XCHRX BIARD LABORATOIRES SA v. ROSUMI LTD.

1997 MP No. 252

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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J U D G M E N T

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The background

1. The Defendant is a company incorporated in Hong Kong. It had been the agent in Hong Kong of the Plaintiff, a company incorporated in France. A dispute arose between them, and eventually the Defendant countermanded two cheques drawn by it on its bank account in Hong Kong in favour of the Plaintiff for FF500,000.00 and FF590,000.00 respectively.

2. The countermanding of the cheques resulted in the Plaintiff initiating proceedings in the Bourg en Bresse Commercial Court ("the Commercial Court"). There is a dispute as to the nature of the proceedings, the nature of the order which the Plaintiff obtained and whether the Defendant submitted to the jurisdiction of the court. As to the nature of the order, the Plaintiff's case is that the Defendant was ordered to pay the sums of FF500,000.00 and FF590,000.00 plus interest and costs, plus compensation in the sum of FF5,000.00 under Art. 700 of the New Code of Civil Procedure. The Defendant's case is that it was simply ordered to lift the instruction which it had given to its bank to countermand the cheques, though it does not dispute that it was in addition ordered to pay interest, costs and the sum of FF5,000.00.

3. The Defendant appealed against the order made by the Commercial Court to the Court of Appeal of Lyon. The Court of Appeal confirmed the order made by the Commercial Court (whatever that order had been), and ordered the Defendant to pay to the Plaintiff a further FF5,000.00 compensation under Art. 700, the sum of FF10,000.00 "in provisional compensation for improper opposition" (presumably for appealing without cause) and court costs. The judgment of the Court of Appeal was eventually registered in Hong Kong. The Defendant applied to set the registration of the judgment aside, but Master Kwan refused to set it aside. The Defendant now appeals against that refusal.

The application of the Ordinance

4. Section 6(1)(a) of the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap. 319) ("the Ordinance") provides that the registration of a foreign judgment "shall be set aside if the registering court is satisfied ... that the judgment is not a judgment to which the provisions of this Ordinance apply." Section 3(2) of the Ordinance identifies those foreign judgments to which the provisions of the Ordinance apply:

"Any judgment of a superior court of any foreign country to which the provisions of this Ordinance extend, other than a judgment of such a court given on appeal from a court which is not a superior court, shall be a judgment to which the provisions of this Ordinance apply, if

(a) it is final and conclusive as between the parties thereto; and

(b) there is payable thereunder a sum of money, not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or penalty; and

(c) it is given after the coming into operation of the order directing that the provisions of this Ordinance shall extend to that foreign country."

5. Final and conclusive. The Defendant contends that the order of the Commercial Court was not final and conclusive because of the nature of the order which was made and the nature of the proceedings in which it was made. It is common ground that the order was an ordonnance de référé, which was made in proceedings to which Arts. 484 and 488 of the New Code of Civil Procedure applied. It is also common ground that Arts. 484 and 488 provide for a procedure whereby issues which require urgent resolution can be brought to the court quickly. There is a dispute as to the proper translation of the words ordonnance de référé, but there is no dispute as to how the rest of Arts. 484 and 488 should be translated. Art. 484 provides:

"An ordonnance de référé is an interim decision rendered upon the request of one party, the other party being present or summoned, in cases in which the law allows a judge who is not sitting in judgment on the merits of the cause the power to order immediate necessary measures."

Art. 488 provides:

"An ordonnance de référé is not, with respect to the principle cause, a judgment on the merits. Such order may be modified or dismissed en référé only in the event of new circumstances."

It is argued by Mr. John Beukema for the Defendant that because an order made in proceedings to which Arts. 484 and 488 apply is a provisional one, made without consideration of or a judgment on the underlying merits, the order is not a final and conclusive one, and is not capable as being converted into one.

6. I cannot accept this argument - at any rate, so far as it relates to the order made by the Commercial Court in the present case. The unchallenged evidence before me is that there are three circumstances in which an ordonnance de référé can be made:

(i) in urgent matters,

(ii) to prevent an immediate danger or to put a stop to an obviously illegal disorder, and

(iii) when the existence of the obligation is not seriously questionable.

In addition, the unchallenged evidence before me is that the reason why the ordonnance de référé was in fact made in the present case was because, having regard to French law relating to the circumstances in which cheques can be countermanded, the Defendant's obligation to cause the cheques to be honoured could not be seriously disputed.

7. On that issue, one needs look no further than the following extracts from the judgments of the Commercial Court and the Court of Appeal. In the Commercial Court, it was said:

"Whereas in application of Article 32 of the execution order of 30th October 1935, an order to stop payment order of the cheque by the bearer is not accepted except in case of loss, theft or of a recovery-plan or winding-up of its bearer's business activities: that such is not the case in this particular case; that there is therefore reason to order the withdrawal of the stop-payment order;

Whereas it is of little importance that the claim represented by these cheques is disputed; and that an alleged banking direct-debit is substituted for these cheques;

Whereas it shall be the responsibility of the [Defendant] to institute any proceedings that it may deem useful, if in fact it considers that these sums were not due, but in the capacity of signatory of the cheque, it cannot today oppose their payment..."

In the Court of Appeal, it was said:

"Whereas it is also well-founded on the grounds that the stoppage imposed on the payment of the two disputed cheques is unlawful, being used outside the limited number of cases listed by article 32, and this unlawfulness requires the urgent applications judge to order the immediate lifting thereof, without having to examine the reasons put forward by the drawee to justify the withdrawal of the measure ..."

Accordingly, the merits of the proceedings in which the ordonnance de référé was made related to whether the law permitted cheques to be countermanded rather than to the underlying dispute which caused the Defendant to countermand the cheques in the first place. If one identifies the merits of the dispute in that way, the Commercial Court was finally deciding the merits of the dispute.

8. Does the fact that the ordonnance de référé is described as an "interim decision" mean that it is not capable of being recognised by Hong Kong law as final and conclusive? I think not. If the reason for the making of the order was because it needed to be made urgently without considering the merits, I can see how the order is interim in the sense that it continues in force only until the merits have been determined. But if the order is made because, having considered the merits, the existence of the obligation cannot be seriously questioned, it is difficult to see how the decision is anything other than final and conclusive. In the present case, the issue as to whether, under French law, the Defendant was entitled to countermand the cheques was finally and conclusively determined. That accords with the view of the French lawyers advising the Plaintiff, who described the ordonnance de référé as "sui generis proceedings which cannot be compared with interlocutory decisions". It also accords with the view of the French lawyer advising the Defendant. Even though he does not accept that the order of the Commercial Court was made following a consideration of the merits (with which I disagree), he does accept that the order was a final judgment.

9. Mr. Beukema relied on the decision of the House of Lords in Nouvion v. Freeman (1889) 15 App. Cas. 1. Under Spanish Law, summary or "executive" proceedings could be taken to recover a debt, and the plaintiff, if successful, would obtain a remate judgment for the recovery of a sum of money. Such a judgment was final in those proceedings unless reversed or varied on appeal. In such proceedings, the defendant could plead certain limited defences, but could not set up any defence affecting the validity of the contract. Either the plaintiff or the defendant, if unsuccessful in the "executive" proceedings, might in the same court and in respect of the same subject-matter take ordinary or "plenary" proceedings, in which all defences and the whole merits of the matter might be gone into. In the "plenary" proceedings, the remate judgment could not be set up as res judicata or otherwise. A remate judgment could be enforced by the plaintiff on giving security, although either an appeal or "plenary" proceedings may be pending. A "plenary" judgment rendered the remate judgment inoperative and required restoration of any money paid under it. The House of Lords held that the remate judgment did not finally and conclusively establish the existence of a debt.

10. However, the House of Lords' conclusion on the facts of that case do not assist me in determining whether the ordonnance de référé in the present case was final and conclusive. In both the remate and "plenary" proceedings, the issue was whether one of the parties was indebted to the other. The remate proceedings did not conclusively resolve that issue. It resolved only some of the questions which bore on that issue. In the present case, the issue in the proceedings in the Commercial Court was wholly unrelated to the underlying dispute between the parties. The issue was whether, irrespective of the merits of the underlying dispute, French law permitted the Defendant to countermand the cheques. The conclusion of the Commercial Court that the Defendant was not permitted under French law to countermand the cheques was final and conclusive because it did not depend on the merits of the underlying dispute between the parties.

11. Sum of money. The judgment of the Court of Appeal could only have been registered in Hong Kong if the order of the Commercial Court which was confirmed by the Court of Appeal was for the payment of "a sum of money". It is quite correct that the order of the Commercial Court was for "the withdrawal of the stop-payment order", but the question is what the Defendant was also ordered to do. One translation of what the Defendant was also ordered to do is "to pay these sums", which is a reference to the sums of FF500,000.00 and FF590,000.00. The other translation of what the Defendant was also ordered to do is "to do so", which is a reference to the order requiring it to withdraw the instruction to stop the cheques.

12. However, even if the latter translation is correct, and the form which the order of the Commercial Court took was simply to order the Defendant to withdraw the instruction to stop the cheques, it is important to look at what the Court was intending the effect of its order to be. Although the language of the order related simply to how the payment of the sums of FF500,000.00 and FF590,000.00 was to be made, the Court was plainly intending that the sums should be paid to the Plaintiff. That is why it said:

" ... it is of little importance that ... an alleged banking direct-debit is substituted for these cheques ..."

I am entirely satisfied, therefore, that the order of the Commercial Court amounted to an order that the sums of FF500,000.00 and FF590,000.00 be paid to the Plaintiff - in addition, of course, to the other sums which the Defendant was ordered to pay.

The jurisdiction of the French courts

13. Section 6(1)(a)(ii) of the Ordinance provides that the registration of a foreign judgment "shall be set aside if the registering court is satisfied ... that the courts of the country of the original court had no jurisdiction in the circumstances of the case." Section 6(2)(a)(i) provides, so far as is material, that:

"the courts of the country of the original court shall ... be deemed to have had jurisdiction ... if the judgment debtor, being a defendant in the original court, submitted to the jurisdiction of that court by voluntary appearing in the proceedings."

The Defendant's case is that it did not submit to the jurisdiction of the Commercial Court or the Court of Appeal. It never defended the Plaintiff's claim on its merits. The only point it took in the proceedings was to contest the jurisdiction of the court.

14. I reject that argument. Although the Defendant did indeed contest the jurisdiction of the court, it also disputed the order made by the Commercial Court on its merits. That is apparent from a passage in the judgment of the Court of Appeal which referred to one of the Defendant's arguments as follows:

"... the debt claimed by the [Plaintiff] can be disputed in its very principle, considering the serious and repeated breaches which were committed thereby in the performance of the contract, and would not therefore justify the payment of any advance."

A litigant submits to the jurisdiction of a lower court by appealing from the order of that court to a higher court: see the observations of Lord Denning M.R. in S.A. Consortium General Textiles v. Sun and Sand Agencies Ltd. [1978] 1 QB 279 at p.299C-F. Mr. Beukema submitted that that principle does not apply to an appeal when the only point taken is that there had not been a submission to the jurisdiction of the lower court. But that does not help the Defendant in the present case in view of the fact that the Defendant also disputed the order of the Commercial Court on its merits.

Public policy

15. Finally, section 6(1)(a)(v) of the Ordinance provides that the registration of a foreign judgment "shall be set aside if the registering court is satisfied ... that the enforcement of the judgment shall be contrary to public policy in the country of the registering court." The enforcement of the judgment in the present case is said to be contrary to public policy in Hong Kong because it subjects a transaction in which cheques were drawn by a company incorporated in Hong Kong on an account with a Hong Kong bank to French law governing bills of exchange. For example, the shelf life of a cheque under Hong Kong law is said to be 6 months, whereas it is said to be 12 months in France. Therefore, although the two cheques in the present case could not have been presented for payment in Hong Kong by the time that the Commercial Court handed down its judgment (which was about 8 months after the cheques had been drawn), they could still have been presented for payment under French law.

16. There are two answers to that argument. First, the Commercial Court recognised that problem by substituting a "banking direct debit ... for these cheques". Secondly, Hong Kong law recognises the need to reflect the fact that other countries have their own laws relating to bills of exchange in general and cheques in particular. That is why section 72 of the Bills of Exchange Ordinance (Cap. 19) provides for what is to happen when a conflict of laws exists. It can hardly be said, therefore, to be contrary to public policy to recognise French law relating to bills of exchange when the law of Hong Kong permits foreign law to apply in various circumstances.

Conclusion

17. For these reasons, there is, in my opinion, no basis for setting aside the registration of the judgment. Master Kwan was correct not to set it aside, and this appeal must therefore be dismissed.