, be (a) and (b) of the Notice of Appeal.

20. I have reflected about the course I have decided to adopt in this most unusual case, and I should add that it should not to be thought that because I have given leave in this instance that it follows that I should be equally amenable in other cases.