AUTONOMOUS NON-COMMERCIAL ORGANIZATION “ORGANIZING COMMITTEE OF XXII OLYMPIC WINTER GAMES AND XI PARALYMPIC WINTER GAMES OF 2014 IN SOCHI” v. PICO PROJECTS (INTERNATIONAL) LTD

HCA 359/2019

[2020] HKCFI 955

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 359 OF 2019

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D E C I S I O N

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1.  In these proceedings, the plaintiff makes applications under Order 14 and Order 14A of the Rules of High Court to enforce a final judgment against the defendant, made by a State Court of the Russian Federation, in the sum of USD2,640,874.60.

2.  The defendant in response has asserted that since the plaintiff’s claim is for the enforcement of the revenue law of the Russian state, that the Hong Kong Court lacks jurisdiction to entertain it. 

3.  The primary issue before the Court is therefore whether the enforcement of the Russian judgement offends the rule of Hong Kong law to the effect that foreign penal and revenue laws are not enforceable through the Hong Kong Civil Courts.

4.  Counsel for the defendant, Mr Smith SC, in his written submissions has asserted that “this is certainly not material suitable for summary disposal”.  Furthermore, the affidavit filed by Gillis Lockwood Heller in opposition to the plaintiff’s summons states that:

“7. I am informed by Tanner De Witt and believe that an Order 14 application for summary judgment is not appropriate as there are issues of law which ought to be tried in Court.”

Thus alerted the Court raised this preliminary issue with Counsel as to whether this matter could appropriately be dealt with by way of summary procedure.

5.  The dicta in Rockwin Enterprises Ltd v Shui Yee Ltd [2003] 3 HKC 174 makes clear that the Court has a residual discretion whether to embark on a question under Order 14A, and that much will depend on the perception and instinct of the judge seized of the matter.  Furthermore, issues of foreign law are not appropriate for determination under Order 14A as they are questions of fact, not law; Nativivat v Nativivat [2012] 3 HKLRD 747, at paragraph 28.  The Court considered the following matters with Counsel.

6.  First, the plaintiff’s claim is that the juridical basis of its claim against the defendant is the Russian law of unjust enrichment, and that the provisions of Russian tax law are essentially background and as such are irrelevant to this dispute.  The defendant’s position, however, is that the plaintiff’s unjust enrichment claim in substance gives effect to the Russian tax code and as such gives effect to the plaintiff’s obligation to withhold money as a tax agent of the Russian tax authorities.  Thus, this offends the rule that foreign penal and revenue law is not enforceable in Hong Kong Civil Courts.

7.  Whether a foreign penal or tax law is relevant or irrelevant to a private liability is a matter where fine lines may sometimes have to be drawn.  Mr Stock SC for the plaintiff fairly conceded that he was unable to say that this was an easy point in this matter and referred me to Johnson & Harris, the Conflicts of Laws in Hong Kong, 3^rd edn, at paragraph 4.012, which provides examples of this and concludes that the line in this matter is not a precise one.

8.  In this regard, Mr Smith in answer to the Court’s query as to whether there was an issue of foreign law was somewhat equivocal, but he said if there was, then there was a possibility that expert evidence may be needed in respect of this matter.  Mr Stock, however, submitted that the Court looks at the Russian judgment for propositions of Russian law and then decides as a question of Hong Kong law whether enforcement falls foul of the rule giving effect to foreign penal and revenue laws.  He further submitted that the Court is informed as to the relevant Russian law as the same is set out in the Russian judgment.  Furthermore, that the burden having shifted to the defendant to establish it has an arguable case, that the defendant has raised no issue of fact, and questions of foreign law are questions of fact.

9.  In my view, Mr Stock’s approach is the correct one.  First, I think the Court within the ambit of Order 14A proceedings is able to discern the “fine line” as to whether foreign penal or tax law is relevant, from consideration of the Russian judgment, and the authorities on the subject.  More importantly, although the defendant has asserted in evidence that there are issues of law which ought to be tried in Court, it has never, upon analysis, stated or formulated what those issues of law might be, or why they need to be tried in Court.  As noted Mr Smith did not further develop this position and thus the Court is left with no evidence and no unequivocal assertion that there is in fact any question of foreign law to be determined.

10.  Second, Mr Stock has submitted that there are no factual disputes in this case.  As noted by Recorder Ma SC (as he then was) in Rockwin Enterprises Ltd, supra, where the Court is not seized of all the relevant facts, it would be an extremely rare case (if ever) in which the procedure under Order 14A would be adopted.

11.  Paragraph 5 of the Statement of Claim asserts:

“…In or around early November 2014, the Plaintiff discovered that when calculating the Payment Sum, it had erred in failing to withhold from the Payment Sum certain sums relating the Defendant’s tax liabilities that the Plaintiff was required to withhold under Russian law. As a result, the Plaintiff had overpaid to the Defendant in the sum of USD2,460,630.47 being the amount which should have been deducted from the Payment Sum before the payments were made to the Defendant…”

In paragraph 5 of the Defence, these pleas are not admitted.

12.  Mr Smith submits that these matters (which are the foundation of the plaintiff’s claim) are factual matters yet to be determined and as such the Order 14A procedure is inappropriate.  He further submits that the fact of payment has not been averred and that in itself would need to be pleaded.

13.  Mr Stock submits that everything in the Russian judgment is res judicata including broad factual findings related to the alleged overpayment to the defendant.  In my view this is correct.  (This point was not included in Mr Stock’s written submissions.)  Mr Stock further refers to Fabiano Hotels Ltd v Profitmax Holding Inc & Others [2017] 6 HKC 414 for the proposition that a foreign judgment which is res judicata would be recognized or enforced if the judgment is final and conclusive, subject to narrow defences.  In the present case, the Russian judgment is final and conclusive on the merits and thus despite the non-admissions found in paragraph 5 of the Defence, there does not appear to me to be any outstanding factual disputes.

14.  Third, Mr Stock submits that the issues to be resolved are “crisp issues of law”.  I do not entirely agree that this well-known characterisation applies in this case. The cases cited by Counsel for both parties are frequently divergent and the resolution of this matter based on these authorities is no easy matter.  However, Mr Smith did not raise any concerns as to this and I am confident, given the calibre of Counsel involved in this case, that the Court will be fully able to resolve this matter based on the authorities provided by Counsel.

Conclusion

15.  Upon first reading into this case, which is a complicated matter involving Russian revenue law and Russian law relating to unjust enrichment, and in view of the position taken by the defendant, my initial instinct was to question whether this was an appropriate case for summary disposal.  However, having sought Counsel’s assistance with regard to these concerns and taking an overall view and the context in which this matter has arisen, I think that this is an appropriate matter to be dealt with summarily under the Order 14 and Order 14A procedure.

16.  In respect of the costs of the hearing on 21 May 2020 as noted, the preliminary question of whether this matter was suitable for summary disposal was originally raised in the defendant’s evidence and by Mr Smith.  This question has now been decided against the defendant. In these circumstances, the proper order is an order nisi, that the costs of and occasioned by the hearing on 21 May 2020 be to the plaintiff, to be taxed if not agreed.