James S. Lee v. Citibank, N.A.
|
CACV000169/1980 Practice and procedure - striking out or staying action - judgment on same cause of action obtained in foreign court after action brought in Hong Kong - no duty on defendant to call on plaintiff to elect whether to proceed with a local or a foreign lis pendens - previous application to stay withdrawn by consent and leave given to amend statement of claim - such withdrawal not a bar to further application in circumstances of the case - foreign judgment constituted res judicata although not in existence when action brought - action stayed. Dates of hearing: 20th and 21st May, 1981 Date of handing down judgment: 2nd June, 1981 P. Scott, Q.C. & D. Chang, Q.C. (Johnson, Stokes & Master) for Appellant. M. Lee, Q.C. & A. Li (Wilkinson & Grist) for Respondent.
----------------- Coram: Sir Alan Huggins, V.-P., Leonard & Cons, JJ.A. Dates of hearing: 20th and May, 1981 Date of handing down judgment: 2nd June, 1981 P.Scott, Q.C. & D.Chang, Q.C. (Johnson, Stokes & Master) for Appellant. M.Lee, Q.C. & A. Li (Wilkinson & Grist) for Respondent. Date of Judgment: 2nd June, 1981. ----------------- JUDGMENT ----------------- Sir Alan Huggins, V.-P. : 1. The Appellant appealed to this Court by leave of Mr. Commissioner Hooper from an order made in Chambers dismissing an application under Order 18 rule 19 and under the inherent jurisdiction of the Court to strike out or to stay the action. The action was originally based solely upon a "continuing guaranty" admittedly executed by the Defendant, whereby he guaranteed the payment by a company called James S. Lee & Company (Guam) Limited of his liability under a "loan and cross collateralization agreement" up to a stated amount. The Plaintiff bank alleges that the Company defaulted and calls upon the Defendant to make good its indebtedness. By a subsequent amendment it is alleged in the alternative that in an action brought in the Superior Court of Guam judgment was entered in favour of the Bank against the Defendant upon its counterclaim in the sum now claimed and that the Defendant has failed to satisfy that judgment. The Defendant's defence in the Guam proceedings was that the Company was not in default, so that his liability never arose. After the present action in Hong Kong was commenced, the foreign judgment was reversed on appeal and a further appeal against that reversal is now pending. 2. The learned Commissioner dismissed the application on the ground that it was not a plain and obvious case of an abuse of the process of the Court. Before us it has been contended that the existing judgment in Guam in favour of the Defendant, although given after action brought in Hong Kong, constituted res judicata and makes it a clear abuse that the Plaintiff should continue its Hong Kong action. However, before I deal with that contention I must refer to a further submission on behalf of the Respondent bank to the effect that the Defendant is estopped from raising res judicata. 3. There was a previous application by the Defendant to strike out this action. The summons was dated 11th February 1980 and sought an order under the inherent jurisdiction on the ground that there was an appeal pending against the judgment of the Superior Court of Guam and another action pending in Japan in respect of the same cause of action. That application was withdrawn by consent and it was further ordered by consent that the Bank have leave to amend its Statement of Claim. Mr. Lee, on behalf of the Bank, has sought to persuade us that the consent order permitting the withdrawal of the first application to stay this action was in effect a representation by the Defendant that the dispute was to be resolved in the Hong Kong courts regardless of the decision which was awaited from the appellate court in Guam, since the same order made provision for the continued conduct of the action: consequently there was a waiver of any estoppel which might arise if the appeal went in favour of the Defendant. With respect I do not think that is a proper inference. It was pursuant to the consent order that the Statement of Claim was amended to allege the judgment of the Superior Court of Guam and I think there can be no doubt but that the consent order was made in contemplation of just such an amendment. The parties knew that an appeal against the judgment of the Superior Court in Guam had been heard and the judgment therein was awaited. If the appellate court upheld the decision of the Superior Court, the Defendant would have had difficulty in contesting the Hong Kong action, but if the Guam judgment were reversed (as it was) it was apparent that the Bank's success in the Hong Kong action was by no means a foregone conclusion and a full trial would be necessary. The present action to stay was begun very shortly after judgment was given in the Guam appeal and I have little doubt but that both parties fully appreciated that a second application would be made if the circumstances warranted it. Certainly the Defendant did nothing which should estop him from seeking an order to stay the Hong Kong action. 4. The view taken by the learned Judge on the main point argued before us was that it was not plain and obvious that a foreign judgment in the Defendant's favour (in the present case that of the appellate court in Guam) given after action brought in Hong Kong made it an abuse of the process to continue the Hong Kong action. The contention on behalf of the Defendant is that that was the wrong approach and that it was incumbent on the Commissioner to decide whether or not the foreign judgment did, as a matter of law, render the continuance of the action an abuse of the process. If it did, then this was a plain and obvious case for staying the action. Even if that be right, said Mr. Lee, the point of law which arose was not a proper one to be decided upon an application to stay but should have been raised as a preliminary point under Order 33 of the Rules of the Supreme Court : the summary procedure under which an action can be stayed is not appropriate for the determination of difficult points of law. I think the contention on behalf of the Defendant is right and that the reply to it has no substance. A "reasonable cause of action or defence" may be disclosed even where full argument may lead to the conclusion that it is bad : unless it is plainly and obviously unsustainable the pleading should not be struck out summarily. Where the question is whether there has been an abuse, the Court should equally not grant a stay unless satisfied that an abuse is clearly established, but the Court cannot avoid deciding whether the conduct proved does constitute an abuse of the process. There may be cases where the evidence leaves it uncertain whether there has been an abuse and there the Court will dismiss the application, but where the facts are clear and the sole question is whether they mount to an abuse of the process I can see no advantage in using the Order 33 procedure rather than that under Order 18 rule 19. 5. The learned Judge based his decision upon a passage in 8 Halsbury (4th Edition) 485 (737) which reads :
Mr. Scott submits that the passage is wrong and he relies upon a passage in Volume 16 of the same edition at p.1022(1519) and to the cases there cited:
It has not been suggested before us that different considerations apply to a foreign judgment from those which apply to a local judgment, and, provided that the foreign judgment is final and conclusive between the parties and has been decided upon the merits of the case, I see no reason why they should. 6. The authorities cited for the former statement of the law start with The Delta (1876) l P.D. 393. The facts were that cross-claims for damages resulting from a collision were instituted in a foreign court by the owners of the two vessels involved. While those claims were still pending the owners of the other vessel, who had not entered any appearance in the foreign action against them and had failed to take necessary steps in their own foreign action, brought an action in the English courts. The owners of the Delta obtained judgment in both the foreign actions by reason of the opposite party's default, but the judgments remained unexecuted. The English action was in respect of the same damage and, when the foreign judgments were entered, the owners of the Delta pleaded those judgments in bar of the English action. The plea failed and judgment was entered for the other party upon the merits. Sir Robert Phillimore held against the plea on two grounds, first that at the time when the English action was brought there was no res judicata but were merely lites pendentes, and secondly that even when the foreign judgments were entered they were not entered upon the merits. Mr. Scott submits that the second ground amply justified the decision but that the first did not, even though Sir Robert Phillimore said that it was upon the first that his judgment was principally founded: p.404. The argument had been that res judicata was a bar to the institution of a second action and it must, therefore, have existed at the commencement of the second action. That view found favour with Pearson, J. in Houstoun v Marguis of Sligo (1885) 29 Ch. D. 448, 454, although the Judge was unwilling to decide the case entirely upon that ground
7. In Bell v Holmes 1956 I W.L.R. 1359, McNair, J. referred to those two cases. As to the first he said at p.1364:
As to the second he said at p.1365:
He went on to mention that Re Defries, Norton v Levy (1883) 48 L.T. 703 appeared to run counter to the two earlier decisions, although he had not had an opportunity of fully examining the report. 8. In Re Defries, where The Delta was not cited, Pollock, 8. said at p.704:
That view was approved in Morrison Rose & Partners v Hillman (1961) 2 Q.B. 266 and I cite from the judgment of Holroyd Pearce, L.J. at p.275:
At p.277 the learned Lord Justice concluded:
9. The only other authority relied upon by Mr. Scott was In the Estate of Langton, Deceased 1964 p. 163, where the plaintiff had sued in his personal capacity for revocation of probate in common form of his aunt's will dated 1949 and to set up a 1906 will. The action and an appeal were dismissed. Before judgment in the first action the plaintiff instituted a second action, as administrator of the estate of his mother, in which he sought precisely the same relief as in the first action. That action was dismissed as frivolous and vexatious. By a third action the plaintiff sought to set aside the judgment in the first action on the ground of fraud and by a fourth action to set aside an order in the third action. He then applied to issue a fifth writ claiming in his personal capacity and as administrator of his mother's estate substantially the same relief as he had claimed in the first two actions. The writ was refused and the plaintiff appealed both against that refusal and against the dismissal of the second action. Willmer, L.J. said at p.168:
10. Against this strong trend of authority Mr. Lee argues that the old rule, as stated in The Delta and Houstoun v Marquis of Sligo, was logical and that where all that exists at the time when the second writ is issued is alia pendens the proper course is to put the plaintiff to his election as to which action he will pursue. That course may well be open to a defendant, but I think it may now be more convenient, if judgment in the first action is expected shortly, for him not to call upon the plaintiff to elect but rather to await the judgment and, if the action is dismissed, then to apply for a stay. I think that is consistent with what Holroyd Pearce, L.J. said in Morrison Rose & Partners v Hillman. 11. Being of the opinion that the appeal succeeded on the ground which I had indicated, we did not find it necessary to hear counsel on the question whether the Judge had properly exercised the discretion which he held was vested in him. We allowed the appeal and now give our reasons for so doing. Leonard, J.A.: 12. In this case the appellant applied for an order under the inherent jurisdiction of the court or alternatively under 0.18 r.19(1)(b) or (d) that all further proceedings in the action be stayed. 13. It was common case that the respondents are bankers carrying on business in amongst other places Guam, that James S. Lee & Co. (Guam) Ltd. (Leeco) and the appellant were customers, that Leeco were indebted in a substantial sum to be repaid by instalments the whole to become due in default of payment of any instalment or interest. It was alleged by the plaintiff in their statement of claim that the appellant had guaranteed payment to them of Leeco's indebtedness to an amount not exceeding US$2,250,000 and that Leeco had on 31st, March 1976 defaulted. The validity of the guarantee was not admitted but it is also common case that in proceedings in Guam taken by the appellant against the respondent the respondent had counterclaimed against both Leeco and the appellant for monies allegedly payable by both arising out of Leeco's default, had obtained judgment on 14th November 1978 on the counterclaim, (filed in Guam on 30th April 1976) and an order for foreclosure on certain mortgaged properties and that a "deficiency judgment" for US$1,850,920 was obtained on 13th December 1973. When the respondents commenced this action in February 1979 they sought the recovery of this sum as money due to them under the alleged guarantee. The appellant and Leeco appealed from the judgments entered against them in Guam and on the 11th February 1980 applied to the Registrar here for an order staying all further proceedings in this action on the ground that the appeal was pending in Guam and that an action based on the same alleged indebtedness was pending in Tokyo and that this action was an abuse of the process. On the 10th April 1980 this application was, by consent, withdrawn and the respondents were given leave to amend their statement of claim. This they did so as to recite the matters to which I have referred and to claim the sum of US$185,920 under the alleged guarantee and also (in paragraph 13) under the judgments in Guam which I have mentioned. 14. On the 18th August 1980 the appellant succeeded in his appeal in Guam and the Appellate Court there reversed the judgment on which the respondent here was suing found that certain sums had been misapplied by the respondent in breach of its fiduciary duties as banker and held that the appellant was not liable to pay the amount of the original judgment under the guarantee. It remanded an issue of rescission of the appellant's guarantee for trial. 15. On this basis the appellant sought an order for a stay in this action or that it be struck out. It is common ground that the respondents have further appealed in Guam but that this further appeal is unlikely to be heard for two years. In the court below it does not appear that the application to strike out the statement of claim was seriously resisted insofar as para. 13 (that in which the original Guam judgment was sued on) of the amended statement of claim was concerned and, the judgment in Guam having gone, that paragraph was struck out. 16. It was conceded that for the purposes of this case the appellate judgment in Guam is final and was pronounced on the merits. It was clearly in respect of the same cause of action and would certainly have been a bar to the proceedings here if given before they commenced. The primary question for decision by the trial judge was therefore whether there was a point of law requiring serious discussion as to whether the appellate judgment could be relied on here since it was not given until after the proceedings here had been commenced. The respondents when contending in the court below that there was such a point of law, relied on a passage in Halsbury 4th Ed. Vol. 8 para 737 reading:
Mr. Scott conceded that to succeed he had to show that it was clear that Halsbury was wrong. 17. A paragraph to the same effect appeared in the 3rd Edition of Halsbury but in the 1973 supplement the reader was directed to see Bell v. Holmes (1) a reference that was unfortunately not followed up when the 4th Edition was compiled. Again in the 1973 supplement dealing with Conflict of Laws at page 234 it is asserted that a foreign judgment can give rise to estoppel by res judicata although not pronounced until after the issue of proceedings in which it is pleaded and Bell v. Holmes and Morrison Rose and Partners v. Hillman(2) are cited as authorities for the proposition. In Vol. 16 of the 4th Edition of Halsbury para. 1519 it is bluntly stated that
The same two authorities are quoted as is Re Defries, Norton v. Levy(3). Such difficulty as there may be arises from the Delta(4) as to which case Holroyd Pearce, L.J. observed in Morrison Rose and Partners v. Hillman at page 273
Willmer, L.J. agreed and Pearson, L.J. in also agreeing observed at page 277-8:
18. This observation is sufficient to dispose of Mr. Martin Lee's contention that the proper course for the appellant to follow was to apply for the trial of a preliminary issue. 19. Mr. Martin Lee, Q.C. sought to contend before us that by being a party to the consent order of the 10th April 1980 the appellant was estopped from relying on the estoppel by res judicata so that the matter was at large. This submission was not acceptable
I would allow this appeal with costs here and below and order that this action be stayed. Cons, J.A.: 20. I have had the advantage of reading the other judgments handed down and add my comments only because we disagree with the court below. 21. In my view, the learned Commissioner was in error when he acceded to the submission that it was arguable that a defendant in Hong Kong cannot raise the plea of res judicata, based on the decision of a foreign court, when the proceedings against him here have already been commenced by the time that the foreign judgment is given. That proposition is untenable in the face of the decisions in Bell v. Holmes and Morrison Rose v. Hillman, authorities, which it is fair to add, were not drawn to the attention of the Commissioner. It was conceded that if the plaintiff bank cannot rely upon that argument it is bound to fail in this action. It follows then automatically that it ought not to be allowed to proceed further. 22. For the argument that the Commissioner ought to have declined jurisdiction and set down the point for trial as a preliminary issue the plaintiff relied upon the note to the Supreme Court Practice 18/19/3, and in particular the sentence:
23. Reference to the case itself shows that this was not intended to be an exclusive course. It was to be taken in "cases requiring argument and careful consideration". The summary procedure was "appropriate to cases which are plain and obvious". 24. In my view, had the attention of the learned Commissioner been drawn to the cases mentioned earlier, he would without hesitation, have classed this as such a case. 25. It may also be observed that in the only case mentioned in that note which deals with the question of res judicata, the defendant adopted precisely the same course as did the defendant in the present case and the Court of Appeal made no criticism: (Lea v. Thursby (1)) 26. As to estoppel, I am not prepared to read the cases as laying down the hard and fast rule that seems to be suggested, that a defendant must cause the plaintiff to elect in which jurisdiction he will pursue his claim at the earliest possible moment, or be thereafter precluded from relying on his foreign judgment. Nor am I driven to the conclusion that the defendant has waived his estoppel -to use the words of Pollock B. in the Defries case - by simply withdrawing his first application in particular circumstances of which we know nothing and as to which we can only guess. 2nd June, 1981. Representation: P. Scott, Q.C. & D. Chang, Q.C. (Johnson, Stokes & Master) for Appellant. M. Lee, Q.C. & A. Li (Wilkinson & Grist) for Respondent. (1) (1956) 1 W.L.R. 1359. (2) (1961) 2 Q.B. 266. (3) (1883) L.T. 703. (4) 1 P.D. 303. (1) [1904] 90 L.T. 26. |