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Colonial Cases

Bank of China, Japan and the Straits Ltd v. Wai Po Kee and Woo Chee Ding, 1898

[choice of law, Mixed Court]


Bank of China, Japan and the Straits Ltd v. Wai Po Kee and Woo Chee Ding

Mixed Court, Shanghai
October 1898
Source: North China Herald, 31 October, 1898



UJNDER the above heading we recently published long repots incidental to the suit of the Bank against Wai Pow-kee and Woo Chee-ding, wealthy Chinese merchants in respect of unpaid calls, on shares in the Bank, which had proved unsuccessful. At the Court which was held at the Bureau of Foreign Affairs Bubbling Wells Road, Mr. A. P. Stokes and Mr. J. C. Hanson represented the plaintiff company and Mr. T. R. Jernigan defended.

   The Taotai of Shanghai has given judgment in the matter as follows:

   This is a case in which the defendants refused to pay extra calls on their shares in the above-named Bank, in consequence of which I, The Taotai of Shanghai, heard the case in accordance with Treaty, at the Bureau of Foreign Affairs, with Mr. Brenan, H.B.M. Consul-General, at Shanghai, on the Bench sitting as Assessor. Accordingly on the 13th day of the 11th moon of the present year (29th of August,1898) I had assembled before me, at the above-named place the plaintiffs and defendants to this case, with regard to the hearing of which there were repeated sittings of the Court, the pleadings and arguments having been made by Mr. Hanson and Mr. Stokes on behalf of the plaintiff Bank and Mr. Jernigan on behalf of the defendants.

   I find that the most important principle involved in this case is as to what law should be applied in giving judgment thereon, and whether the special agreement made between the plaintiffs and the defendants should be binding upon the said defendants. I now find that there is a clause in this special agreement in which it is stated that in the event of any disputes arising between the plaintiffs and defendants the said defendants declare their willingness to abide by the laws of Great Britain.

   In Article 2, clause 3 of the Chefoo Convention there is the statement that in trying cases involving the interests of subjects of the two nations, as the laws of the two countries differ from each other, the laws covering said cases shall be those of the country to which the defendants belong, and that the officials of the two countries trying such cases shall obey the instructions contained in the said Chefoo Convention.

   It is therefore evident that in determining the procedure governing cases involving the subjects of the two countries the respective governments have already agreed to the manner in which such should be tried and therefore no deviation from said instructions is permissible. Moreover, we have it clearly set forth in the treaties that British subjects in China are amenable only to the laws of Great Britain; but whatever Treaties or Conventions there may be extant none of them declare that Chinese subjects are not to be governed by the laws of their own country. All subjects of China within the boundaries of this Empire are therefore governed and subject to the laws of China. Without, therefore, going to any other question, one thing seems certain. The special agreement above named can never ("a myriad times never") be set on top of a treaty executed between the two countries, nor can it interfere with the authority which China possesses over her own subjects.

   Now as the said special agreement between the parties to this suit is greatly contrary to the meaning of the treaties, it should therefore be forthwith cancelled and made null and void. As for the suit of the said plaintiffs complaining that the said defendants Woo Chee-dong and Wai Pow-kee have refused to pay extra calls on their shares I find that according to Chinese law there is none wherein a man may be forced to pay extra money on his shares against his will, hence I cannot allow the present suit and order that the case be dismissed.

   This is my Judgment.

   (Signed) TSAI.

A brevet officer of the second grade button, Superintendent of the Kiangnan Customs, and Intendent of the Military Circuit of the Soo-Sung-and Tai Prefectures.

   The 24th year of the reign of Kuang Hsu 9th noon, 19th day (24th October, 1898.)

Source: North China Herald, 31 October, 1898


   We published on the 27th instant the judgment of the Taotai in the suit brought by the above Bank against Wai Poo-kee and Woo Chee-ding. Mr. Byron Brenan, the British Assessor, and H.B.M.'s Consul-General, has now made the following protest against the judgment in question:

   I dissent from the judgment given by Tsai Taotai in the case of the Bank of China, Japan and the Straits versus Wai Poo-kee and Woo Chee-dong for the following reason:-

   The Taotai states in his judgment that "the most important principle involved in this case is as to what law should be followed in giving judgment thereon, ad whether the special agreement should be binding on the defendants."

   I complain that in giving his judgment the Taotai had not followed the only law applicable in the case - that is, Chinese law. By Chinese law a Chinese subject is bound by any contract he may enter into of his own free will. In this case Wai Poo-kee and Woo Chee-dong, in consideration of their being allowed to take shares, contracted to pay certain sums of money when called upon, and in the event of any question arising between them and the Bank, to have such question decided according to English law. Wai Poo-kee, that is, agreed that his liabilities would be the same as those of any English share holder. It was perfectly lawful for him to make such a contract, and it was the duty of the Chinese Court to ascertain what an English shareholder's liabilities would have been under similar circumstances, and then decide that Wai Poo-kee was equally liable.

   The Taotai argues that Chinese subjects are to be governed by the laws of their own country. This I admit; and the Taotai will also doubtless admit that in England, France, Germany, and the United States the laws of these countries are applicable where their respective subjects are concerned. And yet it is a matter of common occurrence in those countries, especially in the case of maritime insurance and average, that contracts are made in which it is stipulated that in certain given circumstances a claim shall be decided according to the law of some other country; and then, when a claim arises, the Court before which it is brought ascertains what that other country's law is on the subject, and gives judgment in accordance therewith.

   The Taotai has apparently failed to grasp the meaning of Article II of the Chefoo Convention. Its meaning is simply that in China British subjects are under British jurisdiction, and Chinese subjects are under Chinese jurisdiction. There had heretofore been some confusion in the minds of Chinese officials, and they occasionally maintained that the word hui tung (jointly) used in Art. XVI and XVII of the Tientsin Treaty indicated, that in all cases of dispute between British and Chinese subjects, a joint tribunal should be held in which the British and Chinese officials should have equal powers.  The Chefoo Convention disposed of this erroneous idea.

   Although it has no bearing on the present case I must demur to another statement made by the Taotai, for if it is allowed to pass unchallenged, it would have serious consequences in all commercial transactions. The Taotai states that by Chinese law "a man may not be forced to pay extra money on his shares against his will.!" This is not correct. If a business in which several partners have each put in a certain sum of money becomes bankrupt, the parties are responsible to the creditors for the full amount of their debts; and Chinese law will require them to pay extra money on their shares.

   I have also to complain of the unnecessary length to which these proceedings were allowed by the Court to be protracted. The Taotai in his judgment states that the most important principle involved is whether the special agreement made between the plaintiffs and the defendants should be binding on the defendants.  This is the question which on the 9th of September I requested the Court to decide; and the decision could have been given as well on the 9th of September as on the 24th of October. Although the Taotai must have already made up his mind that, in the words of his judgment, the agreement "must be cancelled and made null and void," yet he allowed the proceedings to continue as if he intended to give due consideration to the terms of the agreement, and at the very time that the defendants were insisting that English law had no bearing whatever on the case he allowed them to waste the time of the Court by quoting pages from English law books, and thus unnecessarily prolonging the proceedings at great expense to the British plaintiffs.

29th October.  BYRON BRENAN.

Source: North China Herald, 31 October, 1898



28th Oct.

GREAT BRITAIN and France may war together - Peking and Canton may bristle with revolt and intrigue - but Shanghai will heed it not; she will be in the throes of her own revolution.  Whence comes this spark which is to fire the train? It is nothing less than the judgment of Tsai Taotai in the Bank of China case which we published in our issue of yesterday. 

   The facts of the case hardly need recapitulation. Certain Chinese merchants bought shares in a British Limited Company which were not fully paid. The concern collapsed - as concerns sometimes do even in dear old England - and the liquidator of the company called in the balance still unpaid on the shares. None of the shareholders wished to pay, but fortunately company law showed no pity for individuals and the winding up was found to have been carried through in the home Courts, with distressing completeness. All British shareholders ether paid or were compelled to pay both in London and Shanghai, but the defendants in this case prepared to exercise their treaty rights and contest the point in a Chinese Court.

   Upon the hearing it was shown that at the time of the purchase of the shares the defendants agreed to abide by British law in case of dispute. It was therefore their plain duty, if they wished to hold shares in a foreign concern, to acquaint themselves fully with the worst that such an agreement might entail upon themselves. Most of us have known what it is to take the bitter with the sweet in the matter of investments and to look on in impotent fury while our little savings in Brazil, Australia, or the Cape have been frittered away by a majority of shareholders on the spot. But such the law is, and such it must remain.

   If we put our money out of reach it is because we balanced the pros and cons and decided to run the risk. On this score, therefore, we can only give to these Chinese merchants the same amount of pity that they would give to those in like case.

   The defendants argued in the hearing firstly that the proceedings of the Bank before and after the failure had been irregular, and secondly that under the Chefoo Convention disputes between Chinese and British subjects must be settled according to the respective laws of the two nations. It is possible that the Taotai might in consultation with his advisers have concocted a passable judgment based on the former grounds; but no such thing. He was determined to do it handsomely and who shall deny that he has succeeded? His judgment is a veritable bomb, and if it is allowed to burst it will land us in an industrial and merchant revolution. 

   It simply means this, that in any agreement between Chinese and British the former can easily repudiate their liabilities unless the agreement is in accordance with their national law. The Taotai refused to consider British law at all in scrutinising this contract. European Courts daily recognise and enforce contracts under which the parties have bound themselves by the law of another nation, and experts daily attend our home Courts to give evidence on such points, but the Taotai will have none of it. According to him, Chinese Courts must find in their own code all the provisions of British law before they will enforce contract s embodying that law. If these are not to be found it is an attempt to override the Treaty. 

   It was shown on the trial that British company law had been rigidly followed in winding up the Bank in question and the Taotai does not deny the fact, but he looks in vain for the provisions of our company law in his own code.  Indeed we can well believe it. What a search it must have been! His words have a ring of pathos in them: "I find that according to Chinese law there is none wherein a man may be forced to pay extra money on his shares." No wonder the judgment had been so long delayed.

   The logical outcome of all this is that until the British and Chinese codes exactly correspond, complete freedom of contract can never exist between the two peoples, for we can never be sure that our agreements will run the gauntlet of the Chinese code. This will probably be contemporaneous with the millennium and in the meantime every existing agreement with the Chinese is liable to repudiation. It is indeed high time to set our houses in order, but it will require little short of a revolution to do it. We have Chinese directors on the boards of British companies. What remedies will the unhappy British have against such, if the company fall on ill days.

   How about the Directors' Liability Act? Can the Taotai find it in his code? If not, we fear the Chinese directors must go; their shares must be cancelled and the other directors must account for the dividends disbursed to them. Let us imagine that some Mandarin, Li Hung-chang for instance, had a big holding in Bank shares. We presume that the Bank will at once strike his name off the register and redeem his holding at par, seeing that in stormy times he need only quote the Taotai's  judgment to evade his unpaid calls.

   Have we any Chinese tenants in our houses?

   Our leases must be searched to see if Chinese law will uphold the covenants.

   We have endless agreements, verbal or otherwise, with compradores, clerks and servants. Let is beware lest they devour of British law. Unless they are good under the law of China they will go by the board, and to uphold them would be "to set them on top of the Treaty."

   In our domestic life one whisper of the fatal words "Chefoo Convention" from a coolie will make the staunchest housekeeper qual.

   As long, however, as things go well we may rely upon our Chinese friends maintaining their souls in peace and drawing their dividends. They will not refuse the ha-pence so long as the kicks are in the distant future, but in the meantime we ought to be getting on with our revolution.

Published by Centre for Comparative Law, History and Governance at Macquarie Law School