WFM MOTORS PTY LTD. v. MALCOLM MAYDWELL

CACV 148/1995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 148 OF 1995

(ON APPEAL FROM HCMP NO. 1405 OF 1994)

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J U D G M E N T

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Nazareth V-P:

1. This is an application by the solicitors of the plaintiff, WFM Motors Pty Ltd, "for an order that a sum of $100,000 together with interest thereon in the Court of First Instance to the credit of this matter be paid out to the [plaintiff's] solicitors on its own authority, alternatively for directions as to the conduct of this application".

2. The sum was paid in by the defendant, Malcolm Maydwell, pursuant to the order of the Court of Appeal dated 16 February 1996, in the context of the defendant's application for leave to appeal to the Privy Council. In the event, the Privy Council's advice was against the defendant who was ordered to pay costs.

3. A bankruptcy order was made against the plaintiff and the Official Receiver appointed trustee in bankruptcy. The defendant's solicitors now seek payment out of the entire sum of $100,000 with the interest thereon. In that regard the Official Receiver is concerned about the interest of other creditors and thus associates himself with the application to have the matter in effect sanctioned by the Court. Besides it is very doubtful whether a single judge of this Court now has jurisdiction to decide this matter, but the parties have agreed that this would be expeditious and save costs and therefore to abide by the decision of a single judge of this Court. Purely upon that not wholly satisfactory basis, I have decided to entertain the application.

4. The applicants, i.e. the defendant's solicitors, rely primarily upon the wording of Rule 4(a) of the Order-in-Council regulating appeals from the Supreme Court or Court of Appeal for Hong Kong to Her Majesty-in-Council made in 1909. Rule 4(a) provides that:

"Leave to appeal under Rule 2 shall only be granted by the Court in the first instance that

(a) upon condition of the Appellant, within a period to be fixed by the Court, but not exceeding three months from the date of the hearing of the application for leave to appeal, entering into good and sufficient security, to the satisfaction of the Court in a sum not exceeding $100,000 for the due prosecution of the Appeal and the payment of all such costs as may become payable to the Respondent in the event of the Appellant not obtaining an order granting him final leave to appeal, or of the Appeal being dismissed for non-prosecution, or of His Majesty in Council ordering the Appellant to pay the Respondent costs of the appeal (as the case may be);

..."

5. For his part, the Official Receiver's concerns stem from the actual wording of the formal order of the Court of Appeal made on 16 February 1996. The material part of this was couched in the following terms:

"CONDITIONAL UPON the Defendant within 3 months from the date hereof entering into good and sufficient security to the satisfaction of the Court in the sum of HK$100,000 for the due prosecution of the appeal and the payment of all such costs as may become payable to the Plaintiff in the event of the Defendant not obtaining an order granting final leave to appeal;"

As is plain, the order does not include the other two conditions that appear in Rule 4(a). That could possibly be thought to imply that it is only the two conditions included to which the security relates. However, it seems to me that the exclusion of the other conditions may well have been an oversight. That view is entirely consistent with the words of the judgment. This can be seen from pages 3R to 4C of that judgment handed down on 29 February 1996:

"We therefore gave leave to appeal subject to the following:-

(1) The Defendant to provide security for the costs of the appeal in the sum of $100,000 within 3 months."

That with respect, would have been the normal and entirely correct framing of the order in my view, since it would then have imported the conditions or purposes of the security that on my reading of Rule 4(a) appear to be mandatory. In those circumstances, I have no hesitation in concluding that all four conditions apply to the security, notwithstanding that only two happened to be included in the formal order. It follows that, in my view, the application should be granted.

6. There will accordingly an order for payment out in terms of the application to the plaintiff, i.e. the WFM Motors Pty Ltd solicitors on their own authority. I make no order as to costs pursuant to the agreement of the parties as to that.

Representation:

Mr Roger Beresford, solicitor of Messrs Baker & McKenzie for the Plaintiff

Mr K.C. Yip, Senior Solicitor of Official Receiver for the Defendant

IN THE COURT OF APPEAL

1995, No. 148
(Civil)

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Coram : Hon. Nazareth, V.-P., Bokhary and Ching, JJ.A.

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D E C I S I O N

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Ching, J.A. (giving the judgment of the Court) :

1. On 7th December, 1995, we handed down a reserved judgment by which we reversed the decision of the Judge below and restored the registration in Hong Kong of a judgment obtained by the Plaintiff against the Defendant in Australia. The Defendant applied for leave to appeal to the Privy Council. On 16th February, 1996, we gave conditional leave and said that we would give our reasons in writing. These are our reasons.

2. In his application the Defendant put forward all the grounds available to him in law, namely that the decision was a final one indirectly involving a matter in dispute of the value of $500,000 or upwards under Rule 2(a) of the Order in Council regulating appeals to Her Majesty in Council, alternatively that there were questions of great general or public importance under Rule 2(b), or under the words "or otherwise" in Rule 2(b). In the event we heard argument on only the first of these. The Plaintiff conceded that the monetary requirement was satisfied. In the circumstances we were concerned only with the question of whether or not our judgment was a final one under Rule 2(a).

3. Having regard to the decision of this Court in First Pacific Bank, Ltd., v. Robert H.P. Fung (1990) 1 HKLR 527 the test for finality in Hong Kong is that which has been described as the application test, that is to say whether the controversy in issue between the parties would be finally resolved whichever way the decision should go. In the present case the controversy and the only controversy was whether or not the Plaintiffs should be entitled to register their Australian judgment in Hong Kong. Judgment had gone against the Defendant in Australia and he had exhausted his appeals there. His opposition to the registration here could not be based upon any allegation that the Australian courts had been mistaken or that he was in fact not liable to the Plaintiff. The Court does not sit on appeal from the Australian courts. His opposition was based mainly on the allegation that the judgment had been obtained by fraud. We held that that had not been shown and that no sufficient ground was shown to order that any issue should be tried. In our view the judgment was final. Whichever way the decision had gone no further proceedings could have taken place on the question of registrability.

4. Mr. Geoffrey Ma, Q.C., for the Plaintiff argued that all questions of execution are interlocutory. We agree. He also argued that the registration of the judgment was merely a step in execution. We do not agree. Undoubtedly, registration of the judgment in Hong Kong was a pre-requisite of execution in Hong Kong but it was not itself a step in execution. Once registered in Hong Kong the Australian judgment, like a Hong Kong judgment, became one that could be executed in Hong Kong. Any questions arising in the course of execution would be no different from the same or similar questions arising in the course of executing a Hong Kong judgment but that was not a matter with which the Court was dealing.

5. Mr. Ma also argued that absent registrability the Plaintiff was entitled to proceed in a fresh action by reason of section 5 of the Foreign Judgments (Restriction on Recognition and Enforcement) Ordinance, Cap.46. This emphasised that one must look to the underlying dispute between the parties and showed that the judgment had not resolved that dispute, namely the claim of the Plaintiff that the Defendant was indebted to it. Again, we do not agree. Those proceedings, if instituted, would have been separate proceedings dealing with liability with which the Court was not concerned. The Court was concerned only with recognition of the Australian judgment by way of registration.

6. We therefore gave leave to appeal subject to the following:-

(1) The Defendant to provide security for the costs of the appeal in the sum of $100,000 within 3 months.

(2) The record to be prepared and lodged with the Registrar for transmission to the Registrar of the Privy Council within 3 months.

We ordered the costs of this application to be costs in the appeal to the Privy Council and we ordered a stay of execution of the registered judgment until 29th February, 1996, when the parties will be appearing before us again on a related matter. This was to allow the Defendant an opportunity to place before us a factual basis upon which we could consider a stay pending the decision of the Privy Council. For the sake of clarity we gave him liberty to apply for a further stay on that date.

7. We must express our gratitude to Mr. Ma for offering to assist the Defendant, who has represented himself now for some time, in the preparation of the record.

Representation:

Mr. Malcolm Maydwell, Appellant in person

Mr. Geoffrey Ma, Q.C. & Mr. A.T. Reyes (M/s Baker & McKenzie) for Respondent/Plaintiff

IN THE COURT OF APPEAL

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J U D G M E N T

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Ching, J.A. :

1. Skink, Ltd., is a Hong Kong company in which the Defendant and his wife are the only shareholders. It dealt in the sale of cordless telephones. It had done business with a company owned or controlled by the Plaintiff called Zap, subsequently renamed Australian Telephone Distributors Pty., Ltd., ("ATD") with which it had entered into a distributorship agreement dated 5th December, 1991. The agreement obliged ATD to order a minimum number of telephones every year. For reasons into which it is not necessary to go, it is accepted by the Defendant that Skink became indebted to ATD. There then came into being a guarantee by deed dated 20th July, 1992, executed by the Defendant in favour of the Plaintiff.

2. The guarantee provided that in consideration of the Plaintiff

"..... granting and continuing to grant credit or other financial accommodation ....."

to Skink, the Defendant promised to pay to the Plaintiff the "Guaranteed Moneys" on demand. The "Guaranteed Moneys" were defined as being

"..... all moneys ..... owing by (Skink) to (the Plaintiff) ....."

The maximum liability of the Defendant was to be $3,500,000 with interest and other expenses. By clause 2.04 it was provided that

"A certificate of balance signed by any director of (the Plaintiff) shall be conclusive evidence against the (Defendant) of the amount of the Guaranteed Moneys."

One of the events upon which the Plaintiff could demand payment was the making of an order for the winding-up of Skink. Such an order was made and the Plaintiff, through its solicitors, made a demand. The Defendant did not pay and the Plaintiff issued proceedings in Australia.

3. The Amended Statement of Claim was in a simple form. It alleged the guarantee, the indebtedness of Skink to it, the winding-up order, the demand and the non-payment. Paragraph 8 pleaded that

"By letter dated 18 December 1992 the Defendant acknowledged the indebtedness of Skink to the Plaintiff in the sum of Five Million and Fifty Four Thousand Six Hundred and Seventeen Dollars and Eighty Cents Hong Kong ($5,054,617.80 HK)."

The claim was limited to the amount set out in the guarantee.

4. A Defence was filed. It admitted the guarantee but made no admission as to the demand. It set out details of dealings which took place from 21st July, 1992. In essence those dealings were with ATD who had opened various letters of credit. Only one letter of credit had been opened by the Plaintiff the full amount of which had indeed been drawn down and against which the full amount of goods had been sent. In other words, there was no debt owing by Skink to the Plaintiff. In accordance with this, paragraph 4 admitted the letter of acknowledgement but asserted, as was plainly true, that it was addressed to ATD. Paragraph 5 concluded the pleading in this way,

"(o) Further or alternatively, the Plaintiff represented to the Defendant that it would procure ATD to perform its obligations under the Agreement referred to in paragraph 5(d) above by causing ATD to purchase 61,000 cordless telephones from Skink during 1992 and to cause Letters of Credit to be issued to enable ATD to pay for goods ordered from Skink.

(p) Acting on the faith of the above representation and induced thereby, the Defendant entered into the said Guarantee.

(q) The representations were false, made negligently or alternatively innocently.

(r) In the premises the Guarantee is void."

The agreement referred to in (o) was the distributorship agreement.

5. The Plaintiff made an application for summary judgment and, in the alternative, for the Defence to be struck out. On 22nd October, 1993, the Plaintiff was given summary judgment by Master McLaughlin. The Defendant allowed the time for appeal to pass and then applied for an extension. That application was dismissed by Windeyer, J., on 16th August, 1994. On 26th September an appeal against that dismissal was refused. There have been other proceedings in Australia and the Plaintiff has recovered a part of the judgment debt.

6. On 8th June, 1994, the Plaintiff had registered the judgment in Hong Kong under the provisions of section 4 of the Foreign Judgments (Reciprocal Enforcement) Ordinance, Cap.319, liberty being given to the Defendant to apply to set it aside. Under section 6(2) of the Ordinance the registration may be set aside on the grounds that there is an appeal pending in the foreign court against the judgment or on the grounds that the judgment debtor is entitled to and intends to appeal. Accordingly on 4th July, 1994, the Defendant issued his first summons to set aside the registration on the grounds that an appeal was pending. After he had unsuccessfully exhausted his appeals in Australia, Master Britton dismissed his first summons on 17th October, 1994. On 23rd December, 1994, the Defendant sought leave to appeal against that dismissal out of time.

7. Meanwhile, on 12th December, 1994, the Plaintiff had served a bankruptcy notice upon the Defendant. On 21st December, 1994, he applied to set it aside. On 23rd December, 1994, the same day upon which he sought leave to appeal the Britton order out of time, he issued a second summons seeking an extension of time within which to make another application to set aside the registration of the judgment on five new grounds.

8. At that time the Defendant thus had three outstanding applications. The first was his application for leave to appeal against the Britton order out of time. The second was his application to set aside the bankruptcy notice. The third was his application for leave to issue his second summons to set aside the registration of the judgment. These three applications came before Yam, J., on 10th January, 1995. He refused leave to appeal against the Britton order out of time and he adjourned the other two to be heard together by a Master. They came before Master Betts on 12th April, 1995. He set aside the bankruptcy notice but refused leave to issue the second summons. Both sides appealed to the Judge in chambers. The Defendant maintained that having regard to section 97(2) of the Bankruptcy Ordinance, Cap.6, the Plaintiff's appeal lay only to the Court of Appeal. In any event the two matters then came before Findlay, J.

9. Before Findlay, J., the Defendant's appeal against the refusal of leave to issue the second summons to set aside the registration of the judgment was heard first. It appears to have been treated as a substantive application to set aside. On 31st May, 1995, Findlay, J., set aside the registration of the judgment. Time constraints did not allow the Plaintiff's appeal to be argued. Rightly or wrongly, however, the Plaintiff took the view that the bankruptcy notice was based solely upon the registration of the judgment and, with that registration having been set aside, the bankruptcy notice also had to go. The Plaintiff's appeal was therefore dismissed on 6th September, 1995.

10. On 26th June, 1995, the Plaintiff filed a Notice of Appeal against the setting aside of the registration of the judgment. Without prejudice to its contention that it was entitled to appeal to a Judge to apply for an extension of time to appeal to the Court of Appeal against that part of the Betts order setting aside the bankruptcy notice. On 12th July, 1995, that application was heard and dismissed by Liu, J.A. On 18th July, 1995, the Plaintiff lodged an appeal against that dismissal. On 6th September, 1995, the Plaintiff also lodged an appeal against the dismissal of its appeal by Findlay, J.

11. Before this Court there were therefore four matters. The first is the appeal against the order of Findlay, J., setting aside the registration of the judgment. On the assumption that the Plaintiff was entitled to appeal the setting aside of the bankruptcy notice to a Judge, the second is an appeal against the dismissal of that appeal by Findlay, J. On the assumption that the appeal ought to have been made directly to the Court of Appeal, the third is an appeal against the order of Liu, J.A., refusing an extension of time within which to do so. Finally, on the same basis and if the appeal against the order of Liu, J.A., is successful, the fourth is an appeal against the Betts order setting aside the bankruptcy notice. Before this Court, the Plaintiff's argument focussed entirely upon the first of these matters for, again rightly or wrongly, the Plaintiff's position continued to be that without the registration of the judgment the bankruptcy notice could not be supported. In the event that the appeal on the first matter were to succeed there would have to be further argument on the other three.

12. The setting aside of a registration of a foreign judgment is provided for by section 6 of the Foreign Judgments (Reciprocal Enforcement) Ordinance, Cap.319, and the principles have been the subject of authoritative decisions. It is necessary to refer only to the three which were cited by Mr. Ma, Q.C., who appeared on behalf of the Plaintiff. Abouloff v. Oppenheimer & Co. (1882) 10 QBD 295 concerned a judgment obtained in Russia which was upheld upon appeal. The action was for the return of goods or for their value. The defence was that the goods were in the possession of the Plaintiff. When action was taken in England upon that judgment the Defendant put in the same defence and alleged that the judgment had been obtained by fraud. It was held that notwithstanding that the defence had been considered and rejected in Russia it was available to the Defendant in England.

13. In Vadala v. Lawes (1890) 25 QBD 310, the Plaintiff obtained judgment in Italy which was upheld on appeal. The action was upon bills of exchange alleged to have been accepted by the Defendant's agent. The defence was that the transactions were gambling transactions and that the bills were fraudulent. When the Plaintiff took action upon the judgment in England a similar Defence was put in but counsel for the defence was stopped from cross-examining upon the question of whether the transactions were gambling transactions. The Court of Appeal held that the defence that the judgment had been obtained by fraud was available even though it involved matters adjudicated upon in the foreign court.

14.Owens Bank, Ltd., v. Bracco (1992) 2AC 443 was a decision of the House of Lords. The Plaintiff obtained judgment in a foreign court upheld on appeal against the 2nd Defendant supported by loan documents signed by the 1st Defendant. The 1st Defendant denied the transaction and alleged that the documents were forgeries. An application was made to register the judgment in England and it was ordered that an issue be tried as to whether or not the judgment had been obtained by fraud. Before the matter got to the House of Lords it had been proven in the foreign courts that the documents were in fact forgeries. The House of Lords refused to quash the order.

15. For the purposes of this appeal the principles to be applied are as follows. First, the court is not re-trying the case. The question is not whether the decision of the foreign court was correct. Secondly, however, where fraud is alleged it is permissible in an appropriate case to examine the evidence to consider whether or not the evidence given at the trial was fraudulent. Thirdly, it follows that this can be done even when the very points that are put forward have already been considered and dismissed by the foreign court. An allegation of fraud is always serious and the Defendant must particularise the fraud with precision and then establish it to the appropriate standard.

16. There appears to be little authority on that standard but there is no reason to doubt that it must be as high as that necessary to prove fraud in any case. Mr. Ma was only able to locate two decisions, both upon the question of the standard necessary before the trial of an issue should be ordered. The first is Syal v. Heyward (1948) 2 KB 443. At page 450, Cohen, L.J., said,

"In proceedings under the Act of 1933, the Court is not bound to direct an issue. It should not do so unless in a case of an application based on an allegation of fraud, it is satisfied that a prima facie case of fraud on the Court is established."

17. In Svirskis v. Gibson (1977) 2 NZLR 4, the Defendant had failed in his application to set aside the registration of a judgment and the Court of Appeal ordered an issue to be tried. At page 10, Cooke, J. (as he then was) said,

"..... it would be only in the rarest of cases, if ever, that the court would be satisfied on contested affidavit evidence that fraud had been proved. The power ..... to direct an issue is discretionary. In deciding whether a case strong enough to justify such a direction has been made out, the court would be entitled, we think, to have regard to all the circumstances of the case : including whether the defendant is merely seeking to try again on substantially the same evidence issues already adjudicated on in the overseas court; and whether the defendant refrained from appearing in that court. If he did refrain, another relevant consideration must be what he should have foreseen as the probable consequences. If a defendant had adequate notice of the nature of the evidence likely to be given by the Plaintiff yet did not avail himself of the opportunity of contradicting it, he may have difficulty in persuading the New Zealand Court to exercise the discretion in his favour. In Syal v. Heyward (1948) 2 KB 443, 450 ..... it was said that in proceedings under the Act of 1933 the court is not bound to direct an issue and should not do so in the case of an alleged fraud unless satisfied that a prima facie case of fraud on the foreign court is established. We do not regard this general statement as proposing any mechanical or rigid test or as excluding the kind of consideration just mentioned."

These are words of common sense. Whether it be for the purposes of showing a prima facie case so that an issue may be ordered or whether it be to establish the fraud and so to set aside the registration of the judgment immediately, fraud must be demonstrated to a standard commensurate with the gravity of the allegations.

18. It would be convenient to deal first with the Defendant's argument that judgment in Australia was obtained against him in breach of the rules of natural justice. The argument in the Court below was that the Defendant had not been given sufficient time to attend the hearing before Master McLaughlin, he being in Hong Kong at the time, with the consequences we have already seen. In the Court below, Findlay, J., said,

"On the allegation of a failure of natural justice, I believe there may be something in this. On the Defendant's case he was given very little notice that he was required to attend the summary judgment hearing, and he was advised by his legal advisers that he need not attend. In the result, his attendance might have made a difference in that his case would have been put before the Master in evidence. I am uncomfortable with what happened here, but there is no need to decide the matter."

With respect, we see no reason for discomfort or for thinking that there may have been any breach of the rules of natural justice.

19. The rules of procedure in Australia are not familiar to us. The Amended Statement of Claim and the Defence each conclude with a short affidavit. In the Amended Statement of Claim it is by Mr. Denis Alan Aitken, a director and the secretary of the Plaintiff, in which he deposed that he believed that the allegations of fact contained in that pleading were true. In the Defence it is by the Defendant in which by paragraph 2 he averred that,

"I believe that the allegations of fact which are denied in the Defence set out above are true."

That clearly does not swear to a belief in the truth of the positive averments made in the Defence.

20. When the application came on before Master McLaughlin the Defendant was represented by solicitors. It appears that the Defendant had sworn an affidavit dated 4th May, 1993. That affidavit was not put before us and we do not know what it contained. Ten days before the hearing, the Plaintiff's solicitors had required him to attend for cross-examination upon it. In return his solicitors required the attendance of the Plaintiff's deponents, Mr. Aitken and a Mr. Lewandowski, for the same purpose. The Defendant was in Hong Kong and he asserts that he was advised by his solicitors that he was not obliged to attend upon demand and the notice given to him requiring him to attend was too short. The transcript of these proceedings shows that when the hearing began the Master announced that he did not propose to allow that affidavit to be read having regard to his absence. The Defendant's solicitors then obtained a short adjournment during which they took instructions from the Defendant over the telephone. When the hearing resumed they applied to the Master to amend the Defence which consisted of converting the non-admission of the letter of demand to a denial. That application was refused. They stated that if it were necessary for there to be evidence on the rate of exchange the Defendant

"..... would be able to be present on that occasion."

No application was made for an adjournment to allow the Defendant to be present. The hearing continued. The Plaintiff applied to call Mr. Aitken and Mr. Lewandowski. That application was resisted notwithstanding the position taken in the correspondence. Mr. Aitken was then called, gave his evidence and was cross-examined. Judgment was given for the Plaintiff.

21. There was a delay in appealing against the summary judgment and the Defendant applied for leave to do so out of time. For that purpose he put in an affidavit dated 26th June, 1994, which it was said contained evidence not available at the hearing before the Master. We have not seen that affidavit and do not know what it said. At the hearing before Windeyer, J., the Defendant gave viva voce evidence but we have no transcript. We do have a copy of the judgment of Windeyer, J., by which he dismissed the application and from which it appears that no point was taken that the judgment of Master McLaughlin had been obtained in breach of the rules of natural justice.

22. The Defendant has stated that he was in difficulties preparing his defence. Skink had been ordered to be wound up and he was experiencing difficulties in obtaining access to its documents. That may well be so. However, access to these documents would not appear to have been necessary for the purposes of the Defendant's appearance. Nor was it put forward as a ground upon which his affidavit should be read notwithstanding his absence. His solicitors knew the case he had to meet and they must have known that it was possible that in his absence his affidavit could not be used. They sought no adjournment for the purposes of the Defendant's appearance. In these circumstances any inability in presenting his case was brought about by the Defendant himself or by his own solicitors. At the hearing before Windeyer, J., he was given and took the opportunity of giving viva voce evidence. We can see no breach of the rules of natural justice.

23. Before us the Defendant alleged another breach of those rules. Clause 2.04 of the guarantee provided that,

"A certificate of balance signed by any director of (the Plaintiff) shall be conclusive evidence against the (Defendant) of the amount of the Guaranteed Moneys."

Such a certificate was signed by Mr. Aitken. It was produced to the Court on 24th October, 1993, four days after it had been signed, namely 18th October, 1993. The Defendant alleges that it was deliberately kept back so that he would be taken by surprise with the result that he would not know what he had to meet at the hearing. Whatever the reasons why the certificate was not produced earlier, his solicitors never objected to its production. If they had been taken by surprise or were otherwise not prepared to deal with it they should have sought an adjournment. They did not. The certificate was in any event not essential to a finding of liability. We reject this allegation of a breach of the rules of natural justice.

24. If we understood the argument correctly, it was alleged that it would be contrary to public policy to allow the judgment to be registered and then enforced in Hong Kong because it had been obtained by fraud. As such it adds nothing to the arguments based on fraud. Mr. Ma, of course, argues that fraud has not been shown. The Defendant, on the other hand, took us to a wealth of detail which he argued showed that the judgment had indeed been obtained by fraud. It would be inappropriate to rehearse all of those details in this judgment. Broadly, the Defendant raised four points. First, he alleges that the guarantee, the very document upon which his liability is alleged to be founded, was procured by means of extreme economic duress and by threats of physical violence. Secondly, he says that Skink did not owe the Plaintiff any money. Thirdly, he alleges that the certificate put forward by the Plaintiff was knowingly false. Finally, he says that the evidence that Mr. Aitken gave before Master McLaughlin that ATD was the agent of the Plaintiff was knowingly false. The third and the last point are merely details of the second.

25. We deal first with the circumstances in which the guarantee came to be executed. We bear in mind that the Defendant is not debarred, as a matter of law, from raising again matters already found against him. Nor is he debarred from raising matters which ought to have been but were not raised before. It remains, however, that the burden of proving fraud and duress are upon him and that the burden is a heavy one. The question of economic duress appears to have been raised before and rejected by Windeyer, J. None of the threats of physical violence was raised in the Australian Courts. It is to be remarked that the evidence in this respect would not depend upon access to the documents of Skink. It would necessarily consist entirely of oral evidence from the Defendant himself and would have provided a complete answer to the claim. It could therefore be expected to be in the forefront of the mind of the Defendant and of his representatives. Instead, a Defence was put in which, with respect, we find awkwardly pleaded and which makes no mention of it. On the other hand the solicitors put forward a defence that the demand upon the Defendant was invalid because it had been made by the Plaintiff's solicitors. On the face of it that point would appear to be incontestably bad. The Defendant has asserted that his solicitors advised him that they had sufficient material to prevent summary judgment being given without the use of the evidence on duress. We find this surprising. In addition, Mr. Ma has pointed out to us that the documents show that the terms of the guarantee were extensively negotiated. That is so. Finally, the Defendant has said that he signed the guarantee because he knew that Skink did not owe the Plaintiff any money and therefore he could never become liable under its terms. We appreciate that that assertion is not necessarily contradictory to the assertions of duress but they sit rather oddly together. His evidence was that the business dealings with ATD were crucial to Skink. ATD was unable to continue without the intervention of the Plaintiff and the Plaintiff was unwilling to assist without the guarantee.

26. The evidence upon the execution of the guarantee is not such that a court could find, and indeed the Judge below did not find, that it had been procured by duress and that therefore the judgment had been procured by fraud. Nor would it have been enough, having regard to the authorities cited, to persuade the court to order that an issue should be tried upon it. A matter closely connected with this question of the validity of the guarantee was the pleading in paragraph 5(o) to 5(r) in the Defence already set out above, namely that the guarantee had been executed by the Defendant only upon the representation by the Plaintiff that it would procure ATD to purchase 61,000 cordless telephones from Skink during 1992 and that it would cause letters of credit to be issued to enable ATD to pay for them. The Judge below dealt with this by saying,

"What would have been the position if the Master hearing the application for summary judgment had been told, openly and frankly, by the Plaintiff that, in exchange for the defendant's guarantee the plaintiff had argued that it would arrange for its wholly owned subsidiary, ATD, to purchase 61,000 telephones from the Defendant's company and cause letters of credit to be issued to pay for 50% of the price of these, and, by this mechanism, the indebtedness would be settled, but that it had failed to do so? Surely, there can be little doubt, the Master would have said to the Plaintiff, 'But, then, how can you seek to enforce a guarantee given by the defendant, as one side of the bargain, when you have failed to perform your undertaking which is the other side of the coin? Summary judgment is refused.'"

This was the only basis upon which the Judge below found that the judgment had been obtained by fraud.

27. We see grave difficulties in this. First, in setting out the Defendant's case, the Judge below said,

"The only evidence I have before me is contained in affidavits of the defendant. The evidence is totally uncontradicted before me, and nothing Mr. Aitken said at the summary judgment hearing is inconsistent with it. For these reasons, and because what the defendant says is corroborated by contemporaneous documents and is consistent with the probabilities, I must, for the purposes of these proceedings, accept what he says."

Later in his judgment he referred to the evidence of Mr. Aitken and concluded,

"All in all, I (am) left with the strong impression that Mr. Aitken knew perfectly well what defence the defendant had, but, by obfuscation, he sought to avoid saying that what the defendant alleged was indeed the agreement between him and the plaintiff."

With respect, we do not agree. Mr. Aitken's evidence in cross-examination was that he did have telephone conversations with the Defendant in which he says that the Defendant admitted that Skink owed money, without saying to whom it was owed. He says that the Defendant suggested that a possible way for the money to be repaid was for the Plaintiff to provide financial accommodation to Skink on the basis that twice the value of that accommodation would be provided in goods. He did not agree with the figure 61,000 and he said that rather than the word "procure" it should perhaps be "facilitate" or "assist". In our view the matter was put squarely to Mr. Aitken and his evidence was that the Plaintiff did not promise to or represent that it would procure ATD to make the purchase of 61,000 telephones but did agree to facilitate or to assist in the purchase of a number, not necessarily 61,000, of telephones. We therefore think it wrong that Mr. Aitken's evidence was discounted and for it to be said that the evidence of the Defendant was uncontradicted.

28. The question of fraud in relation to the certificate depends upon the question of whether or not Skink owed money to the Plaintiff at all. We therefore need not deal with it separately. Mr. Ma argued that the question was not raised in the Defence and had not been put before Master McLaughlin. We disagree. While, as we have said, the Defence appears to us to be awkwardly pleaded, it must mean that the Defendant owed nothing to the Plaintiff because goods to the full value of the only letter of credit opened by the Plaintiff had been shipped and the other letters of credit had all been opened by ATD. There would have been no point in pleading these details otherwise.

29. We turn now to deal with the question of agency. In his evidence before Master McLaughlin, Mr. Aitken said that ATD was the agent of the Plaintiff. The Defendant says to the contrary that the Plaintiff was the agent of ATD. The import of this is that as such an agent Skink would not have come under any liability to the Plaintiff. The argument of the Defendant is that he suggests that the claim by Mr. Aitken that ATD was the agent of the Plaintiff was untrue and that the evidence was falsely given for the purpose of showing locus on the part of the Plaintiff to sue. It seems to us that there is a very strong probability of confusion in the minds of those concerned. The Plaintiff was the parent company of ATD. Mr. Aitken and another gentleman named Mr. Politis were joint managing directors of the Plaintiff but were concurrently also directors of ATD. The Defendant has said in evidence that in the early days of his dealings with Zap he was told by a Mr. Jackson, another director of ATD, that he should not concern himself if orders were placed in the name of the Plaintiff. It was explained to him that since the Plaintiff provided the finance the purchases would be placed by the Plaintiff as agent for Zap. Indeed orders and letters of credit did come from the Plaintiff and Skink delivered goods "as per WFM Motors Pty. Ltd. order numbers". Whether one was the agent of the other, which was the agent, disclosed or otherwise, or whether they were each agents of the other may be a difficult question. But the question we have to address is whether or not Mr. Aitken's evidence in this regard was untrue to his knowledge. The evidence does not show that.

30. We turn finally to the main plank of the Defendant's argument, namely that Skink owed the Plaintiff nothing and that the Plaintiff knew it. Mr. Ma argued before us that the affidavit and the evidence of Mr. Aitken was not that the Defendant had no defence but that he believed that the Defendant had no defence which could succeed. We do not think it would assist to analyse this, for at the very least the question would remain as to whether that was Mr. Aitken's genuine belief. Mr. Ma also reminded us that it was necessary for the Defendant to show that there was not merely fraud but that the judgment had been obtained by fraud. We need only say that in the circumstances of this case and having regard to the documentation on the Australian proceedings we are satisfied that if there was fraud the judgment was obtained by it.

31. The precise financial position amongst the three companies, Skink, the Plaintiff and ATD, is not altogether clear. What is clear is that Skink owed money. Assuming in the Defendant's favour, that the money was all owing to ATD and none to Skink it would remain to consider whether the Plaintiff and, in particular, Mr. Aitken knew this. We have already seen that paragraph 8 of the Amended Statement of Claim pleaded that the Defendant had acknowledged Skink's indebtedness to the Plaintiff by a letter dated 18th December, 1992, but that that letter was addressed to ADT. We think it would be truly remarkable for a Plaintiff to put forward a document, to describe it as something which it plainly was not and then to apply for summary judgment knowing that the pretence would be revealed. Mr. Aitken was indeed cross-examined upon it and claimed for it the effect that was pleaded. He readily admitted, however, that it was addressed to ATD and pointed out that the relationship between the three companies should be understood. He claimed that there were other documents signed by the Defendant acknowledging the debt but he was not asked to produce them. However that may be, it seems to us that on the assumption that Skink was not indebted to the Plaintiff, this episode does not show fraud on the part of the Plaintiff, but at the most a lamentable mistake. That is not sufficient for the Defendant's purposes. In any event, the assumption we have mentioned is not one which we would be prepared to make.

32. The Defendant put before the Court a table of all of the letters of credit opened between January and October, 1992, of which 9 were issued by ATD. By his own evidence the Plaintiff also issued letters of credit, although only one after the guarantee was executed. In his evidence before Master McLaughlin, Mr. Aitken said, and was not challenged, that the Plaintiff had made advances to Skink other than by letters of credit, and that the amount was ever-changing so that at the date of the hearing it was up to $100,000. From the volume of evidence put before us we are unable to conclude what the true position was, or that the Plaintiff obtained the judgment by fraud. Nor, on the material before us and having regard to the principles set out in the authorities are we persuaded that there is any issue which we should order to be tried.

33. Mr. Ma, with his customary fairness, did not object to the Defendant raising arguments notwithstanding that no Defendant's notice was put in. Having regard to all of the arguments, however, we are satisfied that this appeal must succeed and we so order. This judgment has been handed down and, having digested it, the parties should arrange to appear before us to argue the remaining three matters.

Representation:

Mr. Geoffrey Ma, Q.C. & Mr. A.T. Reyes (M/s Baker & Mckenzie) for Appellant/Plaintiff

Mr. Malcolm Maydwell, the Respondent/Defendant, in person