XCHRX CEF NEW ASIA CO. LTD. v. CEF NEW ASIA CO. LTD.

HCA 374/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 374 OF 1998

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J U D G M E N T

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1. This is an appeal out of time by the defendant against the order of Master Poon granting summary judgment in favour of the Plaintiff against him.

2. The order against the defendant was made on 11th January 1999. The solicitors acting for the defendant erroneously thought that the time limit for appealing against the order was 14 days instead of 5 days.

3. As the delay was short and was caused purely by the inadvertence of the defendant's solicitors, it is perhaps right that such delay ought not have any adverse impact on the defendant's case. In any event, Ms. Rattigan on behalf of the plaintiff is not taking any issue on the delay. I shall therefore take no notice of the delay and proceed with the matter purely on its merits.

4. The plaintiff's claim against the defendant is based on a judgment obtained against the defendant in Taiwan. The judgment was granted on 30th of September 1996 by the Tainan District Court of Taiwan and the defendant was ordered to pay to the plaintiff the sums of NT$52,596 and US$62,500 together with interest thereon at the rate of 5% per annum from the 19th January 1996 until payment together with costs of the proceedings.

5. On 31st May 1997, the Tainan District Court of Taiwan confirmed that the said judgment was final and conclusive. The judgment remains unsatisfied.

6. There is no dispute as to the transaction giving rise to the judgment in question. The validity of the judgment and that it is final and conclusive are also not in issue.

7. The only issue raised in the defence is that Hong Kong Courts do not and should not recognise the status, existence or competence of any court in Taiwan. The suggestion is that Hong Kong, as part of the People's Republic of China only recognises the People's Republic of China as the only China. In the circumstances, any judgment of the court in Taiwan is not recognised and should not be enforced in Hong Kong.

8. The enforcement of orders of Taiwan court was first considered in Ku Chia Chun & ors. v. Ting Lei Miao & ors. [1998] 3 HKC 119. At page 128 of the judgment, Mortimer VP makes the following observation: -

"As Taiwan is a province of the PRC, foreign affairs are not involved. Further, this case does not concern defence in any way. However, the recognition of a rebel government in control of national territory is a matter for the executive at common law whether or not this is provided for in the Basic Law. In consequence I would hold that if recognition of the Taiwanese court -contrasted with giving effect to an order of that court - is essential to our decision questions must be addressed to the Chief Executive. Only if this appeal can be determined on a worst case scenario should we undertake an adjudication. Initially I would approach this appeal, therefore, on the basis that Taiwan is a province of the PRC presently under the control of a rebel government without recognition of any kind..."

and at Page 130: -

"But Taiwan is not a foreign country. The common law principles concerning sovereignty and recognition either de jure or de facto of foreign governments are not directly in point. Of course, on questions of sovereignty and recognition, whether domestic or foreign, the courts and the executive must speak with one voice. So far as this appeal is concerned therefore the position is fundamentally different from that at first instance before 1 July 1997. We must approach our decision on the basis that Taiwan is subject to PRC sovereignty, and that the government of Taiwan has no legal foundation, but it is allowed - temporarily at least - to remain in effective control. The Taiwanese courts which made the orders relevant to this appeal are not recognised by the Hong Kong courts."

9. Relying on the aforesaid observation, Mr. Shum, on behalf of the defendant suggests that as courts in Taiwan are not recognised in Hong Kong, judgments or orders of the Taiwan court are also not recognised nor enforceable in Hong Kong.

10. Mortimer VP in Ku Chia Chun's case clearly draws a distinction between the recognition of the Taiwanese court and the giving effect to an order of that court. Despite the non-recognition of the Taiwan court, the Court of Appeal, by a majority decision recognises the validity of a bankruptcy order made by a Taiwan court which order appointed the trustees in bankruptcy. The Court of Appeal also recognises the existence and status of such trustees appointed by the Taiwan court.

11. The majority decision of the Court of Appeal is based inter alias on the judgment of Lord Wilberforce in Carl Zeiss Stiftung v. Rayner & Keeler Ltd (No.2) [1967] 1 AC 853 where he states at 954: -

"My Lords, if the consequences of non-recognition of the East German 'government' were to bring in question the validity of its legislative acts, I should wish seriously to consider whether the invalidity so brought about is total, or whether some mitigation of the severity of this result can be found. As Locke said: 'A government without laws is, I suppose, a mystery in politics, inconceivable to human capacity and inconsistent with human society.' and this must be true of a society - at least a civilised and organised society - such as we know to exist in East Germany. In the United States some glimmerings can be found of the idea that non - recognition cannot be pressed to its ultimate logical limit, and that where private rights, or acts of everyday occurrence, or perfunctory acts of administration are concerned (the scope of these exceptions has never been precisely defined) the courts may, in the interests of justice and common sense, where no consideration of public policy to the contrary has to prevail, give recognition to the actual facts or realities found to exist in the territory in question."

12. At page 133 Mortimer VP makes the following observation; -

"Having regard to this extensive body of persuasive albeit obiter authority, I accept the existence of a common law principle that a limited range of acts by those actually in control of a territory but without any lawful validity or authority may be recognised and acted upon by the Hong Kong courts on the basis that the sovereign power has in interest in the proper regulation of the affairs of its subjects within the territory concerned provided that the relevant acts do not directly help the usurper, are not contrary to public policy, and are not inimical to the rights of the lawful sovereign."

13. Mr. Shum argues that there should be a distinction between the recognition of a bankruptcy order and the enforcement of a judgment of the Taiwan court. With respect, I do not see any difference between the two. Both involve the carrying out of the order of the Taiwan court. In my view, the importance lies not in the nature of the order that is being recognised or enforced. The importance lies in whether the recognition and/or enforcement of the order will be "directly helping the usurper, contrary to public policy and inimical to the rights of the lawful sovereign."

14. I cannot ignore the fact that the defendant had signed a memorandum with the plaintiff in which he agreed to purchase shares from the plaintiff at the price to be determined in accordance with the memorandum. The defendant was represented by lawyers at the trial. He had clearly submitted to the jurisdiction of the Taiwan court and the judgment against him was made after the due process.

15. There is no suggestion that the enforcement of the judgment would constitute helping the usurper. There is no suggestion that it would be contrary to public policy or inimical to the right of the lawful sovereign. Indeed, in my view, it will be contrary to public policy if the judgment in question is not allowed to be enforced against the defendant.

16. Ms. Rattigan draws the attention of the court to the recent announcement of the Supreme People's Court of the People Republic of China concerning the recognition by the People's Court of civil judgment delivered in Taiwan. Subject to certain exceptions, the judgment of courts in Taiwan is recognised and can be enforced in China as from 26th May 1998 under "The Rules of the Supreme People's Court concerning the recognition by the People's Court of Civil judgments delivered in Taiwan District".

17. This aspect is also referred to by Godfrey JA in Ku Chia Chun's case when he said at page 137: -

"In my judgment, the People's Republic of China, the lawful sovereign here, should be treated as recognising the same necessity for the exercise of a bankruptcy jurisdiction by the courts of Taiwan as it would recognise for Hong Kong or for any other part of its territory. As we are reminded in the Preamble to the Constitution of the People's Republic of China:

'Taiwan is a part of the sacred territory of the People's Republic of China. It is the lofty duty of the entire Chinese people, including our compatriots in Taiwan, to accomplish the great task of reunifying the motherland.'

It would be, as it seems to me, entirely inconsistent with this aspiration for a court in our part of the People's Republic of China to refuse to recognise the orders in bankruptcy of a court of competent jurisdiction in what the People's Republic of China regards as another part, especially since (as I understand) the mainland courts are themselves expected to recognise Taiwanese judgments."

18. I feel myself bound by the majority decision of the Court of Appeal in Ku Chia Chun's case. The enforcement of the judgment of the court in Taiwan is in the interests of justice and common sense and not contrary to public policy. It does not help any usurper and is not inimical to the rights of the lawful sovereign.

19. I also agree with Ms. Rattigan's observation that the judgment of the Taiwan court should be regarded as creating a debt between the plaintiff and the defendant and that the defendant's liability arises on an implied promise to pay the amount of the judgment. I am satisfied that there is no arguable defence to the plaintiff's claim and that Master Poon had come to a correct decision in granting summary judgment in favour of the plaintiff.

20. In the circumstance, the appeal must be dismissed and I so order.

21. I also make an order nisi that the defendant is to pay the plaintiff costs of this appeal to be taxed if not agreed. The order nisi on costs will be made absolute 14 days after the handing down of this judgment.