White v Roberts

Date03 November 1949
Docket NumberCase No. 15
CourtSupreme Court (Hong Kong)
Hong Kong, Supreme Court.

(Williams, J.)

Case No. 15
White
and
Roberts.

Recognition of Legislation of Foreign State — Enforceability in Local Territory — Validity of Foreign Legislation — Whether Question of Validity of Foreign Laws may be Inquired into by Local Courts — Chinese Foreign Exchange Control Regulations — Contracts made in Foreign Territory — Illegality under Foreign Law — Public Policy of Local State — Evidence of Public Policy — Bretton Woods Agreements — The Law of Hong Kong.

The Facts.—For some years before 1948 the plaintiff, who was a broker in foreign exchange doing business in Shanghai, bought foreign currencies (mainly sterling), Hong Kong dollars and United States dollars, from one Baetens, whom the Court found to be a partner of the defendant. It was the custom for the plaintiff either to telephone or to send a note to the defendant's office ordering a specified amount of foreign currency to be paid to the account of a named payee in a foreign country. In August 1947 the Executive Yuan of the Chinese Government issued regulations, known as the Foreign Exchange Control Regulations of the Central Bank of China, which had the effect of prohibiting dealings in foreign currency otherwise than by an appointed Bank or under licence from an appointed Bank. Article 33 of those Regulations provided as follows:

“Any person other than an appointed bank dealing in foreign exchange and foreign currency securities shall be liable to imprisonment for a term of not more than five years and the amount of foreign currency involved shall be subject to confiscation.”

Thereafter the plaintiff continued to order foreign currencies from the defendant, and the defendant continued, at least until November 1947, to fulfil the plaintiff's orders. The defendant's firm was not at any time an appointed Bank under the Regulations, nor was any licence applied for or received from an appointed Bank for any of the dealings entered into between the plaintiff and defendant's firm. From the beginning of November 1947 until January 1948, when political events in China and, it was suggested, the fear of investigation by the Chinese authorities caused both the plaintiff and the defendant to leave Shanghai for Hong Kong, the defendant's firm failed to carry out the plaintiff's instructions for the remittance of foreign currencies abroad. The present action was brought by the plaintiff to recover from the defendant 900,748·15 Hong Kong dollars, the equivalent of the Chinese money paid by the plaintiff for the purchase of foreign currencies under twelve contracts made between November 1947 and January 1948 which the defendant had not performed. The main defence to the plaintiff's claim was that, as the transactions were illegal, or even criminal, under Chinese law, any money paid by the plaintiff under his contracts with the defendant was not recoverable. In reply to this defence the plaintiff contended that the regulations according to which the transactions were alleged to be illegal were invalid, as they had been promulgated by the Executive Yuan of China and not by the Legislative Yuan as required by the Chinese Constitution. The defendant argued that the Court should not inquire into the validity of the Chinese Foreign Exchange Control Regulations; that any such inquiry would result in the Regulations being found to be valid; and that the public policy of Hong Kong, as evidenced by the application of the Bretton Woods Agreements in the Colony, precluded the recovery of money paid under contracts such as those in the present case.

Held: that the plaintiff's claim must fail. The Court could not inquire into the validity of the acts, whether legislative or executive, of a foreign sovereign State in relation to transactions entered into upon its territory. Furthermore, the effect of the Bretton Woods Agreements as applied in the Colony was to prevent the Court from doing anything to enforce the contracts between the plaintiff and the defendant.

The Court said:

“I deal next with the claim of the plaintiff that the Foreign Exchange Control Regulations, promulgated on the 18th August 1947 (hereafter referred to as the ‘August Regulations’), which defendant pleaded governed such foreign exchange transactions, were invalid. Counsel for the defendant submitted that it was not open to our Courts to say ‘yea’ or ‘nay’ whether any law purporting to be passed by the Government of China is or is not valid. For the moment, I do not propose to go at length into the question of the history of the ‘August Regulations’, but merely to state the facts found by me concerning them. In the translations provided by plaintiff and defendant they are described as ‘Foreign Exchange Control Regulations of the Central Bank of China (Promulgated on the 18th day of the 8th moon in the 36th year of the Chinese Republic—18th August, 1947)’. In the Chinese volume of laws put in evidence, they are stated as being promulgated by the Executive Yuan. The Executive Yuan is one of the 5 Yuan of the Government of China. Plaintiff's objection to them is that they were not passed by the Legislative Yuan. They are contained in various books of laws and orders of the Government of China and, in particular, in a series of 6 volumes containing the 6 Laws of China (i.e. different kinds of laws, constitutional, commercial, etc.). The evidence of the nature of these volumes which I accept is that they correspond to Halsbury's Statutes of England; they are in the hands of every lawyer in China and are accepted by the Judges in Chinese Courts. The ‘August Regulations’ have not been challenged in any Court in China: in a case in the District Court of Canton (Civil Action ‘SO’, No. 1121 of 1949) in which the cause of action arose in October 1947, the Court mentioned the ‘August Regulations’ without disapproval.

“Counsel for the defendant, in support of his submission that this Court could not inquire into the validity of the acts of a...

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