Société Eram Shipping Company Ltd v Cie Internationale de Navigation
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MANCE |
| Judgment Date | 07 August 2001 |
| Neutral Citation | [2001] EWCA Civ 1317 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2001/0284 |
| Date | 07 August 2001 |
[2001] EWCA Civ 1317
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QBD (Commercial Court)
(Tomlinson J.)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Schiemann
Lord Justice Mance and
Lord Justice Keene
Case No: A3/2001/0284
Hugo Page (instructed by Messrs Penningtons for the Appellant)
Christopher Harrison (instructed by Messrs Stephenson Harwood for the Respondents)
This is the judgment of the court.
Introduction
This is an appeal, with Tomlinson J's permission, from his judgment dated 23 rd January 2001 and order dated 2 nd February 2001 refusing to make absolute a garnishee order dated 4 th April 2000 and setting it aside subject to a stay pending the present appeal. The parties are a judgment creditor, Societe Eram Shipping Company Limited ("Eram") and the garnishee, The Hong Kong and Shanghai Banking Corporation ("HSBC"), incorporated in Hong Kong with branches in England. The judgment debtors are Societe Oceanlink Limited and Yoon Sei Wha, a company and individual resident in Hong Kong. The garnishee order relates to the credit balance on a bank account (No. 002.66.372.64) held by one or both of the judgment debtors with HSBC at its Queens Road, Central, Hong Kong branch.
The garnishee bank's objection to the order being made absolute was, shortly stated, that (a) the debt garnisheed (the credit balance) is sited in, and subject to the law of, Hong Kong, (b) the Hong Kong courts will not give effect to an English garnishee order by reciprocal enforcement or by making a Hong Kong court order based on the English court order and (c) there was or would be a real risk of HSBC being liable twice.
The judgment debt relates, we are told, to demurrage. Eram sued the judgment debtors and obtained judgment in the Tribunal de Commerce of Brest, France on 11 th July 1997. The judgment was by order dated 5 th November 1998 registered in England under s.4 of the Civil Jurisdiction and Judgments Act 1982, which gives effect to the Brussels Convention of 1968 and associated protocols and conventions. The order gave the judgment debtors liberty to appeal against the registration within two months after service of notice thereof upon them, and stayed execution in the meanwhile. Notice of the registration was given to the judgment debtors by letters dated 25 th January 2000. No appeal against registration was made within two months. Registration having thus been validly effected, little if any significance can attach to the origin of the present English judgment in a French judgment. It was a main object of the Brussels Convention "to facilitate the free movement of judgments" (cf e.g. Société d'Informatique Service Réalisation Organisation v. Ampersand Software B.V. [1995] A.E.R. (E.C.) 783, paras. 30–31 and 39) and to create in that respect a single European legal space.
After registration, application was made, supported by witness statement dated 3 rd April 2000, for a garnishee order to show cause. Such an order was made by Master Trench on 4 th April 2000, directed to HSBC at its Lower Thames Street, London branch as well as to the judgment debtors. The return date for determination whether it should be made absolute was fixed for 28 th April 2000 before Master Prebble, but the application came ultimately before Tomlinson J. in the Commercial Court, leading to his judgment dated 23 rd January 2001, against which the present appeal is brought. Only HSBC appeared on the application.
Tomlinson J. had before him a witness statement from Mr Bassu of HSBC's English solicitors, Stephenson Harwood. Mr Bassu submitted that
"there is a real risk that the effect of the attachment of any debt owed by HSBC to the Judgment Debtors will not relieve HSBC from any liability it may have to the Judgment Debtors pursuant to any account. HSBC therefore has a real risk of being liable twice".
In support, he produced a letter dated 27 th April 2000 from Mr Martin Reed, a partner in Stephenson Harwood & Lo, an associated firm. This was the only positive evidence of Hong Kong law adduced on either side before Tomlinson J. Mr Reed is a solicitor (we understand, an English solicitor) practising in Hong Kong. He records that he was asked to advise
"whether there is a real risk that the Garnishee will not be relieved from its liability to the Judgment Debtors by the attachment of the debt owed by the Garnishee to the Judgment Debtors and what proceedings the Judgment Creditor could start in Hong Kong to recover the judgment debt".
On the assumption that HSBC's obligations in respect of the account were governed by Hong Kong law, as well as sited in Hong Kong, Mr Reed advised that:
"(a) the Garnishee has a contractual obligation, governed by Hong Kong law, to pay the amount of any credit balance on such account to the account holders according to the terms applicable to such account; and
(b) because an order of an English court has no automatic effect under Hong Kong law, such payment obligation cannot be affected by any such English court order, unless such order becomes enforceable under Hong Kong law because of (1) the operation of reciprocal procedures or (2) the making of a Hong Kong court order based on the English court order. In our opinion, a garnishee made by a foreign court is not a type of order which would be given effect to by the Hong Kong courts under such procedures.
Accordingly, in the absence of the Judgment Creditor's English or French related court orders being given effect under Hong Kong law, the Garnishee would be in breach of contract, and there is a real risk of a debt claim by the account holder for the amount of any credit balance on the relevant account (or possibly a damages claim for at least such amount) if the Garnishee were either to freeze such balance or to pay such balance to the Judgment Creditor in purported reliance on such English or French court orders".
Mr Reed went on to point out that, since 1 st July 1997, no arrangement for reciprocal enforcement of English judgments has been in force in Hong Kong – the only procedure now available there in respect of an English judgment being to commence proceedings upon it at common law. Alternatively, proceedings could be taken to register the French judgment under the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap. 319). Thereafter, in each case a garnishee order could be sought from the Hong Kong courts against any balance remaining on the judgment debtors' HSBC account.
In response to the issues thus raised by HSBC, Mr Matthison of the judgment creditors' solicitors, Penningtons, produced HSBC's standard terms applicable to the judgment debtors' account, and said in a witness statement dated 7 th July 2000:
"(a) In English law, the payment of the debt by the bank will give the bank a [sic] implied contractural [sic] or restitutionary right to recover the sum paid from the Judgment Debtor;
(b) It is also a demand for payment by the Judgment Debtor, compliance with which even in the absence of an account in this country, entitles the bank to reimbursement;
(c) There is therefore an English law liability created in favour of the bank against the Judgment Debtor;
(d) This debt the bank is entitled to set against the credit balance pursuant to clause 1(I) of the terms and conditions …"
No additional evidence of Hong Kong law was put in by either side in the ensuing period of five or so months before the matter was argued in front of Tomlinson J. We were informed that HSBC had not sought any further advice about Hong Kong law. Eram's case is that English law applies to determine whether HSBC would acquire any such restitutionary right.
The bank's standard terms and conditions, to which Mr Matthison's statement refers, provided amongst other things:
"1. GENERAL (applicable to all accounts)
i. The account holder agrees that the Institution's indebtedness to the account holder shall not exceed the net amount owing by the Institution to the account holder after deducting from any credit balance held by the Institution or providing for the aggregate of all the account holder's liabilities … whether such liabilities be actual, present, future, deferred, contingent, primary, collateral, several, joint or otherwise (together the "account holder's aggregate liabilities"). Without prejudice to the generality of the foregoing and in addition to any general lien, right of set-off or other right by way of security which the Institution may have on any account whatsoever, the account holder agrees that the Institution shall have the right, at its sole and absolute discretion and without notice to the account holder. to refuse to repay when demanded or when the same falls due any of the Institution's indebtedness to the account holder if and to the extent that the account holder's aggregate liabilities at the relevant time are equal to or exceed the Institution's indebtedness at that time. …"
HSBC has subsequently produced its special Assetvantage/Powervantage terms, which also applied to the account and which contain a corresponding provision and further expressly applied Hong Kong law to the account.
Garnishee relief
The garnishee procedure goes back to the Common Law Procedure Act 1854. It was incorporated into the Rules of Court by the Supreme Court of Judicature Act (1873) Amendment Act of 1875, and in 1967 it achieved its present place and wording in RSC O.49, which became part of Schedule 1 to the CPR by virtue of CPR 50.1. RSC O.49 provides:
"1.-(1) Where a...
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