ASTRO NUSANTARA INTERNATIONAL B.V. AND OTHERS v. PT AYUNDA PRIMA MITRA AND OTHERS

HCCT 45/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 45 OF 2010

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BETWEEN

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REASONS FOR DECISION

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1.  I would use the same abbreviations that I adopted in my Decision and Reasons for Decision dated 21 March 2012 (“the Decision”).

2.  This is an application by the garnishee, AAL: (i) for leave to appeal against my decision dated 21 March 2012, ordering that, inter alia, pending the final determination of the Singapore Setting Application, AAL shall pay all sums due and payable, as they become due and payable, to First Media into court (“the Order”); and (ii) for a stay of the execution of the Order pending the final determination of the appeal.  In the hearing on 30 March 2012, I allowed both applications by AAL and I now give my reasons.

3.  The background of this case has already been set out in the Decision and I do not want to repeat the same here.

APPLICATION FOR LEAVE TO APPEAL

(i) Arguments put forward by AAL in the hearing on 15 March 2012

4.  The main focus in the hearing on 15 March 2012 was whether the court should stay the Hong Kong Setting Aside Application pending the final determination of the Singapore Setting Aside Application.  In the hearing, I allowed such application by Astro.

5.  There was no dispute that the garnishee order absolute application (“the Absolute Application”) should be adjourned and heard after the final determination of the Hong Kong Setting Aside Application, and so the other issue in the hearing on 15 March 2012 was whether I should order AAL to pay the debt it owed to First Media into court pending the result of the Absolute Application.  In the Decision handed down on 21 March 2012, I allowed Astro’s application and made an order to that effect.  This Order is the subject of this appeal.

6.  AAL was represented by Mr Barber of the garnishee’s solicitors in the hearing on 15 March 2012.  In that hearing, the arguments put forward by Mr Barber to oppose the Order are simple.  Firstly, AAL is objecting the making of a garnishee order absolute on the ground that a Hong Kong garnishee order will not extinguish the underlying debt owed by AAL to First Media, which is governed by Indonesian law, because the Hong Kong court order will not be recognised by the Indonesian courts.  In such circumstances, there is a danger that AAL may have to pay the debt twice.  According to Mr Barber, AAL was mainly relying on this “double jeopardy” argument to oppose the making of the Order.  Secondly, no evidence has been adduced by Astro to justify why such security is needed.  Only one case was included in the AAL’s then list of authorities: Deutsche Schachtbau-und Tiefbohrgesellschaft mbH v Shell International Petroleum Co Ltd [1990] 1 AC 295.

7.  With a view to support AAL’s case, Mr Dawes, counsel for First Media in the hearing on 15 March 2012, referred me to the case of Karaha Bodas Company LLC v Persusahaan Pertambangan Minydak Dan Gas Bumi Negara, unreported, HCCT No 28 of 2002 (decision of Burrell J on 20 December 2002) and argued that the court should not make an order requiring the payment of the debt into court, as it would require AAL or First Media to bring in more assets from overseas to Hong Kong which would be unfair to them.   Although Mr Dawes expressed doubt in the course of his argument as to whether the court does have jurisdiction to make the Order, it is clear from the judgment in the Karaha case that Burrell J’s decision was one based on the exercise of discretion.

8.   I did raise the jurisdiction issue in the hearing, but regrettably, no argument had been put forward by Mr Barber as to why the court does not have jurisdiction to make the Order.

9.   AAL does not dispute the liability under the debt.  Further, Mr Barber accepted that the garnishee, AAL, is within the jurisdiction for the purpose of O 49 r 1 of the RHC, which is the jurisdictional basis for the court to make the Order against AAL.  Based on such position, I decided to exercise the discretion to order AAL to pay the debt into court.  In the Decision, I have dealt with all the arguments put forward by Mr Barber to oppose the Order, and I do not want to repeat my reasoning here.

(ii) New arguments put forward by AAL in the intended appeal

10.  Taking into account such background, I am quite surprised when I look at the draft Notice of Appeal settled by Mr Sussex SC and Ms Lok, counsel appearing for AAL in the intended appeal proceedings.  In this application for leave to appeal, Mr Sussex relies on new arguments and has included 10 cases in his list of authorities.  None of them was referred to me in the earlier hearing.

11.  As I see it, the new arguments of AAL are based on the following three main grounds.

12.  Firstly, the Order is in effect a mandatory Mareva injunction requiring AAL to bring assets within the jurisdiction pending the final determination of the Singapore and Hong Kong Setting Aside Applications and the Absolute Application.  Although the court may exercise its jurisdiction in personam against any party properly joined as a party before the court to give this kind of drastic relief, the court may only do so in exceptional circumstances.  Relying on the dicta of Staughton LJ in Derby & Co Ltd v Weldon (No 6) [1990] 1 WLR 1139 at 1153A-E, 1153G-H, 1154C-E, 1154G-H and 1155A-C, AAL contends that there are no exceptional circumstances justifying the making of the Order.

13.  Secondly, as charging order and writ of fi fa can be made and issued against the fund in the court, the making of the Order would have the effect of pre-judging the Absolute Application and the Singapore and Hong Kong Setting Aside Applications.

14.  Thirdly, AAL now contends that the court does not have jurisdiction to make the Order for the following three reasons.

15.  The first reason is that, relying on the dicta of Lord Bingham in Société Eram Ltd v Cie Internationale de Navigation [2004] 1 AC 260 at 270D-F, the Order by its own terms is contradictory to the very nature of the garnishee proceedings, as the garnishee is only liable to pay the debt to the judgment creditor when the garnishee order is made absolute.

16.  The second reason is that a garnishee order absolute is a proprietary remedy which operates by way of attachment against the property of the judgment debtor, rather than a right in personam against the garnishee.  That is why the court will not make absolute a garnishee order where it will not operate to discharge the garnishee in whole or pro tanto from the debt (see the dicta of Scrutton LJ in Swiss Bank Corpn v Boehmische Industrial Bank [1923] 1 KB 673 at 680-681).  A fortiori, says AAL, it is wrong for the court to order AAL to make payment of the debt into the Hong Kong court before the final resolution of the Absolute Application and the Singapore and Hong Kong Setting Aside Applications.

17.  The third reason is that, since the situs of the debt is in Indonesia, it has been authoritatively held by the House of Lords in Eram that the court has no jurisdiction to make a garnishee order over a foreign debt when it appears that, as a matter of law, the garnishee may not be discharged from his liability in respect of the debt pro tanto under the lex situs (see the dicta of Lord Bingham in Eram at 276A-E).

18.  According to Mr Sussex, the argument about the situs of the debt is quite different from the argument of double jeopardy, the latter of which was the main, if not the only, ground relied on by Mr Barber to oppose the Order.  In the course of the argument, Mr Barber did not even bother to refer me to the relevant passages in the Hong Kong Civil Procedure 2012. In the hearing on 15 March 2012, I myself took the initiative in referring the parties to the following passage in the White Book at §49/1/8:

“The garnishee must be within the jurisdiction. … … … There is no limitation that the garnished debt must be properly recoverable within the jurisdiction. As a matter of discretion, however, the court will not garnish a debt where, although the garnishee is within the jurisdiction, the debt is recoverable outside the jurisdiction, if to do so may expose the garnishee to the risk of having to pay the debt, or part of it, twice over … … … To resist an order, the garnishee must show that such risk is real or substantial; the reality of the risk will be more readily assumed where the situs of the debt is outside the jurisdiction … … … In so far as Richardson v Richardson [1927] P. 228 goes further, and decides that there is no power to garnish a debt situate outside the jurisdiction, it must be taken to be wrongly decided in the light of the Court of Appeal’s reasoning in S.C.F. Finance Co. Ltd v Masri (No 3) [1987] QB 1028 and Interpool Ltd v Galani [1988] Q.B. 738 … … …”

19.  This passage clearly indicates that the court still has a discretion to garnish a debt even if the situs of the debt is outside the jurisdiction.  However, Mr Sussex now submits that such proposition of law stated in the White Book is incorrect in the light of the House of Lords’ decision in Eram, which held that the court does not have such jurisdiction.  Again, this is a completely new argument, and regrettably, I was not referred in the earlier hearing to the Eram case, which is now one of the main authorities relied on by AAL in support of the appeal.

(iii) Astro’s arguments to oppose the leave application

20.  Mr Smith SC, counsel for Astro, opposes AAL’s application for leave to appeal.  Firstly, he submits that the court was exercising a discretion to order AAL to pay the debt into court in the earlier hearing. It is trite law that the appellate court would not generally interfere with the exercise of  discretion of the lower court, and so AAL’s appeal has no reasonable prospect of success.  Secondly, relying on the dicta of Lord Hobhouse in Eram at 287F- 288A and the fact that AAL also carried on business in Hong Kong, the situs of the debt should be in Hong Kong. Thirdly, all the cases relied on by AAL relate to the question as to whether the court should make a garnishee order absolute in the circumstances.  In the present case, Astro are not asking the court to make the order absolute at this stage, nor are Astro asking AAL to pay the debt directly to them.  Under the Order, Astro do not have any right in the fund in the court, and the court is only exercising the wide case management powers under O 1B of the RHC to order AAL to pay the debt, which is subject to the attachment by reason of the garnishee order nisi, into court pending the Absolute Application.  Taking into account that AAL would suffer no real prejudice and Astro have a legitimate concern about the financial position of AAL, it would only have been just and fair for the court to order AAL to pay the debt into court when it is due for payment.

(iv) Reasons for granting the leave to appeal

21.  Whilst I agree that the appellate court would not generally interfere with the exercise of discretion of the lower court, I was not then aware of the new arguments and authorities in making the Order on 21 March 2012.  Naturally, I have not addressed these new arguments in the Decision.  As the lower court has not considered these new arguments in the exercise of discretion, it is quite possible that the appellate court would interfere with my decision and exercise the discretion afresh.  Further, whilst Mr Barber has not relied on the “jurisdiction” arguments in the earlier hearing, Mr Sussex now lodges a new attack on such issue with full force.  Although I am deeply frustrated with the manner in which AAL had conducted the case and the poor assistance that Mr Barber had provided to this court, the fact that I have not dealt with these “jurisdiction” arguments in the Decision is a good reason to justify the granting of leave to appeal.  I therefore did so in the hearing.

APPLICATION FOR STAY OF EXECUTION

22.  The next issue is whether the court should grant a stay of execution pending appeal.  According to the Court of Appeal’s decision in Caine Tai Investment Co Ltd v Ayala International Finance Ltd [1983] 1 HKC 163, the court has an unfettered discretion in this regard.

23.  In Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84, Ma J, as he then was, had laid down some guidelines for the exercise of such discretion.  As observed by Ma J, it is impracticable and undesirable for the court in dealing with a stay application to go deeply into the merits of the appeal, and so I do not propose to address the merits of every new argument put forward by AAL.  However, the fact remains that I did not have the opportunity to deal with the new arguments and the authorities in the Decision, and so the appellate court would have to consider the arguments afresh with the result of increasing the chance of a successful appeal. In my judgment, this alone would justify a stay of the execution of the Order.

24.  As conceded by Mr Sussex, I was not adequately assisted in the earlier hearing.  In fact, in light of the new arguments now included in the draft Notice of Appeal, I must say that the level of assistance given to me in the earlier hearing was minimal.

25.  I have considered the question as to whether the manner in which AAL conducted the case would justify the refusal of the stay of execution.  In order to achieve the underlying objectives as specified in O 1A of the RHC, including increasing costs-effectiveness of litigation and ensuring that a case is dealt with as expeditiously as is reasonably practicable, legal representatives have a duty to ensure that the full arguments of their respective client’s case are presented to the court in the first instance hearing with the support of adequate authorities.  Failing to do so may lead to unnecessary appeals and waste of time, costs and judicial resources.  Regrettably, this is what happens in the present case.

26.  Despite such observation, I agree with Mr Sussex that such concern should be taken care of by an appropriate award of costs in due course, rather to make an order affecting the legitimate rights of the parties such as refusing a stay of execution.  I therefore allowed AAL’s application for stay of execution in the hearing on 30 March 2012.  As the Court of Appeal will have to look at the whole case again, I reserved the question of costs to the appellate court for determination.