LI XIAO YUN AND ANOTHER v. CHINA GAS HOLDINGS LTD

CACV 215/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 215 OF 2013

(ON APPEAL FROM HCCL NO. 18 OF 2011)

________________________

________________________

________________________

D E C I S I O N

________________________

Hon Cheung JA :

The consent summons and order

1. On 15 October 2015, this Court gave judgment for the plaintiffs in the total sum of $279,291,087.44.

2. On 17 February 2016, this Court, among other things, made the following orders :

1)  that the plaintiffs are entitled to have post-judgment interest at judgment rate until payment; and

2)  by consent, stay of execution of our judgment on the terms set out in a consent summons signed by the parties.

3. Paragraph 1 of the consent summons provided that the judgment be stayed upon the defendants paying into Court the judgment sum of $279,291,087.44 together with interest (from 15 October 2015 to 22 February 2016) within seven days.

4. Paragraph 2 of the consent summons further provided that :

‘ 2. There be liberty to apply to the parties on the question of whether the Plaintiffs are entitled to post-judgment interest at judgment rate on the judgment sum of HK$279,291,087.44 to be paid into Court by the Defendant pursuant to paragraph 1(a) above;’

5. The defendants made payment in on 23 February 2016.

6. The consent order relating to the consent summons was sealed on 25 February 2016 and pursuant to paragraph 2 of the sealed order (which is also paragraph 2 of the consent summons), the defendant applies to us not to impose interest at judgment rate on the judgment from the date of payment into Court on 23 February 2016.  Instead it invites this Court to order that the plaintiffs are entitled to post-judgment interest in the form of :

1) the accrued interest in the judicial account as a result of the payment in;

2) alternatively, at the HSBC best lending rate for the period following 22 February 2016 until payment of the judgment sum.

Section 49 of High Court Ordinance

7. The starting point is that this Court has a discretion under section 49 of the High Court Ordinance (‘HCO’) (Cap 4) to award interest on judgment debts from the date of judgment until satisfaction.

‘ (1) Judgment debts shall carry simple interest–

(a) at such rate as the Court of First Instance may order; or

(b) in the absence of such order, at such rate as may be determined from time to time by the Chief Justice by order,

on the aggregate amount thereof, or on such part thereof as for the time being remains unsatisfied from the date of the judgment until satisfaction.

(2) Interest under this section may be calculated at different rates in respect of different periods.’

8. The Chief Justice has from time to time prescribed interest rates for judgment debt (‘the judgment rates’).  The judgment rate has been set at a higher level than the prevailing commercial rate of borrowing.  The current rate is 8% per annum.

Rationale for interest at judgment rate

9. The underlying principle in civil litigation is that a successful litigant should not be deprived of its fruit of success.  Plainly in order to reflect this principle, it has been held that the judgment rate is charged at a significantly higher rate than applies to commercial borrowings to give the judgment debtor an incentive promptly to satisfy the judgment debt per Ribeiro PJ in Man Ping Nam v. Man Fong Hang (No. 2) (2007) 10 HKCFAR 141 at paragraph 23.

10. More recently Ma CJ in The Hongkong Electric Company Limitedv. Commissioner of Rating and Valuation (2012) 15 HKCFAR 1 repeated that :

‘ It is clear that this rate of interest is imposed not so much to compensate a successful party, but to encourage the paying party to honour any money judgment as quickly as possible. This has been the rationale as stated by this Court:- see Man Ping Nam v Man Fong Hang (No. 2) (2007) 10 HKCFAR 140, at 146J to 147A (para. 23).’

Relevance of money in Court

11. The basis for the defendant’s present application is that the judgment sum has since been lodged in Court.  It is difficult to understand the defendant’s contention for a lower rate of interest.  The plain words of section 49 of HCO are that the judgment will carry interest until such time as the judgment debt is satisfied.  A judgment is satisfied when the successful litigant received in his hands the actual award.  Money paid into Court by consent as a condition for a stay of the execution of the judgment pending appeal is not a satisfaction of the judgment itself.  In such circumstances there is nothing to displace the basic proposition that the rate should be at judgment rate.

12. The defendant’s concern that the judgment would be rendered nugatory (when they are eventually successful in the Court of Final Appeal) if the judgment sum was paid to the plaintiffs does not change the fundamental point that the plaintiffs have not yet received satisfaction of their judgment.

13. The plaintiff relies on Lake v Hunt Kid Law Firm LLP [2011] 6 Costs LR 948.  The case is concerned with The Solicitors’ (Non-Contentious Business) Remuneration Order 1994 which allowed a solicitor to charge the client interest on his bill, Article 14 provides that :

‘ 14 Interest

(1) After the information specified in article 8 has been given to [the client] in compliance with articles 6 or 7, a solicitor may charge interest on the unpaid amount of his costs plus any paid disbursements and value added tax, subject to paras 2 and 3 below.

(2) Where an entitlement to interest arises under para (1) and subject to any agreement made between a solicitor and client, the period for which interest may be charged may run from one month after the date of delivery of a bill, ...

(3) Subject to any agreement made between a solicitor and client, the rate of interest must not exceed the rate for the time being payable on judgment debts.’

14. The client paid into Court ₤60,000 pending assessment of the bill.  The Court awarded ₤74,458.52 in the final assessment together with interest.  The client argued, among other things, that the interest should be reduced by reason of the payment into Court.  Wyn Williams J sitting with assessors in the English High Court held that :

‘ 34. When a court makes an award of interest on a debt, damages or costs its primary purpose is to compensate the recipient for the fact that he has been precluded from obtaining a return on the money rightfully kept from him - see Fattal v Walbrook Trustees (Jersey) Ltd and Another [2009] EWHC 1674 (Ch); [2009] 4 Costs LR 591 at para 26 of the judgment of Christopher Clarke J. In my judgment there can be little doubt that the primary purpose justifying an entitlement to interest under the 1994 Order is the same.

  35. I can see no basis on the facts of this case for concluding that the interest claimed by the respondent should be reduced.  The respondent was entitled to interest at the rate and for the period specified in the 1994 Order to compensate for the fact that it had been kept out of the money lawfully due in respect of its legal services.  The fact that under a consent order the appellant paid a substantial part of the money owing into court (earning less interest on that money than might otherwise have been the case) does not count as a sufficient reason to justify a reduction in the interest properly payable to the respondent.  Had I been persuaded that article 14 of the 1994 Order (or for that matter s 35(A) Senior Courts Act 1981) permitted me to reduce the interest claimed by the respondent I would have declined to do so.’  (emphasis added)

15. Ultimately the question is one of construction of the relevant legislation.  The Court in Lake was construing different legislation but it supported the view that payment into Court of money does not mean that the solicitor has not been kept out of the money.  On this limited basis, Lake is relevant.  However, the present case really turns on the specific wording of section 49 of HCO on whether the judgment has been satisfied by the payment in or not.

16. Bharwaney J in 廈門新景地集團有限公司formerly known as 廈門市鑫新景地房地產有限公司v. Eton Properties Limited(裕景興業有限公司), HCCL 13/2011 stated :

‘ 22. But once the amount is paid into court, the rationale [i.e. imposing the 8% judgment rate] can no longer hold good and it is for that reason that I am of the, admittedly obiter, view, and I have to acknowledge that I have not heard full submissions on the point, that for that period of time when the amount remains in court, the interest on costs should not accrue at the judgment rate, but at some other rate. I would suggest that the proper rate should be 1% over HSBC prime from the date of payment into court until the date of payment out to the defendants, on the basis that the interest earned on the money paid into court is to be paid out to the plaintiff.’

17. As Bharwaney J himself recognized his view was expressed without full arguments.  His view certainly does not bind this Court.  We are of the opinion that his view should not be followed.

18. The defendants referred to a statement by Ma CJ in The Hongkong Electric Company Limited that ‘an award based on the judgment rate does not represent compensation; it is more than that.’

19. This statement is made in paragraph 8 of the judgment :

‘8. So what should be the appropriate rate of interest, because it is right to say that the Company has been kept out of its money during the disputed period? I agree that the appropriate rate should be the rate reflecting the Company’s cost of borrowing. This will compensate the Company for being deprived of the relevant funds during the disputed period. An award based on the judgment rate does not represent compensation; it is more than that. As stated above, the rationale for the judgment rate is inappropriate in the present case. There is no injustice in this result either: the Company is still compensated for the loss of the use of its money in interest terms.’ (emphasis added)

20. The context of the issue before the Court of Final Appeal is set out in the judgment of Ribeiro PJ :

‘ 11. The relevant chronology is as follows:

(a) The Commissioner originally assessed the tenement’s rateable value for the year 2004/05 at $6,294,000,000, later adjusting this down to $5,684,000,000.

(b) On 30 November 2009, the Lands Tribunal allowed the Company’s appeal and assessed the rateable value for rates and for Government Rent for that year to be $3,945,000,000 and $1,586,000,000 respectively. 

(c) On 12 April 2010, the Tribunal ordered the Commissioner to refund to the Company the amounts which it had overpaid in the sums of $86.97 million and $20.388 million respectively, with interest.  The Government made the refunds on the following day, 13 April 2010.  On 31 May 2010, the Government also paid the interest awarded.

(d) Then on 14 September 2010, the Court of Appeal allowed the Commissioner’s appeal and restored the Commissioner’s adjusted assessment.  Accordingly, on 3 November 2010, the Commissioner demanded the return of the sums which had been refunded to the Company after the Lands Tribunal’s decision.

(e) On 10 November 2010, the Company duly repaid the amounts it had previously received back as overpayments pursuant to the Lands Tribunal’s judgment.  And on 4 April 2011, it paid interest on the amounts it had received and had since repaid.

(f) Then on 21 June 2011, this Court reversed the Court of Appeal and restored the judgment of the Lands Tribunal.

(g) On 19 and 27 July 2011, the Government paid back the sums reclaimed consequent on the Court of Appeal’s judgment and paid agreed interest thereon for the period following this Court’s judgment.

12. There is disagreement only with regard to the rate of interest payable over the period between 10 November 2010 (when the Company repaid the previously refunded sums to the Government) and 21 June 2011 (when the Company’s appeal was allowed by this Court).  I shall refer to that period as “the disputed period”.

13. The Company claims interest over the disputed period at the prescribed judgment rate on the sums it had repaid.  The Commissioner accepts liability to pay interest on the relevant amount over that period, but submits that this should only be at a lower rate matching the Company’s then actual cost of borrowing (as to which there was evidence). The Court is asked to decide upon the rate of interest to be awarded.’

21. The majority of the Court decided not to award judgment rate.  The rationale is because :

‘ 36. ….., there was no unsatisfied judgment debt in existence during the disputed period. There is no reason to penalise the Commissioner by awarding a higher rate of interest.’

22. Properly viewed in this factual context, what Ma CJ said reflects no more and no less the well-established view on awarding post-judgment interest at judgment rate.

Conclusion

23. Accordingly, the defendant’s application is refused with costs to the plaintiffs together with certificate for two counsel.

Hon Yuen JA :

24. I agree.

Hon Kwan JA :

25. I agree with the decision of Cheung JA.