CEF NEW ASIA CO. LTD. v. WONG KWONG YIU, JOHN

CACV 77/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 77 OF 1999

(ON APPEAL FROM HCA 374 OF 1998)

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J U D G M E N T

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Leong, J.A. (giving the judgment of the Court):

1. On 30th September 1996, the plaintiff (respondent) CEF New Asia Co. Ltd, obtained in the Tainan District Court, Taiwan, a judgment in the sum of NT$52,596 and US$62,500 with interests and costs against the defendant (appellant) Wong Kwong Yiu, John. On 31st May 1997 the judgment was confirmed as final and conclusive in the same court. The defendant failed to satisfy that judgment.

2. On 9th January 1998, the plaintiff issued a writ in the High Court against the defendant claiming the sum awarded as a judgment debt. On 11th January 1999, in an Order 14 summons application, Master Poon granted summary judgment to the plaintiff in the sum claimed. The defendant's appeal against the Master's order was dismissed by Yeung, J. The defendant now appeals against the decision of Yeung, J.

3. The parties accept that if the judgment of the Taiwan court is recognised in Hong Kong courts, at common law, the defendant would have no defence to an action by the plaintiff on that judgment.

4. The defendant's defence is that Hong Kong Courts do not and should not recognise the status, existence or competence of any court in Taiwan and that Hong Kong as part of the People's Republic of China only recognises one country of China i.e. the People's Republic of China and a judgment of a court in Taiwan should not be enforced in Hong Kong. The issue we have to consider is whether this is an arguable defence.

5. As a starting point, the parties accept that we should approach the issue on the basis that Taiwan is part of and subject to the sovereignty of China and the government of Taiwan has no legal foundation and Taiwan courts are not recognised by courts in Hong Kong. We have no doubt about these propositions which were in fact the approach adopted by the Court of Appeal in Ku Chia Chun & Ors. v. Ting Lei Miao & Ors. [1998] 3 HKC 119. The parties also accept that at common law there is an exception to these fundamental propositions in that certain acts and orders of an unrecognised government and its courts may still be recognised. This exception as enunciated in the authoritative statement of Lord Wilberforce in Carl Zeiss Stiftung v. Rayner & Keeler Ltd. & Ors. (No.2) [1967] 1 A.C. 853 and cited by Lord Denning M.R. in Hesperides Hotels v. Aegean Turkish Holidays Ltd. [1978] 1QB 205 at 218 is this:

"... where private rights, or acts of everyday occurrence, or perfunctory acts of administration are concerned ... the courts may, in the interests of justice and common sense, where no consideration of public policy to the contrary has to prevail, give recognition to the actual facts or realities found to exist in the territory in question."

6. In Hesperides Hotels, Lord Denning M.R. examined the conflicting authorities that were in favour of and against such exception and came down in favour of it. He said (at p.218):

"If it were necessary to make a choice between these conflicting doctrines, I would unhesitatingly hold that the courts of this country can recognise the laws or acts of a body which is in effective control of a territory even though it has not been recognised by Her Majesty's Government de jure or de facto: at any rate, in regard to the laws which regulate the day to day affairs of the people, such as their marriages, their divorces, their leases, their occupations, and so forth: and furthermore that the courts can receive evidence of the state of affairs so as to see whether the body is in effective control or not."

7. The Court of Appeal in Ku Chia Chun & Ors. v. Ting Lei Miao & Ors. accepted the existence of this principle and applied it in recognising a bankruptcy order of the Taipei District Court. In his judgment, Mortimer, V.-P. after referring to the authoritative statement by Lord Wilberforce in Carl Zeiss Stiftung and Lord Denning M.R.'s considerations and conclusions in Hesperides Hotels (at p. 133) said:

"I accept the existence of a common law principle that a limited range of acts by those actually in control of a territory but without any lawful validity or authority may be recognised and acted upon by the Hong Kong courts on the basis that the sovereign power has an interest in the proper regulation of the affairs of its subjects within the territory concerned provided that the relevant acts do not directly help the usurper, are not contrary to public policy, and are not inimical to the rights of the lawful sovereign."

8. In his conclusion, the Vice-President said:

"The principle that a limited category of usurper's acts may have legal validity by reason of an implied mandate from the lawful sovereign is rooted in history. It received modern recognition in the US Supreme Court in civil war cases. More recently it has been recognised by the House of Lords and the Privy Council but - so far as I am aware - has never been applied by either."

9. Godfrey, J.A. in the same case, confining the matter to whether Hong Kong courts should recognise a bankruptcy order of the Taipei District Court to give the trustees the right to sue in Hong Kong said:

"The fact that the People's Republic of China does not recognise the present government of Taiwan is not, in my opinion, an impediment to the claim of the trustees, by virtue of the order of 20 October 1990 to recover the shares in dispute here for the benefit of the bankrupt's estate. No question of public international law arises. We are concerned here only with the rules governing the administration of the estate of a bankrupt under the law of his domicile. This is a mater of private international law. Only private rights are involved. In such a case, it is clearly 'in the interests of justice and common sense' (see Carl Zeiss Stiftung v. Rayner & Keeler Ltd. (No.2) [1967] 1 A.C. 853, per Lord Wilberforce at 954) that our courts should afford the same recognition to the order of the Taipei District Court in insolvency proceedings as it would afford to an order of any other court of competent jurisdiction in similar proceedings. I would found this conclusion on the juridical basis explained by Lord Denning Mrin Re James [1977] Ch 41 at 62 where he remarks (following Grotius) that where a lawful sovereign still remains under a duty to do all he can to preserve law and order within the territory and as he cannot do it himself, he is to be held to give an implied mandate to his subjects to do what is necessary for the maintenance of law and order rather than expose them to all the disorders of anarchy. In my judgment, the People's Republic of China the law sovereign here, should be treated as recognising the same necessity for the exercise of a bankruptcy jurisdiction by the courts of Taiwan as it would recognise for Hong Kong or for any other part of its territory. As we are reminded in the Preamble to the Constitution of the People's Republic of China:

'Taiwan is a part of the sacred territory of the People' s Republic of China. It is the lofty duty of the entire Chines people, including our compatriots in Taiwan, to accomplish the great task of reunifying the motherland.'

It would be as it seems to me, entirely inconsistent with this aspiration for a court in our part of the People's Republic of China to refuse to recognise the orders in bankruptcy of a court of competent jurisdiction in what the People's Republic of China regards as another part, especially since the mainland courts are themselves expected to recognise Taiwanese judgments."

10. It would appear from these observations of their Lordships that in Hong Kong so long as the order of the Taiwan court involves no more than private rights and it would have been recognised in a Hong Kong court had it not been from a Taiwan court, in the interest of justice and common sense, the order is one within the limited range of acts that should be recognised and given effect to in a Hong Kong court despite non recognition in Hong Kong of the Taiwan government and its courts. This decision of the Court of Appeal should be followed by this court unless it can be distinguished or unless any of the other grounds for not following a Court of Appeal decision set out in Young v. Bristol Aeroplane exists.

11. Mr. Shum for the defendant argues that the Court of Appeal in Ku Chia Chun & Ors. v. Ting Lei Ming & Ors. found limited applications of the exception and the decision is confined to the recognition of the status and private rights of Taiwan trustees in bankruptcy to sue in Hong Kong, and he restricts private rights to private proprietary rights. The decision, Mr. Shum so submits, never extended to direct enforcement in Hong Kong of Taiwan court judgments otherwise the exception would become the general rule. The distinction, he submits is between direct enforcement of an order the case here and the indirect giving effect to the order the case in Ku but if we are minded to extend that exception to direct enforcement, he is entitled to have his defence argued and summary judgment should not be entered against the defendant.

12. For the purpose of the exception, we see no difference in a bankruptcy order and a judgment on a sum claimed. Both do not involve recognition of the Taiwan government as a matter of public international law and both are giving effect to private rights, in the case of the bankruptcy order, the trustees' right to sue in Hong Kong and in the case of the judgment, the judgment creditor's right to sue for the debt in Hong Kong. In our opinion, it would be artificial to differentiate between directly and indirectly giving effect to a Taiwan court order since both in substance give effect to the order. If a judgment debt pronounced by a Taiwan court cannot be recovered by the judgment creditor in a Hong Kong court whereas by a bankruptcy order of a Taiwan court against the debtor, the trustees in bankruptcy could recover it in Hong Kong, this would be a very unrealistic and strange state of affairs. A person's private rights include his rights as a creditor and not merely his proprietary rights, and non recognition in Hong Kong of these rights is turning a blind eye to realities. Certainly it is not contrary to public policy and not inimical to the rights of sovereignty to recognise such rights.

13. The rules of the Supreme People's Court on recognition by the People's Court of civil judgments delivered in Taiwan District came into force on 26th May 1998. Although these rules are not applicable in Hong Kong because of the provisions of the Basic Law, promulgation of these rules clearly show that our Central Government considers recognition of civil judgments of a Taiwan court necessary and is in the interest of proper regulation of the affairs of the people of the People's Republic of China. This may be taken as an expression of the implied mandate from our Central Government for recognition in Hong Kong of Taiwan court judgments. With these rules of the Supreme People's Court of the People's Republic of China now in place in the mainland, recognition in Hong Kong of Taiwan court judgments could not be regarded as inconsistent with the aspiration in our Constitution of "reunifying the mother land".

14. Yeung, J's conclusion that no distinction should be drawn between recognition of a bankruptcy order and enforcement of a judgment of a Taiwan court, since both are giving effect to the order, that enforcement of the judgement debt had no such effect contrary to public policy and was not inimical to the rights of the sovereign, is in accordance with Ku's case. His conclusion that there is no arguable defence cannot be faulted.

15. What remains is the question why the application for summary judgment proceeded under Order 14 when it appears an Order 14A application would have been more appropriate. However, since both counsel are content to proceed on the basis this case has proceeded and there may be their own particular reasons for so doing, we do not propose to go into this question.

16. We dismiss this appeal with an order nisi that the plaintiff (respondent) shall have the costs of this appeal.