POLYSET LTD. v. PANHANDAT LTD.

HCMP 1840/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1840 OF 1998

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J U D G M E N T

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On 23 November 1999, I handed down judgment for the Defendant. I am now concerned with consequential orders of which there are three matters in dispute.

Costs

2. In my judgment, I made an order nisi for costs of the action to the Defendant. Miss Eu, SC contends that the Plaintiff should be entitled to costs because the Plaintiff has, per judgment, succeeded in recovering $11,534,573.34. Leading counsel suggests I should follow our Court of Appeal decision in Union Base Ltd v Tsang Shek Tong [1998] 2 HKC 349 where it was held that a successful plaintiff who recovered more than nominal damages should in normal circumstances have an order for costs against the Defendant.

3. Mr Chang, SC for the Defendant contends that the general principle is that costs should follow the event. In this case, the Plaintiff alleged repudiatory breach and lost. Hence, costs should be to the Defendant. Union Base, it is said, is irrelevant and does not assist the Plaintiff.

4. I think the starting point must be the fortunes of the cause. The Plaintiff's Originating Summons prayed for, essentially, a declaration that the Plaintiff has effectively rescinded the Contract and repayment of deposit and part payments paid under the Contract in the total sum of HK$51,750,000.00. It is my judgment that the Plaintiff wrongly rescinded the Contract and, of the $51,750,000.00 claimed, only $11,500,000.00 is refundable because damages as assessed is less than the amount of $40,250,000.00 deposit forfeited. As leading counsel for the Defendant pointed out, the Plaintiff banked on succeeding on liability. Expert evidence on valuation which would be relevant only if the Plaintiff failed on liability was not tendered by the Plaintiff until shortly before trial. In fact, barely a month before trial I gave leave to the Plaintiff to file and serve expert evidence out of time. In a nutshell, the Plaintiff lost on the primary issue of liability and was, through no mean feat of its team of lawyers, able to salvage only approximately 20% of the money claimed.

5. In Union Base, the Plaintiff claimed $717,496.48 and the Defendant counter-claimed $590,235.00. Both were in effect liquidated damages and as Godfrey JA observed at p 352 of his judgment "the figures were finally settled" since 20 July 1995 which was more than 2 years before judgment. In the present case, the parties had to come to court for assessment of damages that turned on highly technical property valuation. On the other hand, the Plaintiff's valuation was much closer, within 10%, to the value finally determined by the court.

6. Mr Chang, SC indicates that in the exercise of my discretion, if need be, I may take into account the fact that two days during the trial were spent on valuation. Miss Eu, SC however, takes the point that there was no payment in. Doing the best I can, I think the Defendant must be entitled to 100% costs on liability and the Plaintiff is entitled to 20% costs to reflect the amount recovered in proportion to the amount claimed. Hence, the Plaintiff should bear 80% nett of the Defendant's costs in the action.

Interest

7. Miss Eu, SC contends that since the Plaintiff was kept from its money after the Contract was terminated, the Defendant ought to pay interest on the $11,534,573.34 at judgment rate from the date of issue of proceedings until payment. Again, leading counsel prays in aid Union Base.

8. Mr Chang, SC says no, the Plaintiff is not entitled to interest under Clause 12(a) of the Contract which reads:-

"... without any compensation interest or costs ... and the parties hereto shall be the costs of the Vendor enter into and cause to be registered at the Land Registry an Agreement for cancellation."

In any event, even if interest is payable, the rate should be short term investment rate. See Jefford v Gee [1970] 2 Q B 130.

9. Miss Eu, SC counters by saying that Clause 12(a) of the Contract only applies to rightful termination by the Plaintiff. The Defendant ought to bear interest when it delays in paying back money wrongfully withheld. Also, leading counsel suggests that Jefford v Gee was a personal injury case, the rate of interest in this case should be the usual commercial rate.

10. Indeed the Plaintiff was very late in tendering expert evidence on valuation. But it was equally open to the Defendant to obtain expert advice on reasonable valuation and effect payment into court. In the circumstances, I think the Plaintiff should be entitled to interest from the date of issue of proceedings to the date of judgment. As to the rate of interest, with respects to leading counsel for the Plaintiff, the rationale of the English Court of Appeal decision in Jefford v Gee is not confined to personal injury cases. Lord Denning, MR in his judgment considered the general principle at common law, the principle for admiralty cases and Scottish law before coming to the resultant principles that interest should be awarded to a plaintiff for being kept out of money due and that the appropriate rate of interest should be that payable on money in court placed on short term investment account taken as an average over the period for which it was awarded.

11. It appears from Jefford v Gee that liability for interest does not depend on a plaintiff being able to quantify the principal with sufficient accuracy; although I accept that if there are facts and factors relevant to quantum that are within the peculiar knowledge of the plaintiff and the plaintiff has not made adequate and timely disclosure to enable the defendant to make suitable offer or payment in the plaintiff may be deprived of interest. In the present case, it cannot be said that the Plaintiff withheld relevant information on valuation. Moreover, the valuation by the Defendant's expert was far off the mark. Thus, following Jefford v Gee, I should order the Defendant to pay interest on $11,534,573.34 at short term investment rate from the date of issue of proceedings to the date of judgment and thereafter at the judgment rate until full payment. I have not been furnished with the actual interest rates for pre-judgment interest. To avoid further costs, I would order that the 7 day fixed deposit rate of the Bank of East Asia for the period in question should apply.

Lis Pendens

12. There is registered against the Property the lis pendens of this matter. Miss Eu, SC quite fairly accepted the principle that once the Plaintiff lost the claim on liability there is no more lien on the Property although the Plaintiff is still waiting for a substantial refund.

13. I think it is only right that the lis pendens should be vacated forthwith.

Order

14. In the premises, I make the following orders:-

It is declared and ordered that:-

1. The Plaintiff had wrongfully rescinded the aforesaid Agreement for Sale and Purchase dated 23 May 1997 in respect of the Property and was in breach of the said Agreement in failing to complete.

2. The Defendant is entitled to forfeit and retain HK$40,250,000.00 paid by the Plaintiff to the Defendant under the said Agreement, which extinguishes the damages of the Defendant assessed at HK$33 million.

3. The Defendant is entitled to judgment for agreed interest between 2 March 1998 and 2 April 1998 in the sum of HK$665,424.66.

4. The Defendant do repay to the Plaintiff within 7 days from the date hereof the sum of HK$11,534,575.34 (being the aggregate of the balance of partial payment paid under the aforesaid Supplemental Agreement in the Sum of HK$11,500,000.00 and a sum of HK$700,000.00 paid by the Plaintiff to the Defendant as security money for any loss of rental in respect of the Property pending completion of the sale and purchase less the sum of HK$665,424.66 being the agreed interest for the period between 2 March 1998 and 2 April 1998) together with interest thereon calculated at the 7 day fixed deposit rate of the Bank of East Asia for the period from the date of issue of proceedings to the date of judgment and at judgment rate after the date of judgment until full payment.

5. The lis pendens, namely the Originating Summons under Court of First Instance Miscellaneous Proceedings No. 1840 of 1998, registered with the Land Registry by Memorial No. 7469819 be vacated forthwith.

6. The Plaintiff do pay 80% of the Defendant's costs of this action including the costs of hearing on costs to be taxed if not agreed with certificate for two counsel.