First Pacific Bank Ltd. v. Robert H.P. Fung

CACV000037A/1989

Courts, practice and procedure - whether decision on preliminary points of law under O.33, r.3 is a final or interlocutory judgment for purposes of rule 2 of the Order in Council regulating appeals to Her Majesty in Council contents of application for leave to appeal when rule 2(b) relied upon.

White v. Brunton [1984] 1 OB 570 and Holmes v. Bangladesh Biman [1988] 2 Lloyd's Law Rep 120 followed.

BETWEEN

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Coram: Fuad, V.-P. Hunter & Penlington, JJ.A.

Dates of Hearing: 25 October 1989

Date of Judgment: 25 October 1989

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J U D G M E N T

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Fuad, V.-P.:

1. On 25th July 1989 this Court gave its decision on this appeal which concerned the effect of certain statutory provisions relating to banking. There were three preliminary points of law in issue which had been ordered to he tried under RSC O.33,r.3 and the Court, by a majority, decided that the effect of section 129 of the current Banking Ordinance, as amended by section 27 of an Ordinance of 1987, was that the liability of a principal debtor to a bank for a debt was enforceable as against the principal debtor notwithstanding that there might have been breaches by the bank of certain provisions coutained in section 23 of the repealed Banking Ordinance of 1964. The Court also decided that section 27 of the amending Ordinance of 1987, which commenced on 30th October 1987, had retrospective effect to the date on which the current Banking Ordinance had come into force. The Court also concluded that the liability of a guarantor of a principal debt due to a bank was not rendered unenforceable by reason only of the fact that there might have been a breach by the bank ofsection 23(1) of the repealed Banking Ordinance.

2. This was a decision in favour of the plaintiff bank, the First Pacific Bank Limited and was therefore against the individual defendant Mr. Robert Fung. As the unsuccessful appellant he now seeks leave to appeal to Her Majesty in Council.

3. The Order in Council which regulates appeals to Her Majesty in Council states by rule 2(a), that an appeal shall lie as of right, from any final judgment of the Court if the matter in dispute on the appeal amounts to or is of the value of $500,000 or more, and sub-rule (b) of that rule allows this Court, in its discretion, to grant leave from any other judgment of the Court, whether it be final or interlocutory, if the Court is of the opinion that the question involved in the appeal is one which by reason of its dreal general or public importance, or otherwise, ought to be submitted to Her Majesty in Council for decision.

4. Mr. Thomas on behalf of the intending appellant submits that in the circumstances of this case an appeal lies as of right because the decision given by this Court on 25th July was, in effect, a final judgment and there was no question that the matter in dispute amounted to and was well above the value of $500,000. In the alternative, Mr. Thomas contends that if he is wrong the Court should exercise its discretion under rule 2(b) and grant Mr. Fung leave to appeal.

5. Mr. Thomas, and Mr. Mills-Owens who appears for the Bank, agree that the appropriate test in Hong Kong has now been clearly established in deciding what are to be regarded as final, and what should be regarded as interlocutory, judgments or orders. A number of cases have been cited to us. I merely mention the one case which is reported, Coronation Electronics Ltd. v. Tharoomals (HK) Ltd. [1986] HKLR 1168. This shows that the Hong Kong Courts now consistently apply what has been called the "application" approach rather than the "order" approach and hold that the test must he that a judgment or order is to be regarded as interlocutory unless it is given or made on application which would have the effect, whatever the result of the application of finally disposing of the controversy between the parties.

6. Neither Mr. Thomas nor Mr. Mills-Owens suggested that we should depart from this line of authority. However, Mr. Thomas relies on the decision of the English Court of Appeal in White v. Brunton [1984] 1 OB 570. That was an action claiming, inter alia, reimbursement from the defendant of moneys expended by the plaintiff on the construction of a private road and the question whether the defendant was under a contractual liability in respect of the expenditure was heard as a preliminary issue. The plaintiff was dissatisfied with the judge's determination of that issue and sought to appeal against the judge's determination. The Court of Appeal, which consisted of Sir John Donaldson M.R. (as he then was), Fox and Stephen Brown, L.JJ., held that the decision or that preliminary issue was not to be regarded as a decision preliminary to a final order but was to he treated as a final order for which leave to appeal under section 18(1)(h) of the Supreme Court Act of 1981 was not required.

7. I will read part of what Sir John Donaldson said at page 573:

" The Court is now clearly committed to the application approach as a general rule and Bozson's case [1903] 1 K B 547 can no longer be regarded as any authority for applying the order approach. However, the decision in Bozson's case, as distinct from the reasoning, can be upheld on a different ground as an exception to the general rule. It was a case of a 'split trial', all questions of liability and breach of contract being tried before and separately from any issue as to damages if the two parts of the final hearing of the case had been tried together, there would have been an unfetterd right of appeal even if the judgment had been that there was no liability and that accordingly no question arose as to damages. It is plainly in the interests of the more efficient administration of justice that there should he split trials in appropriate cases, as even where the decision on the first part of a split trial is such that there will have be a second part, it may be desirable that the decision shall be appealed before incurring the possibly unnecessary expense of the second part. If we were to hold that the division of a final hearing into parts deprived the parties of an unfettered right of appeal, we should be placing an indirect fetter upon the ability of the court to order split trials. I would therefore hold that where there is a split trial or more accurately, in relation to a non-jury case, a split hearing any party may appeal without leave against an order made at the end of one part if he could have appealed against such an order without leave if both parts had been heard together and the order had been made at the end of the complete hearing.

In effect that is the position in the present case for in directing a preliminary issue on a point of construction, the district registrar was seeking to divide the final hearing into two parts in the justified belief that it was possible that by adopting this course the expense of part of the hearing might be avoided. That the division may not have run exactly along the line dividing liability from quantum is, I think, immaterial. The decisive feature is that the 'preliminary issue' was not, when analysed, an issue preliminary to a final hearing, but the first part of a final hearing."

8. This decision was followed by the English Court of Appeal in Holmes v. Bangladesh Biman [1988] 2 Lloyd's Law Rep 120 by a Court again presided over by Lord Donaldson, this time sitting with Lord Justices Dillon and Bingham. Bingham, L.J. gave the leading judgment and cited with approval part of the passage I have read from Lord Donaldson's observations at page 573 of White v. Brunton. He then went on to say that the note in the 1988 White Book, Vol. 1, which appears at paragraph 59/1/25 (page 853) accurately reflected the practice. Lord Justice Bingham added this:

"Order 33, r.3 gives the Court a wide discretion to order the separate trial of different issues in appropriate cases and a decision is not to be regarded as interlocutory simply because it will not he finally determinative of the action whichever way it goes. Instead, a broad commonsense test should be applied, asking whether (if not tried separately) the issue would have formed a substantive part of the final trial. Judged by that test this judgment was plainly final, even though it did not give the plaintiff a money judgment and would not, even if in the airline's favour, have ended the action."

9. Mr Mill-Owens submits that the Court of Appeal in White v. Brunton on and in Holmes v. Bangladesh Biman should have followed the often cited authority of Salaman v. Warner [1891] 1 OB 734. That was a case where the defendant had raised a point of law by defence averring that the statement of claim did not, disclose any cause of action. The Judge in Chambers directed that the point should be set out for argument and disposed of before the trial. The matter came before the Divisional Court which decided that the action should be dismissed. The question was whether this decision was an interlocutory or final judgment and the Court held that an order dismissing an action made upon the hearing of a point of law raised by the pleadings before the trial under the then Order 25, rules 2 and 3 was not a final order within the then Order 58, rule 3.

10. Mr Mills-Owens drew our attention to what Fry, L.J. had to say at page 736:

"I conceive that an order is 'final' only where it is made upon an application or other proceeding which must, whether such application or other proceeding fail or succeed, determine the action. Conversely I think that an order is 'interlocutory' where it cannot be affirmed that in either event the action will be determined. Applying this test to the present case, it is obvious that the order here was made on an application of which the result would not in one event be final. Therefore this is an interlocutory order."

11. It is common ground between Counsel that the proper application of rule 2(a) to "split trials" has not arisen in Hong Kong before and we now have to decide what is the right approach to a case of the kind before us.

12. I think it is important to emphasise that it is not as if our case concerned a preliminary point of law that went to some antecedent procedural point or some minor matter collateral to the case as a whole or which would have a small impact on the action as a whole. Rather our decision was on points of law which entirely resolved, while the decision stands, the controversy between the parties except as to the precise sum for which judgment should he entered. Indeed, had it not been for the calculation of interest and another matter regarding, I believe, the possible joinder of another plaintiff who was intended to be added as being assignee of part of the debt said to be owed by the defendant, Godfrey, J., who was the trial judge, would have entered judgment straight away.

13. It seems to me that it would be quite extraordinary if in a case of this kind the intending appellant Would be deprived of his appeal as of right to Her Majesty in Council in respect of a huge sum for which he is liable simply because the case was tried in the way it was. As events have shown, if the decision of this Court is upheld by their Lordships in the privy Council, a great deal of time and expense would have been saved. Lord Donaldson's comments about the interests of more efficient administration of justice in White v. Brunton are very pertinent because in this particular case the decision on the proper construction of the statutory provisions in question was a crucial issue at the trial. In my view an entirely sensible course was taken and I am persuaded that we should follow the approach of the English Court of Appeal in Hong Kong and regard a decision on a preliminary point of law that goes to the root of the case as a decision which amounts to a final judgment and not an interlocutory judgment. This seems to me consistent with common sense and fairness which, perhaps, is not always apparent in the way Courts have dealt with the problem of deciding whether a judgment or order is interlocutory or final .

14. I accept that if an attempt is made to strike out part of a defence under O.18 r.19 as disclosing no defence, then whichever way the decision went, the aggrieved party would not, as the practice now stands in Hong Kong have a right to appeal as of right to Her Majesty in Council but that, I think, is a very different situation from the one we have here. I would therefore hold that the intended appeal lies as of right.

15. If I were wrong, I would grant leave in the discretion of the Court under r.2(b). I do not know whether any decision has distinctly held that where the discretion of the Court will be sought the question involved in the intended appeal should be set out in the papers filed with the application for leave to appeal. I certainly remember the matter being mentioned in at least one case. I think that the time has come, if my brothers agree with me, to state that good practice requires that wherever rule 2(b) is relied upon, the question should be set out in the application. This has obvious advantages. In this particular case, the question involved in the appeal is fairly obvious because of the nature of the proceedings which led to the application for leave to appeal to their Lordships.

16. However, Mr. Thomas formulated, at short notice, a brief statement of the question of law which he says is involved in this appeal, which be put in this way: "To what extent is the Court entitled to supply omissions or repair deficiencies in primary legislation expressly intended to have retrospective effect." I recognise that this very point may not arise again in precise terms but the proper approach of the Court to the difficult task of statutory interpretation where mistakes have clearly been made by the legislature, especially where it is suggested that a provision has retrospective effect despite the absence of express provision to that effect, is in my opinion a matter of great general or public importance. Had it been necessary, therefore, I would have been inclined to exercise my discretion to give leave under the latter part of the rule.

Hunter, J.A.:

17. I agree with my Lord that this applicant should have leave under both limbs of the Order in Council. First on the issue of appeal is of right, I believe that the time has come for the Hong Kong Courts to adopt and endorse the principles expressed by the Court of Appeal in England in White v. Brunton and in Holmes v. Bangladesh Biman. To my mind two statements of principle in those cases are directly applicable. The first is that of Lord Donaldson in White v. Brunton where he said: "the decisive feature is that the preliminary issue was not, when analysed, an issue preliminary to a final hearing, but the first part of a final hearing". The statement by Bingham, L.J. is to the same effect: "instead a broad commonsense test should be applied, asking whether (if not tried separately) the issue would have formed a substantive part of the final trial." In my view, both these general principles should be applied to judgments or decisions resulting from orders for the trial of preliminary issues under O.33, r.3.

18. I say that first, because throughout Hong Kong has followed the English practice and these two decisions represent the final development of the English practice before it was overtaken by their new O.59, r.1A. Secondly, there is no authority against this proposition in Hong Kong. In the recent decisions of this Court on the other hand, the decision of White v. Brunton has been referred to without any criticism and indeed distinguished. This was particularly the view taken by Kempster, J.A. in the Perak Pioneer case (Civil Appeal No. 62 of 1985 - unreported). This exception to the applications rule is as appropriate for adoption here as it was in England In none of the cases has this was ever been regarded as a absolute rule, because throughout the cases all the Courts have had to confess that they have been unable to devise a satisfactory definition. This is no more than what Lord Donaldson in White v. Brunton describes as a "general rule" to which there are certain qualifications and exceptions. Split hearing and preliminary issues can he seen to need special consideration.

19. The good sense of that conclusion has, as my Lord has pointed out, been demonstrated in this case. At the conclusion of the hearing before Godfrey J. he held rightly that his determination had substantially disposed of the issues between the parties. The only issue remaining was quantum. That is why he ordered an enquiry into that matter. Had the figures then been agreed, as they were quite shortly afterwards, he would have been able and would have entered judgment in the bank's favour against this defendant. The appeal which reached this Court could then have been brought collectively against a final judgment as well as Godfrey, J.'s ruling. It is totally bizzare that as a result of adopting what was plainly a sensible mode of trial here, this defendant has been deprived of an appeal as of right against a final judgment in excess of $12 million.

20. Mr. Mills-Owens naturally relies upon the strike out cases where it has long since been established that a judgment on a strike out application under the various parts of O.18, r.19 is an interlocutory judgment. But the fact that this is not an overriding rule is shown not simply by Brunton and the other cases, it also shown by the Privy Council decision in Becker v. City of Marion Corporation [1977] AC 271. There the Privy Council decided that a decision which was unilateral in its effect was in fact final. In arriving at that decision Lord Edmund-Davies giving the opinion of the Privy Council expressly referred to the leading authorities on the strike out cases, Hunt v. Allied Bakeries Ltd. [1956] 1 WLR 1326 in England and Tampion v. Anderson [1973] 48 ALJR 11, a decision of the Privy Council likewise on appeal from Australia.

21. This in my judgment is not a strike out situation nor a akin to a strike out situation. Those cases are in a special category of their own and there is no justification to extending them, as I see it, to the 0.33 situation.

22. As far as the second limb of this appeal is concerned I simply would say that I agree with everything my Lord has said. I would further endorse his view on the proper procedure.

Penlington, J.A.:

23. There is little I can add to the speeches delivered by my Lords Fuad and Hunter except to say that I agree with them and in particular that this Court should follow the reasoning of Lord Donaldson M.R. in White v. Brunton. I also agree that whenever rule 2(b) of the Order in Council is relied on, the question of law on which a decision is sought should he set out in the application.

Representation:

Mr. Michael Thomas, Q.C. and Mr. R. Chao (Herbert Smith) for the Applicant/Defendant.

Mr. Richard Mills-Owens, Q.C. and Mrs. Margaret Clough (Richard's Butler) for the Respondent/Plaintiff.