BRITAIN and China appear ready to strike a deal on Hong Kong's controversial Court of Final Appeal, but sources last night said it was unlikely to be in place before the resumption of mainland rule. A source close to the Chinese side said 'it would be meaningless now to establish the court before 1997' as stipulated by the 1991 Joint Liaison Group court agreement. 'But we can still keep the common ground and discuss preparations for the court in the next few years before implementation in 1997.' The crux of the 1991 deal was to have it in place by 1993 so that it could become fully established by 1997 and the resumption of Chinese sovereignty. 'But there is now only about two years left . . . so the point of having it established long before 1997 no longer exists,' said the source. Under the 1991 accord, the two governments agreed to limit the number of overseas judges to one in an overall panel of five for each sitting of the court, designed to replace Britain's Privy Council as the highest appellant chamber well before 1997. However, the source denied that the 1991 deal was now dead, saying: 'It would be ideal if the two sides could continue talking about preparations before the court is launched on July 1, 1997.' As for the technical problems of dealing with cases that were still being considered by the Privy Council at the time of the handover, the source said there were several solutions. 'If they are worried that there might not be enough time for the completion of a case by the Privy Council, they could wait until the court is established,' he said. 'Or, it is possible for cases handled by the Privy Council to be passed to the court.' Yesterday's developments came just a day after Chinese Vice-Premier Qian Qichen told Britain's Financial Times that establishment of the court should be delayed until after July 1, 1997, with the Privy Council remaining the highest judicial organ of the territory until after the handover. But Democratic Party chairman Martin Lee Chu-ming yesterday denounced any move to delay the implementation of the court until 1997 as a betrayal of the rule of law. 'If Governor Chris Patten and the British Government are really considering leaving it to Beijing to set up the Court on July 1, 1997, they will be consigning Hong Kong people to a very uncertain fate,' he said. 'We will not tolerate the British Government backsliding on its solemn promises to Hong Kong people in order to secure a smooth transition.' Speaking after a four-hour meeting yesterday, the British and Chinese negotiators reported further progress and fewer differences - and said they were ready to talk again today. A source described the move as 'encouraging', and pointed out that the Chinese side had shown greater political will to strike a deal during these talks. But he also warned that past experience in Sino-British negotiations had shown that anything was still possible until 'the ink was on the page'. Yesterday's afternoon meeting, only announced in the morning, followed three days of talks last week during which progress was made after Britain gave a 'positive response' to a new package of Chinese proposals. It is understood that Chinese team leader Chen Zuo'er has flown back to Beijing to seek instructions. He returned to the territory on Tuesday.