XCHRX KOREA DATA SYSTEMS, CO. LTD. AND ANOTHER v. JAY TIEN CHIANG AND ANOTHER

HCA9265/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.9265 OF 2000

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J U D G M E N T

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Introduction

1. In May 1994, the plaintiffs commenced proceedings against the defendants in the Superior Court of the State of California for the County of Orange, USA for breach of contract in the sum of US$4,550,000 and for unpaid invoices in the sum of US$2,150,000. The defendants were represented and took part in the proceedings. Shortly before trial, they acted in person. The trial took place on 26 January 1998. The 1st defendant did not appear. The 2nd defendant did appear and gave evidence. After trial, the California Superior Court on 20 April 1998 gave judgment for (1) the 1st plaintiff against the defendants for US$4,550,000 with interest totalling US$6,400,916; and (2) the 2nd plaintiff against the defendants for US$2,150,000 with interest totalling US$3,027,916 ("the California judgment").

2. The plaintiffs brought the present action in Hong Kong to enforce the California judgment. On 30 March 2001, the learned master, after hearing the parties, gave summary judgment for the plaintiffs. The defendants now appeal.

Evidence before the master

3. The 1st defendant is a Canadian and at all material times resided in Canada. At the hearing before the learned master, he relied on his first affirmation dated 12 December 2000. In brief, he denied the validity of the California judgment and contended that it was not binding on him. He had a strong defence to the plaintiffs' claims in the California proceedings and had instructed a lawyer to defend the action. But he was later dissatisfied with the lawyer's performance. He then acted in person. Sometime in 1998, knowing that the trial was to take place, he sought advice from some lawyers in California as to the consequences of not attending the trial. He gathered that judgment would be entered in his absence. But the judgment could only be enforced in other jurisdictions if the plaintiffs commenced a separate action in those jurisdictions. He was either advised or led to believe by the lawyers that he would be entitled to raise his defence to the plaintiffs' claims in the action to enforce the judgment in other jurisdictions as if it were commenced for the first time. As he did not have time to retain another attorney to represent him, he decided to wait until the plaintiffs sued to enforce the judgment against him in other jurisdictions. He would then raise his defence.

4. The 1st defendant went on to say that the plaintiffs did sue in Ontario to enforce the California judgment but so far had been unable to obtain a judgment for enforcement of the same.

5. The draft defence exhibited to the 1st defendant's affirmation raised two grounds of defence. First, he did not appear in the California action or otherwise submit to the jurisdiction of the California Superior Court. Secondly, he had no opportunity of being heard during the trial. The California judgment was therefore obtained contrary to natural justice.

6. The 2nd defendant relied on his third affirmation filed on 16 December 2000. He is the elder brother of the 1st defendant. At the material times, he resided in Irvine, California, USA. In short, he complained that for some unknown reasons, the 1st defendant failed to appear for trial but the California Superior Court did not adjourn the trial. Consequently, he was unable to adduce some material records and documents kept by the 1st defendant. Thus the California Superor Court had failed to consider all the relevant evidence before coming up with its judgment. The California judgment was in the circumstances obtained in breach of natural justice.

7. The 2nd defendant denied that the California judgment is final and conclusive or is valid and binding on him. But he did not elaborate on the grounds in support. Nor was this point pleaded in the draft defence exhibited to his affirmation.

8. None of the defendants had adduced any expert evidence to support their challenge on the enforceability of the California judgment in Hong Kong.

9. In reply, the plaintiffs relied on the affidavit of Mr D. Steve Cameron filed 10 January 2001. Mr Cameron was the attorney who had the conduct of the California proceedings on behalf of the plaintiffs. He addressed the various points raised by the defendants concerning the enforceability of the California judgment in Hong Kong.

10. Dealing with the 1st defendant's assertions, Mr Cameron made a number of points. First, the California judgment and the statement of reasons by the trial judge were valid and binding on the 1st defendant and there was no factual or legal basis for him to allege the contrary. Mr Cameron said that statements of decisions were governed by section 632 of the California Code of Civil Procedure. The judge's statement of decision explained "the factual and legal basis for [his] decision as to each of the controverted issues at trial".

11. Secondly, according to rule 2 of the California Rules of Court, the time of appeal against the California judgment had expired on 30 June 1998.

12. Thirdly, the lawyers, for the 1st defendant, withdrew from acting for him by filing a motion with the court on 19 November 1996 on the ground of non-payment of fees. Under California law, a party representing himself is held to the same standard as a party represented by counsel. The order granting the motion of ceasing to act contained a bold warning that if the 1st defendant failed to take appropriate action, it might result in serious legal consequences.

13. Fourthly, notice of the trial had been sent to the 1st defendant at his address on record. Under section 594 of the California Code of Civil Procedure, at least 15 days notice of trial had to be given. That was duly done and the trial judge was so satisfied. Under California law, the trial was not considered to be a default proceeding. Mr Cameron had also tried repeatedly to secure the 1st defendant's presence at the trial by speaking and writing to him but to no avail.

14. Fifthly, the 1st defendant, having filed an answer in the California proceedings and actively litigated the matter between May 1994 and November 1996, had under the California law waived any objection to jurisdiction. He referred to the case of Mansour v. Superior Court [1995] 38 Cal App. 4th 1750 at p.1756, 46 Cal.Rptr. 2d 191 where the court held that :

"a general appearance occurs where a party, either directly or through counsel, participates in an action in some manner which recognizes the authority of the court to proceed. It does not require any formal or technical act."

15. Turning to the 2nd defendant's assertions, Mr Cameron pointed out if he was really aggrieved by the California judgment as alleged, he should have appealed but he did not. Further there were procedures under the California law whereby the 2nd defendant could compel the attendance of the 1st defendant at trial but he never availed himself of any of these procedures. Mr Cameron, however, had not identified the source of such procedures. Finally, he said that California judgment is final, conclusive, valid and binding on the 2nd defendant and there is no basis factually or legally for him to assert the contrary.

16. Apart from a copy of the order mentioned in paragraph 12 above, Mr Cameron had not exhibited the source materials referred to by him, be they statutory instruments or decided cases.

17. The defendants had not adduced any evidence to contradict Mr Cameron's evidence.

Fresh evidence

18. At the hearing before me, the plaintiffs sought leave to adduce a second affidavit of Mr Cameron, which principally sought to :

(1) set out his qualifications;

(2) elaborate on the matters raised by him in his first affidavit；

(3) exhibit the source materials he referred to in both affidavits；and

(4) explain how investigation had led to discovery of undisclosed bank accounts in Hong Kong.

The fourth point had previously been covered by Mr Hill who had conduct of the present proceedings for the plaintiffs in his third affidavit filed on 8 November 2000 in connection with the Mareva injunction proceedings earlier. In paragraph 17, Mr Cameron deposed:

"I have already set out in my 1st Affidavit in paragraph 4(c) that the California judgment is final and conclusive. I note that neither Defendant has put forward any reason for a contrary view. In any event I now confirm, lest there be any doubt, that:

(a) the judgment creates a res judicata between the Plaintiffs and the 1st and 2nd Defendants;

(b) the judgment is not liable to be abrogated or varied by the same court which has delivered it;

(c) for the reasons set out in my 1st Affidavit, the absence of the 1st Defendant at trial does not affect the final/conclusive nature of the judgment..."

19. Mr Leung, for the 1st defendant, did not object to the application in principle but submitted that Mr Cameron's second affidavit had raised new matters in paragraphs 5 and 15. He did not have the opportunity to take instructions because the affidavit was only served on his firm nine days before the hearing. Mr Leung therefore asked for an adjournment so that his client might file an affirmation in response.

20. Mr Chan, counsel for the 2nd defendant, did not object to the plaintiffs' application. Nor did he ask to file any affirmation in response. He remained neutral on the 1st defendant's application for adjournment.

21. Having considered Mr Cameron's second affidavit, I was satisfied that no further matters had been raised in either paragraph 5 or 15. Paragraph 5 dealt with the point concerning waiver of jurisdiction by the 1st defendant. This was dealt with in Mr Cameron's first affidavit : see paragraph 14 above. The matters raised in paragraph 15, as noted, had already been canvassed by Mr Hill in his third affidavit. Accordingly, I gave leave to the plaintiffs to adduce Mr Cameron's second affidavit and refused the 1st defendant's application for adjournment.

Defendants' position on appeal

22. Despite what had been put in their affidavits and pleaded in the draft defence, the defendants now seek to rely on this ground alone, namely, the California judgment is not final or conclusive. They do not rely on any expert evidence in support. Indeed, as noted, they had adduced none whatsoever. Nor do the defendants challenge the qualifications of Mr Cameron as an expert of the applicable law of the State of California. They simply contend that his affidavit evidence is defective and no weight should be given to it at all. Accordingly, the defendants contend, the plaintiffs had failed to prove that the California judgment is final and conclusive. They invite me to allow the appeal and dismiss the plaintiffs' application for summary judgment.

The law

23. It is well-established that a foreign judgment for a monetary sum may be enforced at common law in Hong Kong if :

(a) The foreign court granting the judgment has the requisite jurisdiction to adjudicate upon the cause or matter that gave rise to the judgment.

(b) The judgment is final and conclusive.

(c) The judgment is not impeachable according to the rules on conflict of laws in Hong Kong.

See Nouvion v. Freeman [1888] 15 App Cas 1, Dicey & Morris on the Conflict of Laws, (13th ed), Vol.1, Rule 35 at pp.474 - 5.

24. In Nouvion v. Freeman, supra, Lord Herschell said at p.9 :

"...it must be shown that in the court by which [the judgment] was pronounced conclusively, finally, and for ever established the existence of the debt of which it is sought to be made conclusive evidence in this country, so as to make it res judicata between the parties. If it is not conclusive in the same court which pronounced it, so that notwithstanding such a judgment the existence of the debt made between the parties be afterwards contested in that court, and upon proper proceedings being taken and such context being adjudicated upon, it may be declared that there exists no obligation to pay the debt at all, then I do not think that a judgment which is of that character can be regarded as finally and conclusively evidencing the debt, and so entitling the person who has obtained the judgment to obtain a decree from a court for the payment of that debt."

Lord Watson said at p.13 :

"In order to its receiving effect here, a foreign decree need not be final in the sense that it cannot be made the subject of appeal to a higher court; but it must be final and unalterable in the court which pronounced it..."

25. Thus, on the finality and conclusiveness of a foreign judgment sought to be enforced here, the Hong Kong courts would be looking at a quality which the foreign judgment must possess by the law of the foreign country concerned, without which quality it cannot be recognised or enforced in Hong Kong : see Dicey & Morris, supra, para.4-115 at p.515. This view is well-established and has been adopted from time to time, see, e.g. Nintendo of America Inc. v. Bung Enterprise Ltd [2000] 2 HKC 629 at p.632D - E.

26. However, in Chiyu Banking Corporation Ltd v. Chan Tin Kwun [1996] 2 HKLR 395, a case that both parties had referred to, Cheung J said at p.398G that "one must apply Hong Kong Law to determine whether a [foreign] judgment is final and conclusive". (Emphasis supplied.) Mr Bartlett, counsel for the plaintiffs, submitted that it was a "hybrid matter" in the sense that a Hong Kong court should apply Hong Kong law to consider the question if the California judgment is final and conclusive but essential information enabling the court to come to a determination on this question need to be fed by the California proceedings.

27. In my view, what Cheung J had said in Chiyu Banking Corporation (quoted above) must be considered in context. There, the plaintiff sought to enforce in Hong Kong a judgment it obtained against the defendant in the Fujian Intermediate People's Court. Under the legal system in the Mainland, the judgment was liable to be altered by the Intermediate Court itself on a retrial if the Supreme People's Procuratorate lodged a protest in accordance with the Civil Procedure Law. The defendant, having invoked the protest procedure, applied to stay the Hong Kong proceedings in order to avoid multiplicity of proceedings. The plaintiff accepted that the proper forum for resolution of the dispute was the Fuijian Court but contended that the judgment of the Intermediate Court was final and conclusive so that the question of forum was irrelevant. Cheung J had before him expert evidence from both parties on the question whether the judgment was final and conclusive under the law of the Mainland. After referring to Dicey & Morris and the judgment of Lord Herschell and Lord Watson in Nouvion (quoted above), the learned judge held at p.399 G - H :

"Based on the material before me, the supervisory function of the Supreme People's Procuratorate and the protest system are not simply an appeal process. The intermediate court judgment is final in the sense that it is not appealable and it is enforceable in China, but it is not final and conclusive for the purpose of recognition and enforcement by the Hong Kong courts because in the words of Lord Watson [in Nouvion], it is not final and unalterable in the court which pronounced it'. It is liable to be altered by the intermediate court on a retrial if the Supreme People's Procuratorate lodge a protest in accordance with the Civil Procedure Law. If upon protest being made, rare the circumstances may be, a Chinese court has to retry the case, then, clearly it retains the power to alter its own decision."

28. Thus, although the learned judge did say that one must apply the Hong Kong law to determine whether a judgment is final and conclusive, he was considering the question with reference to the law of the Mainland. This accords with the well-established principles as set out in paragraphs 23 - 25 above. Thus in my view, what the learned judge had said, if properly understood in context, amounts to this. In determining whether a foreign judgment is enforceable here, the Hong Kong courts apply the Hong Kong rules on conflict of laws. One of the requirements is that the judgment must be final and conclusive. In addressing this requirement, the Hong Kong courts would likewise apply the Hong Kong rules on conflict of laws. (This was, I believe, what the learned judge had in mind when he said one must apply the Hong Kong law.) And under the Hong Kong rules, the judgment must be final and conclusive according to the law of the court granting the foreign judgment. (This was how the learned judge proceeded to deal with the case before him.)

29. Accordingly, I do not see any real difficulty arising from Chiyu Banking Corporation Ltd. And I do not subscribe to Mr Bartlett's submission on how to approach the issues before me. I will determine whether the California judgment was final and conclusive according to the law of the court granting it, namely, the law of the State of California, USA. With this note, I now turn to deal with the defendants' attacks on Mr Cameron's evidence.

Sufficiency of Mr Cameron's evidence

30. Mr Chan, for the 2nd defendant, relied on The Griesheim [1983] 1 HKC 251 where it was held that in interlocutory proceedings where foreign law applied, the requirement was that the foreign law must be proved as a fact to the satisfaction of the judge. Power J (as he then was) said at p.257 F - I :

"The affidavit [of the expert on foreign law] should, when statutes are referred to, set out in full any section of the statutes to which reference is made. If it deals with the general law of the country not embodied in statue, it should, where possible, refer to and quote from the appropriate passages in authorities, be they learned writings or decided cases, which set out that law. If it relies upon the learned writings or decided cases, it should where possible, set out verbatim the specific passages relied on. When any conclusion of the expert is relevant, then, the reasoning whereby he comes to that conclusion should be fully revealed.

The evidence of an expert which fails to conform with the above requirements runs the risk of rejection even if uncontradicted. Dicey & Morris in The Conflict of Laws say at p 1211:

'If the evidence of the expert witness as to the effect of the sources quoted by him is uncontradicted, the court is, in general, bound to accept it.'

Implicit in this statement is the requirement that the expert should quote the sources and set out his reasoning as to the effect thereof."

31. Mr Chan submitted that Mr Cameron in his first affidavit simply made a bare assertion that the California judgment was final and conclusive without setting out the relevant statute or authority and reasoning in support. Counsel further submitted that paragraph 17 of Mr Cameron's second affidavit was a mere general statement concerning the effect of the California judgment intended to meet the requirements of enforcement. Mr Cameron, however, had failed to set out any authority or reasoning in support why the California judgment created a res judicata.

32. Mr Leung, for the 1st defendant, adopted Mr Chan's submissions.

33. Mr Bartlett, for the plaintiffs, submitted that that the defendants had not adduced any evidence to raise a triable issue that the California judgment is not final and conclusive. The question was simply whether the plaintiffs had discharged the burden of proof. He referred to the voluntary bankruptcy papers filed by the defendants in Canada and California in which they had listed the California judgment as their principal liability. Counsel submitted that these were compelling evidence that the defendants themselves had accepted that the California judgment was final and conclusive and binding on them. He further submitted that the defendants' evidence had not showed any ground why the California judgment lacked the characteristics of finality and conclusiveness.

34. In reply, Mr Leung submitted that the listing the California judgment in the bankruptcy proceedings did not necessarily mean that the 1st defendant admitted its finality or conclusiveness.

35. On the evidence before me, it is simply a bare allegation by the defendants that the California judgment is not final and conclusive. The 2nd defendant had failed in his third affirmation to condescend upon particulars why he considered it not final and inconclusive. The 1st defendant's position is even worse: this ground never featured in his affirmation or draft defence at all. It was only advanced in Mr Leung's submissions. None of them had adduced any evidence to contradict Mr Cameron's opinion. As I understand Mr Chan and Mr Leung, they are not contending that Mr Cameron's opinion is in any way wrong. In the circumstances, I am not satisfied that the defendants' bare allegations had even begun to put in issue the question whether the California judgment is final and conclusive: see generally Hong Kong Civil Procedure 2001, para.14/4/4 at p.152.

36. Even if contrary to my view, the question is now put in issue, I am not satisfied that the defendants had raised a triable issue that the California judgment is not final and conclusive. It is true that while Mr Cameron had stated the authority in support of his opinion on other matters, he had not done so in connection with the question of finality and conlcusivenes of the California judgment. The requirements laid down by Power J had not been fully complied with. But is it necessarily fatal?

37. In my view, the primary requirement is that the foreign law must be proved as a fact to the satisfication to the court: see Dicey & Morris, supra, para.9-001 at p.221. Whether the requirements laid down by Power J should be strictly adhered to and what the consequences of failure to do so are would depend on the particular circumstances of the case before the court. In The Griesheim, the effect of the applicable Japanese law was a hotly contested issue. The experts' evidence came in the very undesirable form of telexes, which was apparently the prevailing practice then. Circumstances such as those in The Griesheim where there were conflicting opinions on the effect of the foreign law would certainly warrant strict compliance of those requirements so as to enable the court to examine the source of the foreign law and to determine its effect. Here, as noted, the defendants had failed to show, by way of evidence, submission or otherwise, that Mr Cameron's opinion is in any way wrong or made on an erroneous basis. In the circumstances, I do not think the failure to strictly comply with all the requirements laid down by Power J is fatal. It would be perfect if Mr Cameron had stated the authority. But given the particular circumstances of the case now before me, I am satisfied that what had been stated by Mr Cameron is already sufficient for present purposes. The position would be quite different if the defendants had adduced evidence or otherwise showed that his opinion that the California judgment is final and conclusive might be wrong.

38. The defendants' challenge on Mr Cameron's evidence therefore fail. Given the defendants' position, it is not necessary for me to deal with the other grounds they had sought to advance in their affirmations or draft defence. If need be, I would only add that those grounds had already been sufficiently dealt with by Mr Cameron. In the absence of any evidence to the contrary, they must also fail.

Conclusion

39. For the foregoing reasons, this appeal must fail. I dismiss it accordingly with costs to be taxed if not agreed.