THE INCORPORATED OWNERS OF SO TAO CENTRE v. LAM KONG WAN

HCMP 790/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 790 OF 2007

(ON AN INTENDED APPEAL FROM DCMP NO. 4250 OF 2004)

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REASONS FOR DECISION

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Application for extension of time

1. The plaintiff applied for an extension of time to serve the notice of appeal.  At the conclusion of the hearing on 29 May 2007 I granted the extension and ordered the plaintiff to pay the defendant the costs of the application including the hearing before me.  I now give my reasons. 

Background

2. The plaintiff sought to recover from the defendant, among other things, arrears of management fees in the sum of $33,936 and interest on the arrears at the sum of $52,685.64 and continuing at 1.5% per month until payment (‘the default interest’).  The claim for interest was based on the term and rate as provided for in a Deedof Mutual Covenant (‘DMC’) which governed the relationship of the parties.

3. On 20 December 2006 Deputy District Judge R. Cheung gave judgment to the plaintiff for, among other things, the sum of $33,936.  But in respect of the default interest he only gave judgment to the plaintiff in the sum of $12,217.  He further ordered interest on the sums of $33,936 and $12,270 at 1% above prime rate from 8 December 2004 (i.e. date of commencement of proceedings) to the date of judgment and thereafter at judgment rate until payment. 

4. The plaintiff obtained leave to appeal from the judge on 23 January 2007.  However, the notice of appeal was not served on the defendant until 21February 2007.  The notice of appeal should have been served no later than 31 January 2007.  There was a delay of 22 days. 

5. Upon the defendant’s refusal to accept the notice of appeal, the plaintiff’s solicitors by a letter dated 22 February 2007 (the letter was wrongly dated 22 January 2007) asked for its consent to serve the notice of appeal out of time.  The defendant’s solicitors refused to give the consent by a letter dated 24 February 2007.  Thereafter, nothing was done by the plaintiff in relation to the notice of appeal until 4 April 2007 when it made an application in the District Court for leave to serve the notice of appeal out of time.  That application was withdrawn on 18 April 2007.  The present application was taken out on 26 April 2007. 

Delay

6. There were two periods of delay.  First the delay of 22 days.  The explanation given by the plaintiff was that the plaintiff was concerned about the costs implication of the appeal and hence a management committee meeting was convened to decide whether to pursue the appeal.  Due to the intervening Chinese New Year holiday the meeting was only held on 21 February 2007 when it was decided that the appeal should continue.

7. The second period of delay is from 22 February 2007 when the plaintiff was notified that consent to serve the notice of appeal out of time would not be forthcoming to 26 April 2007 when the present application was issued. 

8. While the first period of delay was explained in the affidavit, the second period of delay was not explained until Ms Fong, counsel for the plaintiff, informed the Court that after the refusal by the defendant to give consent there was an attempt by the defendant to sell the property of which the arrears had occurred.  The plaintiff was concerned about having an empty judgment on appeal if the property was disposed of.  A meeting with the solicitors was held on 1 April 2007 in which advice was sought as to the enforcement of the judgment. 

9. In my view there clearly was substantial delay by the plaintiff in serving the notice of appeal.  Although the hesitation by the plaintiff in pursuing the appeal is in the circumstances of the case understandable because the amount involved in the appeal was relatively small and the plaintiff, as the corporation of owners, was clearly concerned with the costs implication of an appeal, the delay cannot be described as an excusable delay. 

Merits of the appeal

10. However, what ultimately prompted me to grant extension of time is based on the merits of the appeal : see Nantong Angang Garments Co. Ltd v. Hellmann International Forwarders Ltd (CACV 64/2005) and Jerry Chen v. Whirlpool (Hong Kong) Ltd. (HCMP 1877/2005).

11. Although the plaintiff was successful in its claim it was ordered to pay costs of the action to the defendant.  This was because the sums recovered by the plaintiff was below the amount of payment into court made by the defendant.  The difference was due to the disallowance by the judge of part of the default interest.  He only allowed the default interest for a duration of two years. 

12. The reason why the judge disallowed part of the default interest was on the ground of ‘laches’.  ‘Laches’ was not a defence that was pleaded expressly by the defendant in the defence. 

13. In my view, the plaintiff has shown that it has a meritorious appeal.  Delay which is sufficient to prevent a party from obtaining an equitable remedy is technically called ‘laches’, see : paras. 5 – 16, Snell’s Equity 31^st Edn.  However as the editor of Snell’s further noted this maxim has no application to cases to which the Statues of Limitation apply either expressly or by analogy.  There are thus three cases to consider 

(i)	equitable claims to which the Statue applies expressly;
(ii)	equitable claims to which the Statue is applied by analogy; and
(iii)	equitable claims to which no statue applies and which are therefore covered by ordinary rules of ‘laches’.

14. Two problems immediately appear by the reliance of ‘laches’ in the present case.  First, the plaintiff’s claim was for interest expressly provided for in a DMC.  This was not in the nature of an equitable claim.  Secondly, the claim was clearly subject to the Limitation Ordinance.  This being the case, the appeal involves a serious question as to whether ‘laches’ was available at all.  In my view the plaintiff has raised a substantial issue which justifies an extension of time to be granted to the plaintiff.

Conclusion

15. Accordingly I granted the extension.

16. As the full background of the case was only revealed by the plaintiff at the hearing, I ordered the costs of the application including the hearing to be borne by the plaintiff.