Days Medical Aids Ltd v Pihsiang Machinery Manufacturing Co Ltd & Ors Rev 1

J U D G M E N T

1. LORD JUSTICE DYSON: By order of this court, Ward and Mance LJJ, dated 16 June 2004, the defendants were granted permission to appeal the judgment of Langley J given on 29 January 2004 whereby he ordered that they pay the claimants £10,235,144 plus costs and ordered that they make an interim payment on account of costs in the sum of £2 million by 1 March 2004. He refused permission to appeal on 16 February 2004. In his judgment he went on to deal with the defendants' application for a stay of execution of the judgment pending an application for permission to appeal to this court. At paragraph 28 of his judgment refusing the stay, he said:

"Pihsiang's concern is not that any application would be stifled. It is a substantial company which can meet the judgment, albeit that does not necessarily mean that enforcement of the judgment by DMA would be without its problems. The concern of Pihsiang is that if Pihsiang does meet the judgment but succeeds on an appeal it may not get its money back. DMA itself is a much smaller company and has suffered losses, as it maintains, because of the very matters the subject of these proceedings. However, DMA's parent company, DCC, is prepared to guarantee repayment should that be required. It has written to the court to that effect. DCC is undoubtedly a very substantial company and well able to meet such a guarantee. In my judgment, on the basis of the guarantee, there is no reason to justify a stay of the judgment and I will not order one."

2. The claimants oppose the defendants' application for permission to appeal but, in the alternative, submitted that, if permission to appeal were given, it should be subject to certain conditions. When this court gave permission to appeal in principle on 16 June, it adjourned the question whether the permission should be subject to any, and if so what, terms. It is that adjourned issue that is before me. I do not consider it necessary to consider the merits of the proposed appeal. It is implicit in the grant of permission to appeal that this court was satisfied that it has a real prospect of success.

3. The first defendant is a Taiwanese designer and manufacturer of mobility scooters and power chairs. The second and third defendants are directors of the first defendant company. The claimants are distributors of such devices. The litigation concerns a distributorship agreement between the claimants and the defendants. The agreement was terminated and the claimants claimed damages for breach of contract.

4. The jurisdiction to impose conditions of appeal is contained in two rules, CPR 52.3(7)(b) which provides that an order giving permission may be made subject to conditions and CPR 52.9(1)(c) which provides that:

"The appeal court may -

(c) impose or vary conditions upon which an appeal may be brought."

In addition CPR 52.9(2) provides that:

"The court will only exercise its powers under paragraph (1) where there is a compelling reason for doing so."

5. The argument before me has proceeded on the basis that it is immaterial under which of these two rules the issue is to be considered. Either way the court should only impose conditions where there is a compelling reason for doing so. I am content to proceed on that basis.

6. The claimants submit that permission to appeal should be made subject to the conditions that: (i) the defendants pay to them the whole of the judgment debt and interest; (ii) the defendants should pay to them the £2 million ordered to be paid by way of interim costs; and (iii) the defendants should pay a sum of security for the claimants' costs in respect of the appeal. They say that those costs will be of the order of £350,000 and suggest a figure of £200,000 as appropriate for security.

7. The defendants' position is that they are willing to consent to an order that the appeal be made conditional on (a) payment into court of reasonable security for the claimants' costs of the appeal, and contend for a figure of £100,000; and (b) payment into court of the sum ordered below to be paid on account of costs (ie £2 million) plus interest, which they suggest should be £50,000. They contest the claim that their right to proceed with the appeal additionally should be subject to a condition that they pay, or provide security for, a sum in excess of £10 million in respect of the judgment sum and interest.

8. On behalf of the claimants, it is submitted, first that the defendants are in deliberate breach of the order to pay the judgment sum and the £2 million ordered by way of interim payment on account of costs. The total sum now outstanding, including interest, they say is of the order of £15,334,000. No explanation has been provided for the failure to pay any part of this money. Secondly, they point to the fact that the defendants' application for a stay of execution was expressly refused for the reasons given by Langley J to which I have referred. Thirdly, they rely on the fact that the defendants' failure to pay is not due to any financial difficulty. The first defendant company is a substantial company listed on the Taiwanese stock exchange. The second and third defendants are exceedingly wealthy and are the principal shareholders and directors of the first defendant company. It has never been suggested that the defendants are unable to pay the sums outstanding. Accordingly, there is no prospect that an appeal will be stifled if the proposed conditions are imposed.

9. The claimants make the point that there is no risk of the defendants suffering any irrecoverable loss in the event that the appeal is successful. The claimants are a subsidiary of a substantial Irish company, DCC, which is listed on the Irish and London stock exchanges. DCC has undertaken to the court that it will guarantee repayment of all sums paid, including costs, in the event that the appeal is successful.

10. Finally, it is said that the claimant company has suffered, and continues to suffer, real loss. It is a relatively small company whose fortunes have been adversely affected by the defendants and seriously so. None of the matters to which I have just referred is, as I understand it, in issue. Additionally, it is submitted by Mr Stephen Auld QC, on behalf of the claimants, that there is a real risk that the claimants will face considerable difficulty in enforcing the judgment if the appeal is dismissed. The principal place for enforcement of the judgment and order is Taiwan.

11. There is evidence as to the potential difficulties facing the claimants. In his fifth witness statement Mr Mirchandani, of the claimants' solicitors, refers in paragraph 4 to the potential difficulties of enforcement. He says:

"4.1. I have been informed by Baker & McKenzie (DMA's Taiwan lawyers) that enforcement of a judgment of the English Courts in Taiwan is not without difficulty and can take a considerable length of time.

4.2 Enforcement of a foreign judgment in Taiwan is a two-stage process: the first stage is the 'judgment recognition' procedure which is followed by the 'compulsory execution' procedure. The 'judgment recognition' procedure alone will in a normal case, take two to three years. In addition, as part of the process DMA will have to pay sizeable Court fees and bonds, which in the present case could amount to approximately £400,000. As with many such enforcement procedures, it can, I believe, be made even more difficult by a judgment debtor who is seeking to avoid or evade payment.

4.2 I understand from Baker & McKenzie that it is a pre-requisite to DMA commencing enforcement proceedings in Taiwan that the appeal procedures in England have been exhausted and, from a procedural point of view in Taiwan, the Defendants' application for permission to appeal is effectively preventing that process from starting."

12. That evidence was amplified in a witness statement from Remington Huang of 7 July 2004 which says:

"I should make clear that recognition of a foreign judgment by a Taiwanese court will not be granted unless the foreign judgment is a final and conclusive judgment. If the foreign judgment is still subject to appeal, steps to recognise and enforce it in Taiwan cannot be taken.

Recognition and enforcement procedures in relation to foreign judgments can also take a long time in Taiwan for the following reasons:

(a) Upon filing an application for recognition of a foreign judgment, any adverse party is notified by the Court and allowed to make oral arguments and submit briefs according to the Code of Civil Procedures Both parties have the opportunity to argue whether the foreign judgment is deemed to be valid under Article 402, Paragraph 1 of the Republic of China Code of Civil Procedures. In addition to those basic criteria, however, it is not uncommon for the Judgment Debtor's attorney to try to maximise every defence possible to prolong the legal proceedings by raising the substantive issues involved.

(b) Even if the Taiwan District Court decides that the foreign judgment is enforceable in Taiwan, that is not necessarily the end of the matter. The party against whom the judgment is sought to be enforced has an automatic right to appeal to the Taiwan High Court, and after that to the Republic of China Supreme Court. The Supreme Court can then remand the matter back to the Taiwan High Court and the appeal procedure to the Republic of China Supreme Court can recommence again.

3.4 In summary, in a usual case, the recognition procedure alone will take approximately 2-3 years. The length of this procedure will be increased if the judgment debtor is seeking to evade payment and resists the process at each stage."

13. I also refer to the evidence adduced on behalf of the defendants from Sylvia Hong, an attorney who is licensed to practise law in Taiwan. She agrees to a considerable extent with the evidence of Remington Huang. She does not agree that the recognition procedure alone will take approximately two to three years. She says that a judgment may sometimes take two to three years to become final and irrevocable while sometimes it takes only about 1½ years to complete the procedures. She also refers to Article 522 of the Code of Civil Procedure which provides that a creditor may apply for provisional seizure of the defendants' assets by depositing with the court a certain amount of money or security. In a usual case, she says, this procedure will take about two or three weeks. She goes on to say at paragraph 2.6 that her experience and understanding is that normally the District Court will grant its permission on such provisional execution of its judgment with the condition that the creditor shall deposit a reasonable amount of security with the court.

14. Finally, the claimants also rely on the behaviour of the defendants since the time when Langley J gave judgment as being indicative of the fact that they are likely to be as obstructive as possible if the matter comes to enforcement.

15. The claimants have applied under CPR Part 71 for an order that the defendants should attend court for information about their means and any other information needed to enforce the judgment. In relation to these applications, the claimants complain that the defendants have taken every possible step to avoid the jurisdiction of the English court. First, they refused to instruct their solicitors in England to accept service of the CPR Part 71 application on their behalf. They did this notwithstanding that they had retained English solicitors for the purposes of the proceedings before Langley J and they continue to retain English solicitors for the purposes of prosecuting their application for permission to appeal.

16. The claimants point out that, having changed English solicitors for the second time in the course of these proceedings, the defendants now allege that service was invalidated because permission to serve out of the jurisdiction had not been obtained. The defendants' solicitors have refused to agree to waive any procedural defect and therefore remain without authority to accept personal service on behalf of their clients. The result is that the claimants have been compelled to re-issue and reserve the orders in Taiwan. They have also adduced evidence to show that Mr and Mrs Wu have made it extremely difficult for the process server to serve these orders on them in Taiwan. There is an issue as to that aspect of the matter, which I do not find it necessary to resolve.

17. The claimants rely, in further support of their concerns that the defendants are likely to be obstructive, on the fact that Langley J found that Mr and Mrs Wu were evasive and untruthful on a number of matters of importance (see for example paragraph 19 of his judgment) and that he was critical of certain aspects of the manner in which the defendants handled the case.

18. On behalf of the defendants, Mr Anderson QC concedes that I have jurisdiction to impose conditions such as those that are sought in this case. He submits that it would be a wrong exercise of discretion to impose them in the circumstances of this case. He submits that the proposed order would not compensate the claimants for any prejudice caused by the appeal; rather it would hand them a benefit by short-cutting the normal procedures for enforcement of the judgment. He says that it is open to the claimants to seek to enforce their judgment on the defendants in the usual way. The enforcement mechanisms available in Taiwan are adequate. The only potential prejudice to the claimants of allowing the appeal to proceed is in relation to costs. As far as that is concerned, the defendants are prepared to provide security as well as paying into court an interim payment on account as a condition of being allowed to proceed with the appeal.

19. Mr Anderson advances an argument that the imposition of such conditions would be a violation of Article 14 when taken in conjunction with Article 6 of the European Convention on Human Rights. I shall return to this argument, but, first, I would refer to two recent decisions of this court which have some relevance to the issue that I have to resolve.

20. The first is Hammond Suddards Solicitors v Agrichem International Holdings Limited [2002] CP Rep 21. In this case the defendant had judgment entered against it for 465,000 Belgian francs odd (£7,760 odd) plus £74,945 in unpaid solicitors' fees. The defendant was a BVI company which claimed to have no assets anywhere, but was represented on the appeal by solicitors and counsel. The court ordered it to pay into court the full amount of the judgment sum plus costs as a condition of proceeding with the appeal.

21. The judgment of the court was given by Clarke LJ. At paragraph 41 he turned to the question whether there was a compelling reason for making the appellant pay the judgment debt or to secure it as a condition for permitting it to proceed with the appeal. He said that the court had concluded that the answer to that question was in the affirmative. The facts which combined to constitute a compelling reason included, first the fact that the appellant was an entity against whom it would be difficult to exercise the normal mechanisms of enforcement. There was a real risk that if the appeal failed the respondent would be unable to recover the judgment debt and costs as ordered by the judge below. Secondly, the appellant plainly either had the resources, or access to resources, to enable it to instruct solicitors and leading and junior counsel to prosecute the appeal and to provide a substantial sum by way of security for costs. There was, therefore, no convincing evidence that the appellant did not either have the resources or access to the resources which would enable it to pay the judgment debt and costs as ordered. It was in breach of those orders. For the reasons already given, the court was not persuaded that the appeal would be stifled if the order was made as sought. Finally, the court said:

"We find it unacceptable that absent any other orders of the court the appellant is intending to prosecute the appeal (and is willing to put up security for costs in order to do so) whilst at the same time continuing to disobey the orders of the court to pay the judgment debt and costs, as well as seeking to persuade us it cannot do so."

At paragraph 42 Clarke LJ said that:

"These .... factors add up to a compelling reason to make the orders sought by the respondents. We think there was a real risk that, unless the orders sought were made, the respondents, if the appeal is dismissed, will be deprived of the fruits of the judgment .... In our judgment, on the facts of this case, it is not just to allow the appellant to proceed with an appeal...."

without the imposition of the conditions sought. There was a reference in paragraph 48 to the need for caution to be exercised when this jurisdiction is itself in play. That is a matter to which Mr Anderson in particular drew my attention.

22. The second authority is a decision of Bell Electric Limited v Aweco Appliance Systems GmbH & Co KG [2003] 1 All ER 344. In that case judgment was entered against the defendant for £100,000 by way of interim damages plus £35,000 on account of costs. The defendant was based in Germany and the claimants a small family business based in the United Kingdom. The defendant had indicated to the claimants in correspondence that if attempts were made to enforce the judgment prior to the appeal, steps would be taken to frustrate the enforcement process.

23. The key passage in the leading judgment, given by Potter LJ, is at paragraph 22 where he said:

"The question posed in this case, to which the judgment in the Hammond Suddard case provides no answer, is whether, where there is no reason to suppose that vigorously pursued steps by way of enforcement will ultimately prove fruitless if the appeal fails, there may none the less be a 'compelling reason' meanwhile to make an order staying the appeal if the interim order is not complied with, or a payment into court made or other security provided in respect of the judgment sum. Depending upon the overall circumstances, I see no reason in principle why that should not be so in a case where (i) the appellant is in deliberate breach of the order to pay the judgment sum; (ii) he has applied for and been refused a stay; (iii) his failure or delay in payment is due not to any financial difficulty but is cynically based upon the practical difficulties for the respondent in seeing enforcement in a foreign jurisdiction."

24. Mr Anderson submits that there are notable differences between the facts in the present case and those in the two cases to which I have just referred. The sums involved here are of an altogether different magnitude. He submits that there is no real risk that if the appeal in the present case fails the claimants will be unable to recover the judgment debt and costs. More generally, Mr Anderson urges that great caution should be exercised in making permission to appeal subject to conditions. He submits that there is nothing in the present case to take it out of the ordinary run of cases where the appellant is free to pursue his appeal and the respondent is free to make use of such enforcement mechanisms as are available to him in the time. To impose the conditions contended for by the claimants in this case would be to turn the imposition of such conditions into the general rule; but there is no such general rule and it would be wrong to create one.

25. I agree that there is no such rule and that it would be wrong to create one, but, subject to the Article 14 point, I am in no doubt that this is a case where the conditions sought by the claimants should be imposed. In my judgment, the cumulative effect of the points made by Mr Auld establishes a compelling case. The three requirements identified by Potter LJ at paragraph 22 of Bell are satisfied. I accept that these are not in themselves decisive, but they are cogent. The defendants have given no reason for their failure to pay the judgment sum or the costs. Mr Anderson was unable to provide any explanation.

26. I bear in mind the need to exercise caution in relation to this jurisdiction, but the observations of Rix and Clarke LJJ are directed primarily, if not entirely, to the need for the court to be satisfied that the imposition of a condition will not stifle an appeal. It is not suggested that the imposition of conditions sought in this case would have that effect. In these circumstances it seems to me that it is of little relevance that the sums involved here are very large when compared with those in play in the other cases.

27. I cannot accept the submission of Mr Anderson that there is no risk in the present case that the claimants will face significant problems in enforcing the judgment if the appeal is dismissed. The process of recognition cannot begin if the foreign judgment is still subject to appeal. If the defendants' appeal is dismissed by this court and they petition the House of Lords, the outcome of a petition, and an appeal if leave is given, will have to be awaited before the process can start. Moreover, I am told by Mr Anderson that the appeal raises an important point concerning Article 81 of the EC Treaty on which there is no previous authority.

28. A reference to the European Court of Justice cannot therefore be ruled out as a fanciful possibility, particularly bearing in mind the attitude that has been shown by the defendants in relation to these proceedings thus far. It may therefore be several years before the enforcement process can start. The recognition procedure can take two to three years. It is true that the claimants could apply for provisional seizure of the defendants' assets under Article 522 of the Code of Civil Procedure, but the defendants might well object to such an application. I cannot be confident that such an objection would necessarily be rejected.

29. To put the matter more broadly, the defendants' conduct in refusing to comply with court orders that have been made, without explanation, and their behaviour in relation to the CPR 71 matter, strongly suggests that they will place whatever obstacle they can in the path of any attempt by the claimants to enforce the judgment.

30. For these reasons, subject to the Article 14 point, I would impose conditions as requested by the claimants. I turn to the Article 14-point.

31. Mr Anderson does not contend that to impose the condition would breach Article 6, but he submits, and it is not in issue, that the facts fall within the ambit of Article 6 so that Article 14 is potentially engaged. Article 14 provides:

"The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status."

32. Mr Anderson submits that the imposition of the conditions would involve discrimination against the defendants as compared with litigants who reside or have their assets within the jurisdiction. The discrimination for which he contends would be on grounds of nationality, property or other status. In relation to nationality, he submits that there would be indirect or covert discrimination on the basis of the defendants' residence in Taiwan and/or the fact that their assets are situated in Taiwan. Alternatively, he submits that there would be direct discrimination in relation to property based on the fact that their assets are in Taiwan. In the further alternative, he submits that there would be direct discrimination in relation to "other status" comprised in the defendants' residence in Taiwan or the fact that their assets are in Taiwan. He submits, therefore, that any difference in treatment between the defendants and a litigant resident and possessed of assets within the jurisdiction, is liable to be contrary to Article 14 unless it is objectively justified. He relies strongly, but by way of analogy, on the decision of this court in Fitzgerald & Ors v Williams & Ors [1996] QB 657. That case concerned RSC Order 23.r1(1)(a) relating to security for costs under the pre-CPR regime. It was held by this court that in empowering the court to make orders for security against plaintiffs who were ordinarily resident outside the jurisdiction, which it could not make against plaintiffs ordinarily resident within it, the order was covertly discriminatory on the ground of nationality since most plaintiffs in England who were resident outside the jurisdiction would not be British.

33. The discrimination in issue in that case arose in relation to EC law. That is why I say it is relied on by way of analogy. At page 675 Sir Thomas Bingham, MR, who gave the lead judgment, said at 675C:

"The English court should never exercise its discretion under the rule to order security to be given by an individual plaintiff who is a national of and resident in another member state party to the Convention, at any rate in the absence of very cogent evidence of substantial difficulty in enforcing a judgment in that other member state."

I am prepared to assume, but without deciding, that Article 14 is potentially engaged in the context of the issue that I have to decide. I shall also assume the correctness of the dictum of Potter LJ at paragraph 26 of Bell when he said:

“I think it clear that, the ordinary case of an appeal by an individual or company resident in the United Kingdom or possessed of assets here, the court would be most unlikely to regard the failure of an unsuccessful defendant to pay the judgment sum following refusal of a stay of execution as constituting a compelling reason to deploy its powers under r52.9. In such a case, in the absence of very exceptional circumstances, it seems plain that the remedy of execution and/or bankruptcy or winding-up proceedings should be deployed as the appropriate and effective route to enforcement.”

34. In so far as the imposition of the condition sought by the claimants in this case could be said to discriminate against the defendants, I consider that such discrimination is objectively justifiable. The scope for obstruction available to these defendants is considerably greater than what they could achieve if they were resident and/or had assets within the jurisdiction. I have already referred to the position in Taiwan and the possibility that the claimants might have to wait a considerable number of years before being able to enforce a judgment.

35. In the circumstances of this case, it seems to me that this difference is sufficient to justify imposing the conditions, whereas I accept that it is unlikely that such conditions would be imposed if the defendants were resident and/or had assets within the jurisdiction. I propose therefore to impose conditions that the defendants pay to the claimants the judgment sum and interest together with the £2m costs plus interest. So far as security for the costs are concerned, I have heard no argument as to the amount it would be proper to order. The defendants first offered £150,000 but then reduced their offer to £100,000. As I stated earlier the claimants proposed a figure of £200,000. The estimated length of this appeal is two days. I acknowledge it is a heavy appeal but it seems to me that in all the circumstances a sum of £150,000 is sufficient and reasonable for security for costs.

Order: Defendants to pay the claimants the judgment sum plus interest together with the sum of £2m by way of costs plus interest. Defendants to pay £150,000 by way of security for costs. Defendants will pay the costs of this application to be subject to detailed assessment. All sums to be paid within 6 weeks from the date of this judgment. The period of 28 days for service of the Respondents' notice of cross-appeal not to commence running until the date of payment.