STILWELL DEVELOPMENTS, INC AND ANOTHER v. WING WAH CHONG INVESTMENT CO. LTD.

1988 No. A6643

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. The plaintiffs claim against the defendant on a foreign judgment given in California. Two personalities had been closely involved, Mr Stilwell and Mr Chen. Mr Stillwell is the director of the 1st plaintiff. Together with his daughters and his wife, they own the 1st plaintiff company which is a manufacturer of travel smoke alarms. The 2nd plaintiff of which Mr Stilwell is the President, is the distributor.

2. The dispute arose from certain alleged oral agreement between the plaintiffs and the defendant, upon which the plaintiffs sued in California. The trial took about 5 weeks, and over 3 weeks were spent on evidence before a jury. The jury returned a verdict dismissing some claims and allowing others. The claims filed against the defendant by the plaintiffs are : breach of oral contract, fraud, intentional interference with economic advantage, negligence interference with economic advantage and bad faith denial of contract. The sum awarded in the verdict of the jury came to about US$2.66M.

3. A procedure was adopted whereby the parties came before Magistrate King after verdict. It could best be called, in fact, it is so called, by its initials "JNOV", meaning Judgment Notwithstanding Verdict. Magistrate King entertained submissions or had the parties attending him. Eventually the plaintiff acceded to certain condition s and judgment was pronounced to be in the region of US$1.46M, which was recorded in what is known as Civil Minutes on the 11th August 1988. Final judgment in the same sum was granted on the 15th. Before Magistrate King, an application for a stay was made but which was refused. After final judgment, the defendant in the Californian action appealed. No application for a stay was made. As I understand from Mr Porie, counsel for the defendant, the defendant company has little assets in Calfornia and there was no point to waste good money after bad in seeking a stay.

4. The plaintiffs wasted no time in taking advantage of the Californian judgment. They instituted the instant action against the defendant. The plaintiffs took the matter before the Master on an 0.14 application. The master granted judgment against the defendant. The defendant feels aggrieved, hence this appeal.

5. Before me, Mr Pirie, counsel for the defendant, took, in essence, three points. First, it is suggested that the action in California was maintained in part or wholly by one Mr William Cahill. It transpired that Mr Cahill had a previous transaction with the defendant in which he allegedly lost some US$200,000. Mr Cahill had allegedly been overheard to admit financing the Californian proceedings against the defendant to the tune of some US$210,000 - 219,000. It is claimed that Mr Cahill was motivated by an unfounded sense of vengeance upon Mr Chen. For the purposes of the present argument, I am to accept, prima facie, that Mr william Cahill did so maintain wholly or in part and to that extent, the Californian proceedings.

6. Returning to the first point of Mr Pirie, it is contended by counsel that because of such alleged maintenance by Mr William Cahill of the California proceedings, this Court should frown at the conduct of the plaintiffs as well as that on Mr Cahill. The manipulation, so Counsel submits, infringes our concept of substantial justice. It is conceded that the common law offences of maintenance and champerty have been abolished by the Criminal Justice Act 1967 with a reservation in s.14 (2) which provides that the abolition shall not affect the rule of the law as to cases in which a contract is to be treated as contrary to public policy or otherwise illegal.

7. The Court has been invited to view the proceedings in California, putting on the Hong Kong spectacles. In Hong Kong, the common law offences have not been abolished. There should be all the more reason, so counsel urges upon this Court, for me to adopt a robust attitude in cases where maintenance is alleged to have been afforded.

8. I am the first to confess that I appreciate little of the legal subtlety or procedure of American litigation. I should not be taken as passing any oblique derogatory observation on litigation overseas. It is a matter of utter ignorance. The verdict given by the Californian jury has been curtailed by Magistrate King under the proceedings of "JNOV", upon which Civil Minutes were issued and final judgment was granted.

9. Mr Pirie, counsel for the defendant submits that it is not a question of fraud in the cause of action bur it is a matter of collateral fraud in the sense that when one examines the whole situation against our local concept, one would find it repugnant and objectionable to allow a judgment given in the circumstances I have described to be enforced by a civil action in Hong Kong. It is a well known fact, as it is conceded by Mr Pirie, that maintenance in America is no crime nor is it an offence on France. This can be seen from the case of Re Trepca Mines, Ltd.[1962]3 All E.R. 351 at p.354 I and p.356 A. What can be objectionable is when maintenance otherwise lawful overseas has spilt over or permenated through to proceedings conducted in the courts of Hon Kong. Granted, Mr Cahill allegedly maintained the California proceedings, but it is permissible in California and the controversy was properly dealt with and determined, a jury, verdict was returned, which was modified and on which ultimately a judgment was issued. So much so, the defendant has lodged an appeal and Counsel has given an explanation as to why no application for a stay was made. Proceedings were conducted effectively, lawfully and without the slightest moral objection in a jurisdiction which approves of maintenance. I cannot find anything which would infringe our sense of substantial justice. The fruit of judgment obtained in proceedings in California is not one which this Court should find distasteful to uphold and enforce. Therefore, in the narrow ambit, Mr Pirie's submission fails.

10. Insofar as it is advanced as a collateral fraud sought to be supported by at least four sub-grounds, counsel invites the Court to take into the consideration (a) the cessation of registration of the 1st plaintiff though subsequently reinstated, (b) the maintenance of the Californian proceedings by Mr William Cahill driven by a malacious motive, (c) the dubious cause of action built on an oral agreement together with the unusal relief claimed in the California action and further (d) the two plaintiffs Oregon companies being not legal entities resident in California and possessing no assets in that region. None of these matters in a broader sense has, in my view, the effect of introducing an element of collateral fraud so as to disentitle the plaintiffs from enforcing the Californian judgment by a civil action in the courts of Hong Kong. That is in totality the third point of Mr Pirie.

11. Mr Pirie submits a further point, i.e. that the Californian judgment has no or no clear finality. The proceedings before Magistrate King could be understood as reopening the verdict of the jury. However, the Civil Minutes were issued after the proceedings before Magistrate King and a final judgment was, in fact, granted. An appeal has been lodged. I must accept that the American judgment is, though pending an appeal to a higher tribunal, final for the purposes of enforcement in a civil court in Hong Kong.

12. Broadly speaking, taking into consideration all that been said by counsel for the defendant, there is nothing in the Californian proceedings nor the judgment given therein so contrary to our notion of substantial justice as to warrant curial intervention.

13. Mr Pixie, Counsel for the defendant, has made the best of a very bad case. In the result, the appeal by the defendant against the determinations of the Master on the 0.14 application must be dismissed and I so dismiss it with costs to the plaintiffs. I am told that certain costs have been reserved on an application by the defendant for a stay pending appeal to this court from the Master's decision. Cost for an application for a stay, to my understanding, should always be paid by the appellant unless circumstances are exceptional. Mr Pirie has been fair enough not to resist the application of Mr Lewis for costs of those proceedings to be also made against the defendant in favour of the plaintiffs. I so order.