Okura & Co Ltd v. Kowloon Container Warehouse Co Ltd (in Liquidation) and Others
Read the full judgment text of HCA 2842/1975 on BabelCite. This High Court CFI judgment.
1. These two High Court Actions No. 2841 and 2842 both of 1975 have been consolidated whereby the Plaintiffs sue the Defendant for over 4 ½ million dollars and $210,000 respectively.
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HCA002842/1975 IN THE HIGH COURT OF HONG KONG ACTION NO. 2841 OF 1975 -----------------
----------------- ACTION NO. 2842 OF 1975 -----------------
----------------- Coram: Mr. Commissioner Liu, Q.C. in Chambers. Date of Judgment: 3 November, 1977. ----------------- JUDGMENT ----------------- 1. These two High Court Actions No. 2841 and 2842 both of 1975 have been consolidated whereby the Plaintiffs sue the Defendant for over 4 ½ million dollars and $210,000 respectively. 2. These claims arose from a written Guarantee dated 3rd July 1975 and signed by one Mr. Oyama purportedly for and on behalf of the Defendant. It is alleged that by this Guarantee the Defendant unconditionally guaranteed the repayment of debts due to the Plaintiffs from one Messrs. Oyama Shipping Co. Ltd. under divers contracts specified in documents attached thereto as "A" and "B". The said Guarantee was expressly made subject to Japanese Law. 3. Mr. Oyama was the Permanent Director and Managing Director of the Defendant company, and by Article 90 of the Articles of Association of the Defendant company Mr. Oyama was entrusted by the Board of Directors with powers to run the company and "after consulting the Board of Directors" to, inter alia, enter into such contracts and engagements on behalf of the Defendant company as he might consider necessary and desirable. 4. On the 14th November 1975, the Plaintiffs demanded payment from the Defendant, and three days later both these present actions were instituted. An order 14 summons was thereafter duly issued, and on the 13th January 1976 the Defendant was granted unconditional leave to defend these two actions which were then consolidated. A Defence was filed on the 18th February 1976, and a Reply was filed on the 17th March 1976. A notice of setting down was lodged on the 29th July 1976, and on the next day these actions were set down for trial some 8 months ahead. 5. Third Party proceedings were commenced by the Defendant's ex parte summons filed on the 11th November 1976 whereby the Defendant was granted leave to serve a Third Party Notice on each of the 1st Third Party, 2nd Third Party and 3rd Third Party. In fact, the 1st Third Party, the said Messrs. Oyama Shipping Co. Ltd., had since the 21st August 1975 been declared bankrupt by the Tokyo District Court and is now being would up in Hong Kong. On 25th January 1977, the 1st and 2nd Third Parties applied by summons to stay these consolidated proceedings against them. On the same day, the Defendant applied for Third Party Directions, and by yet another summons the Defendant applied to vacate the fixed date for the hearing of these proceedings. All these three summonses came before McMullin J. in Chambers on the 31st January 1977: the summons for a stay was adjourned by consent, part of the summons for Third Party Directions was granted by the learned judge, and the fixed trial dates were vacated. The remainder of the Third Party Directions were dealt with and disposed of on the 27th April 1977 and 28th June 1977 respectively. 6. On the 8th February 1977, a winding-up order was made against the 1st Third Party. On the 17th February 1977, the Defence in these consolidated actions was amended. As for the pleadings in the Third Party proceedings: The Statement of Claim against the Third Parties was filed on the 13th May 1977, and on the 25th May 1977, the 3rd Third Party, the said Mr. Oyama, filed his Defence. No Defence has yet been filed by the 1st Third Party and the 2nd Third Party who share the solicitors with the 3rd Third Party, Mr. Oyama, and are content to rest on his same defence. These consolidated actions have been set down for trial commencing February 1978. 7. On 27th August 1977, the learned Registrar dismissed the Defendant's application for the evidence of the 3rd Third Party, Mr. Oyama, to be taken in Japan on a Letter of Request. The Defendant now appeals against that decision of the learned Registrar. 8. In the meantime, on the 1st October 1977, the 2nd and the 3rd Third Parties caused to be filed their present summons seeking an order to the same effect. 9. Both the Defendant's appeal and the summons of the 2nd and 3rd Third Parties came up before me on the 7th October. I have been informed by counsel for the Defendant and for the 2nd and 3rd Parties that it is not permissible to have evidence of Mr. Oyama taken in Tokyo before a Special Examiner in the person of a British consul or at all and that the only issue for determination is whether a Letter of Request should issue to the proper judicial authority in Japan for taking the evidence of Mr. Oyama. The prayer for a stay of proceedings until the return on the said Letter of Request has been abandoned. 10. One of the allegations of the Defendant and the 2nd and 3rd Third Parties is that the said Guarantee was signed by Mr. Oyama late in the evening at his residence in Japan as a result of and after pressure to bear having been put on him by a number of officers or agents of the Plaintiffs. A common thread of reasoning which constantly runs through the defence of the Defendant and that of the 3rd Third Party is inter alia that the said Guarantee was in breach of the laws and regulations of Japan and is tainted with illegality, thus being null and void and wholly ineffective and that contrary to Article 90 of the Articles of Association of the Defendant company, the Board of Directors were never consulted or approached to give even an appearance of sanction to the arrangements purportedly made by Mr. Oyama for the Defendant. The Plaintiff has now been fore-warned that the absence of any resolution by the Board of Directors ratifying the signing of this Guarantee will be taken advantage of by the Defendant, the 2nd Third Party and the 3rd Third Party. It is further alleged that Mr. Oyama was in breach of a fiduciary duty known to the Plaintiff and that the guarantee was in fact a fraudulent preference also to the Plaintiff's knowledge. The 2nd Third Party and Mr. Oyama, the 3rd Party, further seek to invoke Article 93 of the Civil Code of Japan which reads as follows:
11. Mr. Martin Lee, counsel for the Defendant, stated categorically that should his client's pleadings (for which Mr. Lee is not responsible) ever fail to sufficiently put in issue such real intention not to create a guarantee or an enforceable guarantee on or about the 3rd July 1975, as counsel he would reassure the Court that it is indeed one of the main lines of defence of the Defendant. 12. These applications are made under Order 39 Rule 1(1) of the Rules of Supreme Court:
13. In support of his summons, Mr. Andrew Li submitted that the Court had first to be satisfied that there is a bona fide desire to adduce the evidence of Mr. Oyama, that then it had to be established that the evidence of Mr. Oyama out of jurisdiction is necessary for the purposes of justice in the sense that he is a material witness and unwilling to come to Hong Kong, and that lastly even if the Court was to accept Oyama's evidence as being necessary for the purposes of justice, it would remain a matter of judicial discretion to be exercised in the light of the circumstances. Counsel dwelt with emphasis on the submission that the evidence of Mr. Oyama is necessary inter alia to substantiate the allegations of Mr. Oyama's intention not to give any guarantee or enforceable guarantee, the Plaintiff's knowledge of such real intention, the issue of a fraudulent preference and the Plaintiff's knowledge thereof. 14. Mr. Oyama is suffering from heart disease described as "Myocardial infarction and bilateral handle block", and he is facing no less than 5 actions in Hong Kong involving millions of dollars. He has confessed to be unable to satisfy any judgments which may be successfully obtained aginst him. He has also been advised of the effect of Order 44A of the Rules of Supreme Court whereby he may be arrested and called upon to furnish security for his appearance to answer the judgment that may be given against him in any of those actions. Furthermore, a winding-up order has been made in Hong Kong aginst the 1st Third Party, and with his past association with that company Mr. Oyama expects to be constantly interviewed by the Official Receiver once he sets foot in Hong Kong. Mr. Oyama's recent memory of his experience in the "bankruptcy" of the 1st Third Party in Japan is far from being pleasant. Mr. Oyama will also have to apply for permission to leave Tokyo pending the Japanese bankruptcy proceedings against the 1st Third Party, but it is not suggested that he is prepared so to apply or that his application will not be favourably received. On all these, it was submitted that the refusal of Mr. Oyama to come to Hong Kong is not being unreasonable or without cause. After all, it is the Plaintiff and perhaps the Defendant as plaintiff in the Third Party proceedings who have chosen Hong Kong as the forum. 15. It is evident that the materials in support of the 2nd and 3rd Third Parties' application are more comprehensive than that placed before the learned Registrar, and counsel's submissions before me were advanced with great tenacity. 16. Emphasis was laid by both counsel for the Defendant and the 2nd and the 3rd Third Parties on the judgment of Leonard J. delivered in Chambers on the 26th June 1974 in The Hong Kong & Shanghai Banking Corporation v. FUNG Wing-ting executor of TANG Siu-kwai(1). It was sought to illustrate the manner in which discretion in like matter was exercised by the local Courts. Leonard J. cited with approval the observations of Baggallay L.J. and Cotton L.J. in Lawson v. Vacuum Brake Co.(2):
17. Counsel conceded that in the light of the nature of his allegations it is highly desirable for Mr. Oyama to come before a Hong Kong Court, but it was submitted that in the circumstances, the heavy burden for establishing that Mr. Oyama cannot reasonably be expected to be present had been discharged and that despite the extra expenses it was necessary for the purposes of justice that the order sought should be granted. 18. The Plaintiffs mounted their principal attack on three fronts: they complained gravely of delay, of Mr. Oyama's excuses for not coming here as a witness, and of the inappropriate procedure for and unsatisfactory nature of his evidence on a Letter of Request. 19. The writs in both actions were issued on the 17th November 1975, and on the 30th July 1976 these consolidated proceedings were originally set down for trial some 8 months ahead. Almost one year after the institution of these actions, a Summons for Third Party Notices was issued by the Defendant on the 11th November 1976, and only 19 months after the commencement of these two actions did the Defendant apply by summons for Mr. Oyama's evidence on a Letter of Request. The Plaintiff complaint of an inordinate delay is founded on such segmented contrasts, and support was sought on the authorities of Ainsley Dunn & Co. Ltd. & Imported Brands, Inc. v. Stewart & Son of Dundee, Ltd.(3) and Steuart v. Gladstone(4). 20. Counsel's answer to "delay" for the Defendant and the 2nd and the 3rd Third Parties is formidable: The Defendant became aware of Mr. Oyama's present intention in June 1977, and on the 27th June 1977 a notice was immediately served with a view to seeking an order for taking Mr. Oyama's evidence abroad in the application for Third Parties Directions due to be heard on the following day. A further notice was served for like purpose under the summons for directions for the trial of these consolidated actions. Both notices were procedurally in error, but the steps so taken do reflect the promptitude with which the Defendant proceeded. The summons for directions were adjourned to the fixed date of 26th August 1977, and by the present summons filed herein on the 30th July 1977 returnable on the same fixed date the Defendant prayed for a Letter of Request. 21. The 2nd and the 3rd Third Parties offer an equally, if not more, convincing explanation: The Defendant was at liberty to serve Third Party Notices from the 11th November 1976, and leave to serve Mr. Oyama as the 3rd Third Party out of jurisdiction was granted on the 15th November 1976. Mr. Oyama entered an appearance on 17th March 1977, but in the interim the other Third Parties appeared on the 11th December 1976 and the 1st Third Party company was made subject to a winding-up order on the 8th February 1977. Thereafter, in May 1977 leave was granted to proceed against the 1st Third Party in liquidation. In the same month of May, Mr. James, solicitor for the Third Parties, visited Mr. Oyama in Japan and was briefed on his intention. In June, the Third Parties must have been aware of the Defendant's activities in seeking Mr. Oyama's evidence to be taken in Tokyo, and it would not appear to be unwise for them to conserve their resources pending the outcome of the Defendant's attempt which proved to be unsuccessful on the 27th August 1977. This appeal was scheduled to be heard on the 7th October 1977, and on the 1st October last ex abundante cautela the 2nd and 3rd Third Parties chose to make their own application returnable on the same day. This cannot be described as dormant. There is obviously no culpable delay. 22. Mr. Oyama is a witness whose evidence is the only testimony on behalf of the Defendant and the Third Parties in support of one of the material issues, and the nature of his evidence calls for the most thorough investigation. That it is highly desirable for Mr. Oyama to be jealously tested by cross-examination in open Court cannot be doubted. The Defendant's position, as highlighted by Mr. Lee, is that Mr. Oyama cannot be induced to come and is uncompellable and that whatever cogency the reasons for his refusal deserve, the Plaintiffs, in the words of Cotton L.J. in Lawson v. Vacuum Brake Co., "could not reasonably be expected to bring him here, ... and it would be for the Court or the jury at the trial to determine how far the weight of his evidence was affected by their not having seen or heard him"(5). Counsel laid great stress on an observation of Leonard J. in The Hong Kong & Shanghai Banking Corporation v. FUNG Wing-king:
23. The Defendant has invited Mr. Oyama to come with an assurance that he would not be molested under Order 44A in any of the five actions in which his real adversary is the Defendant. Mr. Oyama is no longer a director of the Defendant, and there is no evidence that the segregation of interest is artificial. Thus, it is unnecessary for the Defendant to allow itself to be drawn into a debate on the sufficiency of the reasons given for Mr. Oyama's refusal to land in Hong Kong. 24. The same may be said in favour of the 2nd Third Party. As for Mr. Oyama himself, he is a Defendant in the Third Parties proceedings but is certainly not responsible for the choice of forum; nor in fact is the Defendant as his plaintiff in the Third Party proceedings. Reasons for his unwillingness to come here should be viewed with sympathetic consideration. "Bilateral Handle Block" was suggested to be a mistranslation of "Bilateral Hemi Block", a circulatory cardiac ailment, and it is common ground that the medical evidence spells no serious risk of injury to the proposed witness. Counsel for the Plaintiffs also sought to make great play of the fact that Mr. Oyama submitted to jurisdiction by his appearance and participation in these proceedings. It is not unknown that the Court may take into consideration the convenience of a witness. See Lawson v. Vacuum Brake Co.(7) Mr. Oyama has understandably displayed no great interest in these proceedings, and his current financial upheavel in Japan and Hong Kong will not likely leave him with any significant reserve. Absence of incentive could hardly be expected to generate enough enthusiasm. He has a history of heart disease, and every precaution taken to avoid strain and stress cannot be condemned as being totally selfish or imprudent. His fear of a protracted enquiry by the Hong Kong Official Receiver is not unreal. This is a somewhat border-line case, but taking all the circumstances into consideration, Mr. Oyama's refusal is, in my view, neither unreasonable nor without cause. 25. The procedure for evidence to be taken by a Japanese Court on a Letter of Request may be summarized as follows:-
26. The object of furnishing written "enumerated questions" in advance is to define "the scope of examination" and "to familiarize Japanese Judges with subject litigation in order to permit them to determine if questions are relevant". The position of re-examination is ambiguous, and it would appear to be an unenviable task in the framing of questions for re-examination without the benefit of presumed answers to the enumerated questions for cross-examination. It is also left unexplained how the Court's discretion in restricting examination and disallowing extra cross-examination (presumably including extra re-examination) is to be exercised. We know not what is considered relevant in Japan and how the term "incidental and closely related to" is to be construed. 27. Once it is accepted that legal relevance and judicial discretion may play a prominent role in the Japanese process of taking evidence, the basic system of approach is or becomes a matter of not inconsiderable importance. Fry J. in the case of In re Boyse(8) frowned at the impracticability of taking evidence by French Courts for use in an English Court, and this Court has less than comforting information as to the habits and practice of the Japanese Courts on which this appeal and the application ultimately fall to be decided. 28. When evidence of Mr. Oyama is returned on the Letter of Request, assessment on our principles of legal relevance and limit of judicial discretion will have to be attempted - and attempted without the advantage of a seeing judge. There is no assurance that full cross-examination will be permitted or complete evidence adduced or that the evidence as returned will serve any real useful purpose at the trial of these proceedings. The Court should be reasonably satisfied that the proposed measure will not be an exercise in futility. No room should be left for speculation. I feel, as did Fry J. in Boyse Case, no want of respect for the Japanese Courts or the Japanese Judges, but it is hoped that the insurmountable difficulties in the use of two legal systems for the adjudication of an issue by one have been convincingly demonstrated. The Japanese procedure as presently desoribed appears not to be conducive to a fair test of credibility, and pre-framed questions for cross-examination must at least hinder a searching enquiry. 29. Against that background, one cannot but feel highly conscious of the lack of sufficient justification for the additional expense, delay, inconvenience, absence of legal representation by lawyers practising in our Courts, loss of opportunity for a full-fledged cross-examination, difficulties in briefing the Japanese counterparts, inexperience of our Courts in the issuance of a Letter of Request for Japan, cumbersome and elaborate procedure in its preparation and transmission, and the indifference to alternatives. Whilst it is recognised that the Defendant and 2nd and 3rd Third Parties "should have a fair chance of establishing (their) case with the aid of the evidence of (Mr. Oyama)"(9), "of course 'for the purposes of justice' does not mean in the interest of either party to the litigation, but in the interest of all the parties to the litigation".(10) 30. Counsel for the Defendant and the Third Parties implored the Court to allow the Letter of Request to issue as a matter of necessity, not of choice, in the unwelcome position in which their respective clients had been put. The Court was invited to summon all its optimism in hoping for a satisfactory return on the Letter of Request. It was explained that a statement or affidavit of Mr. Oyama, even if admitted, would carry less weight and that it remained controversial as to whether a written statement of a witness beyond the seas is admissible as of right on a Notice under the Evidence (Hearsay) Rules. The Court was informed that the possibility of taking evidence before a Special Examiner in adjacent territories such as Hawaii, Philippines, Borneo, Malaysia, Singapore etc., had yet to be explored. All that could possibly be said in favour of the applicants has been said. 31. In my judgment, for all these reasons the end hardly justifies the means. The appeal must be dismissed with costs with a Certificate for counsel, and the 2nd and 3rd Third Parties' summons is likewise refused with costs and also a Certificate for counsel.
Representation: Mr. Mills-Owens instructed by Messrs. Deacons for Plaintiff. Mr. Martin Lee instructed by Messrs. Johnson Stokes & Master for Defendant/Appellant. Mr. Andrew Li instructed by Messrs. Wilkinson & Grist for 2nd and 3rd Third Parties/ Applicants. (1) O.J. Action 1419 of 1972. (2) (1884) 27 Ch. D. 137 at p.p. 141, 142 & 143. (3) (1969) 1 L1.L. Rep. 49. (4) 7 Ch. D. 394. (5) Ibid. at 143. (6) O.J. Action 1419 of 1972 judgment whereof was delivered on 26th June 1974. (7) Ibid. at p.141 per Baggallay L.J. (8) 20 Ch. D. 760. (9) Ainsley Dun & Co. Ltd. & Imported Brands, Inc. v. Stewart & Son of Dundee, Ltd., ibid. per Willmer L.J. at p.50. (10) Berdan v. Greenwood, 20 Ch. D. 764 per Baggallay L.J. at p.765. |