LAM CHIT MAN t/a YAT CHEONG ELECTRIC CO v. LAM CHI TO

[English Translation – 英譯本]
CACV 354/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 354 OF 2001

(ON APPEAL FROM HCA NO. 9585 OF 1999)

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JUDGMENT

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Hon Woo JA (delivering the judgment of the Court):

Introduction

1. On 4 January 2001, when trial of the present case commenced before Chung J, the learned Judge, upon application by the Defendant, ordered that all the allegations and prayers for relief made by the Plaintiff in the present litigation in respect of a verbal tenancy agreement and related loss, damage and/or compensation be dismissed.  Chung J also ordered that the litigation concerning the allegation that the Defendant instigated his employees to assault the Plaintiff be stayed if not dismissed.  The Plaintiff now appeals against the said orders and requests to have a date re-fixed for trial.

The relevant facts

2. The present case involves a verbal tenancy agreement between the Plaintiff and the Defendant.   The subject-matter of the agreement was factory premises located in Long Jiann Tyan Management Zone, Huang Jiang Town, Dongguan Municipality, China.  In his “Application for Claim” (i.e. the Statement of Claim), the Plaintiff pleaded that the Defendant promised to let to the Plaintiff’s branch company in Dongguan a whole extra floor that the Defendant was constructing at the said premises.  The Plaintiff averred that the Defendant, in breach of the agreement, failed to produce a fire prevention certificate and other approval documents for the said premises by the specified date, and that the Defendant also failed to provide sufficient quarters for workers and receive rent below market value in accordance with the agreement.  Further, the Plaintiff alleged that the Defendant unreasonably cut off the electricity and water supply to the said premises and workers’ quarters and occupied the Plaintiff’s quarters for workers.  On 23 April 1999, the Defendant unilaterally served notice terminating the tenancy agreement.  When the Plaintiff was moving out of the Defendant’s factory premises, electrical workers in the Defendant’s employ dashed into the premises and assaulted the Plaintiff with their fists.

3. The Writ of Summons and Statement of Claim of the present case were issued on 11 June 1999.  The Defendant in the present case is the legal representative of “Dongguan Rong Feng Clocks and Watches Industrial Company Limited” (transliteration) (“東莞榮豐錶業有限公司”) (hereinafter “Rong Feng”), a company set up in Dongguan.  On 12 July 1999, Rong Feng commenced legal proceedings as the plaintiff in the Dongguan Municipality People’s Court (hereinafter “Dongguan Court”) against Heng Chang Electric (Shenzhen) Company Limited (transliteration) (恆昌電子(深圳)有限公司) (hereinafter “Heng Chang”), and Heng Chang’s legal representative is Mr Lam Chit Man, the Plaintiff in the present case. 

4. The two cases proceeded at the same time in Hong Kong and Dongguan respectively.  Mr Lam Chit Man unsuccessfully opposed hearing of the Dongguan case by the Dongguan Court.  He also made a counterclaim in that case.  On 13 November 2000, the Dongguan Court handed down a Civil Ruling on the Dongguan case.  In brief, the Dongguan Court gave judgment in favour of Rong Feng.

5. It is apparent from the said Civil Ruling that the parties’ causes of action and the issues involved in that case were no different from the causes of action and issues involved in the present case.

6. The said Civil Ruling also clearly pointed out how the case was dealt with, as follows:

After this Court decided to hear the case, a Full Court was constituted in accordance with the law, and the case was heard in open court on 25 August 1999, 19 October 1999, 24 March 2000, 12 June 2000, 21 September 2000 and 20 October 2000.  The plaintiff’s legal representative Lam Chi To and his agents Wong Wai Chung and Liu Tung Kong attended the hearings of the case; upon being summoned, the defendant by its legal representative Lam Chit Man attended the hearings on 25 August 1999, 19 October 1999, 24 March 2000 and 12 June 2000 but did not attend the two hearings on 21 September 2000 and 20 October 2000.  The hearing of the present case has now concluded.

7. In the said Civil Ruling, the Dongguan Court made the following determinations on the various issues involved:

(1)   Judging from the cheques that had been issued, Heng Chang had impliedly acknowledged the rental figure, and that figure fell within the medium-to-low range in the same zone and was both reasonable and legitimate.  Although Heng Chang took issue with the calculation of the monthly rent, it was unable to adduce evidence to support its case.

(2)   Heng Chang was unable to adduce evidence to support its claim for compensation in respect of the alleged disconnection of water and electricity supply.

(3)   Investigations revealed that Yuan Feng invested in the establishment of Rong Feng in Long Jiann Tyan Management Zone, Dongguan Municipality.  Heng Chang argued that Rong Feng improperly issued notification in the name of Yuan Feng to inform Heng Chang of the termination of the tenancy; however, following receipt of the notification, Heng Chang removed most of the machinery and equipment from the premises from 24 May 1999 onwards.  Such conduct showed that Heng Chang consented to the discharge of the tenancy agreement over the factory premises and the termination of the tenancy.

(4)   Heng Chang failed to remove all machinery and equipment by 1 August 1999 as agreed.  Heng Chang alleged that Rong Feng stopped it from removing the machinery and equipment, but Rong Feng refuted by saying that Heng Chang refused to go through the clearing procedure and locked up the machinery and equipment that had not been removed.  Heng Chang’s allegation was not supported by sufficient evidence or reasonable grounds.  Therefore, Heng Chang’s counterclaim that the plaintiff unlawfully detained the relevant assets could not be established.

(5)   Heng Chang also counterclaimed for medical expenses and loss of wages on the ground that Rong Feng had instigated its electrical workers to commit the assault.  The counterclaim was unsubstantiated.  Furthermore, it involved completely different legal issues from those in the litigation, and therefore the Court should not deal with the counterclaim.  It was open to the defendant to institute separate proceedings for the counterclaim.

(6)   Heng Chang alleged that Rong Feng was liable for breach of contract by reason of its failure to deliver the factory premises by May 1999 as scheduled for Heng Chang’s use.  This allegation also lacked evidence in support and therefore was not made out.

8. The Dongguan Court gave judgment for Rong Feng in respect of most of its claims.  The Court also dismissed Heng Chang’s counterclaim for compensation for telephone installation expenses and its counterclaims for losses arising from the alleged detention of assets and the vacancy of rented factory premises in Huang Jiang.  The Civil Ruling concluded with the following paragraph:

Any party dissatisfied with this judgment may, within 15 days from the date of service of this Ruling, submit to this Court an application of appeal to the Dongguan Intermediate People’s Court and provide such number of copies of the application as is commensurate with the number of people in the opposite party.

The reasons for Chung J’s decisions

9. In his written Judgment dated 30 January 2001, Chung J referred to a number of legal authorities and made the following rulings:

(1)   “A dispute over an agreement involving land or an agreement related to land should be governed by the law of the place in which the land is situated or by the law with which the agreement has a close connection (which normally means the law of the place in which the land is situated).” (at page 11 A-D)

(2)   “Under Hong Kong law, there is nothing improper for the Dongguan People’s Court to exercise jurisdiction as it did over the present dispute …” (at page 11 F-G)

(3)   In the Dongguan case, as Heng Chang had raised a defence and counterclaim and also attended the court hearings, “Heng Chang should be regarded as having submitted to the jurisdiction of the Dongguan People’s Court.” (at page 12 E-F)

(4)   The ruling of the Dongguan People’s Court is binding (or should be regarded as binding) on the parties to the present case.” (at page 12 I-K)

(5)   The Plaintiff and Defendant in the present case are “privies” to Heng Chang and Rong Feng respectively, within the meaning of section 5 of the Foreign Judgments (Restrictions on Recognition and Enforcement) Ordinance (Cap. 46, Laws of Hong Kong). (at page 12 R-S)

(6)   In conclusion, “all the allegations/prayers for relief made by the Plaintiff in the present litigation in respect of a verbal tenancy agreement and/or related loss, damage and/or compensation should be dismissed.” (at page 13 J-K)

The Plaintiff’s grounds of appeal

10. In his Notice of Appeal which runs to 23 pages, the Plaintiff sets out a number of reasons in support of his appeal.  This appeal, it can be said, solely involves issues of law, and we do not propose to deal with irrelevant factual allegations raised by the Notice of Appeal and the Plaintiff as well as his suggestions regarding alleged misconduct of Chung J.  We only wish to point out the Plaintiff’s use of discourteous, emotional and acrimonious expressions and criticisms against Chung J does not assist his appeal and, being irrelevant to the appeal, only serves to waste this Court’s time.  An appeal against the rulings of a judge will necessarily state the errors that the judge is said to have made; there is, however, no need for the appellant to criticize the judge in discourteous and acrimonious language.   

Hong Kong law recognizes the ruling of the Dongguan Court

11. The Plaintiff has correctly pointed out that the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap. 319, Laws of Hong Kong) only applies to foreign judgments of Commonwealth countries.  However, the Defendant is not seeking to register the ruling of the Dongguan Court pursuant to that Ordinance with a view to enforcing that ruling in Hong Kong.  Under the common law, the enforcement of a foreign judgment is quite distinct, and is dealt with in a different way, from the recognition of a foreign judgment.  Whether a foreign judgment can be enforced in Hong Kong by way of registration must depend on whether that judgment falls within the ambit of Cap. 319; on the other hand, no matter whether it is enforceable in Hong Kong, a foreign judgment is recognized by the common law, with the result that the parties to the judgment are debarred from re-litigating in Hong Kong the cause or matter with which the judgment is concerned.  (See Dicey & Morris, page 467 paragraph 14R-001 and page 512 paragraph 19R-109; Halsbury’s Laws of England (4^th Ed Reissue), Volume 8(1), page 997 Note 4 and page 998 Notes 8 and 10.)

12. Section 10 of Cap. 319, Laws of Hong Kong also provides as follows:

(1)        Subject to the provisions of this section, a judgment to which the provisions of this Ordinance apply or would have applied if a sum of money had been payable thereunder, whether it can be registered or not, and whether, if it can be registered, it is registered or not, shall be recognized in any court in [Hong Kong] as conclusive between the parties thereto in all proceedings founded on the same cause of action and may be relied on by way of defence or counterclaim in any such proceedings.

(2)        …

(3)        Nothing in this section shall be taken to prevent any court in [Hong Kong] recognizing any judgment as conclusive of any matter of law or fact decided therein if that judgment would have been so recognized before the commencement of this Ordinance.

The above provisions show that Cap. 319 does not affect the recognition of foreign judgments under the common law and that the common law of estoppel applies in the context of foreign judgments.  The above provisions also make it clear that foreign judgments recognized by Hong Kong law may be relied on as a defence.

Is the ruling of the Dongguan Court final and conclusive?

13. The Plaintiff’s Notice of Appeal and skeleton submissions dated 10 December 2001 reveal only one contention relevant to the present appeal, namely that the ruling of the Dongguan Court is not a final and conclusive judgment.  This is the key issue in the present appeal.

14. It can been seen from paragraph 9(1), (2), (3) and (5) hereinabove that Chung J has made findings on issues including the law applicable to the issues in the Dongguan case and the present case, the jurisdiction and right of adjudication of the Dongguan Court and Hong Kong court over the present case, and whether the Plaintiff and Defendant in the present case are “privies” to Heng Chang and Rong Feng respectively.  We can find no fault or error in any of those findings.  What the Plaintiff may challenge is the correctness of Chung J’s finding that “the ruling of the Dongguan People’s Court is binding (or should be regarded as binding) on the parties to the present case”.  This question cannot be answered simply by considering whether the causes of action and issues involved in the Dongguan case and the present case are the same; rather, the answer hinges on whether the ruling of the Dongguan Court is a final and conclusive judgment.

15. Before dealing with this question, it is necessary to understand why Chung J ordered that the present case be dismissed.  He dismissed the present case on the basis of Order 18 Rule 19 of the Rules of the High Court and/or the inherent jurisdiction of the court.  Under Order 18 Rule 19, where a plaintiff is allowed to proceed with an action which has no prospect of success, this will constitute an abuse by that plaintiff of the process of the court, or the litigation will be frivolous.  However, it is well-established that the court will exercise the power under that Rule where and only where it is clear and obvious that the claim will fail or the court should not hear the case (see Hong Kong Civil Procedure 2001, page 289, paragraph 18/19/6).

16. The only ground upon which Chung J could dismiss the present case was that the doctrine of estoppel applied: if the ruling of the Dongguan Court was binding on both parties to the present case, neither of them would be allowed to re-litigate in a Hong Kong court the cause or matter with which the ruling was concerned, and therefore the Court of First Instance would not hear the present case.

17. The doctrine of estoppel applies only to a judgment which is final and conclusive.  In the present case, the judgment concerned is a foreign judgment, namely a ruling of the Dongguan Court.  Where a foreign judgment makes a decision on the merits of both parties’ cases and is final and conclusive, then neither party can mount any challenge to any matter of fact or law in the judgment, or can they re-litigate in another case the cause or matter with which the judgment is concerned.  See Dicey & Morris, page 475 paragraph 14R-018, pages 476-477 paragraph 14R-021, and page 512 paragraph 14R-109.

18. In Chiyu Banking Corporation Limited v CHAN Tin Kwun, HCA 1168 of 1995 (12 July 1996, unreported), Cheung J (as he then was) held that a ruling issued by the Fujian Intermediate People’s Court (FIPC) was not a final and conclusive judgment.  The facts of that case were rather unusual: the plaintiff bank granted a loan to one of its customers, and the defendant guaranteed repayment of the loan by that customer.  Upon default, the plaintiff commenced proceedings before the FIPC for recovery of the loan.  On 19 January 1995, the FIPC ruled that the defendant was liable to repay to the plaintiff a sum of more than USD40,000.  The defendant appealed to the Fujian Higher People’s Court, but the appeal was dismissed on 30 July 1995.  The plaintiff commenced proceedings in Hong Kong against the defendant for recovery of the said sum, relying on the FIPC’s ruling as the cause of action.  On 18 October 1995, the defendant submitted an application to the Fujian People’s Procuratorate for re-trial of the case by the FIPC; and on 14 March 1996, the Fujian People’s Procuratorate submitted a report to the Supreme People’s Procuratorate, requesting the latter to lodge a protest.  Cheung J held that, as the protest procedure had commenced which might result in a re-trial of the case by the FIPC, the FIPC’s ruling was not final and conclusive.

19. In our judgment, Cheung J’s decision in that case was correct, legitimate and reasonable.  It should be noted, however, that the parties in that case had adduced opinions of PRC legal experts as evidence, and such opinions pointed out that the Procuratorate exercised a supervisory function over civil rulings of the People’s Court and could lodge a protest against the rulings, and it was for this reason that the FIPC might re-try the case; further, the protest procedure had actually commenced.  On this basis, Cheung J allowed the defendant’s application and stayed the proceedings in Hong Kong pending completion of the protest procedure.

Conclusion

20. It can be seen from the above case that, under the PRC legal system, the Procuratorate was entitled to lodge a protest against a civil ruling, which might result in a re-trial of the case by the People’s Court concerned.  Accordingly, the ruling of the People’s Court was not final and conclusive.  That case, however, differs from the present case in that there was expert evidence in that case on the relevant PRC law at the material time, which served to support Cheung J’s decision.  In the present case, neither party has adduced evidence on the relevant PRC law, and therefore it is not known whether the current PRC law on the above area remains the same or has been amended.

21. The Plaintiff in the present case indicated to us that he has lodged an appeal against the ruling of the Dongguan Court.  This, however, does not mean that the said ruling is not final and conclusive.  This is a long-standing common law rule (see Dicey & Morris, page 478 paragraph 14-024) and is recognized by section 3(3) of Cap. 319, Laws of Hong Kong, which provides that “… a judgment shall be deemed to be final and conclusive notwithstanding that an appeal is pending against it, or that it may still be subject to appeal, in the courts of the country of the original court”.  Furthermore, there is no evidence that the Plaintiff has taken any step to request the People’s Procuratorate to lodge a protest.  Having said that, as the Defendant applied to Chung J to dismiss the present case, it had to produce compelling proof that the doctrine of estoppel applied to the present case, and therefore it bore the burden of proving that the ruling of the Dongguan Court was final and conclusive.  As the Defendant failed to adduce the relevant evidence before Chung J, the decision to dismiss the present case was, with respect, unsupported by evidence and erroneous.  Furthermore, the Defendant did not apply for dismissal of the present case until the first day of trial, and Chung J should not have allowed the application (see The Supreme Court Practice 1999, Volume 1, page 348 paragraph 18/19/3, Halliday v Shoesmith [1993] 1 WLR 1, at page 5 C-D).  Accordingly, we allow the appeal, set aside Chung J’s order for dismissal and costs order, and remit the case to another judge of the Court of First Instance.

22. We also make an order nisi that the Defendant is to bear costs of this appeal and costs of the hearing before Chung J on 4 January 2001.