Moscow Narodny Bank Ltd v. Edward Wong Wing Cheung

HCA000797/1977

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: LIU, J. in Chambers

Date of Judgment: 6th May, 1981.

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JUDGMENT

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1. In this application, I need only consider the plaintiff's claim for moneies lent allegedly repayable on demand. The assertion is that these loans were made in between January to December 1973. It would seem that the plaintiff bank made its demand for repayment by writ on the 1st April 1977.

2. By his Defence filed on the 25th October 1978, the defendant is said to have admitted US$7,000,000 as falling due. On that contended admission, the plaintiff now seeks to sign judgment pursuant to Order 27 rule 3 of the Rules of the Supreme Court.

3. It is conceded in the Defence that in January 1973 the plaintiff bank granted to the defendant facility, under which US$5,000,000 had been advanced and in July 1973 further banking facility was extended to him, under which monies lent amounted to US$2,000,000. However, no concession has been made as to the time at which and the manner in which these admitted advances were given. It was contended on behalf of the defendant that none of these US$7,000,000 advances could clearly be identified with any of the principal sums allegedly lent in between January and December 1973 and that the reference made in the Defence to these advances was not an unequivocal admission to any of the plaintiff's claim particularized in paragraph 1 of the Statement of Claim.

4. The defence to this part of the plaintiff's claim is that the advances were not repayable on demand but were orally agreed to be repayable either by profits generated in the Panamanian Building Development or in the absence of such sufficient profits to be repayable not later than 7 years from the respective dates of the advances. It is further claimed in the Defence that the defendant was entitled to capitalise the interim interests accrued.

5. The only clear admission seems to be one of advances totalling US$7,000,000. No particulars have been sought or delivered as to precisely when these advances were made and, if they were in fact made in between January and December 1973, whether they formed part of the plaintiff's claim for monies lent in this action. For the purposes of this application, it is assumed that of the plaintiff's claim for US$7,653,501.57 alleged to have been lent to the defendant, US$7,000,000 has been admitted and that the whole of these US$5,000,000 and US$2,000,000 advances was made in the month of January and in the month of July respectively. Thus, I will assume that by the 1st August 1980, both of these US$5,000,000 and US$2,000,000 advances had become repayable.

6. The plaintiff bank craves leave to sign judgment on the contended admission that US$7,000,000 of its claim has, at least since the 1st August 1980, fallen due. The plaintiff has not applied for leave to add a fresh cause of action arising since the issue of the writ, founded on the contended admission. In order to avoid any possible confusion, the plaintiff's very cause of action for this part of its claim must be constantly borne in mind. The plaintiff's claim is for monies lent repayable on demand made either prior to or by the commencement of this action. That is wholly traversed. The defence is that no part of the loans had fallen due at the date of the writ and therefore no cause of action had accrued. It was further pleaded in the Defence by way of confession and avoidance that none of the loans was repayable before the fulfilment of a condition subsequent or in any event until the expiration of 7 years from the respective date of each advance. On the contended admission of the defendant's, a cause of action for each advance made under these banking facilities would arise sometimes in 1980, latest by the 1st August 1980. Naturally, if the advances had been made just before the filing of the Defence on the 25th October, 1978, the 7-year period would not have expired until October 1985. Even on the effect of an admission as contended by the plaintiff, the defendant had no obligation to repay any of the advances before expiration of the alleged 7-year period. It follows that the defendant had incurred no legal liability as at the date of the writ. Now that the 7-year period has elapsed on the assumed facts, nevertheless the defendant remains recalcitrant on the plaintiff's claim for repayment. No admission has been made by the defendant to the plaintiff's alleged due date for repayment on demand.

7. A cause of action for the recovery of a debt allegedly accrued at the time of or before the commencement of an action cannot be said to have been admitted to by an averment that the obligation to repay the same or part of the same debt only arose some years thereafter. It is no admission to the plaintiff's claim in this case by conceding to a subsequent obligation, the breach of which would give rise to a future cause of action. In my view, there has been no admission, even on the contended true construction of the Defence, to the plaintiff's cause of action.

8. Furthermore, the plaintiff has not seen fit to adopt the factual basis relied upon by the defendant, if only for a claim in the alternative, and no leave to amend by adding a fresh cause of action has been sought. Even if the plaintiff were to recommence proceedings for the recovery of its loans to-day after the expiration of the alleged 7-year period, without setting up an alternative claim on the allegations of the defendant the plaintiff's cause of action would still be confined to the one accrued on demand prior to or in April, 1977. The only essential fact common to the case of the plaintiff and that of the defendant as understood by the plaintiff is that to the extent of US$7,000,000 the advances have become and are now being repayable, i.e. the sum is due but for different reasons and at different times. The identical consequence would not have the effect of merging the two distinct causes of action. Counsel for the defendant endeavoured to theorize as to why repayment was still being resisted. At this stage, forensic eloquence does not sound too persuasive, but the defendant has decidedly not abandoned his defence that the loans were not due as at the date of the writ.

9. Our present Order 37 rule 6 permits damages in respect of any continuing cause of action to be assessed down to the time of the assessment. The plaintiff's claim is not for an assessment of damages. It is a claim for monies lent repayable on demand on a date certain. Nor is the plaintiff's claim a continuing cause of action akin to an act in trespass or of nuisance or a continuing breach of a covenant. Order 37 rule 4 and its underlining principles cannot therefore aid the plaintiff.

10. Our present Order 18 rule 9 enables the plaintiff to plead "in any pleading" any matter which has arisen at any time whether before or since the issue of the writ. The effect of an amendment introducing a subsequent cause of action after the issue of the writ discussed at p.344 in volume 1 of the 1979 Annual Practice (marginal reference 20/5-8/2) must be read with the new cases given in its Fifth Cumulative Supplement. But the plaintiff is not praying for any amendment. Even if the plaintiff bank were so minded to make an application to amend by adding, in the alternative, a fresh cause of action arising at the expiration of the alleged 7-year period, it would still be precluded from introducing any new cause of action which has arisen since the issue of the writ. See p.281, 1979 White Book (marginal reference 18/9/1).

11. It has long been the standing practice that save for damages and consequences flowing from a single cause of action (eg. damages in a running down case or mesne profits in an action in ejectment) and save for damages in a continuing cause of action as envisaged by Order 37 rule 6, the plaintiff cannot so amend as to include a cause of action which did not exist at the commencement of the action. Nothing in the Rules of the Supreme Court seems to allow the incorporation of such a subsequent cause of action. The settled practice has been to exclude it. See Eshelby v. Federated European Bank Ltd.⁽¹⁾. In fact, the point was so well entrenched that when the case in Eshelby came before the Court of Appeal, all argument on the attempted inclusion of a fresh cause of action arising after the date of the writ was abandoned and Scrutton L.J. described it as a "universal practice" at p.429 of the same volume.

12. Unusual circumstances saw many a departure from the general rule. In Coutts & Co. v. Duntroon Investment Corporation Limited⁽²⁾, a further claim materialised under a registered charge after the issue of the originating summons was included by amendment. At p.p. 118 and 119, Harman, J. acknowledged the general rule that no amendment could be made to include a right which was non-existent at the commencement of the proceedings, but ignoring the technical defect to which no objection was taken, the learned judge treated the claimant as if he had issued a fresh summons at the time of the amendment.

13. The Fairport⁽³⁾ was an Admiralty action claiming, inter alia, wages accrued after the date of the writ. Cairns, J. declined to follow the general rule for a suit in Admiralty for the reasons given at p.1035 B/C:

"Is it, then, necessary for the Plaintiff to issue a further writ and then come back to the Court to claim the wages now in question? I am reluctant to reach a conclusion which would cause additional delay and expense and will benefit nobody. The rule that claims in an action can be made only in respect of causes of action which have accrued at the commencement of the action is, I think, a rule of practice rather than a rule of law. It is subject to exception. Mesne profits and interests are two that occurred to me. In none of the Admiralty cases to which I have referred, it is suggested that this rule is a ground for disallowing a claim for wages and, indeed, it seems to me that their reasoning in The Carolina and in The James W. Elwell is inconsistent with it. The strongest reason for considering that the rule is not applicable in connexion with seamen's actions in rem against a ship is that it is well established that claims for viaticum can be made covering expenses incurred after the date of the writ. The Raffaelluccia and The Bridgwater are two old authorities to this effect, and Hewson, J's, judgment in this very case included the expenses of the plaintiffs' repatriation which obviously had not been incurred at the date of the writ."

14. It is evident that Cairns J. was prepared to follow, for practicality and good sense, some of the precedents in the Admiralty Division for parting company with the generally accepted rule in the case of seamen's wages accrued after the issue of the writ.

15. From an action in Admiralty, I turn to arbitration in the case of Toepfer v. Cremer⁽⁴⁾, where an arbitrator was appointed one day before the accrual of right by default in an arbitration. It was unanimously held by all the three appeal judges, confirming the decision of the Commercial Court, that the commencement of the proceedings was not premature by reason of the fact that the arbitration did not "start" until the arbitrator's acceptance of his appointment which came after the alleged default. It was further observed by two of the judges in the Court of Appeal that although it was generally true that a cause of action should be complete before proceedings were begun, it was a rule of practice not of law. At p.125, Lord Denning, M.R., led the assault on this time-honoured practice in litigation:

16. The learned Master of the Rolls advocated, though obiter, a more ready departure from the general rule of practice whenever justice may best be served.

17. At p.129 Scarman, L.J. had this to say:

"Mr. Lloyd's second point was that by appointing an arbitrator on July 9 the buyers issued their proceedings prematurely, i.e. before they had a cause of action. I agree with the Judge in thinking the point not open to them on the stated case. But, if it be open, it is, in my judgment, a bad point. While it is generally true that a cause of action should be complete before proceedings are begun, it is a rule of practice, not of law: see the judgment of Mr. Justice Cairns in The Fairport, [1967] p.167. I would expect to find exceptions to the practice more readily permitted in arbitration where more often than not there is a time limit of a few months only for beginning proceedings, than in ordinary litigation begun by writ, where years may elapse before the writ has to be issued. In the crisis of this case it did not matter when arbitration was begun, so long as it was begun promptly: but Mr. Lloyd's complaint is not lack of promptness, but of the reverse."

18. Whilst Harman, J. in the case of Coutts & Co. explicitly bowed to this general rule of practice in litigation but treated as done what clearly ought to have been done, rare exceptions are found only in Admiralty and arbitration proceedings, the latter of which was uncalled for. Moreover, Eshelby and the pertinent statement in the 1979 white Book both seem to have stood the test of time. All rules of practice are primarily designed to ensure fair play, eliminate prejudices and improve efficiency. This rule of practice in litigation is no exception. Its unchecked relaxation would likely cause an inundation of the Registry with premature writs, encourage molestation of most contingent obligees, invite unwarranted harassing or protective litigation and create unnecessary nuisance or anxiety. There is every conceivable reason for this deep-rooted rule of practice to be more jealously guarded.

19. In this application, armed with these generous dicta the plaintiff implores the Court to seize jurisdiction of a fresh cause of action said to have accrued after the lapse of the alleged 7 years. It must be noted that even if the well-established general rule of practice in litigation may readily be taken leave of whenever justice of the case so requires, Toepfer v. Cremer was proceeded on, though prematurely, one cause of action. Only the effect of a premature commencement of the arbitration was at issue. Whether the arbitrator was properly seized of the dispute, no other dispute existed. The objection was truly "very technical" and would cause delay and expense with no resultant contribution to the determination of the real controversy. What must not be overlooked is the fact that in all these cases, Coutts, The Fairport and Toepfer, the fresh cause of action accrued after commencement of the proceedings had been included either prematurely or by amendment in the suit.

20. But the instant case involves the sequence of two separate causes of action - one arose from a breach of an obligation to repay before or at the time of the issue of the writ and the other from the contended admission of a due date for substantially the same bank loans at the expiration of the alleged 7-year period. The subsequent cause of action on the contended admission has never been contemplated nor included. What this Court is presently urged to act on is really a probable cause of action which the plaintiff has neither felt confident nor justified to embrace even in the alternative. Even if the dicta of the Master of the Rolls and Scarman L.J. should be acclaimed by a more liberal reception, it could not assist the plaintiff unless it decides to add a new cause of action by amendment.

21. In my judgment, none of the allegations in the defence as understood by the plaintiff can be taken as an admission to the plaintiff's existing cause of action. The plaintiff has not taken any steps to introduce a new cause of action on the defence raised, and it is quite unnecessary to consider the general rule of practice for adding a claim which did not exist at the commencement of this action. Furthermore, the plaintiff's action can, without difficulty, be brought to a conclusion before the expiration of the limitation period for any liability to pay on the facts presently raised by the defendant. The obligation on the facts so alleged arose earliest in 1980 and would not be statute-barred at least until 1986. There seems to be also no hindrance to the plaintiff instituting fresh proceedings today on such alleged facts in the alternative. The defendant violently resists the application. He declines to pay, even at the expiration of the alleged 7-year period, for some unspecified cause yet to be disclosed. Unlike the departure in the rare instances in The Fairport and Toepfer, we seem to be more involved here than mere delay and sheer waste of costs. In the circumstances, the power to dispense with the application of the general rule of practice should not, in any case, be invoked in favour of the plaintiff. For all these reasons, the application of the plaintiff be dismissed with costs. I certify these proceedings fit for two counsel.

Representation:

Mr. Martin Lee, Q.C. with Mr. M. Ozorio instructed by Slaughter & May for Plaintiff.

Mr. Mills-owens, Q.C. & Mr. Robert Tang instructed by K.K. & Winston Chu for Defendant.

(1) [1932] 1 KB 254.

(2) [1958] 1 WLR 116.

(3) [1966] 2 AER 1026.

(4) [1975] 2 Lloyd's Rep. 118.

Action No.: 797 of 1977

Date of Hearing: 24th April 1981

Date when judgment reserved: 24th April 1981

Date when Judgment was delivered: 6th May 1981

ORDER: Application dismissed with costs. Certified fit for 2 counsel.

Representation:

Mr. Martin Lee, Q.C. with Mr. M. Ozorio instructed by Slaughter & May for Plaintiff.

Mr. Mills-owens, Q.C. & Mr. Robert Tang instructed by K.K. & Winston Chu for Defendant.