LIN CHIEN CHENG v. HUI CHI KEUNG

HCA 2680/2018

[2021] HKCFI 3600

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2680 OF 2018

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DECISION

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1.  By a summons dated 1 March 2021, the Defendant applies for, inter alia:

(1)  The Plaintiff’s Writ of Summons with Statement of Claim be struck out;

(2)  The Plaintiff’s Reply be struck out; and

(3)  The Mareva injunction granted by the Order of Deputy High Court Judge Marlene Ng (as she then was) dated 14 December 2018 and continued by Recorder Manzoni SC dated 31 October 2019 (in judgment [2019] HKCFI 2686 dated 31 October 2019 (the “O.14 Judgment”)) be discharged and an inquiry be made into the damages sustained by D by reason of the injunction order.

MATERIAL FACTS

2.  On 31 October 2017, the Plaintiff obtained a judgment from the Intermediate People’s Court of Yangzhou, Jiangsu Province of PRC under which the Defendant was ordered to pay the Plaintiff a sum of RMB44,112,600 with interest (“Intermediate Court’s Judgment”).

3.  On 24 January 2018, the Defendant appealed to the Higher People’s Court of Jiangsu Province.

4.  On 7 September 2018, the Higher People’s Court dismissed the appeal and ordered that the Defendant should pay the Plaintiff a sum of RMB43,976,302.04 with interest (the “Mainland Judgment”).

5.  On 14 November 2018, the Plaintiff commenced these proceedings to enforce the Mainland Judgment in our jurisdiction under the common law regime.

6.  On the same day, namely, 14 November 2018, the Defendant applied to the Supreme People’s Court (3^rd Circuit Court) for review of the Mainland Judgment under the adjudication supervision system (the “Supreme Court’s Review”).

7.  On 14 December 2018, Deputy High Court Judge M Ng (as she then was) granted an interlocutory Mareva injunction in favour of the Plaintiff which contained the Defendant’s undertaking in its Annex 1 and the Plaintiff’s undertaking in Annex 2 of the injunction order.

8.  The Plaintiff then took out a summons for summary judgment on 7 January 2019. The hearing of the summary judgment application and the continuation of the Mareva injunction order were both held on 22 October 2019 before Mr Recorder Manzoni SC.

9.  The learned Recorder dismissed the summary judgment application on the basis that there was a triable issue whether the Mainland Judgment was final and conclusive given the Supreme Court’s Review was pending but continued the Mareva injunction order.

10.  On 20 October 2020, the Supreme People’s Court made an ordered that:

(1)  The Intermediate Court’s Judgment and the Mainland Judgment be revoked (or set aside); and

(2)  The case shall be remitted to the Yangzhou Intermediate People’s Court of Jiangsu Province for retrial.

11.  I think it is important to set out the Chinese wording of the order:

(1)  撤銷江蘇省揚州市中級人民法院(2014) 揚商外初字第00010號民事判決及江蘇省高級人民法院 (2018) 蘇民終112號民事判決;

(2)  本案發回江蘇省揚州市中級人民法院重審。

(the “Supreme Court’s Judgment”) (Emphasis added.)

12.  Further, on 14 January 2021, in view of the Supreme Court’s Judgment setting aside the Intermediate Court’s Judgment and the Mainland Judgment, the Intermediate People’s Court made an order that the enforcement of the PRC Judgment be terminated.  

13.  The Chinese wording of the order is that:

“本院認為，該案件據以執行的法律文書已被撤銷，依據 ‘ 最高人民法院關於執行案件立案丶結案若干問題的意見’ 第十七條第二項，裁定如下:

   終結對江蘇省高級人民法院 (2018) 蘇民終112號民事判決的執行。”

(the “Termination of Enforcement Order”) (Emphasis added.)

14.  Mr Law for the Defendant submitted that it is clear that the foundation or the substratum of the present action, namely the enforcement of a final and binding judgment, has gone or no longer subsist.  I agree.

15.  There is no dispute, as Mr Lai for the Plaintiff quite rightly agreed, first, the Mainland Judgment which forms the cause of action of these proceedings has been set aside or revoked; secondly, the enforcement proceeding in the Mainland has been terminated; and thirdly, the PRC case is now remitted to the Intermediate People’s Court for retrial.

16.  Mr Lai for the Plaintiff referred this Court to the Plaintiff’s Mainland legal expert opinion and stated that there are cases which support the legal proposition that under PRC laws, although a judgment or an order has been set aside or revoked, nonetheless the asset protection measures ordered by the Court can be preserved.  However, I am of the view that even assuming that proposition of law is correct, it is irrelevant to the analysis here.  The Plaintiff can apply for whatever assets protection measures in the Mainland, but the fact remains that the Plaintiff can no longer enforce a final and binding judgment against the Defendant in our courts.

17.  Mr Lai’s second argument is that the retrial in the Mainland is only an order for an account.  Mr Law for the Defendant disputed that.  However, again assuming that Mr Lai is correct on this point, it does not depart from the plain fact that presently there is no final and binding agreement to be enforced.  Pending the retrial, this Court cannot order an enforcement of a judgment sum arbitrarily.

18.  The applicable legal principles on enforcement of foreign judgment under the common law regime is well set out by Madam Justice Lisa Wong in Jiang Xi An Fa Da Wine Co Ltd [2019] HKCFI 2411where the learned Judge at p.20, §52, said as follows:

“52. It is further acknowledged that the traditional criteria for the enforcement of a foreign judgment by action under the common law are that the judgment is:

(1) for a debt or definite sum of money;

(2) made by a court of competent jurisdiction over the parties and the subject-matter;

(3) between the same parties or their privies on an identical issue;

(4) final and conclusive on the merits;

(5) not impeachable according to the rules on conflict of laws of Hong Kong.”

19.  The learned judge went on to explain the meaning of a final and conclusive judgment, at p.21, §55, as follows:

“55. Second, a judgment is final and conclusive if it is not amenable to challenge except by way of appeal. Put in another way, for a judgment to be final, it must be final and unalterable in the court that pronounced it and cannot thereafter be modified by such court. See Nouvion v Freeman (1890) LR 15 App Cas 1 applied in, for example, Lee Yau Wing v Lee Shui Kwan [2007] 2 HKLRD 750 (CA) at [10]-[12], per Cheung JA.”

20.  Further, in a recent case of China NPL Holdings Pte Ltd v Mo Haidan (莫海丹) & others [2020] HKCFI 980, the plaintiff in that case obtained judgments from the Basic People’s Court of Huangpu District, Guangzhou City, Guangdong Province (the “Huangpu Court Judgments”) against the defendant and sought to enforce the same in Hong Kong under the common law regime. However, the defendant successfully applied to the Intermediate People’s Court of Guangzhou for a retrial of the Huangpu Court Judgments: §§7-14. The defendant therefore applied to discharge the Mareva injunction as there was no good arguable case.

21.  On the basis that the Huangpu Court Judgments, same as the present case, were set aside by the retrial orders, Deputy High Court Judge Sherrington at §§42-47 said:

“42. It seems to me there is a clear distinction between a judgment of a foreign court where there is an appeal pending which I accept might be regarded as final and conclusive, notwithstanding the ongoing appellate process in the overseas jurisdiction and the position, as here, where a retrial has been ordered in the overseas jurisdiction such that the original judgment has been set aside, the findings are not binding on the court hearing the retrial and there is therefore no question of the matters being ‘res judicata’.

43. I cannot see how it can be said that a judgment in the second situation is final and conclusive; I accept the evidence of Mr Hu that there is no ‘res judicata’ arising from the original proceedings in the PRC and in the circumstances it would be contrary to common sense as well as to the established principles of Hong Kong Conflict of Laws to regard it as such for enforcement purposes in Hong Kong.

44. Accordingly, I am unable to conclude that P has discharged its obligation to demonstrate a good, arguable claim based on a final and conclusive judgment of the PRC court.” (Emphasis added.)

22.  Although the Court of Appeal subsequently in China NPL Holdings Pte Ltd v Mo Haidan (莫海丹) [2021] 1 HKLRD 344 held that the Huangpu Court Judgments were in fact stayed or suspended, instead of set aside, the Court of Appeal confirmed that a foreign judgment could not be regarded as final and conclusive once it was set aside and Hong Kong courts would not enforce an overturned foreign judgment. Lam VP at §53 said:

“53. In other words, though a foreign judgment subject to an appeal can still be regarded as final and conclusive until they were set aside, this would not preclude the courts in Hong Kong from taking account of the developments in the foreign jurisdiction from which the judgment emanated in deciding what is the proper relief to be granted and the course to take in an action in Hong Kong based on such foreign judgment.

…

57. A fourth scenario is that though the action in Hong Kong was brought when the foreign judgment was valid, it was subsequently overturned on appeal in the foreign appellate court. In that event, subject to the exceptional situation where the appellate judgment was given in tainted circumstances rendering its recognition against public policy in Hong Kong, Hong Kong courts would not enforce the overturned foreign judgment. If judgment has already been entered in Hong Kong based on the overturned foreign judgment, that Hong Kong judgment should be set aside. Mr Chua did not demur from this analysis.” (Emphasis added.)

23.  Hence, as a matter of analysis, I am of the view that the only correct legal position is for the present Writ of Summons and Statement of Claim to be struck out.  The Plaintiff’s pleaded cause of action is solely based on the Mainland Judgment which has now been revoked or set aside. No cause of action subsists.

24.  Mr Lai for the Plaintiff also argued that there are disputes on the correct PRC legal principles on the effects of the revocation of the Mainland Judgment.  However, it is not disputed by the Plaintiff’s Mainland legal expert that the Mainland Judgment has been revoked and its enforcement is terminated.  From Hong Kong Court’s perspective, there is no final and binding judgment of a specific sum to be enforced here in Hong Kong. That should be the end of the analysis.

25.  I note that the Plaintiff might well get another judgment which may be subject to further appeal, but that is not the Mainland Judgment as pleaded in the present Statement of Claim. As such, the Statement of Claim should be struck out.

26.  Similarly, as a matter of logic, upon the striking out of the Statement of Claim, the Reply and the Mareva Injunction Order should also be set aside.

27.  Finally, I like to say that there is no need for this Court to decide whether there is risk of dissipation in the present case as this Court has already ruled that there is no cause of action to support any court action against the Defendant at the present stage.

28.  However, the Court is keenly aware of the Plaintiff’s case that there is a risk of dissipation of assets if the Statement of Claim is struck out and the Mareva Injunction Order is set aside.  If indeed the Plaintiff has such concerns, it is up to the Plaintiff to obtain proper legal advice to see how its position can be protected in the interim period pending the retrial in the Mainland. The Plaintiff may or may not be able to successfully apply for proper relief under Section 21M of the High Court Ordinance, Cap 4. It is something for the Plaintiff to consider.

DISPOSITION

29.  For all the reasons stated above, I make an order in terms of the Defendant’s Summons dated 1 March 2021.

30.  I also make a cost order nisi that the Plaintiff is to pay the costs of and occasioned by the Defendant to be taxed and paid forthwith, on a party to party basis if the parties cannot reach agreement on costs. The cost order nisi will be made absolute if no application is taken out to vary the same within 14 days herein.

31.  This Court thanks Mr Lai for the Plaintiff and Mr Law for the Defendant for their helpful assistance.