SANYO ELECTRIC TRADING CO. LTD. v. LEUNG KWOK HING

HEADNOTE

Observations on Practice Direction of 19th October 1989 - whether repeated applications for a stay of execution may be made - no consideration of the merits of earlier application for a stay of execution - R.S.C. Ord. 47 rr.1(1) and 1(5) - balancing the interests of judgment creditor and debtor.

1991 No. A20

IN THE SUPREME COURT OF HONG KONG HIGH COURT

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Date of Handing Down of Judgment: 15 October 1992

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J U D G M E N T

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1. This is an appeal by the Defendant from orders made by Master Yam on 24th March 1992 and 17th June 1992. I give leave for this judgment, though handed down in chambers, to be reported so that (a) some observations which I wish to make about the Practice Direction issued by the Chief Justice on 19th October 1989 and (b) my views on other issues raised by this appeal can be brought to the attention of the legal profession.

THE HISTORY OF THE PROCEEDINGS

2. By its Statement of Claim, the Plaintiff claimed US$1,000,000 from the Defendant under a guarantee which she is alleged to have executed in favour of the Plaintiff for the debts of a third party. The Plaintiff sought summary judgment under Ord. 14. Master Cannon gave the Defendant conditional leave to defend the action The conditions which the Defendant had to satisfy before she could defend the action were set out in Master Cannon's order of 13th September 1991, though that order was subsequently varied at the Defendant's request on no less than three occasions. The order was finally varied on 18th December 1991. By that date, the Defendant had paid US$400,000 into court, and the conditions which the Defendant had then to satisfy to avoid the Plaintiff obtaining judgment against her were either (a) to pay the sum of US$600,000 into court, or (b) to provide the Plaintiff with a continuing bank guarantee, i.e. one which did not contain an expiry date, for the sum of US$600,000 in the form which had by then been agreed between the parties, by 4 p.m. on 17th January 1992. In order to have her time for complying with either of those conditions extended to that date, the Defendant had persuaded Master Cannon to release her from an undertaking which she had given on 2nd December 1991 that she would not seek a further extension of time for satisfying the conditions previously imposed.

3. The Defendant failed to comply with the conditions by 4 p.m. on 17th January 1992. However, she was given a final chance by Master Cannon to come up with part of the judgment debt, because on 17th January 1992 Master Cannon ordered that provided she paid into court the sum of US$300,000 by 4 p.m. on 20th January 1992, the time for complying with the conditions was extended until after thehearing of an appeal fixed for 24th January 1992 from Master Cannon's order of 18th December 1991. The Defendant did not pay US$300,000 into court by 20th January 1992. Not surprisingly, therefore, on 21st January 1992, judgment was entered against her in favour of the Plaintiff for US$1,000,000 plus interest and costs.

4. The US$400,000 paid into court by the Defendant was paid out to the Plaintiff's solicitors on 24th February 1992, together with the interest which had accrued on it, but the balance of the judgment debt, together with interest, remains unsatisfied to this day.

5. By a summons dated 25th January 1992, the Defendant sought a stay of execution on the judgment under Ord.47 r.1 on the ground that the Defendant was unable to pay the balance of the judgment debt at one time. That summons came before Master Yam on 30th January 1992. It was adjourned to a date to be fixed, but in the meantime there was to be an interim stay of execution on the balance of the judgment debt until the summons could be heard, and the Defendant was ordered to file evidence in support of the summons, as required by Ord.47 r.1(3) by 13th February 1992. The Defendant failed to comply with that part of Master Yam's order.

6. The adjourned hearing of the summons took place on 24th March 1992. The Defendant's counsel applied to Master Yam for leave to file out of time an Affidavit sworn on the Defendant on the same day. Leave was refused. In part because there was no evidence in support of the application for a stay, the summons was disimissed without a consideration of the merits. It is this order which is the first of the two orders made by Master Yam from which the Defendant now appeals.

7. The dismissal of the Defendant's summons for a stay prompted the Defendant to issue a further summons dated 8th April 1992. By this summons, she again sought a stay of execution on the judgment on the ground that she was unable to pay the balance of the judgment debt at one time. That summons was heard by Master Yam on 17th June 1992. He dismissed that summons without a consideration of the merits because he took the view either that he had no power, or that it would be an abuse of process for him, to determine a question which could have been determined on the hearing of the earlier summons. It is that order of Master Yam which is the second of the two orders from which the Defendant now appeals.

8. To complete the relevant history, on 29th June 1992, the Defendant issued a summons for an interim stay of execution on the judgment pending the hearing of these appeals. On 15th July 1992, Chan J. granted the Defendant an interim stay on condition that she paid to the Plaintiff HK$800,000 by noon on 20th July 1992 and HK$200,000 per month thereafter. In the event, the condition was not complied with, and the Plaintiff has been free since 20th July 1992 to execute the judgment.

THE PROCEDURAL HURDLES FACING THE DEFENDANT

9. On these appeals, the Defendant seeks what she was denied by Master Yam on both 24th March 1992 and 17th June 1992, namely a determination of her application for a stay of execution on its merits. Each appeal has its own procedural problems, however, and I shall deal with each in turn.

(i) The order of 17th June 1992

10. The summons dated 25th January 1992 raised the question of whether there should be a stay of execution. Master Yam decided that no stay of execution should be granted. The summons dated 8th April 1992 attempted to re-litigate that very question. That is not permissible. The principle is succinctly stated in Halsbury's Laws of England, Vol. 26, 4th ed., para. 556:

"As a general rule, except by way of appeal, no court, judge or master has power to re-hear, review, alter or vary any judgment or order after it has been entered either in an application in the original action or matter or in a fresh action brought to review the judgment or order. The object of the rule is to bring litigation to finality."

Indeed, it is axiomatic that unless there is an express provision to the contrary, and save in certain defined circumstances (such as mistake or misrepresentation, which do not apply to this case), the remedy for challenging an adverse order is by way of appeal to a court of higher jurisdiction rather than by the making of a new application to the same court: see, for example, Re St. Nazaire Co. (1879) 12 Ch. D. 88 and Preston Banking Co. v. William Allsup & Sons [1895] 1 Ch. 141.

11. Mr. Rogers Q.C. for the Defendant, while accepting the general application of this principle, contends that it applies only where the previous order had been made after a consideration of the merits. I see no warrant for limiting the application of the principle in that way. In Yat Tung Investment Co. Ltd. v. Dao Heng Bank Ltd. [1975] AC 581, Lord Kilbrandon said at p.590A:

"...it becomes an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings" (my emphasis).

This applies to issues which were able to be litigated in earlier interlocutory proceedings: Chan Pak Wai v. Thomas Young (CA 18 of 1982). Moreover, even if the principle should be so limited, I cannot believe that the principle ceases to apply when the reason why the previous order was made without a consideration of the merits was the failure of the party seeking the re-hearing to comply with orders relating to the time for filing evidence. If the principle ceased to apply in situations of that kind, it would always be open to the unscrupulous litigant to abort one hearing (admittedly at his own risk as to costs) in the knowledge that he could have a second bite of the cherry when his evidential tackle was in order.

12. I do not overlook the fact that the summons dated 8th April 1992 differed from the summons dated 25th January 1992 in two respects: it purported to be issued pursuant to Ord.45 r.11 as well as Ord.47 r.1, and the stay which the Defendant sought was expressed to be conditional on her paying the judgment debt and costs by instalments of HK$200,000 a month. However, those instalments were not a new offer: that offer was contained in para. 13 of her Affidavit of 24th March 1992 which Master Yam read de bene esse, even though he refused her leave to file it out of time. Moreover, Ord.45 r.11 added nothing to the summons. The summons relied on precisely the same ground as that relied on in the summons dated 25th January 1992, namely the Defendant's inability to pay the judgment debt at one time, and there was nothing in her Affidavit of 8th April 1992 which related to that issue but which had occurred since 24th March 1992.

13. Finally, Mr. Rogers relied on two provisions in Ord. 47:

(a) Ord.47 r.1(1) enables the judgment debtor to apply for a stay of execution "at the time of the judgment or order, or at any time thereafter". However, that does not, in my view, entitle a judgment debtor to make repeated applications for a stay: it merely permits the judgment debtor to apply for a stay either when the order was made or at any time afterwards.

(b) Ord.47 r.1(5) provides for the variation or revocation of an order staying execution by a subsequent order. Mr. Rogers argued that this provision showed that an application for a stay of execution was treated exceptionally by the Rules of the Supreme Court: the provision ran counter to the principle that an order, once made, could not be varied except on appeal. I do not see how the Defendant can derive any assistance from this provision. It operates only when a stay has been granted, not when (as here) a stay has been refused. It caters for the situation when something has happened since the grant of a stay to justify its variation or revocation.

14. For these reasons, therefore, I do not think that the Defendant can use her appeal from the order of 17th June 1992 as a vehicle for arguing the merits of the application for a stay. Accordingly, her appeal from this order is dismissed.

(ii) The order of 24th March 1992

15. The Defendant's Notice of Appeal from the order of 24th March 1992 was not filed until 22nd June 1992, almost three months out of time. Accordingly, she needs an extension of time to file her Notice of Appeal before she can use her appeal from this order as a vehicle for arguing the merits of the application for a stay. The court's discretion to extend her time is unfettered, though in Chiu Sin Chung v. Yu Yan Yan Angela & anor. (HCA A4089 of 1991), I attempted to identify the principles which could be extracted from the various cases.

16. There is no evidence before me as to the reasons for the time limit not having been observed and for the delay in then applying for an extension. However, Mr. Rogers has told me, on express instructions from the Defendant's solicitors, that they thought that since the summons of 25th January 1992 had not been considered on its merits, the Defendant could make a further application for a stay. That application was made promptly by the summons dated 8th April 1992. However, when Master Yam ruled that the issue of that summons was an abuse of process, the Defendant's solicitors knew that if Master Yam's view prevailed on appeal, the correct course would have been to lodge an appeal against his order of 24th March 1992. They did that within five days of his dismissal of the second summons.

17. Mr. Yu for the Plaintiff did not challenge the accuracy of Mr. Rogers' instructions, but maintained that I should not take the explanation into account because it had not been verified on Affidavit or Affirmation. That criticism is far too refined for me to go along with it. In the normal course of events, an explanation for delay should be verified, but where delay is due to decisions taken by a party's solicitors, it is permissible for counsel to relate to the court his express instructions. Of course, if the other party is taken by surprise, or if the facts are disputed, so that there has to be an adjournment for the filing of further evidence or for the taking of further instructions, the party responsible for causing the adjournment is likely to be penalized in costs. For that reason, it is always better for the explanation for the delay to be verified well before the hearing. In this case, however since the accuracy of Mr. Rogers' instructions was not challenged, an adjournment was unnecessary, and I was prepared to take his instructions into account.

18. I do not think that the Plaintiff suffers any prejudice if I extend the Defendant's time for appealing. It is true that if her appeal had been lodged in time this appeal could have been heard that much earlier, and the Plaintiff, if the appeal had been dismissed, would then have been able to execute the judgment. However, the Plaintiff has been able to execute the judgment ever since 24th March 1992 apart from the five days following Chan J.'s order of 15th July 1992. An earlier hearing of the appeal would not, therefore, have enabled the Plaintiff to execute the judgment earlier than it has in fact been able to However, the fact remains that the delay in lodging the appeal was (a) lengthy and (b) inexcusable, because the Defendant's solicitors proceeded on what I have held to be an erroneous view of the law.

19. In the event, because the Defendant is herself not to blame for the delay, it would be right, in my view, to extend her time for appealing provided that there is merit in her appeal. However, because the delay was lengthy and inexcusable, the balancing exercise, in my judgment, requires me to extend the Defendant's time only if there is a real prospect of success on the merits. As it is, I have considered the merits as if I had extended her time for appealing.

THE MERITS OF THE DEFENDANT'S APPEAL FROM THE ORDER OF 24TH MARCH 1992

20. Ord.47 r.1(1) provides, so far as is material:

"Where a judgment is given.... for the payment by any person of money, and the Court is satisfied, on an application made ... by the judgment debtor ... that; the applicant is unable from any cause to pay the money, ... the Court may by order stay the execution of the judgment ... by writ of fieri facias either absolutely or for such period and subject to such conditions as the Court thinks fit."

Accordingly, before the court's discretion becomes exercisable, the court has to be satisfied that the Defendant cannot pay the judgment debt. For the reasons which I set out below, I am satisfied that the Defendant is not even able to pay the instalments that she has offered, i.e. HK$1,200,000 by 24th September 1991, and HK$200,000 on the last day of each month thereafter. A fortiori, I am satisfied that she cannot pay the balance of the judgment debt of US$600,000 plus interest and costs at one time.

21. I turn to the exercise of my discretion. Judgment creditors are entitled to be paid their debts in full. For that reason, various aids to execution have been devised, and judgment creditors have, for the most part, a free hand to decide what method of execution is most likely to result in full payment of the judgment debt. However, the judgment debtor must also be considered. If the judgment debt can realistically be paid by instalments, the court has power under Ord.47 r.1 to stay execution of the judgment debt by writ of fieri facias on condition that the instalments are paid. In my view, Ord.47 r.1 requires the court to balance the legitimate interest of the judgment creditor to choose the best method of enforcing his judgment so as to ensure payment in full against the interest of the judgment debtor to avoid more draconian methods of enforcement by paying the judgment debt in realistic instalments.

22. I do not think that the Defendant has a realistic chance of keeping up the instalment payments which she offers. I say that for two reasons. In the first place, the history of this case is littered with promises of payment or bank guarantees which never materialized:

(a) On 11th September 1991, the Defendant deposed that she was in the course of realizing stocks and shares which she owned in various Italian companies, and would be able to provide US$1,000,000 "in about 2 months' time".

(b) By 18th October 1991, the source of the US$1,000,000 had changed. She then deposed that a UK company of which she was chairman ("PHCL") had resolved to instruct its bankers to issue a bank guarantee for US$1,000,000 as soon as an anticipated US$2,000,000 advance had been paid to it by an Italian company.

(c) By 2nd December 1991, that advance had not been paid because she deposed that "due to problems with remittance arrangements", the money from Italy had not arrived in Hong Kong.

(d) Her bank subsequently confirmed that on 16th December 1991 four fixed deposits in various sums stood to her credit. On 18th December 1991, the Defendant deposed that she believed that these funds were unencumbered, and the unchallenged evidence of the Plaintiff's solicitor is that when cross-examined that same day at the hearing before Master Cannon (at which the order of 13th September 1991 was finally varied), she claimed that two of those deposits - the sums of ECU 104,804.52 and Can$433,926.84 could be paid into court on 30th December 1991 and 16th January 1992, their respective maturity dates.

(e) Despite all these proposals, the only sum raised by her was the sum of US$400,000 paid into court prior to 18th December 1991.

(f) Neither the ECU nor the Canadian dollar deposits were paid into court on their maturity dates. The Defendant's subsequent explanation for that was that those sums had been advanced to her by PHCL to raise a bank guarantee, not to pay into court. When the banks refused to give a continuing bank guarantee, she transferred the sums to her personal accounts to reduce their overdrafts. The Defendant also admitted that the other two fixed deposits, amounting to US$75,508.81, were encumbered after all.

(g)    In her Affidavit sworn on 24th March 1992, the Defendant sought a stay of execution conditional upon her paying the Plaintiff HK$200,000 on the last day of each month, commencing on 30th April 1992. That offer was repeated in her Affidavit sworn on 8th April 1992. Not one instalment has been paid by her.

(h)    Most significantly of all, the Defendant did not comply with the conditions imposed by Chan J. for an interim stay pending the hearing of these appeals. I am sceptical of her explanation that she was out of Hong Kong at the time, and could not therefore make the necessary arrangements for payment by the date stipulated by Chan J. I do not believe that if she was genuinely anxious to obtain a stay, arrangements would not have been made before she left Hong Kong for attempting to comply with whatever conditions Chan J. imposed. She also claims that money was remitted to her on 30th July 1992, but she has not paid it to the Plaintiff since it refused to agree to extend the time limit imposed by Chan J. I am sceptical about that as well. If she was genuine in her attempts to pay the judgment debt by the instalments she had offered, she would have paid to the Plaintiff the money remitted to her. The fact of the matter is that if she was unable or unwilling to take the steps which would have given her an interim stay, I have grave doubts about her ability or willingness to take the steps which she claims she would if she were granted a stay.

23. Secondly, I cannot identify the income or assets which would be available to her to pay the instalments she offers. Her income is HK$200,000 a month, which represents advances against bonuses to be paid to her at the end of each calendar year by PHCL and another company ("TWDL"). Her agreement with TWDL provides that TWDL will pay for her accommodation in Hong Kong and reimburse her all travelling expenses, but that is all. She deposes that she is "able to support [her] livelihood from such monthly advances [from TWDL]", but if the HK$200,000 paid to her each month by PHCL and TWDL is to be paid each month to the Plaintiff, what is she going to live on? She has no assets to fall back on, because she claims that she has no assets to speak of. Indeed, she admits substantial liabilities consisting of two judgment debts amounting to HK$21,757,445 plus interest. If her Affidavit of 8th April 1992 sets out an accurate picture of her income, assets and liabilities, her chances of being able to comply with the offer that she makes are negligible. In any event, I am not persuaded that PHCL or TWDL can each afford to pay her HK$100,000 a month. The up-to-date audited accounts of PHCL have not been exhibited: all I have seen are extracts from what I take to be audited accounts up to 31st December 1989; and although I have seen management accounts for TWDL for the year ending 31st December 1991, they are unaudited, and I am not prepared to take them at face value.

24. The consequence of what I regard as the Defendant's inability or unwillingness to keep up the instalment payments which she offers is that in the balancing exercise which Ord.47 r.1 requires me to undertake, the scales are heavily in favour of permitting the Plaintiff to choose the best method of enforcing its judgment.Accordingly, the Defendant has not persuaded me that she has a real prospect of success on the merits of her appeal from the order of 24th March, 1992, and I therefore decline to extend her time for filing her Notice of Appeal. However, even if I had extended her time, I would have dismissed the appeal on its merits.

THE PRACTICE DIRECTION

25. The estimate of the length of the hearing in the Defendant's Notice of Appeal was half a day. In those circumstances, para. 1 of the Practice Direction issued by the Chief Justice on 19th October 1989 applied. It reads:

"In all inter partes applications and appeals to a Judge in Chambers estimated to last more than 30 minutes, the following steps will be taken not less than 3 clear working days before the day fixed for the hearing:-

(i) each party shall inform the Judge's Clerk in writing the affidavits and exhibits which it proposes to use;

(ii) the applicant or appellant shall lodge with the Judge's Clerk a bundle containing the pleadings and previous court orders chronological sequence."

In my experience, this Practice Direction is far more frequently honoured in the breach than in the observance. I believe that that is because many solicitors and barristers in Hong Kong are unaware of its existence. Neither (i) nor (ii) were complied with by either party in this case.

26. The reasoning behind (i) is to enable the judge who is due to hear the summons to know which affidavits and exhibits he should read to prepare himself for the hearing. The more reading a judge is able to do before a summons is heard, the shorter the hearing is likely to be, and the parties' legal bills are likely to be less. A judge will be less likely to prepare himself for the hearing if he does not know which of the affidavits in the court file are going to be used by the parties.

27. The reasoning behind (ii) is to enable the judge who is to hear the summons to have easy access to the pleadings and previous court orders. The court file can become extremely voluminous, and tracing the relevant history of the case through the court file can therefore be a time-consuming exercise. A judge is less likely to prepare himself for the hearing if he has to embark on the paper-chase himself without assistance from the parties.

28. Compliance with the Practice Direction is therefore important, and I trust that it will not be ignored in the future.

CONCLUSION

29. For the reasons I have given, the application for leave to extend the time for filing a Notice of Appeal from the order of Master Yam of 24th March 1992 is refused, and the appeal against his order of 17th June 1992 is dismissed. I make an order nisi that the Defendant pays to the Plaintiff its costs of the application and the appeal, to be taxed if not agreed.