Société Eram Shipping Company Ltd v Cie Internationale de Navigation
|LORD MILLETT,LORD NICHOLLS OF BIRKENHEAD,LORD HOFFMANN,LORD BINGHAM OF CORNHILL,LORD HOBHOUSE OF WOODBOROUGH
|12 June 2003
| UKHL 30
|House of Lords
|12 June 2003
 UKHL 30
The Appellate Committee comprised:
Lord Bingham of Cornhill
Lord Nicholls of Birkenhead
Lord Hobhouse of Woodborough
HOUSE OF LORDS
This appeal is against the making of what was formerly called a garnishee order absolute but is now called a final third party debt order. When they were begun the proceedings were governed by a procedure since replaced by a procedure very similar in substance but expressed in different language, and I shall so far as possible use the new terminology. The feature of the order which gives rise to controversy is that it was made in relation to a foreign debt. The House is called upon to consider the power of the English court to make an order in such a case and, if there is power, the manner in which it should be exercised.
The appellant is the Hong Kong and Shanghai Banking Corporation Limited, a company incorporated in Hong Kong and carrying on a banking business there and elsewhere. It has a branch in London and is registered in England under section 691 of the Companies Act 1985. The appellant would formerly have been called "the garnishee" but is now to be called "the third party", by which term I shall describe it.
Société Eram Shipping Company Limited is a Romanian shipping company. I shall refer to it as "the judgment creditor".
Société Oceanlink Limited and Mr Yoon Sei Wha are a company and an individual resident in Hong Kong. I shall refer to them as "the judgment debtors". A third company against which the judgment creditor also issued proceedings may be ignored for present purposes. The judgment debtors have played no part in these proceedings at any stage.
The judgment creditor claimed demurrage against the judgment debtors and obtained judgment against them in the Brest Commercial Court for some US $101,000 and 5000 French francs. The judgment debtors did not satisfy the judgment and the judgment creditor registered it in the Queen's Bench Division of the High Court under the provisions of the Civil Jurisdiction and Judgments Act 1982.
One or other of the judgment debtors holds an account in Hong Kong with the third party. The debt due from the third party to the judgment debtors on this account is situated in Hong Kong and is governed by the law of Hong Kong.
The judgment creditor could have obtained a third party debt (or garnishee) order in Hong Kong against the third party in respect of the debt due from the third party to the judgment debtors. Under the law and procedure of Hong Kong it was open to the judgment creditor to obtain such an order after applying to the Hong Kong court for registration and enforcement of the Brest judgment or after suing in Hong Kong on the judgment registered in the Queen's Bench Division. The judgment creditor did not adopt those procedures. Instead, it applied to the High Court in England for an interim third party debt order (then called a garnishee order nisi) in respect of the debt owed by the third party to the judgment debtors in Hong Kong. The application was made in the usual way without notice to the third party, and an order was made that all debts accruing to the judgment debtors from the third party be attached to answer the Brest judgment registered in the High Court; and also that the third party attend on an application by the judgment creditor that the third party pay to the judgment creditor the debt due from the third party to the judgment debtors or so much thereof as might be sufficient to satisfy the judgment and the costs of the third party debt order (or garnishee) proceedings.
A hearing took place before Tomlinson J sitting in the Commercial Court to decide whether the interim third party debt order should be made final (or the garnishee order nisi be made absolute). The undisputed evidence was that under the law and procedure of Hong Kong a third party debt (or garnishee) order made in England did not have the effect of extinguishing the third party's (or garnishee's) Hong Kong debt to a judgment debtor in Hong Kong. Nor would the Hong Kong court give effect to an English third party debt (or garnishee) order by reciprocal enforcement or action. Having reviewed the authorities, the judge declined to make a final third party debt order and he set aside the interim order. His essential reasons (elaborated in a very convincing judgment) were, first, that he considered the third party to be at risk of having to pay twice (once in London in compliance with the English order if made, and again in Hong Kong at the suit of the judgment debtors), and secondly out of reluctance to exercise jurisdiction over foreigners in relation to their conduct outside the territorial jurisdiction of the court: . On appeal by the judgment creditor the Court of Appeal (Schiemann, Mance and Keene LJJ) reversed the judge's decision: ; . In a judgment of the court delivered by Mance LJ the risk that the third party might have to pay twice was discounted and reliance was placed on the existence of a restitutionary remedy available to the third party in Hong Kong.
The third party challenges the Court of Appeal judgment, contending that the English court had no jurisdiction to make an order in this case and that, if it did, it should have exercised its discretion against making an order. The judgment creditor rejects these contentions, submitting that the Court of Appeal reached the correct conclusions for the reasons which it gave.
The attachment of debts
As many a claimant has learned to his cost, it is one thing to recover a favourable judgment; it may prove quite another to enforce it against an unscrupulous defendant. But an unenforceable judgment is at best valueless, at worst a source of additional loss. This was a problem which our Victorian forebears addressed with characteristic energy and pragmatism. The Judgments Acts of 1838 and 1840 allowed choses in action to be taken in execution. Then, in the Common Law Procedure Act 1854, a new garnishee procedure was introduced. The essential features of this procedure were laid down in sections 61-63 and 65 of the Act:
"61. It shall be lawful for a judge, upon the ex parte application of such judgment creditor, either before or after such oral examination, and upon affidavit by himself or his attorney stating that judgment has been recovered, and that it is still unsatisfied, and to what amount, and that any other person is indebted to the judgment debtor, and is within the jurisdiction, to order that all debts owing or accruing from such third person (hereinafter called the garnishee) to the judgment debtor shall be attached to answer the judgment debt; and by the same or any subsequent order it may be ordered that the garnishee shall appear before the judge or a master of the court, as such judge shall appoint, to show cause why he should not pay the judgment creditor the debt due from him to the judgment debtor, or so much thereof as may be sufficient to satisfy the judgment debt.
62 Service of an order that debts due or accruing to the judgment debtor shall be attached, or notice thereof to the garnishee, in such manner as the judge shall direct, shall bind such debts in his hands.
63 If the garnishee does not forthwith pay into court the amount due from him to the judgment debtor or an amount equal to the judgment debt, and does not dispute the debt due or claimed to be due from him to the judgment debtor, or if he does not appear upon summons, then the judge may order execution to issue, and it may be sued forth accordingly, without any previous writ or process, to levy the amount due from such garnishee towards satisfaction of the judgment debt.
65 Payment made by or execution levied upon the garnishee under any such proceeding as aforesaid shall be a valid discharge to him as against the judgment debtor to the amount paid or levied, although such proceeding may be set aside or the judgment reversed."
The procedure so established was regulated by the Rules of Court scheduled to the Supreme Court of Judicature Act 1875 when that Act took effect, and by the Rules of the Supreme Court promulgated in 1883 when those replaced them. In each of these codes of rules Order 45 regulated garnishee proceedings. When the rules were revised in 1965 (Rules of the Supreme Court (Revision) 1965, SI 1965/1776, made under section 99 of the Supreme Court of Judicature (Consolidation) Act 1925), Order 45 was substantially reproduced as Order 49. It is apparent from the terms of rules 1(1) and (2), 3 and 8 of this Order that the nature of the 1854 procedure remained essentially unchanged:
"Attachment of debt due to judgment debtor
1(1) Where a person (in this order referred to as 'the judgment creditor') has obtained a judgment or order for the payment by some other person (in this order referred to as 'the judgment debtor') of a sum of money amounting in value to at least £50, not being a judgment or order for the payment of money into court, and any other person within the jurisdiction (in this order referred to as 'the garnishee') is indebted to the judgment debtor, the court may, subject to the provisions of this order and of any enactment, order the garnishee to pay the judgment creditor the amount of any debt due or accruing due to the judgment debtor from the garnishee, or so much thereof as is sufficient to satisfy that judgment or order and the costs of the garnishee proceedings.
(2) An order under this rule shall in the first instance be an order to show cause, specifying the time and place for further...
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