1998.04.28

1994 (O) 1838

Judgment upon case concerning 'judgment of a foreign court' as provided in Article 24 of the Law on Civil Enforcement and the judgment of Hong Kong High Court ordering the payment of court costs

Judgment of the Third Petty Bench, dismissed

Osaka High Court Judgment of July 5, 1994

1. The order of the Hong Kong High Court for payment of the cost of litigation and the determination of the assessment of cost which are inseparable from this order are 'foreign judgment' as provided by Article 24 of the Law on Civil Enforcement.
2. Under the circumstances where, based upon the agreement between P and Company Q which P represents on the one hand and A on the other, A initiated the first action in a Hong Kong court claiming the performance of an obligation of guarantee, B initiated the second action against P, in case B loses the first action, asking the court to acknowledge the possibility of subrogate exercise of the base hypothec, and the third action against P and Company Q asking the court to acknowledge the possibility of claiming compensation, and the Hong Kong court has jurisdiction over the first and second actions, in the light of the purpose of Article 7 of the Code of Civil Procedure, concerning the third action, the jurisdiction of the Hong Kong Court on the consolidated claim with the second action should be acknowledged and the judgment of the Hong Kong court should be recognised in Japan; this is compatible with the idea of the fairness of the parties, just and speedy trial and the rules of reason.
3. If there is a treaty on judicial cooperation between Japan and the country where the original judgment was rendered and the service of documents needed for the commencement of the litigation must be effected in the manner as provided by this treaty, service of document which does not follow the procedure as provided by the treaty does not fulfil the requirements of Article 118, subpara.2 of the Code of Civil Procedure.
4. Service of documents by way of direct delivery in Japan by an individual who was personally asked by a party who is a resident in Hong Kong does not fulfil the requirements of Article 118, subpara.2 of the Code of Civil Procedure.
5. A judgment ordering a party to pay the total cost of litigation including the lawyers fee is not against 'public order' as provided by Article 118, subpara.3 of the Code of Civil Procedure.
6. There is 'mutual guarantee' as provided by Article 118, subpara.4 of the Code of Civil Procedure between Japan and Hong Kong before the reunification in relation to a judgment ordering payment of money.

(On Item 1 to Item 6)

Article 22, subpara.6 of the Law on Civil Enforcement
Enforcement of judgment is effected on the basis of the following titles (hereinafter, 'enforcement titles'):
(6) foreign judgments and arbitral awards with an enforcement judgment which have taken effect

Article 24, Law on Civil Enforcement
1 Claims on the enforcement of foreign judgment fall within the jurisdiction of the district court which covers the location of ordinary jurisdiction of the debtor. If there is no such location, the court which has jurisdiction over the location of the assets which are the object of seizure, or assets which are seizable has jurisdiction over such claims.
2 Enforcement judgment shall be rendered without examining the case on its merit.
3 Claims as provided in subpara.1 shall be dismissed if there is no proof that the foreign judgment has taken effect, or does not fulfil the requirements provided by the subparagraphs of Article 118 of the Code of Civil Procedure.
4 In the enforcement judgment, it should be declared that enforcement is allowed on the basis of a foreign judgment.

Article 118, Code of Civil Procedure

Judgments of foreign courts which have taken effect have effect only when they fulfil all the following requirements:
(1) The jurisdiction of the foreign court is acknowledged by laws or ordinances or international treaties.
(2) The losing party has been summoned or been served a writ (except by way of public notice and other similar manners of notice) necessary for the commencement of litigation, or has not been summoned or served a writ, but nevertheless, responded to the claim.
(3) The content of the judgment and the procedure are not against public order and good morals of Japan.
(4) There is a mutual guarantee

(On Item 2)

Article 7 of the Code of Civil Procedure
If there are several claims in one action, action can be initiated in the court which has jurisdiction on one of the claims in accordance with the three preceding provisions. However, in relation to action with multiple parties, this is limited to instances as provided by the first part of Article 38.

(On Item 4)

The Convention on the Service Abroad of Judicial and Extra-judicial Documents in Civil and Commercial matters (Treaty No.7, June 5, 1970)

Consul Treaty between Japan and the United Kingdom of Great Britain and Northern Ireland (Treaty No.22, September 29, 1965).

The appeal is dismissed.
The cost of appeal shall be borne by the appellant

The present case involves a claim by the appellees for an enforcement judgment on the basis of Article 24 of the Law on Civil Enforcement in relation to the judgment of the Hong Kong High Court on the allocation of the cost of litigation rendered before the return of Hong Kong to the Peoples' Republic of China on July 1, 1997. Since Article 24, para.3 of the Law on Civil Enforcement was amended by Law No.110, 1996 after the present case had been brought to court, the present judgment will interpret the ground of appeal concerning the error in the interpretation and application of the subparagraphs of Article 200 of the previous Code of Civil Procedure to be on the error in the interpretation and application of the subparagraphs of Article 118 of the present Code of Civil Procedure which corresponds to former Article 200 (in the following, appellant X will be called 'appellant X', appellant company Sadhwanis Japan Limited, 'appellant company', appellee Y will be called 'appellee Y', Z, who is not a party to this litigation as 'third party Z', Bank of India as the 'third party Bank').

1. On item 1 of the ground of appeal by the representative of the appelant, Tadao Yamamoto

'Judgment of a foreign court' as provided in Article 24 of the Law on Civil Enforcement denotes a final judgment rendered by a foreign court on private law relations by providing procedural guarantee to both parties, regardless of the name, procedure, or form of judgment. Even if the judgment is called a decision or order, insofar as it possesses the characteristics of the above, it should be regarded as a judgment of a foreign court.
In the present case, according to the records, (1) in Hong Kong, the person who is to bear the cost of litigation and the allocation of the cost are not determined by the judgment on the substance of the case, but by an order for allocation of the cost of litigation upon the petition of the winning party, (2) the Hong Kong High Court rendered a judgment on the substance of the first to fourth litigation as indicated below between the appellants, appellees, and the Bank on April 27, 1988 in favour of the appellees and this judgment has taken effect, (3) the appellees applied for an order on the payment of the cost of litigation vis-a-vis the appellant and the Bank on May 11 of the same year, (4) the High Court of Hong Kong, after hearing the representative of the appellants, issued an order of payment of the cost of litigation to the appellants and the Bank on August 31 of the same year (hereinafter, 'the Order'), (5) subsequently, the actual cost of litigation was determined and on the basis of the Order and the Determination of the Cost dated October 3, 1989 and Certificate of Cost dated September 11, 1989, both of which are part of the Order (hereinafter, 'Orders'), the appellants were ordered to pay the appellees 1,202,585,58 Hong Kong dollars. On the basis of these facts, it is appropriate to regard the Orders to be a judgment of a foreign court as provided by Article 24 of the Law on Civil Enforcement, and the ruling of the original instance which is in line with this conclusion is justifiable. There is no error in the original judgment as asserted by the appellants, and the argument is not acceptable.
2. On item 2

In cases where interest is generated on the amount whose payment is ordered by a judgment etc., whether to include this in the judgment or to give enforcement power by provisions of law without including it in the judgment etc. differs from jurisdiction to jurisdiction, but the difference is largely due to technical considerations, and therefore, even if it is not included in the judgment etc. of a foreign court, it is not impossible to recognise and enforce interest payment in Japan (Supreme Court (O) Case No.1761, Judgment of the Supreme Court, Second Petit Bench, July 11, 1997, Minshu 51-6-2530).
According to the records, (1) there is no indication of the interest for delay in relation to the cost of litigation which the appellants were ordered to bear in the Orders, (2) however, under the Law of Hong Kong, in relation to judgments ordering monetary payments, if there is no specific order of the High Court, interest for the delay automatically emerges, and the rate of interest is to be determined ad hoc by the Chief Justice of the Hong Kong Supreme Court, (3) in the Orders, no specific order is included, and it is acknowledged that by the order of the Chief Justice of the Hong Kong Supreme Court, the rate of the interest for the delay after September 1, 1988, which is the next day of the date of issue of the Order, has been determined as indicated in the table of calculation for interest attached to the judgment of the first instance court. Based upon the above facts, the ruling of the original instance court which acknowledged that interests for de lay in accordance with the rate as provided in the above-mentioned calculation table of interests which was not included in the Orders could be recognised and enforced in Japan is justifiable.
The appellants also argue that the original instance court unlawfully failed to rule on the grounds of the emergence of the interests for delay and the legitimacy of its rate, but the court in Japan is not empowered to examine the appropriateness of such rulings (Art. 24, para.2, Law on Civil Enforcement).
The original judgment is not unlawful as argued by the appellant; the arguments of the appellants are not acceptable.

3. On item 3

According to the records, it is evident that the appellants had failed to appeal against the Orders within the period of appeal as provided by the relevant law, and the ruling of the original instance court which found that the Orders have taken effect is justifiable in its conclusion. In the light of Article 24, para.3 of the Law on Civil Enforcement, the method of proving that a foreign judgment has taken effect is not limited to the submission of the so called certificate of taking effect.
The argument is unacceptable.

4. On item 4

1) Article 118, subpara.1, which provides that 'the jurisdiction of the foreign court can be acknowledged by laws or ordinances, or international treaties', should be understood in the meaning that in the light of the international civil procedural law of Japan, the country where the foreign court in question is located (hereinafter, 'country of judgment') is required to be positively acknowledged to have international jurisdiction (indirect general jurisdiction) on the given case. Since there is no provision of law or ordinance which directly indicates on what grounds the country of judgment has international jurisdiction, nor are there treaties or established clear rules of international law, it should be decided by reason in accordance with the idea of ensuring equal treatment of the parties and just and speedy trial. More specifically, whether or not the country of judgment has international jurisdiction should be determined in the lig ht of reason, basically in accordance with the provisions of the Code of Civil Procedure on the territorial jurisdiction of the courts from the viewpoint of whether it is appropriate to recognise the given foreign judgment, taking into consideration specific circumstances of each case.
2) The Orders are auxiliary decisions on the payment of costs of litigation in relation to the judgment in substance, and therefore, whether or not Hong Kong has jurisdiction over the Orders should be examined, in principle, in relation to the judgment in substance.
3) In the present case, the original instance court acknowledged international jurisdiction of Hong Kong on the grounds that (1) in the first litigation in which the third party Bank demanded performance of guarantee vis-a-vis the appellees, the place of residence of the appellees (defendants) (Art.2, para.1 of the previous Code of Civil Procedure) was in Hong Kong, (2) in the second litigation against the third party Bank, appellant X and his wife third party Z in which the appellees claimed recognition of subrogation of the third party Bank on the condition that the obligation in the first litigation is performed in relation to the base hypothec which the Bank held vis-a-vis the appellants, the jurisdiction of consolidated claims (Art.21 of the previous Code of Civil Procedure) was in Hong Kong, because not only in relation to the counterclaim vis-a-vis the third party Bank, but also in relation to the claims vis-a- vis X and third party Z, there is a common ground in substantive law and they are closely related, and (3) in the fourth action vis-a-vis the appellees in which the appellants and third party Z, in defence against the third action referred to below, claimed recognition that it was the appellee Y only, who is to have an obligation of guarantee, since it is a counter claim against the third action, since Hong Kong has jurisdiction over the third action. The above ruling of the original instance court is justifiable also under the current Code of Civil Procedure which has a similar provision on territorial jurisdiction. The original judgment is not unlawful as argued by the appellants.
4) On the other hand, the third action is a claim by the appellees vis-a-vis the appellants and third party Z (three of them) asking the court to acknowledge the existence of the right to indemnification, and has a nature of a third party proceeding which is unique to Anglo-American jurisdiction. Defendants in the third action, appellant X and third party Z are at the same time, defendants in the second action, and moreover, the second and third actions are a claim for the acknowledgement of the possibility of subrogate exercise of the base hypothec right or claim for indemnification based upon the litigation agreement between the appellants and the third party Bank on the condition that the first action initiated against the appellees is decided in favour of the plaintiffs. These are actions on the same basis of substantive law, are mutually closely related, and therefore, a strong necessity exists for a uniform adjudication. Cons idering these circumstances, concerning the third action, in the light of the essence of Article 7 of the Code of Civil Procedure, acknowledgement of the existence of jurisdiction in Hong Kong of the consolidated claim with the second action, including the claim vis-a-vis the appellant company which was newly made a defendant, and recognition of the judgment of the Hong Kong court suits the idea of equality of the parties, just and speedy handling of the case, and coincides with reason. Therefore, the ruling of the original instance court which acknowledged international jurisdiction of Hong Kong in the third action is justifiable in its conclusion.
5) Based upon the above, the argument of the appellants cannot be accepted.

5. On item 5

1) According to the records, it can be ascertained that (1) the appellees applied for the Order vis vis the appellants on May 11, 1988, (2) upon this application, the Hong Kong High Court allowed the service of the notice of motion to the appellant X, an Indian national residing in Kobe, and the appellant company which is a Japanese juridical person, (3) this notice of motion was delivered to the appellants on July 26, 1988 by a Japanese attorney who was personally asked to do so by the appellees, (4) the appellants retained an attorney resident in Hong Kong as a representative for the proceedings concerning the notice of motion and a hearing took place on August 25, 1988 with the participation of this attorney, (5) the representative of the appellant contested the international jurisdiction of Hong Kong in relation to the third action mentioned above.
2) The argument of the appellant is that service of the document by direct delivery is not compatible with manner of delivery of documents as provided by the International Convention on Judicial Cooperation, and therefore, in relation to the appellant company, failed to fulfil the requirement of 'service' as provided in Article 118, para.2 of the Code of Civil Procedure and also that before responding to the claim, the international jurisdiction of the court has been contested, and therefore, the requirement of 'response to the claim' as provided in the same provision has not been fulfilled. The Court will examine whether or not these requirements have been fulfilled in relation to appellant X ex officio.
3) 'Summons or service of the order required for the commencement of litigation' to the defendant as provided by Article 118, subpara.2 of the Code of Civil Procedure does not have to be summons or service on the basis of the Japanese law of civil procedure, but must be sufficient for the defendant actually to become aware of the commencement of the litigation and to defend himself. Furthermore, from the viewpoint of ensuring clarity and stability of the procedure of litigation, if there is a treaty of judicial cooperation between the country of judgment and Japan and if this treaty provides that the service of the document required for the commencement of litigation must be effected in a manner set out in this treaty, service of documents not in accordance with the manner set out in the treaty should not be regarded as service which fulfils the requirement of the above provision of the Code of Civil Procedure.
In the present case, Japan and the United Kingdom, which had sovereignty over Hong Kong then, were both signatories to the Convention on the Service Abroad of Judicial and Extra-Judicial Documents in Civil and Commercial Matters, service of documents by direct delivery to the recipient by a person who has personally been asked by the party such as in the present case is not allowed under the above Convention. Furthermore, no legal basis for it can be found in the 'Consul Treaty between Japan and the United Kingdom of Great Britain and Northern Ireland' (Japan-UK Consul Treaty). Therefore, the service of the above notice of motion to the appellant does not fulfil the requirement of the provision of the Code of Civil Procedure and is unlawful.
4) On the other hand, 'response to the claim' as provided by Article 118, para.2 of the Code of Civil Procedure, unlike the response to the claim in determining the jurisdiction based upon response, includes cases where the defendant was given the opportunity of defence and effected defensive measures in court. According to the above facts, it is evident that the appellants responded in the meaning of this provision on the proceedings of notice of motion.
5) Therefore, in relation to the appellant company, the Orders fulfil the requirement of Article 118, subpara.2 of the Code of Civil Procedure. The ruling of the original instance court on this point is justifiable in conclusion, and the argument of the appellants is not acceptable. It is also evident that in relation to the appellant X, the Orders fulfil the requirement of the said provision.

6. On item 6

The problem of how to allocate the cost of litigation is a matter to be decided by each jurisdiction, and provided that it is determined within the scope of cost actually incurred, even if one of the parties is to bear the total cost including lawyers fee, it is not against 'public order' as provided by Article 118, subpara.3 of the Code of Civil Procedure.
According to the records, in the present case, the fact that the appellants acted in bad faith, the rate for the so-called indemnity basis was applied and most of the cost including the lawyers' fee was ordered to be borne by the appellant. It is unusual that this rate on indemnity basis is applied by a court in Hong Kong and it can be acknowledged that it has a punitive element, but on the other hand, the amount of cost of litigation which the appellants were ordered to pay by the Order does not exceed the cost actually incurred, and therefore, the content of the Order cannot be regarded as being against the public order of Japan. The ruling of the original instance court which, in principle, is in line with this view is justifiable. The original judgment is not unlawful as argued by the appellants and the argument that the payment of cost of litigation on an indemnity basis is unlawful in parallel to punitive damages is unacceptable.
It was also argued that the judgment of the Hong Kong High Court in the substance of the case was a result of a deceit by the appellees and is against the procedural public order. However, this is merely an allegation that the finding of facts was a result of the leading testimony by the witness, criticising the inappropriateness of the choice of evidence. Japanese courts are not empowered to examine the appropriateness of the choice of evidence (Art.24, para.2, Law on Civil Enforcement) and the argument is not acceptable.

7 On item 7

'The existence of mutual guarantee' as provided by Article 118, subpara.4 of the Code of Civil Procedure means that in the country where the foreign court which rendered the judgment in question resides, judgments of a similar nature by Japanese courts are treated as valid under the requirements not substantially different from the requirements of the above provision (Supreme Court 1982 (O) Case No.826, Judgment of the third Petit Bench, June 7, 1983, Minshu 37-5-611).
According to the records, it can be ascertained that (1) in Hong Kong, there is a law and a rule on the recognition of foreign judgment (mutual enforcement), and by the order of the Governor, the Rule lists specific countries which are regarded to have mutual guarantee, (2) Japan was not listed as a country with mutual guarantee, (3) however, in Hong Kong, in relation to the recognition of foreign judgments, in addition to statutory law, principles of English Common Law was applicable, (4) under the Common Law, judgments of a foreign court ordering payment of money were recognised in accordance with the requirements of the original judgment. The requirements for the recognition of foreign judgments under the Common Law can be regarded as not substantially different from the requirements of the subparagraphs of Article 118 of the Code of Civil Procedure of Japan. And therefore, it is appropriate to conclude that between Hong Kong and Japan, there was a mutua l guarantee on recognition of foreign judgments as provided by Article 118, subpara.4 of the Code of Civil Procedure. There is no unlawfulness in the original judgment as argued by the appellants, and the arguments are unacceptable.
Therefore, the justices unanimously rules as the main text of the judgment.

JusticeHideo Chikusa
JusticeItsuo Sonobe
JusticeYukinobu Ozaki
JusticeToshifumi Motohara
JusticeToshihiro Kanatani