Lin Fung Trading Co v. Hanade Wafu

CACV000046/1979

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Coram: Roberts, C.J. and Cons, J.

Date of Judgment: 16 August 1979

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JUDGMENT

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1. On the 4th July, 1977 the plaintiff company issued a writ against the defendant. On the same date, the plaintiff obtained from Mr. Justice Li in chambers, an order for the issue of a warrant to bring the defendant before the court under Order 44A of the Rules of the Supreme Court.

2. The plaintiff's case was that the defendant, a Japanese citizen, was a member of a group of Japanese businessmen with whom the plaintiff had carried on business in 1971. During the course of this business, a quantity of gems was said to have been sold by the plaintiff to the group of Japanese businessmen, the negotiations for the sales taking place in Hong Kong.

3. The gems were sold on the basis that one-third should be paid in cash and the rest by means of post dated cheques.

4. By October 1971 about one million dollars Hong Kong was outstanding to the plaintiff from the group. The plaintiff approached the defendant for payment in Japan. The defendant, according to the plaintiff, in consideration of the plaintiff taking no action to enforce his claim in the courts, agreed to indemnify the plaintiff for the outstanding amount.

5. The plaintiff alleges that the outstanding monies have never been paid and that he is still owed a sum of $1,024,259 plus interest at 8% per annum from October 1971 to the date of the writ. By the date of the issue of the writ the principal sum plus interest amounted to almost one and a half million dollars. (The Further Reamended Statement of Claim frames the claim in Yen, instead of Hong Kong dollars, but this is not relevant to this appeal.)

6. According to the affidavit evidence placed before Mr. Justice Li in July 1977, the plaintiff was unable to trace the defendant from October 1971, until July 1977, when in a chance encounter in the street, Mr. Doo, a partner in the plaintiff firm, saw the defendant in Hong Kong.

7. On the 5th July 1977 Mr. Justice Li made an order (the "first order") requiring the defendant to give bail in the sum of approximately one and a half million dollars by the 12th July, 1977, to secure the appearance of the defendant when called upon. Though not expressed to be so made, it is clear from its terms that this order was made under rule 3(2) of Order 44A.

8. The order also provided that

9. On the 14th July, at the hearing of a summons issued by the defendant seeking to set aside the first order, Mr. Justice Li made a further order (the "second order"), which varied the first order by providing that bail should not be required from the defendant on condition -

10. On the 22nd July the defendant signed an undertaking to the effect required by the judge.

11. The next two years were occupied in various interlocutory proceedings. Mr. Justice Li has commented that he does not feel that the delay was due to any fault of the plaintiff or the defendant. In our view, he has been over charitable. It does not appear to us that legal advisers representing either party have shown a sufficient degree of urgency in bringing the action to trial.

12. On the 22nd June, 1979, the defendant issued a summons asking that

13. We can quickly dismiss the first request, since it is clear from the second order that Mr. Justice Li withdrew the requirement of bail on that occasion, on condition that the defendant agreed that his passport should remain in the bailiff's custody and that he gave a personal undertaking not to leave Hong Kong. Both of these conditions were fulfilled by the defendant.

14. On 6th July, 1979 Mr. Justice Li made a further order (the "third order") permitting the defendant to withdraw his consent to stay and ordering that his passport and travelling documents be returned to him.

15. Mr. Justice Li further ordered, by consent, that the effect of his order of the 7th July, 1979 be stayed for six days to enable an appeal to be entered. An application to extend this period of stay was made to the Court of Appeal on the 14th August when the stay was extended until the decision of this court on the substantive appeal.

16. Counsel for the plaintiff (the appellant) based his appeal upon two main grounds. Firstly, did Mr. Justice Li have power to make the third order? Secondly, if he had, did he exercise his power properly in the defendant's favour on the evidence before him?

17. Counsel argued that the provisions of Order 44A are comprehensive and that if the judge wished to vary or revoke an order which he had previously made under Order 44A, he would have to derive his power to do so from within Order 44A alone.

18. The only rules which appear to deal with subsequent orders by the court are rules 4(2) and 5(1). But, rule 4(2) only applies where the defendant has been committed to prison and rule 5(1) where a defendant has given bail or has been committed to prison for default in giving bail.

19. In this case, the effect of the second order was that no bail was required. Consequently this case does not appear to fall within the scope of either rule 4(2) or rule 5(1) of Order 44A.

20. Counsel for the defendant submitted that Order 44A could not be regarded as exclusive so as to withdraw from the court its inherent jurisdiction to vary or discharge any order made by the court. Alternatively, he argued that, in any event, the order which is the subject of this appeal was not made by the judge under Order 44A.

21. He submitted that there was no provision in Order 44A for the second order, since Order 44A rule 4(4) only permits the court to accept, in lieu of bail, the deposit of a sum of money or other valuable property sufficient to answer the amount of any judgment given against him. Consequently, he argued, the second order did no more than embody, in the form of an order, an undertaking to be given by the defendant to the court.

22. We agree that the second order was not one which the court had power to make under Order 44A though we must confess that we consider the judge's action to have been an eminently sensible and practical one. Consequently, the second order must be deemed to have been made in accordance with the general power of the courts to obtain undertakings from parties in actions before them where the courts think it appropriate to do so.

23. The case of Cutler v. Wandsworth Stadium Ltd.⁽¹⁾ makes it clear that a court can discharge an undertaking given by a party if it thinks it proper to do so, even though it does not have power to vary it.

24. Therefore, we are satisfied that Mr. Justice Li had the power to make the third order.

25. The second main ground of appeal is that the judge exercised his discretion wrongly in making the third order.

26. It was argued that the judge had failed to give proper weight to the following factors -

27. Counsel also argued that the judge had given weight to the following irrelevant matters -

28. We see no real substance in these objections, with two exceptions. It does not seem that the ability to trace the defendant has changed since the second order. At that date the defendant's passport, which does enable him to be traced more easily, was already in the possession of the bailiff.

29. The judge was also, in our view, wrong in paying heed to the possibility of enforcement of a Hong Kong judgment in Japan in the absence of any evidence as to this. He seems to have relied on an assertion by counsel for the defendant.

30. We do not think that the judge can be fairly criticized for giving weight to humanitarian grounds.

31. The object of Order 44A is to give a reasonable protection to plaintiffs against those who incur debts within the jurisdiction and seek to leave it without satisfying them.

32. It was surely not intended that debtors should lose their freedom of movement, by being confined within Hong Kong, whether in prison or outside it, for very long periods. There must surely come a point at which the hardship caused to a defendant by lack of progress in an action against him becomes a factor of substantial importance in any judge's mind when weighing up the interests of the parties.

33. There is one further factor of considerable importance. During his judgment, on the third order, Mr. Justice Li referred twice to his understanding that there was no hope of the case being heard before October 1980.

34. The prospect of the defendant being kept in Hong Kong for a further fifteen months before trial, must surely have been a potent factor in the judge's decision to release the defendant from his undertaking to remain in Hong Kong until trial and to return his passport to him.

35. However, it has subsequently been possible for the hearing of the trial to be arranged for the 10th September this year, rather less than five weeks after the hearing of this appeal.

36. In reaching his decision on what he described as humanitarian grounds, we consider that the judge was wrong in giving weight to the supposed ability to trace the defendant more easily, and to his belief that the Hong Kong judgment was enforceable in Japan.

37. In addition, he gave considerable weight to the expected date of trial in 1980. Had the early trial fixture been known to him we believe that this must have strongly influenced his decision.

38. Taking these factors together, we believe that the judge was wrong in making the third order and that we should allow the appeal and revoke the third order of the 7th July 1979.

39. The effect of this would be to restore the second order of the 14th July, 1977.

40. The appeal therefore succeeds with costs to the plaintiff in the appeal. Costs in the cause in the hearing before Mr. Justice Li.

Representation:

A. Li & N. Pirie (Hampton, Winter & Glynn) for appellant

Ching, Q.C. & Patrick Chan (P.H. Sin & Co.) for respondent

(1) 1945 L.T. 107