Hip Foong Hong vs H. Neotia and Company

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1918 Supreme(SC) 58

Privy Council
Lord Dunedin, Lord Buckmaster , Justice Earl Loreburn, JJ.
Hip Foong Hong -Appellant
Versus
H. Neotia and Company -Resopndent
On appeal from His Majesty’s Supreme Court for China
Decided On : 15-07-1918

Advocates Appeared:
Malleson, Wadeson , Harwood and Co., Stephenson, A.C. Nesbitt, Hughes , A.M. Latter, D.M. Hogg

Important Points

A new trial based on fraud requires proof that the fraudulent conduct tainted the judgment. Unlike new evidence, which must be conclusive, fraud vitiates the process; however, if the alleged dishonesty did not influence the trial judge's decision, the judgment remains valid.

Subject

Civil Law - Civil Procedure

Act Referred

CIVIL PROCEDURE CODE: O.47 R.1

Headnote

(A) Civil Procedure - Application for new trial - Ground of fraud and surprise - A judgment that is tainted and affected by fraudulent conduct is tainted throughout and must fail; however, such fraud must be both alleged and proved. (Para 15)

(B) New Trial - Discovery of new evidence - Distinction between a claim for a new trial based on the discovery of evidence not obtainable at the time of trial and a claim based on fraud or surprise - In cases of new evidence, the evidence must be presumably believable and, if believed, conclusive; however, these considerations do not apply to questions of surprise or fraud. (Para 15)

(C) Procedure - Setting aside judgment for fraud - While a motion for a new trial is an available weapon, the more satisfactory and convenient method for determining a dispute based on fraud is to take independent proceedings to set aside the judgment, allowing the issue to be properly defined and determined. (Para 16)

Facts of the case:
Contracts for the sale of opium were entered into between a buying firm and a selling firm. Due to import prohibitions in certain provinces, a regulatory system involving a combine and a guild was established to liquidate contracts. The buyers failed to take substantial delivery, and the sellers subsequently claimed the contracts had been cancelled. The trial court ruled in favor of the sellers. The buyers later applied for a new trial, alleging that the sellers' case was tainted with fraud and dishonesty, supported by newly discovered documents and evidence that witnesses had been paid to provide favorable testimony.

Findings of Court:
The court found that the newly discovered documents did not disclose any new facts that had not already been weighed by the trial judge. While the court expressed disapprobation regarding the unlawful issue of search warrants to obtain documents and the suspected dishonesty in preparing the case, it concluded that such conduct did not affect the mind of the trial judge or the ultimate conclusion of the original judgment.

Issues: Whether the discovery of evidence suggesting fraudulent conduct and the payment of witnesses by the respondents was sufficient to establish a miscarriage of justice warranting a new trial.

Ratio Decidendi: A new trial on the grounds of fraud requires a showing that the fraudulent conduct tainted the judgment. If the newly discovered evidence merely repeats facts already considered by the trial judge and does not introduce a determining factor that would have altered the result, the judgment is not rendered unsustainable despite improper preparation of the case.

Result: Appeal dismissed.

Legal Category Hierarchy

Lord Buckmaster:-

This is an appeal from an order of the full Court of His Britannic Majesty's Supreme Court for China siting at Shanghai, refusing the appellants' application for the new trial of an action heard by the Chief Judge, Sir Havilland de Sausmarez, on 7th July, 1916, and decided in favour of the respondents.

An appeal was originally instituted against the judgment itself, but this was abandoned in favour of the attempt to obtain a new trial. The appellants were well advised in the course they thus took. The difficulties that beset the hearing of the action were not of a nature that could be resolved better before their Lordships than they were before the learned Judge who tried the case. No question of law whatever was involved in the issue; the conclusion depended upon the determination of claims of contending witnesses and the balance of commercial probabilities, weighed with the knowledge of local habits and local manners.

The soundness of the judgment on the material originally before the learned Judge is therefore no longer in controversy; but, none-the-less, it is essential for the determination of this appeal that there should be some examination of the facts leading up to the dispute.

The appellants are a Chinese firm residing in Shanghai and dealing in opium. The respondents are a firm of British Indian opium merchants, with head offices in Calcutta and Bombay and a branch office in Shanghai. Between 10th August 1911, and 14th February 1912, contracts were entered into between the appellants and the respondents by which the respondents agreed to sell to the appellants 175 cases of opium in parcels deliverable four months after the date of the respective contracts.

In January, 1912, the importation of opium into several of the provinces of China was prohibited, and the position alike for the Chinese dealers and for the Indian merchants became hazardous in the extreme. Had the strict rights under all the existing contracts been relied upon and enforced, the Chinese dealers would, in all probability, have been unable to meet their obligations and the merchants would have found themselves unable to recover payment for their delivered goods. In order to relieve the position two combinations were formed - one known as the "Foreign Opium Merchants' Combine," and the other as the "Chinese Opium Guild" - with the object of regulating the flow and distribution of opium so as to enable the contracts to be slowly and effectually liquidated. For this purpose agreements were come to between the combine and the guild by which the combine should sell when opportunity offered and that, so far as Bengal opium was concerned, one half of the sale should be apportioned among the members of the guild and one-half among the foreign merchants, such latter half being divided pro rata between bargain stock, i.e., stock subject to contract and not delivered, and the unsold stock. This method of liquidation proceeded, and towards the end of 1914 the markets became more easy and private deliveries capable of being carried into effect.

These circumstances need to be borne in mind in considering the conduct of the appellants and respondents in relation to this matter. So far as the appellants were concerned, they took some small deliveries of the opium in 1912, but they failed to take any substantial delivery throughout the whole of that year; and claims for interest were consequently made against them by the respondents. On 17th February, 1913, the respondents made a return to the Opium Combine of their contracts, and included therein the whole of the balance of the appellants' contracts. In January, 1914, the appellants asked for delivery of twenty chests, the respondents only objecting upon the ground that the quality asked for was of the poor quality, and was not equally distributed among the various classes of opium.

Nothing further took place till May, 1915, when the appellants asked for delivery of the balance of opium and were met wit

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