TRIDANT ENGINEERING CO. LTD. v. MANSION HOLDINGS LTD.

CACV 311/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. CACV 311 OF 2000

(ON APPEAL FROM HCCT NO. 3/96 AND HCCT NO. 66/96 (CONSOLIDATED))

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J U D G M E N T

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Introduction

1. On 15 June 2000, Deputy Judge To handed down judgment in two consolidated actions. The judgment was sealed on 23 June. If any of the parties wished to appeal, they had to serve their notice of appeal by 21 July. One of the parties, Mansion Holdings Ltd. ("MH"), wished to appeal, but it had not served a notice of appeal by that date. It now applies for its time for doing so to be extended to 7 August, when the notice of appeal was filed in court and (I assume) served on the solicitors for the other party to the appeal, Tridant Engineering Co. Ltd. ("Tridant").

2. Deputy Judge To had not determined all the issues between the parties. All questions relating to interest on any sums for which he gave judgment and costs were adjourned at the request of the parties. A further hearing took place on those issues. The judge delivered judgment on those issues on 26 July. MH wishes to appeal against the award of interest. It contends that one element in the calculation, namely the date from which the interest is to run, was wrongly decided. The notice of appeal which was filed (and presumably served) on 7 August relates to that issue as well, and an extension of time for serving that part of the notice of appeal is not required.

3. Finally, both MH and another party, Mansion Fire Engineering Co. Ltd. ("MFE"), wish to appeal against the orders for costs made by the judge. Orders for costs which are in the discretion of the court cannot be made the subject of an appeal without the leave of the court: see section 14(3)(e) of the High Court Ordinance (Cap. 4). Accordingly, MH and MFE now apply for leave to appeal against the orders for costs.

The reason for the non-compliance with the time limit

4. Prior to 5 May 2000, the time for serving a notice of appeal to the Court of Appeal from a final order was six weeks. However, with effect from that date, Ord. 59 r. 4(1)(c) was amended to reduce the time to 28 days. MH's and MFE's previous solicitors were unaware of this change in the time limit, which had occurred only seven weeks before the judgment was sealed, and they were proceeding in the mistaken belief that they had until 4 August to serve the notice of appeal.

5. It is not suggested that either they or counsel who had been instructed to draft the notice of appeal had made any inquiries or conducted any research into what the time limit then was. Both they and counsel simply assumed that the time limit was as it had been for many years. It has not been suggested that the reduction of the time limit was given particular publicity, but it has to be said that the current Rules of the High Court can be browsed on the internet. Having said that, if a time limit has been in place for many years, I do not suppose that it would occur to many lawyers to take the precaution of checking that the time limit had not recently been reduced.

6. By the time MH's and MFE's current solicitors were retained, the time for serving the notice of appeal had expired. I use the phrase "serving the notice of appeal" as opposed to "filing and serving the notice of appeal" advisedly. The time limit in Ord. 59 r. 4(1)(c) relates only to serving a notice of appeal. The time limit for filing a notice of appeal - or, to be more accurate, lodging the notice of appeal with the Registry - is provided for by Ord. 59 r. 5(1).

7. I should add that nothing turns on the fact that the notice of appeal was not lodged with the Registry until three days after the expiry of the six weeks' period. An attempt to lodge it had been made on 4 August, but the Registry had refused to accept it as it had not been served in time. It was only when it was appreciated that the notice of appeal included an appeal the service of which would, indisputably, have been in time, i.e. the appeal against the award of interest, that the Registry was willing to permit the notice of appeal to be lodged.

8. These facts have been verified on affirmation, and none of them have been disputed by Tridant. Nor does Tridant suggest any relevant prejudice, i.e. prejudice caused by the fact that the notice of appeal was served 17 days later than it should have been. No question of Tridant having to wait longer for its money arises, because the judgment debt, i.e. the difference between the sum which MH was ordered to pay to Tridant and the sum which Tridant was ordered to pay to MFE, was paid to Tridant on 18 July, and the interest on it was paid on 4 August - albeit without prejudice to the outcome of any appeal which might be pursued.

The relevant principles

9. In view of the stark difference in approach between Ms Gladys Li SC for MH and MFE and Mr John Scott SC for Tridant, it would be sensible to remind ourselves of the relevant principles relating to extensions of time generally. The convenient starting point is the judgment of Sir Thomas Bingham MR (as he then was) in Costellow v. Somerset County Council [1993] 1 WLR 256. At pp. 263G-264H, Sir Thomas said:

"The first principle is that the rules of court and the associated rules of practice, devised in the public interest to promote the expeditious dispatch of litigation, must be observed. The prescribed time limits are not targets to be aimed at or expressions of pious hope but requirements to be met ... The second principle is that a plaintiff should not in the ordinary way be denied an adjudication of his claim on its merits because of procedural default, unless the default causes prejudice to his opponent for which an award of costs cannot compensate. This principle is reflected in the general discretion to extend time conferred by Ord. 3 r. 5, a discretion to be exercised in accordance with the requirements of justice in the particular case. It is a principle also reflected in the liberal approach generally adopted in relation to the amendment of pleadings.

Neither of these principles is absolute. If the first principle were rigidly enforced, procedural default would lead to dismissal of actions without any consideration of whether the plaintiff's default had caused prejudice to the defendant. But the court's practice has been to treat the existence of such prejudice as a crucial, and often a decisive, matter. If the second principle were followed without exception, a well-to-do plaintiff willing and able to meet orders for costs made against him could flout the rules with impunity, confident that he would suffer no penalty unless or until the defendant could demonstrate prejudice. This would circumscribe the very general discretion conferred by Ord. 3 r. 5, and would indeed involve a substantial rewriting of the rule ...

Cases involving procedural abuse ... or questionable tactics ... may call for special treatment. So, of course, will cases of contumelious and intentional default and cases where a default is repeated or persisted in after a peremptory order. But in the ordinary way, and in the absence of special circumstances, a court will not exercise its inherent jurisdiction to dismiss a plaintiff's action for want of prosecution unless the delay complained of after the issue of proceedings has caused at least a real risk of prejudice to the defendant ... The approach to applications under Ord. 3 r. 5 should not in most cases be very different. Save in special cases or exceptional circumstances, it can rarely be appropriate, on an overall assessment of what justice requires, to deny the plaintiff an extension (where the denial will stifle his action) because of a procedural default which, even if unjustifiable, has caused the defendant no prejudice for which he cannot be compensated by an award of costs."

Similar views were expressed by Millett LJ (as he then was) in Mortgage Corporation Ltd. v. Sandoes (Court of Appeal (Civil Division) Transcript No. 1634 of 1996). He said, so far as is material:

"The court was acutely aware of the growing jurisprudence in relation to the failure to observe procedural requirements. There was a need for clarification as to the likely approach of the court in the future to non-compliance with the requirements as to time contained in the rules or directions of the court ... Lord Woolf MR and Sir Richard Scott V-C had approved the following guidance as to the future approach which litigants could expect the court to adopt to the failure to adhere to time limits contained in the rules or directions of the court. (1) Time requirements laid down by the rules and directions given by the court were not merely targets to be attempted; they were rules to be observed. (2) At the same time the overriding principle was that justice must be done. (3) Litigants were entitled to have their cases resolved with reasonable expedition. The non-compliance with time limits could cause prejudice to one or more of the parties to the litigation ... (8) The court would not look with favour on a party who sought only to take tactical advantage from the failure of another party to comply with time limits ... (10) In considering whether to grant an extension of time to a party who was in default, the court would look at all the circumstances of the case including the considerations identified above."

10. The issue which divides the parties in the present case is the extent to which the merits of the appeal should be considered. That the merits have to be considered has never been doubted. As Lord Donaldson of Lymington MR said in Norwich & Peterborough Building Society v. Steed [1991] 1 WLR 449 at p. 454H, echoing what Griffiths LJ (as he then was) had said in C. M. Van Stillevoldt B. V. v. E. L. Carriers Inc. [1983] 1 WLR 207, one of the factors to be taken into account is "the chances of the appeal succeeding if an extension of time is granted". The reason for that was explained by Godfrey JA (as he then was) in Mak Hau Shing v. Oriental Press Group [1996] 3 HKC 12 at p. 16H:

"... obviously, to give an applicant for an extension of time in which to appeal [such an extension] would be pointless if the proposed appeal cannot be shown to have a reasonable chance of success."

11. But given that the merits have to be considered, they should not be afforded the same degree of prominence in every case. As was said in Chiu Sin Chung v. Yu Yan Yan Angela [1993] 1 HKLR 225 at p. 228, the merits:

"... will play little part in the balancing exercise if the delay is short and is wholly excusable, but where delay is substantial and is not wholly excusable, much more merit is required to overcome it: Steed, p. 455G-H, distinguishing Palata Investments Ltd. v. Burt & Sinfield Ltd. [1985] 1 WLR 942 from Rawasdeh v. Lane (Court of Appeal (Civil Division) Transcript No. 327 of 1988)."

12. So to what extent should the merits be considered in the present case? Mr Scott urged me to follow the course adopted in Chiu Sin Chung. That was an appeal against the master's refusal to extend the parties' time for appealing against an order of the master to a judge in chambers. In that case, like the present, the parties' solicitor had made a mistake about the time for appealing. The court said at p. 229:

"The delay in this case was short: only 9 days elapsed between the date when the Notice of Appeal should have been filed and the date when the defendants' solicitors took steps to have the Notice of Appeal filed. However, that delay was inexcusable. The facts that the defendants themselves were wholly blameless and the delay has been explained do not mean that the solicitors' error (and the delay caused by it) can be excused. In my view, it cannot ... In the event, because the defendants are blameless for the delay and because the delay was for such a short time, it would be right, in my view, to extend the defendants' time for appealing provided that there is merit in their appeal. However, because the delay was inexcusable, the balancing exercise, in my judgment, requires me to extend the defendants' time only if there is a real prospect of success on the merits."

13. In my view, the present case is distinguishable from Chiu Sin Chung. In that case, although the delay was explained on the basis that the solicitor had mistaken the time for filing the notice of appeal, how the mistake arose was unexplained. The solicitor did not explain how he came to think that the time for filing the notice of appeal was 14 days, when it was 5 clear days. It was not as if there had been a recent change in the law of which he had been unaware. Moreover, unlike the present case, no attempt had been made to file the notice of appeal prior to when the solicitor had thought, albeit erroneously, the time limit expired. In that case, the lack of an explanation for the matter made the solicitor's conduct inexcusable. There is, in my opinion, a very considerable difference between that case and one such as the present where an attempt was made to file the notice of appeal prior to what was thought to be the time limit for its service, and where that time limit had only very recently been changed.

14. For her part, Ms Li relied on the Palata case referred to in Chiu Sin Chung. That was, like the present case, a case in which an extension of time was sought to serve a notice of appeal from a final order in an action in the High Court to the Court of Appeal. In that case, too, the would-be applicant's solicitor was unaware of a recent reduction in the time limit from six weeks to 28 days, and the application for an extension was made only three days after the time limit had expired. However, unlike the present case in which the time limit had been reduced only seven weeks before the sealing of the judgment, in the Palata case the reduction had taken place two years earlier, but before the new edition of the Supreme Court Practice referring to the reduction had been published. Having referred to these facts, Ackner LJ (as he then was) said that he regarded the circumstances of the case as exceptional, and concluded at p. 948A-B as follows:

"There is no question of any prejudice arising to the plaintiffs in the circumstances which I have described, and in that situation there was in my judgment absolutely no need to go into the complex and time consuming question as to whether or not there was a good arguable case on the appeal. There is no invariable rule which requires that consideration and it would obviously involve the very reverse of what the new procedure is designed to achieve if on every application to extend time for leave to appeal there was a pre-appeal hearing in order to consider what were the prospects of success."

15. Ms Li accepted, I think, that the ratio of that case is not that there are cases which are so exceptional that the merits need not be considered at all. Rather, 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. This theme was picked up by Nicholls LJ (as he then was) in Nestlé v. National Westminster Bank Plc (Court of Appeal (Civil Division) Transcript No. 245 of 1990). The effect of his judgment was described by Lord Donaldson of Lymington MR in Steed at p. 456F-G as follows:

"... the important point which was concerning the court in that case was that it 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."

Ms Li contended that the present case was classically one in which the merits could not be addressed without the hearing of the application to extend time degenerating into a mini-hearing of the appeal. Indeed, she was not in a position to address me on the merits, and it was accepted by both her and Mr Scott that if the merits had to be addressed, the application had to be adjourned for further argument.

The application of these principles

16. Applying these principles to the present case, the delay was short, MH was itself blameless, and the fault lay with its solicitors. Their mistake, though not capable of being condoned, was nevertheless an understandable one, and no prejudice was caused to Tridant. In these circumstances, I have concluded that the overall interests of justice require the grant of the extension of time which MH seeks, unless the appeal has no real prospect of success. However, if an assessment of that can only be made at a hearing equivalent to the hearing of the appeal itself, the overall interests of justice require MH's time to be extended without any further consideration of the merits.

17. Since the hearing of the application, I have read (a) Deputy Judge To's judgment, (b) the Notice of Appeal and (c) Mr Scott's skeleton argument which sets out in considerable detail his reasons for submitting that the appeal has no reasonable prospect of success. I have to say that that is not a conclusion which I could safely come to without a further hearing, which would, I am sure, escalate into a hearing equivalent to a hearing of the appeal itself. Accordingly, I grant the extension of MH's time for serving its notice of appeal to 7 August. If it is of any comfort to Tridant, I should add that the very provisional view which I have formed of the merits is that it could not be said that the appeal has no real prospect of success.

The application for leave to appeal

18. If MH's appeal succeeds, the costs will be at large, and leave to appeal from the judge's orders for costs is not required. Leave is only required in respect of orders for costs which MH and MFE contend should not have been made even if MH's appeal fails.

19. I do not wish to make this already lengthy judgment even longer by summarising Ms Li's submissions on the arguability of the contention that these were orders for costs which should not have been made if the judgment on liability stands. It is sufficient for me to state that, for the reasons set out in paras. 12-14 of her skeleton argument, I think that the arguments are sufficiently arguable to justify the grant of leave to appeal. I am confirmed in that view by the fact that, although Mr Scott did not consent to leave being granted, he did not advance any submissions in opposition to the grant of leave. Accordingly, I give MH and MFE leave to appeal against the orders for costs made on 26 July.

The costs of the current application

20. I turn to the costs of the current application. I suppose that it could be said that Tridant could have consented to the extension of time. If it had done so, the costs of the hearing would have been avoided. However, my present view is that since the application would not have been necessary if the notice of appeal had been served in time, and since MH is seeking the court's indulgence, MH should pay to Tridant its costs of the application to extend time in any event, those costs to be taxed if not agreed. That is the order nisi as to costs which I make. So far as the costs of the application for leave to appeal against the orders as to costs are concerned, the order nisi which I make is that the costs be in the cause of that appeal.