Ng Wing-see and Others v. Chang Chi-ching

CACV000058/1972

IN THE SUPREME COURT OF HONG KONG

(APPELLATE JURISDICTION)

CIVIL APPEAL NO.58 OF 1972

(On appeal from O.J.M.P.239 of 1972)

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Coram: Blair-Kerr, S.P.J. , Huggins and McMullin, JJ.

Date of Judgment: 23 March 1973

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JUDGMENT

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Huggins, J. :

This case provides another example of the truth of the adage "more haste, less speed". The Appellants were the Defendants in an action begun by originating summons. The Plaintiff sought a declaration that an agreement for the sale and purchase of land had been lawfully rescinded or annulled. The Defendants filed affidavits in answer and indicated therein that they were desirous of counterclaiming for specific performance of the agreement. The full terms of that indication will have to be referred to later, but the affidavit followed the lines of Form 11 at 29 Atkin's Court Forms and Precedents (2nd Ed.) 271. This was unfortunate because it may have led to the confusion which has since resulted.

2. It will be convenient to look at once at the provisions of 0.28 r.7, which govern counterclaims by defendants in proceedings instituted by originating summons. Paragraph (1) merely authorises the raising of a counterclaim. Paragraph (2) then says:

"A defendant who wishes to make a counterclaim under this rule must at the first or any resumed hearing of the originating summons by the Court but, in any case, at as early a stage in the proceedings as is practicable, inform the Court of the nature of his claim and, without prejudice to the powers of the Court under paragraph (3), the claim shall be made in such manner as the Court may direct under rule 4 or rule 8."

This paragraph contemplates two stages in the raising of a counterclaim: first there is the information to the Court of the nature of the claim and then the making of the claim. The first stage must be "at the first or any resumed hearing of the originating summons by the Court but, in any case, at as early a stage in the proceedings as is practicable". It is not suggested that the Defendants here failed at this stage: they tendered the affidavit to which I have already referred, in which they indicated their desire to make a counterclaim and they set out in detail the nature of their claim. It was in relation to the second stage that the difficulty has arisen. Under para. (2) the claim "shall be made in such manner as the Court may direct ....". There is an apparent dichotomy in the rule itself, for the Defendant "shall" make the claim in the manner the Court "May" direct. On the face of it the Court could decline to make a direction and thus abort the counterclaim altogether and the power to strike out which is conferred by para. (3) may indicate that that is what was intended. This is the view adopted by McMullin, J. and the Editors of the Supreme Court Practice, but strictly one cannot strike out a counterclaim which, because the court declined to direct how it should be made, has never been made. As at present advised I incline to the view that the power to strike out cannot be exercised until a counterclaim has been made in the manner directed by the court. If that be right (and it is not necessary finally to dispose of the question in this case) then the court is always obliged to make a direction as to the manner in which the counterclaim is to be made. In any event I agree with McMullin, J. that the learned judge did not purport to refuse to direct the manner in which the counterclaim should be made or purport to strike out the counterclaim, but rather to adjudicate upon the counterclaim, and this is where the present proceedings went wrong. In my view he should have given a direction under para.(2).

3. There has been some criticism of the fact that the learned judge has declined to supply a copy of his notes. In my view that criticism is unfounded. A judge of the Supreme Court is not obliged to keep notes of legal argument and, if he does so, they are his own private notes. Whether any good reason can be found for changing this rule is not a matter upon which I would wish to comment here. All that the judge is obliged to record are notes of evidence, when no shorthand writer is in attendance, and of any rulings or orders which he may make. Thus, if he had given a direction as to the manner in which the counterclaim was to be made this should have been recorded and that note should have been made available. As it is, we are entitled to assume that the judge's refusal to supply a note is that there is no such note and also to assume that there is no such note because no direction was made. It is indeed conceded that no direction was made. As no direction was made it is surprising to find that the learned judge has given judgment upon a counterclaim, because until he gave a direction under r.7(2) there could be no counterclaim. I must agree that if we had the learned judge's notes of the argument it might be possible to ascertain how he came to follow this extraordinary course, but in my view that is no ground for criticising his refusal to supply a copy of his notes. Although counsel for the Appellant has told us what is his recollection of the course the proceedings took before the judge in chambers, nothing he has said in this connection has had any bearing upon the conclusion which I have reached and I am glad that it was not necessary that it should. Where it is material for the Full Court to know what course the proceedings took at a trial and there is no official note of the proceedings, I think counsel should endeavour to agree a note setting out what happened and should supply a copy of that note to the trial judge so that he may, if he sees fit, express his agreement or disagreement.

4. In fairness to the learned judge I think he may have been misled in the first instance by the form of the affidavit which was put before him. I have already said that it followed the lines of a precedent in Atkin, but that precedent is headed "Affidavit opposing originating summons and making counterclaim". In spite of the heading the form itself, in para.6, indicates not the making of a counterclaim but merely a desire to make a counterclaim. The text was, therefore, wholly appropriate for the purpose for which the Defendants wanted it. Nevertheless in the text at p.237 of this volume the learned editor suggests that an affidavit in Form 11 is suitable for use after a direction has been made that the counterclaim be made in an affidavit. The learned judge may, in consequence, not have attached the significance to para.25 of the affidavit which was filed as he might otherwise have done. With the utmost respect I suggest that the form in Atkin ought not to be followed where a direction has been given because, although a statement that the deponent is desirous of making a counterclaim may be the truth, that is immaterial and ought not to be pleaded: the material fact to be pleaded is that he does by his affidavit make a counterclaim. However, seeing this affidavit the learned judge may have thought that it was not necessary for him to make any direction as to the manner in which the counterclaim should be made. This view may have been reinforced by the fact that, as we are told, counsel for the Defendants did not at the beginning of the hearing point out that his clients wished to counterclaim and that directions as to the manner in which the claim should be made ought to be given before the proceedings went any further. The learned judge could, of course, have made a direction that the affidavit already filed should stand is the Defendants' particulars of claim and that the matter be proceeded with on the same day, but he did not do so. From what leading counsel for the Defendants has told us, he would not have objected to that course. We do not know what might have happened had this been done. One would have expected that the judge would then go on to enquire from counsel for the Plaintiff whether he had any and, if so, what defence to the counterclaim, but a failure to do that would not have been fatal. What appears to have happened is that at some stage of the hearing counsel for the Plaintiff indicated two defences, one of which was an equitable defence of laches. That was a defence which, under the rules, had to be pleaded. We have no record of any application for an adjournment resulting from the raising of these defences and, again we must assume there was none. This is consistent with what we have been told from the Bar. Mr. Gittins further tells us that he expressly asked the judge not to rule upon the counterclaim, and this itself indicates some confusion in counsel's mind as to what was happening. If there was a counterclaim lawfully before the judge then it was his duty to rule upon it unless he made an order of adjournment. Indeed, the very fact of counsel's asking him not to rule upon "the counterclaim" might have strengthened the judge's impression that there was a counterclaim before him. But whatever the judge's impression may have been he had no jurisdiction to rule upon a counterclaim which was not lawfully before him.

5. Counsel for the Plaintiff refers to The Gniezno 1967 3 W.L.R 705 and some of the cases cited therein. He submits that, although "a counterclaim is made when it is properly formulated", "statement in an affidavit in the proceedings of intention to counterclaim has been held sufficient". In my view that is stating the matter too generally. I accept the first part of the submission, but the filing of the affidavit was not a proper formulation of the counterclaim in this case: a counterclaim in an action begun by originating summons can only be properly formulated if it is made in accordance with a direction under 0.28 r.7(2). The second part of the submission is no doubt correct in relation to a counterclaim raised upon a summons for summary judgment: in such a case the statement of intention may properly be treated as the claim itself, because if it were worded as a claim the affidavit would be sufficient. If the affidavit in the present case had been worded as a claim it would not have been sufficient, because there was no direction that the counterclaim be made by affidavit.

6. Counsel for the Plaintiff has sought to argue that the Defendants waived any irregularity in the making of the counterclaim. If I were persuaded that the Defendants had allowed the judge to rule upon their claim without any form of protest, I might have thought the point arguable, but, as I have said, we are told that counsel did protest and we are further told that the judge's attention was twice drawn to 0.28 r.7(2). Counsel for the Plaintiff even went so far before us as to suggest that the mere fact that counsel who appeared for the Plaintiff in the court below was allowed to argue upon the claim and counterclaim without his opponent's having insisted on directions under that paragraph amounted to a waiver of the irregularity. It might well have been a ground for asking for costs thrown away, but I cannot accept that if the issue has arisen at that stage it could properly have been held that there had been a waiver.

7. If, as I would hold, there never was a counterclaim properly before the court, that part of the judgment dealing with the counterclaim must be set aside and the other matters which have been argued become immaterial. I am firmly of opinion that the Defendants have not had a fair trial of their claim and that they must succeed upon the appeal. Strictly there has never been a trial of that claim at all and it may be wrong for them to have asked for a "new" trial, but since there is a judgment against them it is not altogether inapt for them to have used that word. It has been suggested that the Defendants are in truth seeking a second bite of the cherry in that the affidavit informing the cause of their claim referred to specific performance but not to damages in lieu thereof. We are told that the learned judge in the course of the argument expressly drew attention to the fact that if he gave judgment against both parties on their respective claims the Defendants might thereafter be faced with a plea of res judicata. That could only have had reference to the absence of a claim for damages in lieu of specific performance and it is unbelievable that leading counsel would have failed to claim damages in the alternative after the two defences had been raised if he thought the judge intended to decide the counterclaim forthwith. Again, we are told that the case was adjourned so that an affidavit could be filed by the Defendants to deal with the alternative defence raised by counsel for the Plaintiff, namely that although the Defendants were seeking specific performance of the agreement of sale and purchase they were asking that specific performance be effected by an assignment of land other than that referred to in the agreement itself. There is no record of any such order of adjournment in the papers before us, even less of an express term in that order limiting the further affidavit to the alternative defence, although it is said that such a limiting order was made. I cannot see why the Defendants should have been prevented from meeting an equitalble defence which had been sprung upon them at the hearing, and there may have been a misunderstanding. It is said that the Defendants could at any time up to the present have filed an affidavit explaining the delay which is complained of and particularising their damage. If there was no counterclaim properly before the court then not only were they under no obligation to do so but, strictly, they had no right to do so. In my view the Defendants are not, so far as we are able to tell, having a second bite at the cherry at all. It may be that as a result of what has happened they will now take a larger first bite than they would otherwise have done. That may be unfortunate for the Plaintiff and from his point of view be an injustice, but, looking at it from a less restrictive point of view, it involves no real injustice - it merely means that the Plaintiff will not get the advantage of a mistake which might have been made by unwary counsel. On the other hand, there would be a complete denial of justice if the judgment were to stand in its present form although no counterclaim had ever been made and, a fortiori, had never been properly adjudicated upon. If I were not persuaded that the failure to follow the proper procedure had resulted in there never being a counterclaim and, consequently, in a denial of justice to the Defendants, I would have been inclined to think that on the papers before us the Plaintiff would have been bound to succeed upon the appeal. However, no useful purpose would be served by dealing with the various issues which would then have arisen.

8. I would allow the appeal but order that the costs be paid by the Appellants on a solicitor and own client basis.

Representation:

IN THE SUPREME COURT OF HONG KONG

(APPELLATE JURISDICTION)

CIVIL APPEAL NO.58 OF 1972

(ON APPEAL FROM O.J. M.P. 239 OF 1972)

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Coram: Full Court (Blair-Kerr, S.P.J. , Huggins & McMullin, JJ.)

Date of Judgment: 23 March 1973

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JUDGMENT

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McMullin J. :

Since the circumstances giving rise to this appeal and the arguments advanced by counsel upon the hearing, are fully displayed and explored in the judgments of the other members of the court it will be unnecessary to repeat them here. The point for decision is within a narrow compass and is concerned with the interpretation principally of Order 28 rule 7 of the Rules of the Supreme Court under which it is open to a defendant in an action commenced by Originating Summons to raise a counterclaim in the same action. Counsel for the plaintiff referred us to a long and very comprehensive judgment by Brandon J. in the Gniezne, 1967 3 W.L.R. 705 in which the learned judge reviews and discusses many earlier cases dealing with the question of the manner in which a counterclaim may be raised. Helpful though that decision undoubtedly is in respect of counterclaims arising under other provisions of the Rules of the Supreme Court it is, as counsel concedes, of use only by analogy in the present case because it would appear that there is no direct authority as yet on the proper interpretation of Order 28 rule 7 in so far as the procedure relating to the raising of a counterclaim under that rule is concerned. I do not believe that that decision is of much assistance because the procedure by way of Originating Summons is sui generis and is, in certain important respects, very different from that governing proceedings commenced by way of writ or otherwise. I believe therefore that the answer to the present problem is to be found in the wording of the rule itself.

2. Paragraph 2 of rule 7 requires only that the defendant should "inform the court of the nature of his claim" and provides that this should be done "at as early a stage in the proceedings as is practicable". As the commentary in the White Book points out, no set procedure is laid down. The parties and the court are left to some extent in the position that they must see that the general instruction contained in the rule is applied in the manner best suited to the needs of the given case. It has been pointed cut in the other judgments of the court in this case that the rule contemplates that the matter will be dealt with by the judge in two distinct, successive steps. The defendant firstly informs the court "at as early a stage in the proceedings as is practicable" of the nature of his claim; secondly, he can thereafter present his claim only "in such manner as the court may direct". Strictly speaking, until the second stage has been reached and until directions have been given and complied with the claim cannot be said to have been formally constituted and until that has been done it is not open to the court to adjudicate it whether by allowing it or dismissing it. The substance of the claim only is before the court at that stage and it awaits the court's direction to achieve an adjudicable form. But, as I see it, the judge is not obliged, simply because the first step has been taken, to move to the second whether of his own motion or at the express request of the parties. He must first decide on the evidence and argument had before him whether the defendant has a viable claim at all and if it is patent that he has not, he will refuse to give any directions concerning it. I think it is clear that at this point, between the two steps as it were, the court has a power to strike out the claim in limine. I take that view because firstly it is said that the court "may" direct the manner in which the claim "shall" be made; and secondly, because the obligation imposed upon the court by rule 7(2) is said to be "... without prejudice to the powers of the court under paragraph (3) ..." which latter paragraph deals, of course, with the court's special and limited power to strike out the claim upon the reasons stated in that paragraph. None of those reasons apply here but the point is that that power can only be a power exercisable before any directions have been given, since if directions are given and have been complied with there would be no reason to strike out the claim as distinct from adjudicating it. The court, in other words, should not give directions unless it is satisfied that the claim may go forward. Thus it would appear that the power given to the court by rule 7(3) is not quite the same as the power it has to strike out pleadings and indorsements under the provisions of Order 18 rule 19 since, by the nature of the procedure established under Order 28, no pleadings as such are yet before the court at the moment it moves to strike out under that rule, it is therefore not so much a power to strike out the claim as a power to refuse to let it proceed at all. That this is the true sense of paragraph 3 would seem to be borne out by the commentary upon it which appears at pages 420 - 421 of the Supreme Court Practice for 1970 where the learned commentators say:

"Striking out. Presumably as the counterclaim will not have been formally made without leave, this means that the court may refuse leave to bring the claim." (my emphasis)

This short passage appears to confirm both the fact that the court has a discretion in the matter of giving directions and also the special nature of the power which it possesses to strike out the claim. If the court has the power to "strike out" the claim in the special sense which appears to be contemplated in paragraph 3, before the giving of any directions in relation to the manner in which the action is to be conducted, i.e. before the counterclaim has been pleaded formally, it would, in my view, be open to the court to strike out the counterclaim at the same stage of the proceedings by virtue of its general powers to strike out under Order 18 rule 19 which provides in paragraph 1 thereof that :

"The Court may at any stage of the proceedings order to be struck out or amended any pleading or the indorsement, of any writ in the action, or anything in any pleading or in the indorsement, on the ground that -

3. This rule is employable, as the commentary makes plain, not only where : "the pleading discloses no reasonable cause of action or defence" but also : "where the action or defence is shown to be frivolous or vexatious or otherwise an abuse of the process of the court." It is also said at the same place that paragraph (d) : "derives from the inherent jurisdiction of the court which, of course, may still be exercised apart from the rule." If this be granted it follows, as a necessary corollary, that, if the court does not move to "strike out" either under paragraph 3 of rule 7 or by virtue of its powers under Order 18 rule 19, or by virtue of its inherent power, apart from the rules, to prevent an abuse of the court's process it must give directions under rule 7(2) of Order 28 whether the parties apply for specific directions or not. Once the court is satisfied that there is a justiciable claim it is not entitled to frustrate the action by refusing to give directions altogether. Indeed it is obliged to give directions whether it is asked to or not its sole discretion in the matter being, as I see it, to refuse directions only where it takes the view that the claim should not go forward.

4. A defendant proposing to counterclaim under Order 28 rule 7 has a duty to put before the court all matter necessary to enable the court to adjudicate upon the preliminary question of the competency or bona fides of his claim. I would think, however, that where it was prima facie a sustainable claim, and one which might justly be disposed of in the action the court would be obliged to let it proceed and then it would become necessary to give directions as to how it was to proceed. It would, in other words, only be open to the court to frustrate the claim by refusing directions when it was fully disposed to strike out the claim for any of the reasons appearing either in paragraph 3 of rule 7 of Order 28 or in paragraph 1 of rule 19 of Order 18.

5. If paragraph 2 of rule 7 were read and applied in the manner suggested above I believe applicants thereunder would be less likely to fall into the kind of confusion which evidently beset the proceedings in the present case, more especially in the concluding stages. It would appear that counsel for the defendant did ask for directions and that he did exhort the judge not to adjudicate the claim. There is no doubt that the judge did purport not merely to strike out (or refuse permission to proceed with) the counterclaim but actually to adjudicate it by dismissing it. He evidently had taken the view that the counterclaim was before him although no directions had yet been given in respect of it. Counsel on both sides contributed to the error. Counsel for the plaintiff by not merely indicating his proposed defence to the proposed claim but by arguing that defence as though the claim had already been constituted upon pleadings; counsel for the defendant by failing to disclose the nature of his reply to the allegation of laches or to ask for an adjournment for the purpose of adducing evidence on that matter and upon his alternative claim for damages. Since an adjournment which was granted to the defendant resulted in an affidavit which dealt with neither of these matters but with a totally different point relating to the claim for specific performance, the judge was inevitably led to the conclusion that the parties had put before him everything that was necessary to enable him to form an opinion on the case generally. Had he thereafter merely "refused leave to bring the claim" on what had been put before him and consequently, of course, refused to give directions under 7(2), it would, procedurally speaking, have been within his competence to do so and I would hesitate to say that the defendant's application had not been properly refused since it was for them to show a viable cause and the point of laches was very strongly against them. I am, however, of the opinion that the judge was wrong to dismiss the claim at that stage of the proceedings for in doing so he adjudicated it and did so before any directions had been given and despite an application for directions and the plea that he should not adjudicate the matter.

6. What occurred was something like a short-circuiting or telescoping of the procedure. The judge was asked, though belatedly, for directions; it was perhaps open to him to refuse directions and to strike out "the claim" if he thought it was incompetent or to give directions and then move to dismiss it if he thought it had not been proved. He did not give directions but moved directly to judgment.

7. The upshot was that because of what I believe to be a misapprehension as to the right interpretation of rule 7 - a confusion in which the court and all parties and their advisers shared - the defendants have had their claim concluded finally against them upon argument relating to a state of facts which they did not have an opportunity of explaining and have thus been shut out from pursuing a claim which, whatever suspicions may attach to it, is not upon the face of it obviously either incompetent or vexatious. For these reasons I would allow the appeal but I am in full agreement with the learned president of the court on the order which he proposes in relation to costs.

Representation:

IN THE SUPREME COURT OF HONG KONG

(APPELLATE JURISDICTION)

CIVIL APPEAL NO.58 OF 1972

(On appeal from O.J.M.P.239 of 1972)

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Coram: Full Court (Blair-Kerr, S.P.J. , Huggins and McMullin, JJ.)

Date of Judgment: 23 March 1973

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JUDGMENT

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Blair-Kerr, S.P.J. :

In this case we are concerned with a piece of land in Kowloon registered in the Land Office as New Kowloon Inland Lot No.2690 and Extension. This lot was formerly owned by Hong Kong Realty and Trust Co. Ltd. It appears that, over the years, this company assigned portions of the lot to various persons; and in February 1962, the company purported to assign to the plaintiff what was described in the body of the assignment as "the Remaining Portion of New Kowloon Inland Lot No.2690 and Extension which said piece or parcel of ground ..... is more particularly delineated and described on the plan hereto annexed ...". The plan showed what is obviously that portion of Lot 2690 which is situated at its south end; and I shall refer to it as "the old lot". The plan was coloured pink and yellow; and a memorial of the assignment was registered in the Land Office as No.363245 of 15th March 1962.

2. The old lot was an awkwardly shaped piece of land from the point of view of development; and in 1969 the plaintiff was negotiating with Government for the surrender of the old lot in exchange for a new lot which would consist of the major part of the old lot together with certain additional land which did not form part of the original lot 2690. What was envisaged was the grant of a new lot more or less rectangular in shape, which would be suitable for development.

3. On 14th July 1969, the plaintiff and defendants entered into an agreement for the sale of the new lot; and on 27th January 1970, the parties signed a supplemental agreement varying the July 1969 agreement in a number of respects and fixing the 28th December 1970 as the date for completion.

4. On 23rd December 1970, the Registrar General wrote to a firm of solicitors who had been acting for both parties, pointing out that a small portion of roadway which was part of Lot 2690, and which was situated some distance from the old lot, had never been assigned by the Hong Kong Realty and Trust Co. Ltd to anyone. Why this was so is not clear. But at any rate, from Government's point of view, it was regarded as part of "the Remaining Portion" of Lot 2690. From the point of view of the plaintiff and the defendants, this small portion of land was not contiguous to the old lot. It did not form part of the land "delineated" in the plan attached to the assignment from the Realty Co. in favour of the plaintiff; and it was not in the contemplation of the plaintiff and the defendants when they signed their agreements of 14th July 1969 and 27th January 1970; that is to say it did not form part of what, it was anticipated, would be granted by Government to the plaintiff as the new lot.

5. The mistake was discovered by the Registrar General when the Grown rent in respect of the various portions of the area was being adjusted. The title to this small portion of land was still vested in the Realty Co.; and the Registrar General informed the solicitors as follows:-

"I have instituted inquiries as to whether Government would be prepared to take a surrender of this portion of roadway, as an alternative to a Deed of Rectification in respect of the Assignment to your client. ................. I regret that these requirements must necessarily delay the apportionment and subsequent transactions ........... If a surrender is approved, I shall in due course ask you, on behalf of your client" [i.e. the plaintiff]" to make the necessary approach to [the Realty Co.].......".

6. It is not clear why rectification of the mistake involving the small portion of roadway situated some distance from the old lot and the anticipated new lot - a mistake which did not concern the parties to this action (except in so far as the old lot was incorrectly described in the 1962 assignment as comprising "the Remaining Portion of Lot 2690") - should necessarily have delayed the grant by Government of the new lot. Be that as it may, Government chose to say that, as a condition precedent to the grant of the new lot, the mistake in regard to the small portion of roadway must be rectified. With respect to those who think otherwise, I am not prepared to associate myself with any criticism of the Registrar General for holding-up the grant of the new lot. What he was concerned with was the surrender of two portions of Lot 2690 and a regrant to the plaintiff of a part of what was comprised in Lot 2690 together with certain other land which did not form part of Lot 2690. I do not know to what extent he was cognizant of the contractual arrangements between the plaintiff and defendants. We have not heard the Registrar General. I do not know what technical difficulties may have had to be overcome as regards the apportionment of Crown rent consequent upon this surrender and regrant; and, in any event, Government were perfectly entitled to insist on the plaintiff, in consultation with the Realty Co., taking steps to have the mistaken rectified as a condition precedent to the grant of the new lot. It was unfortunate that there had been this mistake on the part of the Realty Co. - if it was a mistake. But that is all I feel we can say about it.

7. In October 1970 the plaintiff had employed another firm of solicitors; and, on 28th December 1970 (the date fixed for completion), the defendants' solicitors sent a copy of the Registrar General's letter to the plaintiff's solicitors and added :-

"It will be necessary for your client to obtain a confirmatory assignment in respect of the unassigned portion of the Remaining Portion. before your client is in a position to give a good title to the assignment of the Remaining Porting. Your client is bound to show a good title to the property at his own expense and as long as this requisition for a good title and confirmatory assignment or otherwise to perfect your client's title to the Remaining Portion is not complied with, our clients are not bound to complete the assignment as your client is not in a position to complete the assignment and to give a good title. .....".

The defendants were threatening to resile from the contract unless the plaintiff took steps to comply with the Registrar General's requirements. But, whereas the Registrar General had in mind a straight surrender of the small portion of road by the Realty Co. or a deed of rectification in the plaintiff's favour by the Realty Co. the defendants' solicitors were requiring the plaintiff to acquire this small piece of land which never formed part of the property assigned to him by the Realty Co. in 1962.

8. The agreement of 14th July 1969 required that the plaintiff should show a good title; and, of course, if, before the grant of the new lot, Government were insisting that the small unassigned portion of Lot 2690 should either be surrendered by the Realty Co. to Government direct, or be assigned to the plaintiff by the Realty Co. as part of "the Remaining Portion" by deed of rectification the plaintiff could not show a good title to the new lot till one or other of those procedures had been effected.

9. The clause in the agreement of the 14th July 1969 which was invoked by the defendants' solicitors is the usual clause appearing in agreements of sale and purchase. It reads :-

10. On 12th January 1971, the plaintiff's solicitors replied to the defendants' solicitors as follows:-

"We appreciate that your letter is a requisition on the title of our client. However, our client is unwilling to comply with your client's request on the ground of difficulty delay and expenses. Accordingly our client annuls the sale to your client in respect of the above property in accordance with clause 8 of the agreement for sale and purchase entered into between our client and yours on the 14th day of July 1969 ...".

11. On 8th September 1972, the plaintiff took out an originating summons by which he sought a declaration that the agreement of 14th July 1969 as varied by the supplemental agreement of 27th January 1970 had been lawfully rescinded or annulled by him. By notice dated 9th October 1972, it was ordered that the summons would be heard by Mr. Justice Briggs on 16th November. No affidavits had been filed by the defendants by 9th October; but on 11th November, the 1st defendant, on behalf of himself and his co-defendants, filed an affirmation in which he amplified the facts previously set out in the plaintiff's affirmations, but, so far as I can see, those facts did not conflict in any way with the facts in the plaintiff's affirmations. He said that on 24th December 1970 his solicitors had sent a draft assignment to the plaintiff's solicitors for the latter's approval. However, the draft assignment was not in respect of the new lot which, it was anticipated, Government would be granting to the plaintiff. It was a draft assignment of the land "more particularly delineated and described on the plan annexed to an assignment memorial no.363245 and thereon coloured pink and yellow." In other words, it was a draft assignment of the old lot, whereas on 14th July 1969 the plaintiff had agreed to assign the new lot as and when it had been granted to him by Government.

12. Paragraphs 20-25 of the 1st defendant's affirmation read as follows:-

13. The matter was heard by Mr. Justice Briggs on 16th November. Mr. Ching and Mr. Denis Chang appeared for the plaintiff and Mr. ...(illegible) and Mr. Robert Tang appeared for the defendants. As far as the claim is concerned, the main argument centered around the opening words of clause 8 of the agreement viz. "If the purchaser shall make and insist ......". A number of cases were cited, including Duddell v. Simpson⁽¹⁾, Greaves v. Wilson⁽²⁾, Selkirk v. Romar⁽³⁾, Bowman v. Hyland⁽⁵⁾ and In re Ramuz and Edwards' Contract⁽⁶⁾. Judgment was reserved; and on 24th November, the learned judge gave a written decision in which he held that:

"When an objection to the title is made to the vendor by the purchaser, it is then the duty of the vendor to try to rectify it. If he is unable or unwilling to do so and the purchaser insists on his objection, then and only then the right to rescind arises ...... There must be more than a mere declaration of a requisition on (the plaintiff's) title ...... the plaintiff did nothing ...... the power to rescind must not be exercised capriciously or in an arbitrary manner ...... The plaintiff rescinded on the ground of 'difficulty delay and expenses' ...... but there was no evidence of this."

In other words the judge held that the annulling of the contract was premature; and he declined to make the declaration prayed for.

14. Reverting to the hearing, this was adjourned on 16th November to the afternoon of 17th November; and on the morning of 17th November, pursuant to leave given to him on 16th November, the defendants' solicitor filed a further affirmation in which he referred to a clause of the supplemental agreement of 27th January 1970 [clause 4(d)], and he averred that

"... the parties hereto agreed to enable the defendants if they should so desire to take an assignment of the old lot from the plaintiff so that they could continue dealing with Government for the regrant and be entitled to execute the Conditions of Regrant. It was to give effect to such agreement that clause 4(d) of the supplemental agreement dated [27th January 1970] .... was incorporated ....".

Having, in his judgment, dealt with the plaintiff's claim, the judge then went on to deal with the counterclaim. He said:

"In an affirmation filed by the defendants, the defendants counterclaim for specific performance ....".

The judge held that the plaintiff had never agreed to assign the old lot. I entirely agree with his conclusion. Clause 4(d) of the supplemental agreement could not possibly be construed in the manner contended for by the defendants' solicitor in his affirmation of 17th November.

15. However, the judge went on to consider whether the defendants were entitled to a decree for specific performance of the agreement to sell the new lot; and he held that they were barred from doing so by laches. The judge said:-

".... the defendants made inquiries as to the possibilities of the surrender and regrant of the roadway in February 1971. I was told that the surrender and regrant to the plaintiff was effected some six months later. Apart from that, there is nothing before me to show that the defendants have pursued this claim in any way until their affirmation was filed in these proceedings, which, of course, were instigated by the plaintiff, not by the defendants. Certainly, there is no evidence that the defendants have shown themselves to be 'ready, desirous, prompt, and eager' to complete the sale [see Milward v. Thanct(7)]."

The counterclaim was therefore dismissed.

16. This is an appeal by the defendants against the decision of the judge dismissing their counterclaim for specific performance. [The plaintiff has not appealed against the judge's refusal to ...(illegible) the declaration sought in the originating summons]. The grounds or appeal are, in substance:

17. The procedure for counterclaiming in an action commenced by originating summons is a relatively new innovation. As Odgers says⁽⁸⁾.

"....... in a suitable case it is now possible for a defendant to make a counterclaim [0.28 r.7]."

In fact the procedure appears to have been introduced in England when the rules were revised during the period 1926/65. The right to counterclaim appears to be conferred by para. (1) of o.28 r.7; and para. (2) of that rule reads :-

18. What we are concerned with in this appeal is the meaning of the concluding words of that paragraph viz.

"... the claim shall be made in such manner as the Court may direct under rule 4 or rule 8."

Does this mean that, in the absence of any application by the parties the judge is bound in every case, to give directions as to how the defendant's claim "shall be made"?

19. In a note to 0.28 r.7 at pp.420/1 of the Supreme Court Practice (1970), the learned editors say:-

The learned editor of Atkin's Court Forms (2nd Ed.) says at p.237 of Vol.29:-

"The court may, for example, direct the counterclaim to be made in an affidavit."

And, in a footnote, he refers to Form 11 at p.271 of Vol.29 as being an example of the sort of affidavit which might well be filed pursuant to any order which the court may make under para. (3) of r.4 or para. (2) of r.7.

20. If, prior to the originating summons coming on for hearing, the defendant has done nothing but "serve on the plaintiff proposed prints of counterclaim," and at the first hearing, the defendant then informs the court (presumably verbally) "of the nature of his claim" [para. (2) of r.7], no court would regard that as being sufficient to raise, or make, a counterclaim. In such circumstances there would have to be a direction that the counterclaim be made in an affidavit. Until that has been done, the court would not be in a position to decide whether to give further directions with a view to resolving disputed questions of fact [paras.(2), (3) and (4) of r,4], or a direction that the action be continued as if it had been begun by writ [r.8], or a direction that the counterclaim be struck out or tried separately [para. (3) of r.7]. But what is the position if, prior to the first hearing, a defendant files an affidavit which, on the face of it discloses his counterclaim in as formal a manner as in a pleading, although the counterclaim does not raise any questions of fact or other matter calling for directions under rr.4 or 8 or under para.(3) of r.7? In the absence of any application for an adjournment by the defendant, in my view the judge may proceed with the hearing of the claim and the counterclaim at the first hearing. Para. (2) of r. 7 makes specific reference to r.4; and para. (2) of that rule contemplates a situation in which the judge may dispose of the claim "on the first hearing". Unless the defendant's affidavit discloses matter calling for directions under rr.4 or 8 or para. (3) of r.7, the judge may proceed with the hearing of the claim and counterclaim together. But, in the absence of any application by either of the parties, is it necessary that the judge should, at the commencement of the hearing, give a direction that the claim and counterclaim shall be heard together and that the defendant's affidavit shall be treated as his defence to the claim and as disclosing his counterclaim and that the hearing may proceed although the plaintiff has not filed an affidavit by way of defence to the counterclaim?

21. In my view it is most desirable that there should be such an express direction by the judge in every case. But I do not think that it is strictly necessary. If neither party seeks the judge's formal direction and, by their conduct, leave him with the impression that claim and counterclaim are ready for trial, the fact that the judge has not given an express direction that the trial may proceed on the material then before the court does not vitiate the proceedings. In my view, the fact that the defendant's affidavit, on the lines of Form 11, concludes with the words "I am desirous of counterclaiming" matters not. As Atkin says, Form 11 is the sort of affidavit which might well be filed pursuant to any order which the court might make under para. (3) of r.4 or para.(2) of r.7.

22. Reverting then to the facts of this case. The first hearing was on 16th November 1972. The defendants filed their affirmation on 11th November. Obviously, the draftsman had Form 11 in mind. On the face of it, it appeared to disclose fully the defendants' counterclaim and it did not raise matters calling for any particular direction under rr.4 or 8 or para. (3) of r.7. The counterclaim was closely connected with the claim. Indeed, it was "the opposite side of the penny," so to speak. The plaintiff was seeking a declaration that the contract had been validly annulled. The defendants were saying, by way of defence: "The contract was not validly annulled; and, in the event of the court declining to make the declaration sought, we ask for an order for specific performance."

23. Neither party sought any directions from the judge; and Mr. Ching proceeded to address the court fully on the claim; and, as regards the counterclaim, he raised the defence of laches. This was a matter of law. It did not have to be raised by the plaintiff in an affirmation, even if it could be said that the plaintiff had sufficient time between 11th and 16th November to file another affirmation. However, if the defendants were really in a position to call evidence to explain the delay of at least 18 months in raising their counterclaim, one might have expected counsel for the defendants to seek an adjournment as soon as the question of laches was raised by Mr. Ching - if only to take his clients' further instructions. But, no application for an adjournment was made on behalf of the defendants.

24. On the hearing of the appeal, Mr. Gittins for the appellants said that, as far as he was able to recollect, he had asked the judge for directions under 0.28 r.7; that the judge, in granting leave to file the further affidavit by the defendants' solicitor, had expressly limited it to matters pertaining to the defendants' submission that the object of clause 4(d) of the supplemental agreement was "to enable the defendants, if they should so desire, to take an assignment of the old lot;" and that the defendants were thereby precluded from filing any evidence to explain their apparent laches and particularising the damage suffered by them as a result of the annulling of the agreement by the plaintiff. Mr. Gittins also said that, before the court adjourned, he requested the judge not to deal with the counterclaim at all.

25. Of course, in all this Mr. Gittins frankly admitted that he was relying entirely on his memory. Neither his junior or his instructing solicitor were in a position to produce a note of the proceedings in the lower court; and it is significant that at one point in his submission, when asked by the court about what had been said in the court below regarding a certain matter, Mr. Gittins said frankly that he was not prepared to trust his memory of the course of the proceedings in case his answer might possibly, as he said, "be coloured by wishful thinking."

26. This court has the very highest regard for Mr. Gittins' honesty and integrity; but, for myself, I have always felt that counsel should not be placed in the impossible position of having to cast his mind back to a time, perhaps weeks or months earlier, and be asked to say what happened during a prior hearing in the court of first instance. I have never been able to understand why our procedure does not require the keeping of a full record of all proceedings of whatever nature by courts of first instance, which records would be always available to the appellate court. It seems to me that the more an appellate court is made aware of the course of the proceedings in the court below, the better able it is to do justice. But in this, I regret to say, I find myself in a minority. All kinds of arguments are continually put forward against my view, including the stock argument: "they don't do it in England; therefore we shouldn't do it here;" or: "there is no need for the judge's note or a shorthand note in chamber applications because the judge should deal with all relevant matters in his judgment." As to the latter argument, what is the position if the judge inadvertently omits to deal with some matter which a party chooses to raise on appeal? Or, if counsel's recollection is faulty and he thinks that something happened in the court below which did not in fact happen? At the very least, the conduct of the parties in the court below may be most material on the question of costs; and in the present case, it is of some importance in deciding whether, during the hearing, the defendants, is they now allege, at all material times, regarded their affirmation of 11th November 1972 as nothing more than "an intimation of the fact that they] were desirous of counterclaiming," or whether the truth of the matter is that, at any rate at the commencement of the hearing, they were quite prepared to proceed on the basis of the documents then before the court - that is to say they regarded their affirmation as effectively raising their counterclaim for the decision of the court on the first hearing.

27. In view of counsel's assertions in regard to the conduct of the case in the court below, I have felt compelled to discuss the matter with the judge. I asked him whether there is anything in his notes or his recollection of the proceedings to support the assertion that he was asked by counsel for the appellants not to deal with the counterclaim. The answer to that question was in the negative. I also asked the judge whether there was anything in his notes or his recollection of the proceedings to support the assertion that, as regards the affirmation filed on the morning of 17th November, the judge ruled that the defendants' solicitor should deal only with matters relating to clause 4(d) of the supplementary affidavit with the result that the appellants were precluded from filing evidence to explain apparent laches on their part or to particularise damage allegedly suffered by them. Again, the judge's reply was clear. No application to file evidence relating to laches or damage was ever made; nor was any order made regarding the subject matter of any affirmations which the defendants or their solicitor might wish to file.

28. The judge also told me that he did have a note of a request by Mr. Gittins, made at the end of his submission, to the effect that he (the judge) should give directions under r.7(2); that he expressed the view that it was "a bit late in the day to ask for directions;" and that counsel then agreed.

29. The judge has very kindly given me his note book and permitted me to peruse his notes which I have now done. This has confirmed my general understanding of the hearing. As regards the claim, the defendants maintained throughout that the agreement between the parties was to the effect that the plaintiff would assign the old lot. As I have said, it was an argument which had no merit whatsoever; and it could not but have cast doubts on the bona fides of the defendants in counterclaiming at all. There is nothing in the notes of proceedings to support counsel's recollection that he asked the judge not to deal with the counterclaim or that the judge limited the defendants' solicitor in any way as regards the affidavit he proposed to file on the morning of 17th November; and one cannot but ask oneself this: If (as the defendants now suggest) there may be evidence to explain the apparent laches, why did they not file such evidence during the adjournment? The judge would then have been in a position to decide whether some direction under rr.4 or 8 was called for.

30. As regards the question of damages in lieu of specific performance this was never mentioned by the defendants throughout the entire proceedings; and it would appear from the record that this never entered their heads.

31. My first impression of this appeal was clearly that it should be dismissed. It seemed to me that the defendants were simply trying to have "two bites at a cherry" and that they should not be permitted to invoke the equitable jurisdiction of this court after sitting back and doing nothing for 18 months, more especially having regard to the misleading manner in which they conducted their case before the judge in the court below. Indeed, why is it that even today there is no affidavit from them setting out the substance of the evidence which they suggest may exist to explain the laches of which the plaintiff complains, and to particularise the alleged damage? It seemed to me that at the commencement of the hearing there was a valid counterclaim before the judge and that the defendants were quite prepared to have it argued out on the basis of the documents then before the court. Indeed (although he withdrew his remarks later) at one point in his submission on the appeal, Mr. Gittins said that, according to his recollection, he was quite prepared to proceed on the basis of the affirmations then before the court, but that what altered the whole situation was the fact that counsel for the plaintiff introduced the question of laches.

32. As I have said, if that is so, I find it quite incomprehension that any evidence having a bearing on the question of laches was not filed by the defendants on the morning of 17th November. Be that as it may, what has caused me to have second thoughts about the way in which this court should deal with the appeal is the judge's note of Mr. Gittins' closing remarks. Gertain words are of course written in an abbreviated form; but the note reads:-

"Plaintiff relies on absence of title to rescind and has no right. It is a breach of contract of sale by repudiation. Consequences are defendants' counterclaim specific performance and plaintiff can raise defences, laches, frustration. Not now: only when it is up for adjudication. 0.28 r.7. I would like directions under 0.28 r. 7(2)."

Human memory is sometimes an unreliable guide. I need hardly say that a contemporaneous note made by a judge is of far more value. I still think that the truth of the matter may well be that there was a valid counterclaim before the court on the morning of 16th November and that, upon counsel for the plaintiff raising the defence of laches, the defendants should have applied for an adjournment, if they were in a position to file any evidence relevant to this question. They did not do; and, it may well be that their grounds of appeal are nothing but an afterthought.

33. On the other hand, the judge's note viz. "plaintiff can raise defences, laches, frustration. Not now: only when it is up for adjudication" strongly suggests that, at the end of the hearing, counsel was under the impression, rightly or wrongly, that the counterclaim would be disposed of at a later date. As I have said, it may well be that he simply changed his mind half way through the case and was negligent in not asking for an adjournment in order to file a further affidavit. If that were all, it would not justify this court allowing the defendants to reopen the case. But, in view of the judge's note ("Not now, only when it comes up for adjudication") despite the rather extraordinary manner in which the defendants conducted their case, I think that there must be a doubt as to the defendants' true intention at the time they filed their affirmation on 11th November And, of course, if there never was a counterclaim before the court, it is still open to the defendants to seek the court's direction under para.(2) of r. 7. Therefore, with considerable hesitation, I am prepared to agree that the appeal should be allowed.

34. However, there remains the question of costs. I would myself order that the appellants, in any event, should pay the whole of the respondent's costs incurred in connection with this appeal, such costs to be taxed on a solicitor and client basis. They sat back and did nothing for at least 18 months. Their counterclaim was raised for the first time in November 1972 in conjunction with their defence to proceedings which were instituted by the respondent. They now say that they can explain the delay in seeking an order for specific performance; and they now allege that they have, or may have, suffered damage. If there is any substance in these allegations, all I can say is that their conduct of the case in the lower court was slip-shod and grossly misleading, to say the least of it.

Representation:

S.V. Gittins, Q.C. and R. ...(illegible) Pang (Philip K.H. Wong & Co.) for appellants.

R. Mills-Owens (Gunston & Chow) for respondent.

(1) [1866] 2 Ch. App. 102

(2) [1858] 25 Beav. 290

(3) [1963] 3 All E.R. 994

(4) [1907] 1 Ch. 244

(5) [1878] 8 Ch. D. 588

(6) [1893] 37 Sol. J. 701

(7) [1801] 5 Vesey 720

(8) Pleading and Practice 20th Ed. at 354