GRANDYIELD KNITTERS LTD v. GRANDYIELD KNITTERS LTD

CACV 125/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 125 OF 2002

(ON APPEAL FROM DCCJ NO. 11136 OF 2000)

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REASONS FOR JUDGMENT

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Hon Le Pichon JA:

1. This is an appeal against the award of interest made by His Honour Judge Yung on damages of $90,000 for breach of a sale and purchase agreement made between the defendant as vendor and the plaintiff as purchaser. The appeal was dismissed with costs to the plaintiff. The court indicated that it would give its reasons in writing later. This we now do.

2. On 22 May 2000, the parties entered into a provisional agreement for the sale and purchase of two car parking spaces in Mei Foo Sun Chuen. The plaintiff claimed that the defendant was unable to pass any title, much less good title, to the plaintiff and sought the return of the deposit of $45,000 and also another sum of $45,000 being compensation payable pursuant to clause 14.2 of the provisional agreement. In the alternative, the plaintiff claimed damages to be assessed. Paragraph 3 of the prayer read:

"Interest on the said sum of HK$90,000 or on damages awarded at such rate and for such period as this Honourable Court deems just;"

The judge found in favour of the plaintiff. In a judgment handed down on 12 October 2001, the judge gave "judgment for the plaintiff in the sum of $90,000 and interest as claimed." The Judgment was in the following terms:

"IT IS ADJUDGED THAT the Defendant do pay the Plaintiff a sum of HK$90,000.00 together with interest thereon at the rate of 11.98% per annum from the 22nd day of July 2000 to the 12th day of October 2001 and thereafter at judgment rate until payment and costs with certificate for counsel, to be taxed if not agreed."

This appeal

1. It was the defendant's contention that the judge had no jurisdiction to award interest, whether pre-judgment or post-judgment. Counsel for the defendant submitted that a claim for interest must be pleaded specifically, whether it is claimed under section 49 of the District Court Ordinance, Cap. 336 or otherwise. He relied on Ord. 18, r. 8(4) of the Rules of the District Court which reads as follows:

" (4) A party must plead specifically any claim for interest under section 49 of the Ordinance or otherwise."

Section 49 of Cap. 336 is in these terms:

" (1) The Court may include simple interest, at the rate the Court thinks fit in a judgment for a debt or damages, on the debt or damages or on a payment made before judgment, for the period between the date when the cause of action arose and-

(a) for a sum paid before judgment, the date of the payment; and

(b) for the sum for which judgment is given, the date of the judgment."

It was suggested that post-judgment interest which is governed by section 50 of Cap. 336 comes within the term "or otherwise" in r. 8(4).

Post-judgment interest

3. At the hearing, counsel for the defendant effectively 'abandoned' the appeal against the award of post-judgment interest. Nevertheless, in order to settle the point once and for all, I propose to set out why the point is a bad one.

4. Section 50 of the District Court Ordinance (prior to the amendment made in 2000) provided as follows:

"A judgment debt shall carry interest ... from the date of the judgment until satisfaction."

Post-judgment interest is mandatory in that it does not require the exercise of any discretion on the part of the judge. Such interest does not arise unless the plaintiff first obtains a judgment in his favour. It is a relief subsequent to judgment whereas pleadings are concerned with the plaintiff's claim to judgment. In my judgment, Ord. 18 r. 8(4) of the Rules of the District Court is not concerned with post-judgment interest. Such interest is not within the purview of the words "or otherwise" in that rule. Accordingly, insofar as this appeal relates to post-judgment interest awarded by the judge, it is wholly misconceived.

Pre-judgment interest

5. The only issue left is the award of pre-judgment interest. The amount at stake was a sum of $13,233.80, one would have thought, hardly worth the costs involved in taking the matter on appeal even if it were successful. Given the highly technical nature of the point taken, the exercise appears principally to benefit the lawyers.

6. Counsel for the defendant submitted that the judge did not have jurisdiction to award pre-judgment interest because of the plaintiff's failure to comply with Ord. 18 r. 8(4). It was his contention that that rule required a specific reference to section 49 of the District Court Ordinance and that the phrase "specifically pleaded" required specific mention not only of the relevant Ordinance but also the specific section. This contention was based on the annotation in 18/8/15 of the Hong Kong Civil Practice 2002 (considered below) arising from the fact that Ord. 18 r. 8(4) of the Rules of the District Court is identical to Ord. 18 r. 8(4) of the Rules of the High Court. The defendant does not seek to contend that the claim to interest had to appear in the body of the statement of claim: it is sufficient for it to be included simply in the prayer for relief. In Prague Enterprises Ltd v Chan Miu Cheung (Personal Representative of John Gilbert, deceased) [1994] 3 HKC 175, following McDonald Hamburgers Ltd v Burgerking (UK) Ltd [1987] FSR 112, that point had been settled. Litton JA held (at 182H):

"A statement of claim is an entire document which includes the prayer for relief. If, from the statement of facts in the body of the statement of claim, liability for the payment of interest could arise, the pleader needs to do no more than to include a claim for interest in the prayer for relief."

7. Counsel for the plaintiff submitted that Ord. 18 r. 8(4) of the Rules of the District Court was inapplicable to the present case because it only became operative on 1 September 2000 which was some 6 weeks after the date of the writ. He pointed out that the old District Court rules did not have a provision similar to that of the present Ord. 18 r. 8(4) and the new rules did not specifically provide that they were to have retrospective effect. The defendant's answer was that if that be the case, then rule 37 of the District Court Civil Procedure (General) Rules would apply. Rule 37 was part of the District Court Civil Procedure (General) (Amendment) (No. 2) Rules 1970 (LN 182 of 1970) which came into effect on 1 February 1971. This provides that the provisions of the Rules of the Supreme Court relating to the form and content of pleadings shall apply to proceedings in the District Court. So even if the amendment did not have retrospective effect, given rule 37, it becomes necessary to consider the effect of Ord. 18, r. 8(4) of the Rules of High Court.

8. Since this rule was modelled on the parallel English rule, the position under the English rule is relevant and may be summarised as follows. Prior to the introduction of that rule, section 3 of the Law Reform (Miscellaneous Provisions) Act 1934 ("the 1934 Act") conferred on the court a wide discretion to award interest. That section read:

" (1) In any proceedings tried in any court of record for the recovery of any debt or damages, the court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest at such rate as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment. Provided that nothing in this section ... (b) shall apply in relation to any debt upon which interest is payable as of right whether by virtue of any agreement or otherwise."

In Riches v Westminster Bank, Ltd. [1943] 2 AER 725, the English court of appeal upheld the trial judge's award of a pre-judgment interest under that section where there had been no claim for interest made in the statement of claim. That case concerned a claim by R against the judicial trustees of a testator. R claimed that under an agreement with the testator, he was to share equally in profits of a certain transaction and that he had been fraudulently deprived of his share over a period of years. The court gave judgment to R. Lord Greene, MR held that there was nothing in the section to indicate that the claim to interest under the 1934 Act must be pleaded, or that the statement of claim must say that, at the trial, the plaintiff, if successful, will ask the judge to exercise his discretion under that provision.

9. But the wide discretion conferred by section 3 of the 1934 Act was made 'subject to rules of court' as a result of section 35A of the Supreme Court Act 1981. When paragraph (4) was added to r. 8 by amendment in 1982, it had the effect of negativing the Court of Appeal's decision in Riches v Westminster Bank, Ltd. See Tsang Sing Wah v Pow Kam Shing [1985] 2 HKC 52 at 55D and the annotation at 18/8/10 of The Supreme Court Practice 1985. That annotation is of interest because it sought to explain the purpose of Ord. 18 r. 8(4) in these terms:

"Para. (4) which requires a claim for interest to be pleaded reflects the fundamental principle that the pleading should give fair notice to the opposite party of the nature of the claim which is being made against him, with the relevant facts relied upon, so as to enable him to meet such claim and to prevent surprise at the trial. Thus, if the defendant has due notice of the plaintiff's intention to seek an award of interest he will know the extent or totality of the plaintiff's claim and he can better calculate what sum, if any, he should pay into court under O.22, r.1(8) or what sum he can fairly offer to settle the claim out of court, or even whether in all the circumstances he should allow the plaintiff to enter judgment in default of pleading."

10. The latest annotation which appears at 18/8/19 of The Supreme Court Practice 1999 reads as follows:

"A claim for interest must be specifically pleaded, whether it is claimed under s.35A of the S.C.A. 1981 ... or otherwise. If the claim for interest is not pleaded, the Court will not award the plaintiff any interest (Ward v. Chief Constable for Avon and Somerset (1985) 129 S.J. 537 (sic) ...

... It must identify precisely the ground or basis on which it is claimed, and, whenever possible, the date from which and the rate at which the interest is being claimed, assuming, that is, that the date to which it is claimed is the date of judgment. If the interest is being claimed under s.35A, the pleading should specifically so state, since it is not sufficient to state the claim as being 'interest under the statute'. If interest is being claimed under another statute, e.g. the Bills of Exchange Act 1882, the pleading should specifically identify the statute or statutory provision with the rate at which and the period for which the interest is being claimed."

It is to be noted that the citation to the Ward case was incorrect: the correct page reference is 606. This mistake also appears in the first paragraph of the annotation at 18/8/15 to the Hong Kong Civil Procedure 2002. The first sentence of the third paragraph reads:

"If interest is being claimed under section 48, the pleading should specifically so state, since it is not sufficient to state the claim as being 'interest under the statute'."

The similarity between that annotation at 18/8/15 to the Hong Kong Civil Procedure 2002 and the annotation at 18/8/19 to The Supreme Court Practice 1999 is apparent. Neither cites any decided cases in support of the proposition that 'it is not sufficient to state the claim as being 'interest under the statute'.

11. The short point in this appeal is whether in order to satisfy Ord. 18 r. 8(4) of the Rules, whether of the High Court or the District Court, it is necessary to identify both the statute and the relevant section in the pleading.

12. The defendant relied on Bullen & Leake & Jacob's Precedents of Pleadings, 13th edn. ("Bullen & Leake") at 568 which stated that the pleading should specifically identify the statute or statutory provision. As an aside, it is to be observed that in Riches, du Parcq LJ (at 726G) disagreed with the learned authors of Bullen & Leake who had expressed views as to the necessity to state in the pleadings that it was intended to ask for interest. He did not appear to regard those views as either correct or authoritative. The only other support I am able to find is the Practice Direction issued on 28 October 1982 by the English High Court which dealt with claims for interest under the 1934 Act but which differed from the views expressed in Bullen & Leake. See Practice Direction [1982] 3 All E.R. 1151. There it was stated that a prayer claiming interest pursuant to the 1934 Act was sufficient: unlike the authors of Bullen & Leake, the practice direction did not require the specific section to be pleaded. In the same practice direction, it was stated that a claim expressed as "interest pursuant to statute" was considered unsatisfactory on the grounds that there were several statutes dealing with interest. But a pleading which is 'unsatisfactory' may not necessarily render the claim invalid: the consequence would depend on the nature of the deficiency.

13. It might also be observed that in contrast to section 35A(1) of the Supreme Court Act 1981 which commences:

"Subject to the rules of court ...",

section 49(1) of the District Court Ordinance is in similar form to section 3 of the 1934 Act in that the power to award interest was not made expressly subject to the Rules of Court. Section 49(2) of Cap. 336 merely provides that the rules may provide for the rate of interest and the method of calculation. Any failure to comply with Ord. 18, r. 8(4) would therefore be a breach of the Rules; it would not constitute a matter of jurisdiction in the court.

14. So far as case law is concerned, the two Hong Kong authorities to which reference has been made are Prague Enterprises where the relevant claim 'interest pursuant to Ordinance' was held by this court to be sufficient and the Tsang Sing Wah case which, being a decision which pre-dated 1988, (when para. 4 was added to Ord. 18, r. 8) is of little assistance in this regard. There is therefore no case law directly on point.

15. In the present case, unlike Ward v Chief Constable of Avon and Somerset (supra) where there was no claim for interest, there is a claim for interest viz. "... at such rate and for such period as this Honourable Court deems just". The defendant was therefore apprised of a claim for interest which involved the exercise by the court of a discretion vested in it. Having regard to the nature of the claim which was for the return of the deposit and the stipulated penalty or, alternatively, for damages for the vendor's breach of a sale and purchase agreement relating to land, other than the discretion vested in the court under the District Court Ordinance, it is not entirely clear what other ordinance could have been pertinent. The Bills of Exchange Ordinance plainly did not apply. In any event, counsel for the defendant was not able to identify any other ordinance that could conceivably be relevant.

16. Had the plaintiff sought to amend the pleading, there is no doubt in my mind that the judge would have allowed the amendment. Having regard to the rationale behind para. 4, I do not see that the defendant was in any way prejudiced by the absence of a specific reference to the relevant section and/or the Ordinance, i.e. Cap. 336. In my judgment, the judge did have jurisdiction to award pre-judgment interest on the facts of this case and I so hold.

Hon Yeung J:

17. I agree and have nothing to add.

Hon Rogers VP:

18. I entirely agree with the judgment of Le Pichon JA. As already expressed the practical effect of this appeal would almost be a net financial loss to the appellant whether it should win or lose. The lack of any real purpose in the appeal becomes more apparent when it is considered that the pleadings must have served their purpose in alerting the defendant to the nature and extent of the plaintiff's case. This is quite apart from the fact that the grounds of appeal when properly analysed are erroneous. In the circumstances the appeal fell to be dismissed with costs.