SUN LEGEND INVESTMENTS LTD v. HO YUK WAH, DAVID AND OTHERS

HCA 1212/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1212 OF 2002

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BETWEEN

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(Consolidated by Order of Master Woolley dated 31 October 2003)

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D E C I S I O N

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1.  On 2 February 2010 a decision was handed down in relation to costs in this matter. This decision deals with the question of interest and the costs on the application to vary the costs order nisi. I have received written submissions from both sides in relation to the issues.

Interest:

2.  The reasons for judgment were handed down on 18 September 2009. In short, I found for the Firm in both actions, accepting their entitlement to have made the deductions, and for the Firm on the counterclaim against the original developers in the Beijing action (the developers), but for NWD on both counterclaims.

3.  The Firm is entitled to interest on the Judgment it succeeded in obtaining in against the developers in the counterclaim in HCA 2915/2002.

4.  Mr Pow SC, for the developers argues that the interest rate should be fixed at 5%, and that this is not a case where the Firm is entitled to a commercial interest rates. He says first, that there is no evidence that by reason of developers not having paid, it was necessary for the Firm to resort to borrowing. He says that if the circumstances are such that the Firm would likely have placed any payment on investment, the interest rate should be at the investment rate.

5.  Mr Szeto correctly submits that interest is a matter in the discretion of the court: see Hong Kong Civil Procedure 2010, Vol 1, pp 86-89; paras 6/L/9 – O6/L/20.

6.  The appropriate principles to apply in exercising the discretion in relation to interest are laid down by the Court of Final Appeal in Polyset Ltd v Panhandat Ltd, unreported, (FACV 28 of 2000, 25 April 2002)[1]. There, Ribeiro PJ approved the decision of the Court of Appeal in Komala Deccof & Co SA v Perushaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina) [1984] HKLR 219, in the following terms:

“The trial judge has a discretion to determine the rate of interest.  To compensate a successful plaintiff for being kept out of his money, the general practice in Hong Kong has, at least since 1984, been to award interest reflecting the theoretical cost to the plaintiff of borrowing the sums withheld.  This is a rate taken to be prime plus 1% unless the evidence in a particular case makes adoption of another rate appropriate: see Komala Deccof & Co SA v Perushaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina) [1984] HKLR 219.”

7.  Mr Szeto is justified in his submission, relying upon Komala, that where the winning party is a small or less well-established entity, the appropriate rate of interest could be 3% over prime. In Komala, Cons JA said at 223B-C:

“Whatever may have been the position in the past we should take notice that now it is not normally possible to borrow at their prime rate.

The practice in the Commercial Court of England seems to be a rule of thumb at 1% above that, as a possible increase to 2% or even 3% in the case of smaller or less well-established concerns.”

His Lordship thereafter set out a passage from Tate & Lyle Distribution v GLC [1982] 1 WLR 149, and proceeded:

“I would venture to suggest that a similar approach should be adopted here.  Although the practical circumstances of the two jurisdictions may differ in some ways, I do not think there is any significant distinction between our basic mercantile principles.  It may be that on the local financial scene 1% above prime is not a realistic rate, but time will tell and if necessary the guideline can be adjusted accordingly.  For the time being however I would suggest the use of that rate, unless in any particular case there is evidence which shows some other rate to be more appropriate.”

8.  The Developers have elected not to put any evidence before me on the issue of interest. The Firm on the other hand puts before me evidence by way of a letter from HSBC dated 2 May 2003, demonstrating that banking facilities were extended to the Firm with interest on daily balances at 3% per annum over the Bank’s best lending rate.

9.  Mr Szeto also puts before me recent English decisions in Bridge UK.Com Ltd (t/a as Bridge Communications) v Abbey Pynford plc [2007] EWHC 728 and Ahmed v Jaura [2002] EWCA Civ 210, both cases in which a higher rate of interest to reflect the commercial rate of interest that was being paid on an overdraft, was awarded.

10.  That is entirely consistent with recent Hong Kong decisions in the context of unpaid solicitor’s fees, where in the High Court, (Simmons & Simmons v Thomas Joseph Dillon Jr., HCA 2784/2003), and in the District Court, (George YC Mok & Co v Trade Advisers Co Ltd, DCCJ 18479/2001; Richards Butler v Bolton Group & Anor, DCCJ 703/2004; and Deacons v Wonderyouth Industries Ltd, DCCJ 1891/2006), enhanced interest has been awarded.

11.  In fixing the rate of interest I take into account the fact that the developers are part of a very substantial group of companies, and there could have been no issue at all as to their ability to pay. On the other hand the Firm is a small firm of solicitors for whom the failure of the developers to pay would be more likely to have a substantial impact.

12.  The developers must pay interest at 3% over the best lending rate of HSBC, from 6 June 2002 to the date of Judgment, and thereafter at Judgment rate to full payment.

Costs on the application to vary the costs order nisi:

13.  Mr Pow SC argued that on the application to vary the costs order nisi, there should be costs to the developers, simply because the order nisi was varied. He says that without such variation, Sun Legend would not have been entitled to Judgment on the counterclaims, and would not have been awarded any costs.

14.  I prefer Mr Szeto’s characterisation of the outcome of the application. He put it this way:

(i)  The Plaintiffs’ application to vary the costs order nisi in relation to the claim in the Dongguan Action was not successful;

(ii)  The Plaintiffs’ application to vary the costs order nisi in relation to the claim in the Beijing Action was not successful;

(iii)  NWD’s application to vary the costs order nisi in relation to the counterclaim in the Dongguan Action was not successful;

(iv)  NWD’s application to vary the costs order nisi in relation to the counterclaim in the Beijing Action was not successful;

(v)  Sun Legend’s application to vary the costs order nisi in relation to the counterclaim in the Dongguan Action was successful only to a very limited extent;

(vi)  The Plaintiffs’ application for a certificate for two counsel was not successful.

I am satisfied that that characterisation more accurately reflects the outcome of the argument.

15.  I accept also Mr Szeto’s submission that the hearings on 20 October 2009, and 15 February 2010, were occasioned by the failure of the Plaintiffs to plead and raise the assignment issue either properly or at the appropriate time. During the course of the trial, I specifically raised with counsel for the Plaintiffs whether or not, if the Firm succeeded on the counterclaim, there would be any issue as to the ability of any of the developers, other than NWD, or Sun Legend to meet any judgment due. I was assured that there was no issue. That was the time at which I should have been told, and the Firm learned, that Sun Legend proposed to raise the assignment point.

16.  Equally, Mr Szeto is completely correct in saying that the Plaintiffs were wrong to fix a summons raising that issue for only 15 minutes, at 9:30 a.m. on 20 October 2009. The issue was complicated and could never have been resolved in 15 minutes. There will be an order that the Plaintiffs must pay the Firm’s costs wasted in relation to the hearing on 20 October 2009.

17.  Viewed properly, in terms of paragraph 14 above, Mr Szeto was entitled to say that the Plaintiffs got very little out of the summons to vary the costs order nisi. Sun Legend’s entitlement costs was limited to the costs prior to trial. The appropriate principles to be applied are those set out in Medway Oil and Storage Company Ltd v Continental Contractors Ltd & Ors [1929] AC 88, HL, which are adequately set out in the headnote in the following terms:

“Where a claim and counterclaim are both dismissed with costs, upon the taxation of costs, the true rule is that the claim should be treated as if it stood alone and the counterclaim should bear only the amount by which the costs of the proceedings have been increased by it.  No costs not incurred by reason of the counterclaim can be costs of the counterclaim.  In the absence of special directions by the Court there should be no apportionment.  The same principle applies where both the claim and the counterclaim have succeeded.”

18.  The matters in paragraph 14(i), (ii) & (vi) are issues under the claim, and costs on those aspects should be to the Firm. The matters in paragraph 14(iii) & (iv) are matters relating to the counterclaims. I accept Mr Szeto’s submission that although NWD would otherwise be entitled to 20% of the costs of the counterclaim, since this part of their application was not successful, costs on those aspects should be to the Firm.

19.  Item 14(v) is the one aspect in which Sun Legend was successful, but as it does not get costs of the trial, neither should it have costs on the summons to vary the order nisi.

20.  I accordingly conclude that the costs on the summons to vary the order nisi should be to the Firm.

Entry of Judgment:

21.  Mr Szeto points out that all material times Jade Ho was the sole proprietor of the Firm. He is right to say that Judgement should be entered in favour of Jade Ho and the Firm.

22.  The Firm has succeeded on the arguments both as to interest and costs. Plaintiffs must pay the Firm’s costs on the written submissions leading to this decision.