CHAMPION CONCORD LTD AND ANOTHER v. LAU KOON FOO AND ANOTHER

FACV Nos. 16 and 17 of 2010

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 16 OF 2010 (CIVIL)

(ON APPEAL FROM CACV NO. 232 OF 2010)

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JUDGMENT

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Chief Justice Ma :

1.  At the conclusion of submissions made by counsel for the appellants (Mr Mark Strachan), we dismissed the appeal together with the appellants’ application for leave to raise a jurisdiction issue before this Court, with costs.  It was indicated to the parties that the Reasons for Judgment would be handed down on a date to be notified.

2.  I agree with the reasons for dismissing the appeal and summons contained in the Judgment of Mr Justice Ribeiro PJ.  I wish only to make two brief observations.

3.  First, in relation to the jurisdiction issue, it must be accepted that, generally, there can be no conferment of jurisdiction (where none exists) by the consent of the parties, nor by the doctrines of waiver or estoppel.  However, notwithstanding this general statement, all these three aspects – consent, waiver and estoppel – are decisive in the present case in favour of the existence of jurisdiction.  As analyzed in the Judgment of Mr Justice Ribeiro PJ, it is critical to bear in mind that under s.34B(4)(c) of the High Court Ordinance, Cap 4 (for the full text of this provision, see para 23 below), the very foundation for the jurisdiction of two appellate judges to hear an appeal from a final order or judgment, is the consent of the parties.  True it is that that provision refers to the filing of a consent by the parties prior to the appeal being heard, but this requirement is in my view merely a procedural one; it is the consent of the parties that founds jurisdiction.

4.  In the present case, there can be no doubt that the parties consented to the appeal being determined by Rogers VP and Le Pichon JA.  What was missing was only the filing of the consent.  Here, as developed in the Judgment of Mr Justice Riberio PJ, the parties had given undertakings to the court to this effect or this requirement was waived or the appellants are estopped from contending otherwise.

5.  In the context of the jurisdiction issue, I should add I also have doubts over the correctness of the decision of the Court of Appeal in SOL International Ltd v Guangzhou Dong Jun Real Estate Interest Co. Ltd [1998] 2 HKLRD 637.

6.  My second observation is that this is yet another appeal which has been heard by this Court “as of right” under s.22(1)(a) of the Hong Kong Court of Final Appeal Ordinance, Cap 484.  And, like the vast majority of appeals which are heard by this Court by this route, it was wholly without merit and unarguable.  The Appeal Committee has recently (in Chinachem Charitable Foundation Limited v Chan Chun Chuen and another unrep., FAMV 20 of 2011, 28 October 2011) remarked that the time has come for the “as of right” ground in s.22(1)(a) of the Ordinance to be reviewed to see whether in these modern times, it still serves a valid purpose.  In my view, it is doubtful that it is in the public interest that such a provision still has a place.  The experience of this Court has been that appeals brought by this route are a drain on resources, waste time and hinder in a very tangible way the resolution of other, far more meritorious proceedings.

Mr Justice Bokhary PJ :

7.  The result, for reasons to be handed down, was announced by Chief Justice Ma at the conclusion of the hearing.  And the story of the case, which is an unfortunate one, is as told by Mr Justice Ribeiro PJ.  All that I have to say is this.

8.  Although it sat in a division of only two judges when hearing and determining an appeal which was not interlocutory, the Court of Appeal was, I have no doubt, duly constituted in the circumstances.  So this appeal reached us on the merits.  And on the merits, the appellants had to fail.

9.  Mr Justice Ribeiro PJ has aired a number of bases on which to hold that the Court of Appeal was duly constituted.  I have no doubt that it was duly constituted because the parties had, before the hearing of that appeal, given the consent required by s.34B(4)(c) of the High Court Ordinance, Cap.4, for an appeal to the Court of Appeal to be heard and determined by two judges even though it is not an interlocutory appeal.  That consent was given in the face of the court and was effective.  On a purposive construction of s.34B(4)(c), the filing of a consent was not essential in such circumstances.  Even on the foregoing basis alone, the Court of Appeal was duly constituted.  I propose to say nothing as to any other basis or bases on which that conclusion might be reached.

10.  None of that is to say that a consent ought not to have been filed beforehand.  Nor is it to suggest that a panel of three judges ought not to have been convened given that no consent had been filed beforehand.  It is only to say that consent having been given – one might say fortunately having been given – in the face of the court before the hearing of the appeal began, the Court of Appeal was duly constituted when the appeal was heard and determined.

11.  The only other thing I would stress is my agreement with Mr Justice Ribeiro PJ’s statement that considerations different from those in a context like the present arise when the question is one of leave to appeal to this Court under s.22 of our statute.

12.  My reasons for dismissing this appeal with costs are the same as those given by Mr Justice Ribeiro PJ.  Mr Mark Strachan for the appellants cited a number of judicial statements on construction.  I invited him to say which of those statements was the most helpful to his case.  As I expected, Mr Strachan pointed to Lord Hoffmann’s statement in Chartbrook Ltd v. Persimmon Homes Ltd [2009] 1AC 1101 at para. 21.  There Lord Hoffmann said that what a court has to do when construing a contract is to “decide what a reasonable person would have understood the parties to have meant by using the language which they did”.  Note the reference to the language used.  One does not construe a contract by ignoring what it says.  But that is exactly what one would have to do in order to decide in favour of the appellants.  It cannot be done.

Mr Justice Chan PJ :

13.  I agree with the reasons for dismissing this appeal given by Mr Justice Ribeiro PJ and also with the comments made thereon by the Chief Justice and by Mr Justice Bokhary PJ.

Mr Justice Ribeiro PJ :

14.  At the hearing, the appeal and the summons issued by appellants for leave to challenge the Court of Appeal’s jurisdiction were dismissed with reasons to be provided later.  The following are my reasons.

A. The dispute

15.  The respondent is the indigenous owner of a village house in Sai Kung.   In 2006, he agreed to sell it to the appellants. Pending completion, the appellants were permitted to enter into possession under two leases granted by the respondent.

16.  The sale and purchase agreement was not completed, the respondent having changed his mind about selling.  Consequently, in 2007, the appellants brought proceedings for specific performance.[1]  However, on 10 March 2009, the action was settled after mediation.  Advised by solicitors on both sides, the parties signed a settlement agreement of that date (“the settlement agreement”) which set out fresh terms for the sale and purchase of the property.  As the respondent had built the house as an indigenous villager, sale to the appellants required the consent of the District Lands Officer (“DLO”) who would fix a government premium to be paid by the appellants for his consent to their acquisition. 

17.  The settlement agreement stipulated certain completion dates, laid down time limits by which the DLO’s consent had to be obtained and provided for the agreement’s automatic cancellation if the time limits were not met.  It placed the responsibility for obtaining the DLO’s assessment of the premium and for seeking his consent on the 1^st appellant.  The relevant clauses are further considered below.

18.  The 1^st appellant duly applied to the DLO for consent but did not obtain a response until it received a letter dated 26 February 2010 from the DLO assessing the premium at $522,643.20 and indicating that such premium, plus a forebearance fee of $52,264 and a registration fee of $670, would have to be paid by 18 March 2010. However, the respondent declined to proceed with the sale.  He asserted that the settlement agreement had already been automatically cancelled by operation of the relevant clauses. 

19.  Proceedings leading to the present appeal were instituted by the parties against each other.  The appellants sought an order for specific performance by way of summary judgment under Order 86 of the Rules of the High Court,[2] while the respondent sought to strike out that action and sought orders for delivery up of vacant possession as well as damages or mesne profits.

B. The proceedings below and issues on this appeal

20.  The appellants failed and the respondent succeeded before Stone J[3] and the Court of Appeal,[4] those courts holding that on their true construction, the clauses providing for automatic cancellation had been triggered.  However, the Court of Appeal granted the appellants leave to appeal to this Court on the basis that the appeal was as of right.[5]

21.  While the present appeal was pending, the appellants sought leave from the Appeal Committee to introduce as a fresh issue, a claim for rectification.  That application was refused.[6]

22.  Before this Court, the appellants sought to argue that the courts below have wrongly construed the settlement agreement.  They also issued a summons seeking leave to argue that the Court of Appeal was not properly constituted and so lacked jurisdiction to hear the appeal, making its judgment a nullity.  I will deal first with the latter argument.

C. The challenge to jurisdiction

C.1 The nature of the challenge

23.  The appellants’ contention is based on section 34B(4) of the High Court Ordinance[7] which materially provides as follows:

“(4) The Court shall, if it consists of 2 Justices of Appeal, be duly constituted for the purpose of-

(a) hearing or determining any appeal against an interlocutory order or interlocutory judgment; ...

(c) hearing or determining any appeal where all the parties have before the hearing filed a consent to the appeal being heard and determined by 2 Justices of Appeal;...”

24.  Mr Mark Strachan[8] pointed out that the Court of Appeal below consisted of only two members, namely, Rogers VP and Le Pichon JA.  He submitted that the judgment of Stone J was a final judgment and accordingly that the Court of Appeal was not hearing an appeal against an interlocutory order or judgment.  He further submitted that the parties had also not filed a consent to the appeal being heard by only two judges.  It follows, he argued, that sitting with two members, the Court of Appeal was not duly constituted and lacked jurisdiction, with the result that its judgment is a nullity.

C.2 Was the judgment of Stone J a final judgment?

25.  Before considering what occurred in the Court of Appeal and subsequently, the question whether Stone J’s judgment was final as opposed to interlocutory should be addressed. 

26.  In his printed case, Mr John Scott SC[9] sought to argue that no jurisdictional issue arises because that judgment was in truth interlocutory.  The question was approached on the basis of this Court’s decisions in Shell Hong Kong Limited v Yeung Wai Man Kiu Yip Co Ltd[10] and Hip Hing Timber Co Ltd v Tang Man Kit,[11] where the debate regarding section 34B(4) focussed on how the “application test” should be applied.[12]  As Lord Millett NPJ, speaking for the Court, pointed out in Hip Hing Timber,that approach involves: “...a notoriously difficult question and an unsatisfactory basis upon which to found the jurisdiction of an appellate court.”[13]

27.  However, legislative amendments that came into operation after the Shell Hong Kong and Hip Hing Timber decisions but before the Court of Appeal hearing below now provide a more secure basis for founding the Court of Appeal’s jurisdiction and should henceforth be adopted for that purpose.

28.  With effect from 2 April 2009, our courts adopted (somewhat belatedly) the requirement in civil cases for leave to appeal in respect of interlocutory judgments or orders of the Court of First Instance. This was done by inserting into the High Court Ordinance,[14] section 14AA which materially states:

“(1) Except as provided by rules of court, no appeal lies to the Court of Appeal from an interlocutory judgment or order of the Court of First Instance in any civil cause or matter unless leave to appeal has been granted by the Court of First Instance or the Court of Appeal.

(2) Rules of court may specify a judgment or order of any prescribed description to which subsection (1) does not apply and accordingly an appeal lies as of right from the judgment or order.”

29.  The relevant rules of court, also coming into effect on 2 April 2009, are contained in Order 59, rule 21 of the Rules of the High Court.  Rule 21 pertinently provides:

“(1) Judgments and orders to which section 14AA(1) of the Ordinance (leave to appeal required for interlocutory appeals) does not apply and accordingly an appeal lies as of right from them are the following –

(a) a judgment or order determining in a summary way the substantive rights of a party to an action; ...

(2) Without affecting the generality of paragraph (1)(a), the following are judgments and orders determining in a summary way the substantive rights of a party –

(a) a summary judgment under Order 14 or Order 86;

(b) an order striking out an action or other proceedings or a pleading or any part of a pleading under Order 18, rule 19 or under the inherent jurisdiction of the Court; ...”

30.  These provisions make it clear that while appeals from interlocutory judgments and orders of the Court of First Instance to the Court of Appeal do in general require leave, that requirement does not apply to appeals from “a judgment or order determining in a summary way the substantive rights of a party to an action”, and in particular where the judgment or order appealed against comes within one of the Order 59 r 21(2) categories. 

31.  Although the legislation does not in terms state that appeals from the Court of First Instance falling within Order 59 rr 21(1)(a) or 21(2) are to be treated as final and not interlocutory, that is their effect.  Those rules therefore address the same question as that which has bedevilled section 34B(4), namely: Is the appeal in question an appeal from an interlocutory or final judgment or order of the Court of First Instance?  While section 14AA and Order 59, r 21 ask that question to determine whether leave to appeal is required, the same question has to be asked in the section 34B(4) context to determine whether the Court of Appeal would be duly constituted if sitting with two Justices of Appeal, or whether such a bench requires the consent of the parties to be properly constituted. 

32.  There is, in my opinion, no reason in logic or policy to adopt different tests in approaching those two questions.  Where by operation of the aforesaid rules, the appeal to the Court of Appeal does not require the Court’s leave, that appeal should equally be treated as final and as requiring a bench of three unless there is the requisite consent of the parties to the appeal being dealt with by a panel of two members.[15]   I would however add that these remarks are not intended to apply to applications for leave to appeal to the Court of Final Appeal under section 22(1)(a) of the Court’s statute since considerations going beyond the requirement of finality of the judgment arise in that context.

33.  In the present case, Stone J dismissed the appellants’ Order 86 application and struck out their action, ordering them to deliver vacant possession of the property and to pay mesne profits to the respondent.  That was plainly a judgment “determining in a summary way the substantive rights of” the appellants within Order 59 r 21(a) and also “an order striking out an action ... under Order 18, rule 19 or under the inherent jurisdiction of the Court” within Order 59 r 21(2)(b).  It was therefore final for section 34B(4) purposes and the appeal ought to have been heard by three judges unless there was the requisite consent of the parties.

C.3   What occurred in the Court of Appeal and subsequently

34.  The question is therefore whether there was such consent.  Mr Strachan did not appear in the proceedings below.  He submits that the jurisdictional question is raised on the footing that where the Court’s jurisdiction is in doubt, counsel is duty bound to raise the issue.  However, he realistically acknowledges, as he must, that in the light of what transpired below, the argument advanced is highly unattractive. 

35.  In his judgment concerning leave to appeal, delivered on 3 December 2010, Rogers VP stated:

“This is an application for leave to appeal from a judgment of this court given on 16 November of this year. I say ‘this court’ because it was by two members of this court. I am reminded that when the appeal came on for hearing before this court [it] was concerned as to whether the matter before us was truly interlocutory or was really a final order. We, therefore, raised this matter before the appeal was heard and an undertaking was given that written consent would be given by the parties that there was no objection to this matter being heard by two judges.”[16] (italics supplied)

36.  The transcript of what was said by Rogers VP before the start of the hearing of the appeal has been placed before the Court. It shows that having pointed to his doubts about jurisdiction, his Lordship said:

“It can be cured if you sign a consent, I think, prior to us hearing the case ... if you give me your undertaking to sign the appropriate document ... then we’ll take it as signed already...”

37.  His Lordship obviously had section 34B(4)(c) in mind. While the quoted statement was made in an exchange with counsel for the respondent, it seems clear that Counsel on both sides gave the undertaking sought.  The Court of Appeal then proceeded to hear and determine the appeal. 

38.  When the judgment went against the appellants, they sought leave from the Court of Appeal to appeal to this Court.  As Rogers VP records,[17] counsel then appearing (not counsel now instructed) submitted that it was a final judgment which qualified for leave to appeal as of right.  The Court granted such leave on the expressly discussed basis that the Court of Appeal’s judgment appealed from was that of a two-member court.

39.  On 4 May 2011, the appellants failed in their attempt to introduce rectification as an issue before this Court.  They therefore lodged their printed case on 25 May 2011 addressing the question of contractual construction without mention of any jurisdictional challenge.  On 22 June 2011, the respondents lodged their printed case in response. 

40.  It was only by summons filed on 3 October 2011 that the appellants raised the jurisdiction issue.

41.  What therefore occurred is as follows.  Before the hearing in the Court of Appeal began, the parties through their counsel consented to that Court sitting with a two-member panel.  Conscious of the requirement of filing a written consent in section 34B(4), the parties each gave an undertaking to the Court to sign the requisite document.  They did so with a view to enabling the Court to proceed to deal with the appeal on the basis that the statutory requirements were treated as satisfied.  The Court and the parties thereafter took a series of steps in proceedings leading to the present hearing, all premised on the Court of Appeal having been duly constituted.

C.4   The requisite consent

42.  On such facts, the jurisdictional challenge sought to be advanced as a ground of appeal plainly must fail.  This is a conclusion which may be arrived at on one or more of the following related and overlapping grounds.

C.4a The undertakings

43.  The first ground focuses on the undertakings given to and accepted by the Court of Appeal prior to the start of the hearing.  The Court has an inherent discretion, necessary for its effective functioning, to act in reliance upon the parties’ undertakings, treating what that they have undertaken to do as done.   This was the course adopted by Rogers VP.  As the transcript shows, he accepted the parties’ undertaking that they would file their written consents to the Court dealing with the appeal as a two-member court, and then proceeded on the basis that the consents had there and then been filed and the statutory requirements for a two-member Court duly complied with.

44.  Rogers VP might, of course, have stood down the Court for a short time to enable a written document to be lodged in the Registry before proceeding.  Or indeed, his Lordship might have asked for a written consent to be handed up and filed directly with the Court rather than through the Registry.  But he obviously took the view, in my opinion correctly, that that would have been an unnecessary formality given the parties’ consent and undertakings given directly to the Court. 

45.  In various situations, the Court may be prepared to exercise such a discretion.  It may do so to avoid delay and wastage of costs if no procedural injustice arises.  It often does so in cases of urgency.  The fact that the undertaking may relate to a factual or procedural condition for establishing the Court’s jurisdiction does not exclude the practice. Thus, Mareva injunctions are frequently granted on the plaintiff’s undertaking to issue and serve the Writ forthwith, often accompanied by an undertaking to swear a draft affidavit relied on in support.  The Court has no jurisdiction over the proposed defendant until the Writ is issued and served on him.  But where the plaintiff’s undertaking to carry out those steps is accepted, the Court proceeds on the basis that such steps have already been taken and therefore assumes jurisdiction to make immediate interim orders against the defendant.

46.  Mr Strachan submitted that the example just mentioned is inapt because it is expressly covered by Order 29 r 1(3) which states:

“The plaintiff may not make such an application [ie, an application for the grant of an injunction] before the issue of the writ or originating summons by which the cause or matter is to be begun except where the case is one of urgency, and in that case the injunction applied for may be granted on terms providing for the issue of the writ or summons and such other terms, if any, as the Court thinks fit.”

47.  In my view, contrary to Mr Strachan’s submission, Order 29 r 1(3) reflects and confirms the inherent power of the Court to act on undertakings as a basis for establishing jurisdiction, as discussed above. Order 29 r 1(3), being a procedural rule of Court, cannot and does not purport independently to confer jurisdiction on the Court to act in respect of the proposed defendant. The rule is that its jurisdiction is invoked and acquired by the issue and service of originating process on that defendant.  Order 29 r 1(3) recognizes this and therefore provides that applications for injunctive relief cannot generally be made before issue of the originating process.  It nevertheless goes on to stipulate that the Court may, if it thinks fit, permit such applications in situations of urgency, putting the plaintiff on suitable terms as to the issue of the writ or summons.  It therefore endorses the practice of the Court acting in such cases on an undertaking to issue the writ or summons, equating such an undertaking with the actual issue of proceedings.

C.4b Estoppel

48.  The second ground for rejecting the jurisdictional argument involves the doctrine of estoppel.  In the events which have happened, it is my view that the appellants are estopped from denying that written consents were duly filed prior to the Court of Appeal hearing.  It would follow that the Court of Appeal must for all purposes be treated as having been duly constituted.

49.  The constituents of an estoppel by convention have been discussed in this Court in Unruh v Seeberger.[18]  The parties in the present case proceeded to argue the appeal in the Court of Appeal on the shared assumption of fact and law that the written consents required by section 34B(4) were deemed to have been filed and the Court duly constituted.  Moreover, as outlined in Section C.3 above, further steps were subsequently taken by both parties in the process of obtaining leave to appeal and progressing the present appeal, all premised on the Court of Appeal having been duly constituted. 

50.  It would self-evidently be unjust for the appellants to be allowed to depart from that shared assumption since they occasioned its adoption by the respondent in common with themselves (and the Court). Such a departure would plainly cause detriment to the respondent since it would mean that his success in the Court of Appeal would be undone; that significant costs might have to be thrown away; and that the litigation would have to be re-run and therefore likely to persist for many more months.  If the respondent had known that a challenge to the Court of Appeal’s jurisdiction would in future be made, he could obviously have withheld his consent and either asked for the Court to be re-constituted with three members or for actual written consents to be filed before continuing with the hearing. 

51.  However, Mr Strachan submitted that the doctrine of estoppel has no role to play. Section 34B(4) lays down the clear requirement that a written consent be filed prior to the hearing.  The absence of such a document, he argued, fatally deprives the two-member Court of jurisdiction.  Jurisdiction cannot be conferred on the Court by invoking the doctrine of estoppel since that would, he said, be tantamount to conferring non-existent jurisdiction by consent. 

52.  Mr Strachan cited the decision of the Court of Appeal in SOL International Ltd v Guangzhou Dong Jun Real Estate Interest Co Ltd,[19] and relied in particular on the following passage from the judgment of Godfrey JA:

“If the conditions of s 2M have not been satisfied, and the court accordingly had no jurisdiction here to entertain the contractor's application for leave to appeal, reliance on an estoppel cannot assist the contractor. As Mortimer JA pointed out in the (very similar) case of Ananda Non-Ferrous Metals Ltd v China Resources Metal and Minerals Co Ltd [1994] 1 HKC 204, at p.210H:

... however flexible the doctrine of estoppel as between the parties is, it cannot confer jurisdiction on the court when the parties cannot achieve this result even by clear oral agreement. This would enable a party to establish the fact upon which the court's statutory and only jurisdiction depends, by showing that it would be unconscionable for the other party to deny it. This cannot be done. It would enlarge the scope of estoppel far beyond the equitable regulation of affairs as between the parties themselves which cannot be justified in principle or on authority.

I agree.”

53.  We have not heard full argument as to the correctness of the cited statement which is a question I would wish to leave open.  However, in my view, the SOL International decision is in any event clearly distinguishable. 

54.  I of course accept the general proposition that where a Court has no jurisdiction to deal with a particular matter, the parties cannot confer jurisdiction on it by consent, nor generally can the operation of an estoppel confer jurisdiction where none exists.  But these general propositions must obviously be qualified and treated with care when, as section 34B(4) does, the statute conferring jurisdiction makes the consent of the parties the very condition for establishing such jurisdiction.  In such cases, the parties can indeed confer jurisdiction by consent because that is what the statute stipulates to be the foundation of the jurisdiction.  Where, as in the present case, the parties’ consent undoubtedly exists but the prescribed written form of such consent is missing – having been replaced by undertakings accepted by the Court –there is ample room for application of the doctrine of estoppel.  The parties may by their conduct estop each other from denying the existence of the requisite written document.  This does not in any way offend against the general principle excluding the conferring of non-existent jurisdiction by consent.

55.  In the SOL International case, section 2M of the Arbitration Ordinance then in force gave the parties the option of applying the domestic arbitration provisions (in which leave to appeal might be granted in certain circumstances) to international arbitrations if, but only if, the international arbitration agreement so provided, or the parties agreed in writing that the relevant Part of the Ordinance should apply or that the arbitration should be treated as a domestic arbitration.  Since it too was a case where the statute provided for jurisdiction to be conferred by the consent of the parties, I have left open the question whether the Court of Appeal’s decision, or at least its broader statements of principle, are correct.

56.  In any event, the Court of Appeal in SOL International found that no written agreement to the effect required by the Ordinance existed[20] and the estoppel argument was evidently premised merely on the proposition that “the employer’s conduct (in participating in the arbitration) gave rise to an estoppel against it.”[21] It is unsurprising that in such circumstances, the question of estoppel had little chance of getting on its feet.  In contrast with the present case, the parties in SOL International did not share a common assumption that the regime governing domestic arbitrations, permitting appeals to the Court, was applicable to their arbitration; they never gave any Court their undertaking that they would comply with the statutory requirements for establishing the Court’s jurisdiction to entertain an appeal – for example, by undertaking to sign an agreement for the relevant Part of the Ordinance to apply; nor did they take a series of steps in the course of Court proceedings premised on the Court possessing jurisdiction to entertain the appeal.

C.4c Waiver of a procedural requirement

57.  The third ground involves distinguishing the substantive jurisdictional requirements of section 34B(4) from its purely procedural requirements.   In my view, as a matter of statutory construction, the substantive jurisdictional requirement for constituting a two-member Court of Appeal as a Court empowered to determine appeals from final judgments or orders of the Court of First Instance is the actual consent of all the parties. The requirement that such consent be filed before the hearing merely concerns the form in which such consent should be conveyed to the Court, a mere question of procedure which is capable of being waived – as it was in the present case.

58.  Support can be found for this view in the terms of section 34B(4)(d) which provides:

“(4) The Court shall, if it consists of 2 Justices of Appeal, be duly constituted for the purpose of ...

(d) hearing the remainder of, and determining, any appeal where part of it has been heard by 3 or more Justices of Appeal of whom one or more are unable to continue and all the parties have consented to the remainder of the appeal being heard, and the appeal being determined, by 2 remaining Justices of Appeal; ...”

59.  Section 34B(4)(d) makes no provision for the filing of written consent but founds the jurisdiction of the two remaining Justices of Appeal upon the parties’ consent being directly communicated to the Court.  This is obviously sensible since prior written consent could not be given in the unexpected circumstances envisaged by this provision.  However, this demonstrates that what is essential for establishing the two-member Court’s jurisdiction is the express consent of the parties and that the form in which such consent is signified is purely a matter of procedure.

60.  In the events which have happened in the present case, both sides undoubtedly gave their consent to the Court of Appeal hearing the appeal as a two-member court.  They thereby waived the procedural requirement of a prior filing without affecting the Court’s substantive jurisdiction.

C.5 Conclusion as to the jurisdictional challenge

61.  In my view, the appellants’ jurisdictional challenge fails on the grounds set out above. 

D. The true construction of the settlement agreement

D.1 The relevant clauses

62.  As noted in Section A above, the settlement of the first action involved a fresh sale and purchase agreement which stipulated certain completion dates, laid down time limits by which the DLO’s consent had to be obtained and provided for the agreement’s automatic cancellation if the time limits were not met.

63.  Clauses 13 to 17 of the settlement agreement are important and provide as follows:

“13. The completion of the sale and purchase of the Property (‘Completion’) in accordance with the terms and conditions herein shall take place on the Completion Date which shall be on or before the 30^th day from the date on which the DLO consent is obtained provided that such day shall in any event be not later than 10 months from the date of this Settlement Agreement (‘Long Stop Date’) or, if Clause 16 applies, not later than the expiry of 12 months extension period as provided in clause 16 below (‘Extended Long Stop Date’) (collectively ‘the Completion Date’).

14. If the 1^st party fails to proceed with the Completion on the Completion Date, the 3^rd party is entitled to forfeit the Deposit, and the sale and purchase of the Property hereunder shall be automatically cancelled.

15. Subject to Clauses 16 and 17 below, if, for any reason, the DLO consent is not obtained by the Long Stop Date, the sale and purchase of the Property agreed hereunder shall be automatically cancelled; and within 30 days from the date when the District Lands Office indicated that the DLO consent is not granted or from the Long Stop Date, whichever is the earlier:

(1) the 3^rd party shall return the Deposit to the 1^st party; and

(2)   the 1^st  party and the 2^nd party shall deliver vacant possession of the property and the private garden on the adjoining Lot No. 258 R.P. in D.D.238 to the 3^rd party.”

16.   In the event that on or before the Long Stop Date the District Lands Office decided not to give the DLO consent and the 1st party decided to contest such decision of the District Lands Office, the parties agreed that the Long Stop Date shall be extended for a further period of 12 months (‘Extended Period’) on conditions that: ...

17.   In the event that Clause 16 is triggered and for any reason the DLO Consent is not granted during the Extended Period notwithstanding any step taken by the 1st party to challenge the decision of the District Lands Office for refusal to grant the DLO consent on or before the Extended Long Stop Day, the sale and purchase of the property agreed hereunder shall be automatically cancelled; and within 30 days from the date when the aforesaid contest of the District Lands Office’s decision fails or from the Extended Long Stop Date, whichever is the earlier.”

64.  The evidence was that under the aborted sale and purchase agreement, it had been left to the respondent to secure the DLO’s consent but that, having in fact obtained that consent, he did not inform the appellants of that fact since he had changed his mind about selling.  To avoid that happening again, the 1^st appellant assumed the obligation of using due diligence to secure the DLO’s consent and of keeping the respondent informed of the state of the application to the DLO from time to time.[22]

65.  However, it was obviously uncertain whether such consent would in fact be granted; how much would be demanded by way of premium; and how long the process of obtaining consent might take.  Clauses 13 to 17 contained the agreed scheme for addressing those uncertainties.

66.  They provided for three possible completion dates: 

(a) First, if the DLO’s consent was secured without difficulty, the parties would be bound to complete within 30 days of such consent.[23]  If, the appellants were to fail to complete notwithstanding such consent, Clause 14 provided for the automatic cancellation of the agreement and forfeiture of their 10% deposit.

(b) However, the parties were obviously not going to wait indefinitely for the DLO’s consent.  So they agreed secondly to a “Long Stop Date” for completion, namely 10 months from the date of the settlement agreement.[24]  If for any reason the DLO’s consent was not obtained by the Long Stop Date, they agreed that the agreement would be automatically cancelled and, within 30 days, the respondent would refund the appellants’ deposit and the appellants would deliver vacant possession of the property to the respondent.[25] 

(c) Clause 16 provided for the third contemplated completion date.  This would only arise if the DLO decided to refuse consent on or before the Long Stop Date and if the appellants decided to contest that decision.  In that eventuality, there would be an “Extended Period” for completion, adding 12 months to the Long Stop Date and ending in the “Extended Long Stop Date”.  If during the Extended Period the challenge to the DLO’s refusal of consent failed or if for any reason consent was not granted despite the challenge, the agreement’s automatic cancellation would follow pursuant to clause 17.

67.  The respondent’s case is simple: The DLO’s consent had not been obtained by the Long Stop Date which fell on 9 January 2010.  There had neither been a decision to refuse consent nor a decision to contest such refusal on or before that date.  The Extended Long Stop Date therefore did not come into play.  Accordingly, by operation of Clause 15, the sale and purchase had automatically been cancelled, requiring the respondent to return the deposit (which he is ready to do) and requiring the appellants to deliver up vacant possession of the property within 30 days, which they have wrongly refused to do.  The fact that the DLO did, by letter dated 26 February 2010, in fact fix a premium and indicate willingness to grant consent is irrelevant since the contract had been discharged by operation of its own terms more than a month earlier.

68.  That construction was accepted by Stone J and the Court of Appeal, each taking the view that the meaning of the agreement was clear and that none of the principles of construction prayed in aid by the appellants affected that meaning.

D.2 The principles of construction invoked by the appellants

69.  Mr Strachan invited the Court to adopt what he called a “liberal construction” of the settlement agreement.  He cited decisions[26] in support of the proposition that where something has evidently gone wrong with the language so that a literal interpretation would involve attributing to the parties an intention that they plainly could not have had, the Court will construe the contract with a view to arriving at the meaning that a reasonable person would have understood the parties to have intended.  However, those authorities do not assist him since there is nothing to suggest that anything had “gone wrong” with the language of the settlement agreement so as to require a remedial construction.

70.  Mr Strachan also cited well-known cases[27] supporting the principle that the Court must look at the contract as a whole, taking account of the factual and legal background against which it was concluded, with a view to ascertaining in a commercially sensible manner the practical objects which the contract was intended to achieve.

71.  On the strength of such authorities, Mr Strachan endeavoured to argue that the settlement agreement ought to be construed so that clause 16 is treated as having been triggered, bringing the Extended Long Stop Date into effect and putting the respondent in breach for refusing to complete.  The contention was that the settlement agreement effected the settlement of a dispute where the legal merits were “overwhelmingly” in the appellants’ favour so that:

“In entering into the Settlement Agreement the Purchaser would not have foregone its overwhelmingly strong position in the 2007 Action for anything other than an overwhelmingly strong position under the Settlement Agreement.”[28]

72.  The following passage from Lord Hoffmann’s judgment in Chartbrook Ltd v Persimmon Homes Ltd[29] was cited in support:

“When the language used in an instrument gives rise to difficulties of construction, the process of interpretation does not require one to formulate some alternative form of words which approximates as closely as possible to that of the parties. It is to decide what a reasonable person would have understood the parties to have meant by using the language which they did. The fact that the court might have to express that meaning in language quite different from that used by the parties (‘12 January’ instead of ‘13 January’ in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749; ‘any claim sounding in rescission (whether for undue influence or otherwise)’ instead of ‘any claim (whether sounding in rescission for undue influence or otherwise)’ in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896) is no reason for not giving effect to what they appear to have meant.”

73.  The persistent deficiency in the appellants’ argument is its failure to confront the language used in the contract.  As the citation from Lord Hoffmann makes clear, the Court’s task is to determine “what a reasonable person would have understood the parties to have meant by using the language which they did”.  In the present case, the language of clauses 13 to 17 leaves no room for doubt as to what the parties meant.  Those clauses addressed the uncertainties which they faced regarding the obtaining of consent, the amount of the premium and the time it would take to obtain a decision from the DLO.  The purpose of those clauses was to place a limit on the period allowed for completion of the transaction with different completion dates provided for against specified eventualities.  Those were objectives which made good commercial sense viewed from both sides of the contract.  

74.  By clause 13, the parties allowed the transaction 10 months to arrive at completion.  By clause 15, they made it clear that, subject to clause 16,[30] the contract would be automatically cancelled if for any reason, the DLO’s consent had not been obtained within that 10 month period.  That introduced certainty into an otherwise uncertain situation.  By making clause 15 subject to clause 16, the parties provided for an exception in one eventuality.  That was the situation where, “on or before the Long Stop Date” the DLO “decided not to give the DLO consent and the [1^st appellant] decided to contest such decision”.  If that were to occur, it was agreed that the date for completion would be extended for a further period of 12 months.

75.  The parties might have chosen to specify as an additional eventuality for the Extended Long Stop Completion Date to come into play, the situation where the DLO did not reach or communicate a decision about consent prior to expiry of the Long Stop Date.  But they did not do so.  It may be that having assumed responsibility for obtaining the DLO’s decision, the appellants did not consider this necessary.  In any event, for whatever reason, the triggering of the Extended Long Stop Date under clause 16 was confined to the “contested refusal” scenario.

76.  None of the principles of construction relied upon would justify construing the settlement agreement as if it contained a ground for triggering clause 16 involving merely the absence of a decision by the DLO on or before the Long Stop Date.  Such a construction would fly in the face of the clear words of clause 15 which prescribe automatic cancellation if for any reason the DLO’s consent was not obtained within the 10 month period.  The invitation to adopt such an interpretation is an impermissible invitation to re‑write the parties’ contract. 

E. Conclusion

77.  For the foregoing reasons, the appeal was dismissed with costs.

Lord Scott of Foscote NPJ :

78.  I agree with the reasons for dismissing this appeal given by Mr Justice Ribeiro PJ and also with the comments made thereon by the Chief Justice and by Mr Justice Bokhary PJ.