THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD v. SY SHUN WU AND OTHERS

CAMP 81/2018

[2018] HKCA 736

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 81 OF 2018

(ON AN INTENDED APPEAL FROM HCMP 3269/2016)

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J U D G M E N T

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Hon Lam VP (giving the Judgment of the Court):

1.  On 20 July 2017, Master M Wong made an order in these mortgagee actions that the Plaintiff’s application by way of an originating summons be continued as if it were begun by writ. Upon the Plaintiff’s appeal, on 26 January 2018 Deputy High Court Judge Le Pichon [“the Judge”] allowed the appeal and gave judgment in favour of the Plaintiff.

2.  On 19 March 2018, the Defendants applied for an extension of time to bring an appeal against the Judge’s decision.  The application was dismissed by the Judge on 24 May 2018.

3.  By a summons dated 1 June 2018, the defendants renewed their application before this Court seeking leave to appeal out of time.

4.  Having considered the documents lodged with the summons, together with the Skeleton Submissions of the counsel for the respective parties, we consider it appropriate to determine the application on paper without an oral hearing. 

Background

5.  The factual background of this case was set out at [4] to [27] of the Judge’ decision published as [2018] HKCFI 247.  The claims of the Plaintiff were based on three mortgages, referred to as the D1, D2, and D3 Mortgages by the Judge.  The D1 and D2 Mortgages were executed by the 1^st and 2^nd Defendants as the mortgagors and the 4^th Defendant as the borrower.  The D3 Mortgage was executed by the 3^rd Defendant as both the mortgagor and the borrower.  The 4^th Defendant is the parent company of the 2^nd and 3^rd Defendants.  The 1^st Defendant and a Tang Tiang Pong (“Tang”) own 40% and 60% respectively of the shareholdings of the 4^th Defendant.  The mortgages were executed for securing the bank facilities granted by the plaintiff to the 3^rd and 4^th Defendants. 

6.  In early 2015, due to the discovery of abnormality over the account activity of the 3^rd and 4^th Defendants, the Plaintiff exercised its overriding right of, inter alia, suspension and temporarily suspended the bank facilities. 

7.  In late May 2015, the 3^rd and 4^th Defendant started to default in making repayments under the mortgages.  In November 2016, the Plaintiff commenced the present proceedings under Order 88. 

The applicable principles for extension of time

8.  This Court has discretion to grant or refuse an extension of time for appealing.  The court’s approach in this type of application is well established.  The factors normally taken into account are:

(1)  the length of the delay;

(2)  the reasons for the delay;

(3)  the chances of success of the intended appeal; and

(4)  the prejudice to the other party if time is extended.

9.  Where the delay is inexcusable, the party seeking an extension of time must show a real prospect of success on the merits, not just a reasonable prospect of success: see Secretary for Justice v Hong Kong & Yaumati Ferry Co Ltd & Anor [2001] 1 HKC 125.

10.  Although prejudice to the other party is a ground for refusing to extend time, the absence of prejudice is not a ground for extending time: see Jotz, Klaus-Bernhard Markus v Hamawy, Tarek Mahmoud & Anor [2018] HKCA 144 at paragraph 11.

Reasons for delay

11.  The Defendants advanced various reasons for delay which were all rejected by the Judge.  The reasons are: (1) the defendants had   insufficient funds to instruct a legal team to prosecute the appeal until 1 March 2018; (2) there was confusion regarding the nature of the order of 26 January 2018; and (3) that there was mistake on the part of the Defendants’ solicitors as to when the time for appeal started to run.

12.  It is quite plain to us that none of these constituted reasonable excuse for the delay.

13.  Insufficient funds to instruct lawyers cannot be accepted as a ground for delay.

14.  On the evidence, solicitor for the Defendants did not articulate the reason or circumstances leading to his so-called confusion as to the nature of the order. The firm represented the Defendants at the hearing before the Judge and counsel was instructed to appear for the Defendants. It was the duty of the solicitor to have an accurate record and understanding of the proceedings. Had there been any confusion, counsel should have sought clarification from the Judge. If the confusion was confined to the solicitor, he should have sought clarification from counsel. This Court will not give weight to a bare assertion of confusion.

15.  Likewise, the alleged mistake made by the Defendants’ solicitors as to the time when the appeal period starts to run cannot be a reasonable excuse. It is elementary that an order takes effect from the time when it is pronounced. Ignorance of such elementary principle by practitioners is no excuse.

16.  The same can be said in respect of the forum to which the application for extension of time should be made. The amendment of Order 59 Rule 15 took effect on 1 December 2017. Solicitors have a duty to keep abreast of changes in procedural law. Prior to the implementation of the change, the legal profession had been consulted and notified well in advanced from 2016 to 2017. The change was not a sudden and unexpected revision.

17.  Accordingly, the Defendants’ delay is inexcusable.  In accordance with well-established practice, the Defendants have to show a real prospect of success on the merits in the intended appeal before extension of time would be granted: Secretary for Justice v Hong Kong & Yaumatei Ferry [2001] 1 HKC 125.

Merits of the intended appeal

18.  In the draft notice of appeal annexed to the present summons, the Defendants relied on three grounds of appeal:

(1)  The Judge erred in law in holding that the defence of collateral agreement was unbelievable;

(2)  The Judge’s reasoning for finding against the existence of collateral agreement was flawed in that it was not extraordinary for a bank officer to give verbal assurance as alleged. Further, the alleged collateral agreement would not render the facilities to become an indefinite and open-ended loan; and

(3)  The Judge erred in law in rejecting the defence of misrepresentation by finding that there was no evidence in support of the contention that the 1^st Defendant’s interests in the business were not real.

19.  Although counsel framed the grounds of appeal as involving errors of law, they are in substance challenging the Judge’s evaluation of evidence and facts.

20.  The Judge gave judgment to the Plaintiff at the hearing of the originating summons (or more precisely, at the hearing of an appeal from a master hearing the originating summons). It is akin to a summary judgment with the rider that there is no burden on the Defendants, see Wing Hang Bank Ltd v Liu Kam Ying [2002] 2 HKC 57; Bank of China v Twin Profit Ltd HCMP 874/2009, 30 March 2010.

21.  There is no dispute that the Defendants were in default in repayments under the banking facilities granted by the Plaintiff. The only issue is whether the Defendants were obliged to repay in light of the three lines of defence (collateral agreement, misrepresentation and undue influence) advanced on their behalf.

22.  At this stage, the question is not whether the defence case is to be believed. Rather, the question is whether the defence case is capable of being believed or, as the Judge put it, whether it is believable.

23.  For the reasons given in the judgment of 7 February 2018, the Judge found the defence case not capable of being believed. On that basis, she gave judgment to the Plaintiff.

24.  Hence, the question in the intended appeal is whether the Judge was correct in holding that none of the three lines of defence is capable of being believed.

25.  The draft grounds of appeal related to collateral agreement and misrepresentation. The Defendants no longer relied on undue influence. 

26.  The Judge set out her reasons for rejecting the defence of collateral agreements at [48] to [53] of the judgment. The Judge’ evaluation was that: (1) it was inherently improbable for a bank officer to give an assurance that had the opposite effect to a standard term in the Facility Letter; and (2) it defies belief that the Defendants did not refer to such assurance when the banking facilities were suspended by the Plaintiff notwithstanding the due payment of monthly sums by the Defendants servicing the loans.

27.  In our judgment, those are sound and cogent reasons for the conclusion reached by the Judge on collateral agreement.

28.  Draft grounds (1) and (2) boil down to one point: it is not that inherently improbable that a bank officer would give the assurance as alleged. With respect, the arguments advanced by counsel missed the point made by the Judge. The difference between the Plaintiff and the Defendants is not whether some explanation would be given by a bank officer. The Judge referred to the relevant evidence at [29] to [31] of the judgment. In light of such evidence, the Judge identified the difference at [48]:

“ 48.  Whether or not a collateral agreement exists depends purely on whether the assurance was qualified by the term “usually” as the Bank maintains.  It is not disputed that prior to the suspension, the defendants were up-to-date with their monthly repayments and not in default.” 

29.  Thus, the Judge accepted that some qualified form of “assurance” could have been given. Still, it is inherently unlikely that a bank officer would give an unqualified form of assurance which would be directly contradictory to a standard provision in the Facility Letter in an ordinary commercial banking transaction.

30.  The reference to indefinite and open-ended loan at [50] should be read in context. It is obvious that the Judge was referring to the lack of power on the part of the Plaintiff to determine the loan during the life cycle of a facility instead of lack of duration for renewal.

31.  In any event, the most crucial point was the contemporaneous response of the Defendants when the facility was suspended. The Judge said at [52]:

“ 52.  In my view, it defies belief that had such a collateral agreement existed, it would not have featured in the forefront of the defendants’ communications (whether by telephone or email) with the Bank as soon as credit facilities were suspended.  The irresistible inference from the absence of any mention (much less assertion) of the existence of the collateral agreement in the email correspondence and taking into account the matters set out in under the heading “the overall context” in (a) above, is that there was no such agreement.” 

32.  We agree with the Judge that the defence of collateral agreement is moonshine and not believable.

33.  Mr Koo did not elaborate on draft Ground (3). In any event, the ground is totally misconceived.  The Judge explained at [54] of the judgment the reason for her addressing undue influence together with misrepresentation. It was because of the way in which counsel for the Defendants (Mr Chong) argued the case before the Judge based on paragraph 25 of his written submission, set out by the Judge at [37] and [38].

34.  As pointed out by the Judge, counsel for the Defendants ran the case of misrepresentation (like the case on undue influence) on the premise that the 1^st Defendant had little or no participation in the business of the 3^rd and 4^th Defendants. As mentioned in [37] to [39] of the judgment, it was the Defendants who invited the Judge to draw inference in their favour based on, inter alia, the 1^st defendant’s lack of participation in the business.  It was in such context that the Judge alluded to the deficiency in the evidence, as she was entitled to, in that respect in the discussion on these two lines of defence.

35.  In light of that, we fail to see the basis for challenging the Judge under Ground (3). There is no substance in this ground of appeal.

36.  For these reasons, we are of the view that none of the grounds of appeal has any merit.  The Defendants cannot even demonstrate that the intended appeal has any prospect of success, let alone real prospect of success. In other words, it is a hopeless appeal.

37.  Accordingly, we refuse to extend time to the Defendants to appeal against the Judge’s decision of 26 January 2018.  The summons dated 1 June 2018 is dismissed.

38.  Costs of this summons should follow the event. We make an order that the Defendants should pay the Plaintiff’s costs of this summons.  Having considered the statement of costs submitted by the Plaintiff, we fix the costs payable to the Plaintiff at HK$81,884.

39.  We are also of the view that the application is totally without merit. Pursuant to Order 59 Rule 2A(8), we make an order that no party may request our refusal of leave to be reconsidered at an oral hearing inter partes.