WING HANG BANK LTD v. CRYSTAL JET INTERNATIONAL LTD AND OTHERS

CACV255/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 255 OF 2002

(ON APPEAL FROM HCMP NO.5014 OF 1999)

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REASONS FOR DECISION

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Hon Ma CJHC :

1. On 27 April 2005, this Court heard and dismissed the 1st Defendant’s appeal from the judgment of Deputy High Court Judge Saunders after trial in an action in which the Plaintiff claimed against the 1st Defendant on the basis of a legal charge over certain property.  The Plaintiff was the mortgagee under the Charge, the 1st Defendant the mortgagor.  The Reasons for Judgment were handed down on 12 May 2005.

2. By an application dated 9 January 2006, the 1st Defendant applied for leave to appeal to the Court of Final Appeal.  Before the court could entertain this application, however, the 1st Defendant required an extension of time and this was asked for in the written application as well.  Under section 24(2) of the Hong Kong Court of Final Appeal Ordinance, Cap.484 (“the Ordinance”), a notice of motion seeking leave from the Court of Appeal must be filed within 28 days of the judgment appealed from.  Judgment having been delivered on 27 April 2005, as I have said, the deadline for filing the requisite notice of motion seeking leave to appeal to the Court of Final Appeal was therefore 25 May 2005.  The application for leave was filed some 7½ months out of time.  The Notice of Intended Application to appeal (required by section 24(2) to be given to the opposite party within 7 days of the judgment) was also filed only on 9 January 2006.

3. At the hearing, having heard Mr Ko Chi Hung (a director of the 1st Defendant who had been given leave to represent the company), we dismissed the application with costs on a solicitor and own client basis.  We had also earlier dismissed an application to adjourn the hearing.  We indicated that reasons for our decision would be handed down in due course.

4. The 1st Defendant being substantially out of time, it was important to examine the reasons for this delay.  In the affirmation of Mr Ko in support of the application, the following facts and matters were asserted : -

(1)   Mr Ko and his wife are the only shareholders and directors of the 1st Defendant.

(2)   At some stage subsequent to the judgment of the Court on 27 April 2005, the directors of the 1st Defendant decided to apply for legal aid.  Mr Ko did so on 7 July 2005 and he was interviewed by members of the Legal Aid Department.  The application for legal aid was made by Mr Ko on his own behalf.  On 14 July 2005, legal aid was refused on the basis that Mr Ko was not himself involved in the proceedings.

(3)   On 21 July 2005, Mr Ko made an application under section 26A of the Legal Aid Ordinance, Cap.91 to a review committee effectively for the reconsideration of his application for legal aid to enable the 1st Defendant to seek leave to the Court of Final Appeal.  This was rejected on 6 August 2005 for the same reason that Mr Ko was not involved as a party in the relevant litigation.

(4)   Thereafter, the directors of the 1st Defendant considered applying for judicial review of the two decisions but, as Mr Ko puts it, “as more money would be spent on that proceeding we decided to press ahead with the appeal to the Court of Final Appeal instead.”

5. In my judgment, this affirmation went nowhere near providing a satisfactory explanation for the failure to comply with the provisions of section 24(2) of the Ordinance : -

(1)   There was no explanation provided for at least two significant periods of delay : - from 25 May 2005 (the last day for making an application seeking leave to appeal to the Court of Final Appeal) to 7 July 2005 when an application for legal aid was made, and between 6 August 2005 and 9 January 2006 (when the application for leave was eventually filed).

(2)   Although mention was made of the directors considering whether or not to apply for legal aid and, when this was eventually refused, of their considering the possibility of launching judicial review proceedings, this hardly explained, much less justified, the significant delays in the two periods I have identified.

(3)   It is perhaps also worth observing that both the application for legal aid and the consideration of the possibility of judicial review proceedings, were entirely misconceived.  The only relevant party wishing to appeal was the 1st Defendant and legal aid was of course unavailable to it (see the definition of “person” in section 2(1) of the Legal Aid Ordinance).  For this reason alone, there could be no question of the decisions of the Legal Aid Department and the review committee being impeachable in judicial review proceedings (even if such a course were open to the 1st Defendant).

6. In the present case, the failure to provide a satisfactory explanation for the delay – I might add one of the worst of its kind - was enough by itself to dispose of the application.  Section 24(5) of the Ordinance admittedly does enable the court to extend time for applications for leave to appeal to the Court of Final Appeal.  However, as this Court made clear in Full Wisdom Holdings Limited v Traffic Stream Infrastructure Company Limited, unreported, CACV266/2003, 27 July 2004 : -

“Good grounds have to be shown before the Court’s discretion under section 24(5) of the Ordinance can be exercised.  It is important to bear firmly in mind in the context of applications for extension of time to seek leave to appeal to the Court of Final Appeal, that by definition, the would-be appellant has already had, twice, his ‘day in Court’.  At this stage, I would have thought that the Court will be inclined to give an extension only where exceptional or at least very good grounds are shown.”

7. In the Full Wisdom case, the Court indicated it was unnecessary to examine the question whether the principles governing extensions of time as stated in Secretary for Justice v Hong Kong & Yaumati Ferry Co Ltd & Anor [2001] 1 HKC 125 required revision or at least applied to applications for leave to appeal to the Court of Final Appeal.  In the Hong Kong & Yaumati Ferry Co Ltd case, at 129I, Le Pichon JA said (in relation to an application for extension of time to file a notice of appeal to the Court of Appeal) : -

“Where the delay is inexcusable, the party seeking an extension of time must show a real prospect of success on the merits.”

However, for the reasons given by the Court in Full Wisdom in the passage quoted above, it seems to me that where there is simply no or no reasonable excuse or explanation given for a delay in making an application for leave to appeal to the Court of Final Appeal, that may well by itself be enough to dispose of the application.  No extension under section 24(5) will then be given and it would be unnecessary for the court to go into the merits.  I appreciate that there have not been extensive arguments before the Court on this point and I am content to treat the observations just made as obiter remarks.

8. In the present case, on the merits, even were leave to extend time to be given, the chances of success in the Court of Final Appeal are remote.  In this context, the court is I think able to examine the overall merits of the appeal itself.  The court is not confined to look only at the merits of the very application for which an extension is sought (in the present case the application for leave to appeal to the Court of Final Appeal).  Mr Ko submitted that as far as the application for leave was concerned, the 1st Defendant’s appeal to the Court of Final Appeal lay as of right under section 22(1)(a) of the Ordinance.  He may well be correct in this (as the judgment obtained by the Plaintiff against the 1st Defendant was in the nature of liquidated damages).  However, as I have said, the court is entitled to take into account the merits of the substantive appeal to the Court of Final Appeal itself in exercising its discretion whether or not to extend time.

9. The question for determination by the Court of Final Appeal identified in the written application was as follows : -

“Whether in a situation when a Third Party surety which has no commercial interest in another company and when the mortgagor/guarantor was asked to execute an unlimited guarantee in favour of the mortgagee/guarantee and the amount to be guaranteed far exceeded the value of the property which was used as a security, then should the bank be put on enquiry and whether under such circumstance the option and benefit of seeking independent legal advice should be given.  Further whether the solicitors firm which acted as the agent for the bank should when explaining the contents of the mortgage/legal charge to the guarantor explained fully the terms of the banking facilities and the effect thereof to be granted to the mortgagor otherwise the mortgage/legal charge should be rendered void.”

10. In my view, any appeal to the Court of Final Appeal would be quite hopeless based on this ground : -

(1)   The issues of undue influence and misrepresentation  which underlie this question were not pleaded and could not therefore be relied on by the 1st Defendant.  The Reasons for Judgment handed down on 12 May 2005 dealt with this point and also recorded the fact that undue influence, which was much relied on by the 1st Defendant before us, was expressly abandoned by counsel for the 1st Defendant at trial.

(2)   While it is perhaps correct to say that the 1st Defendant did not have an interest in the 2nd Defendant (who was the relevant borrower from the Plaintiff bank), the evidence clearly showed a link between the two companies through Mr Ko and his wife, and Mr Lo’s brother (who was, together with his wife, a shareholder and director of the 2nd Defendant).

(3)   Besides any pleading points, on the facts as found by the trial judge, any case based on undue influence or misrepresentation was doomed to failure.  In paragraphs 32 and 33 of the Reasons for Judgment, Lam J said this : -

“32.   There is not a shadow of a doubt in my mind that the judge rejected the evidence of CH and ML on their assertions that CH was ignorant about the terms of the Facility Letter or was misled as to the effect of the Legal Charge.

33.   In Paragraphs 42 to 44 of the judgment, the judge accepted the evidence of the solicitors clerk and found that ‘all that was required to be explained was explained’ when CH and his wife executed the Legal Charge on behalf of the 1^st Defendant.   The clerk had said in his evidence that ‘he fully explained the documents [which included the Legal Charge]’.”

(4)   The analysis of these two issues contained in the judgment of Lam J, with whom the other members of the Court agreed, is impeccable.

11. At the start of the hearing before us, Mr Ko sought an adjournment on the basis that the company (or he himself, it is not clear who) was seeking advice from the Hong Kong Bar Association’s Free Legal Service Scheme.  The adjournment was refused.  No explanation was given as to why this course was left so late.  In any event, it seemed to me that this would unjustifiably have added to the significant delay already occasioned to the Plaintiff who, in an action begun in 1999 in respect of a cause of action accruing that year and which was tried and determined in the Court of First Instance in 2002, has still to see the end of the present litigation.  The 1st Defendant’s application was, for the reasons above stated, hopeless and I can see no real prospect of the Bar’s Free Legal Service Scheme thinking otherwise.

12. For the above reasons, the 1st Defendant’s application was dismissed.  The order for costs was made on the basis of the contractual provisions regarding costs contained in the legal charge.

Hon Suffiad J :

13. I agree.

Hon Lam J :

14. I agree.