WING MING GARMENT FACTORY LTD v. THE INCORPORATED OWNERS OF WING MING INDUSTRIAL CENTRE

HCCT 60/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 60 OF 2006

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D E C I S I O N

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1.  The defendant, the IO, has issued a summons dated 20 October 2016 to deal with a number of matters concerning the reliefs arising from my judgment handed down in this action on 23 June 2014.[1] Some of these matters have since been resolved by agreement. Those that remain outstanding and require determination are questions relating to interest on the sums in the nature of occupation rent awarded in favour of the IO in relation to CPS 3 and 4 and the Part Loft. There is also the question of costs of the summons at the end of the day.

2.  Certain sums had been paid by Wing Ming to the IO on 23 January 2015 covering the principal amounts due up to the end of 2014.  Further sums have been accruing due in relation to the Part Loft which has not yet been removed.  I need not however concern myself with the arithmetic here.  It can be worked out by the parties in light of my decision on the issues joined.

3.  On interest, specifically the issues are:

(1) for what period of time should interest be awarded; and

(2) at what rate should interest be awarded.

4.  The IO had, in addition, contended until today that it was entitled to compound interest.  This however has not been pursued by Mr Cooney SC who has appeared for the IO this morning and nothing more need be said about it.

5.  As for the period of time, while the amounts payable date back to 1994, the claims were brought by the IO very late by way of counterclaim in this action.  There is no suggestion that the IO had at any earlier time sought to vacate Wing Ming from the areas in question.  It might be that the IO was mistaken as to its legal rights over those areas, but there is no escape from the fact that there had been a great and objectively inordinate delay until the claims were brought.  Mr Cooney referred to a letter from Wing Ming in November 2016 which suggested an interest calculation that went back to 1994.  It seems to me however that all Wing Ming was doing there was saying that the approach of Reyes J in the first action should be followed, which I shall come to in a moment.  It was not a concession giving up any argument that the period that carries interest should be cut down because of the delay.  It may be noted that in the first action Reyes J also ordered interest to run from the date of the counterclaim, not from the date of accrual of the management fees, though admittedly the period between the two was much shorter there.  In all the circumstances I agree with Mr Pao who has appeared for Wing Ming that it would not be just to order interest for the period of inactivity from 1994 during which the IO had not asserted any relevant right, and that interest should be awarded from the date when the relevant counterclaim was brought or sought to be instituted.

6.  It is not in dispute that the rate for pre‑judgment interest, as I shall set out in a moment, should be used up to the date of quantification of the amounts due, which the parties are content to take to be 23 January 2015.

7.  In the case of CPS 3 and 4, the claim was in the counterclaim as originally filed on 29 September 2006.  Interest will therefore be awarded from that date onwards, until 23 January 2015, and thereafter at judgment rate until payment.

8.  In the case of the Part Loft, the claim was added by amendment[2] made on 15 January 2008 pursuant to a summons for leave to amend filed on 19 September 2007.  Interest will therefore be awarded from 19 September 2007 onwards until 23 January 2015 at the pre‑judgment rate, and thereafter at judgment rate until payment.

9.  As to the rate of interest for the pre‑judgment period, Mr Pao submitted that I should adopt the approach of Reyes J in the first action between these parties (HCA 8805/1993) with regard to the IO’s claim for unpaid management fees from Wing Ming, ie to award interest on half of the total outstanding payments at one‑third of the HSBC prime rate from time to time.[3]

10.  Taking half of the total sum deals with the fact that the principal amounts accrued due not all at once but periodically and gradually — a rough and ready method that I would adopt.

11.  As for using one‑third of the HSBC prime rate, it appears to me that Reyes J adopted that probably because of the delay in proceeding with the counterclaim, which was brought in 1993 but only tried in 2007.  As a result, while he awarded interest for the entire period from the date of the counterclaim, he reduced the rate of interest in light of that delay.  Having regard to my conclusion about the period in which interest should be awarded, this is not a reason to adopt a lower rate in this case.

12.  The prevalent practice in Hong Kong, at least since 1984, has been to adopt the rate of prime plus 1% “unless the evidence in a particular case makes adoption of another rate appropriate” (see Polyset Ltd v Panhandat Ltd (FACV 28/2000, 25 April 2002), §13), such as where it can be shown that the application of the general practice would be “substantially unfair either to one party or the other”: Shearson Lehman v Maclaine Watson (No 2) [1990] 3 All ER 723, 733, applied in The Hongkong Electric Co Ltd v Commissioner of Rating and Valuation (unrep, LDGA 224 & 358/2004, 12 April 2010), §§24–26.

13.  There is no evidence of any particular unfairness to any party if the general practice is followed or any special reason why a different rate should be applied.  I therefore adopt the usual rate of prime plus 1% pa as the rate of pre‑judgment interest.