MKKWH (also known as MKGWH) v. RKSH

CACV 271 /2015

[2018] HKCA 932

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 271 OF 2015

(ON APPEAL FROM HCMC 9/2010)

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D E C I S I O N  O N  C O S T S

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Hon Lam VP (giving the Decision on Costs of the Court):

1.  In our judgment handed down on 12 July 2018, we directed parties to lodge submissions on costs and interest. Submissions were lodged accordingly and we have considered the same. We now give our decision on costs and interest.

Costs

2.  Counsel for H accepted that H should pay W the costs of the appeal (except the hearing on 10 November 2017) and costs of the hearing before Lok J and the application for direction on leave to appeal.  However, it was contended on behalf of H that there should be no order as to costs for the hearing on 10 November 2017 and the summons of 21 February 2014. 

3.  On the other hand, counsel for W asked for all the costs of appeal as well as costs of the summons of 21 February 2014.

4.  H carved out the costs of 10 November 2017 on the basis that it had not been his stance that the Amended Order achieved equal division.  We have alluded to the circumstances leading to the initial dismissal of appeal and the re-opening of the same after the hearing at [39] and [40] of our judgment. 

5.  Whilst it is correct that counsel for H did not positively advance the case that the Amended Order achieved equal division, neither did he clarify at the hearing on 10 November 2017 that the Amended Order did not achieve equal division.  Instead, he was quite content with our dismissal of the appeal on a false premise.  

6.  Though we would not criticize counsel for H in leaving it to W’s counsel to explain to the Court that the Amended Order did not achieve equal division (as he was entitled to do so), it is quite another thing to say that W should not have the costs of the hearing of 10 November 2017 because the Court only appreciated the problem with the Amended Order after that hearing.

7.  The matter can be analysed by looking at the costs position in this hypothetical situation: instead of the Court dismissing the appeal on 10 November 2017, counsel for W had to take the full day on 10 November 2017 to persuade the Court that there was a problem with the Amended Order and the other arguments in the appeal have to be adjourned to another date, necessitating a further day of hearing.  In that scenario, we cannot see any basis for suggesting that H should not pay W’s costs for both hearings. 

8.  For present purposes, we cannot see any material difference between that scenario and the present appeal.  As we said, counsel for H was entitled to adopt a passive role when counsel for W encountered difficulties in explaining the problem of the Amended Order.  However, if more time was spent in the appeal due to such difficulties (which could have been avoided if H’s counsel were more proactive in accepting the problem and assisting the court to understand the problem) and H ultimately failed in resisting the appeal, we cannot see any sound reason in principle for reducing his liability for costs. 

9.  Hence, it would actually be in the interest of the parties if counsel can be more forthcoming in making clarifications at the right time.  Adopting a passive role may backfire in some cases.

10.  We emphasize that this is not a case where costs had been wasted due to the running of a bad point by W.  Hence, there is no reason for placing the costs of hearing of 10 November 2017 on her shoulder. 

11.  In our judgment, H should bear the costs of the appeal, including the costs of the hearing of 10 November 2017, with certificate for two counsel.  We shall order accordingly.

12.  As regards the costs below, counsel for H submitted that the summons was necessitated by the failure of everybody to note the problems of the Amended Order before it was sealed.  Those acting for W only realized the mistakes many months later after she had changed her lawyers.  In such circumstances, he submitted that costs of the summons should not be borne solely by H. 

13.  Had H readily conceded that the relief prayed for in the summons should be granted, there might be some force in this contention. But that was not the stance of H.  H resisted the summons all the way and failed in the end. 

14.  In these circumstances, we do not see any ground for segregating the costs of the summons from the costs of the hearing at the court below. 

15.  We shall order H to pay all the costs of the summons in the court below to W. 

Interest

16.  W seeks interest on $15,768,500 from 11 May 2015 at judgment rate.  11 May 2015 was the date on which the lump sum payment should be paid to W pursuant to paragraph 7 of the Amended Order, taking account of subsequent developments including the consent summons of 27 April 2015.

17.  H resists the payment of interest on the basis that he had not defaulted in any payment as the correction under the slip rule only took effect from the date of our judgment, viz 12 July 2018.  

18.  In the reply submissions, W advanced a fall-back position, seeking interest from 11 May 2015 at commercial rate, 1% above prime.

19.  The Court gave directions on 23 August 2018 for further submissions to be lodged so that H could have the opportunity to address the fall-back position. 

20.  W’s primary position (set out at [16] above) is founded on the premise that our order of 12 July 2018 has retrospective effect for the purpose of calculating interest in accordance with Section 28AA of the Matrimonial Proceedings and Property Ordinance Cap 192 [“MPPO”].  Her counsel cited R & T Thew Ltd v Reeves [1982] QB 172 and R (Lunn) v Governor of Moorland Prison [2006] 1 WLR 2870 to support that premise.

21.  With respect, we cannot agree that H should be treated as having failed to make full and punctual payment in compliance with the Amended Order for the purpose of Section 28AA(2) of the MPPO.  Even though it can be said that H had not made full payment because of the amendment of the Amended Order as ordered by us, it can hardly be said that he had not been punctual in making payment when he acted in accordance with the then version of the Amended Order as well as the subsequent development as per the Consent Summons of 27 April 2015.   

22.  In our judgment, there was no arrears of maintenance up to the time when the Amended Order was rectified by this Court on 12 July 2018.  Otherwise, because of the lapse of more than 12 months since the Amended Order, W would be caught by section 12 of the MPPO which bars her from enforcing the payment of such arrears without the leave of the Court. 

23.  Though this is not an application for enforcement of payment of arrears and W has not made any application for leave under Section 12, the concept of failure to make full and punctual payment in Section 28AA(2) is tied in with arrears in Section 28AA(3)(a).  The same expression “arrears” appears in section 12.  Given that they are in the same statute, the meaning should be the same.  Actually, section 28AA(5) expressly refers to the grant of leave in section 12.  It provides that in granting such leave, the Court has the power to order interest to be calculated from the date specified by the Court which can be a date different from the date of the original arrears.

24.  In this connection, we reject the submission of Ms Eu SC (leading counsel for W, appearing with Mr D Chen) that it is possible to have retrospective effect on the amendment of the order for the purposes of section 28AA but not for section 12.      

25.  It is not necessary to consider the position if H has to resort to section 28AA(7) as we are of the clear view that there had not been any failure on the part of H to make full payment in compliance with a maintenance order within the mearing of section 28AA(2).  As said, there cannot be any arrears when H had at the material times acted in accordance with the then prevailing orders.  There had not been any failure to comply with the Amended Order by H up to 12 July 2018 and Section 28AA is not engaged, see PLTO v KLK CACV 157/2012, 4 July 2013 at [17].

26.  The two cases cited by counsel were decided in wholly different contexts and we do not find these authorities helpful in advancing W’s cause in establishing the obligation of H to pay interest under Section 28AA(2).  

27.  R & T Thew Ltd v Reeves, supra, was about the rectification of a legal aid certificate.  In such context, Lord Denning MR said at p.191G:

“ All the cases show that when a slip is corrected in this way, the correction dates back to the date when the document originally took effect, unless anything has happened in the meantime to make it inexpedient or unjust to do so…”

28.  R (Lunn) v Governor of Moorland Prison, supra, was a case concerning a mistake in the warrant for imprisonment of a person subject to a sentence in criminal proceedings.  The mistake was only discovered after the release of the prisoner according to the mistaken terms of the warrant.  The warrant was subsequently amended by the court and the prisoner was re-arrested after 65 days.  A question arose as to whether the prisoner was unlawfully at large for those 65 days.  The English Court of Appeal held that notwithstanding the rectification of the order (which had the retrospective effect of making the prisoner a long term prisoner), it did not have retrospective effect of rendering his release unlawful.  Thus, the prisoner should not be regarded as having been unlawfully at large during the 65 days. 

29.  It is of interest to note the judgment of Moore-Bick LJ at [29]:

“ We accept that when an order of the court is amended it takes effect for most purposes in its amended form as from the date of the original order, but it does not follow that it has retrospective effect for all purposes. Whether it has retrospective effect … may depend on the nature and terms of the original order, the terms of the amendment and the purpose for which the question is being asked.”

30.  In the present case, the relevant question is whether the rectification of the Amended Order should have retrospective effect so as to attract automatically the liability under section 28AA to pay interest at judgment rates on a sum of money which H was under no legal compulsion to pay at the material time.  There is a punitive element in the imposition of interest at judgment rates which are generally significantly higher than commercial lending rates.  In our judgment, it would be unjust to impose such burden on H in the present case.

31.  For these reasons, we reject the primary argument of W on interest.

32.  On the other hand, we can see the force of W’s alternative argument on the basis that H should compensate W’s loss of use of the money (whilst he enjoys the benefit of using the same in the meantime) which W should have according to true intent of Deputy Judge Carlson in ordering equal division. 

33.  We accept the submission of Ms Eu that the court has inherent jurisdiction to order interest as held by the Court of Final Appeal in Man Ping Nam v Man Fong Hang (No 2) (2007) 10 HKCFAR 140 at [14] to [15].  Though the factual context is different, we do not agree with Mr Yu SC (leading counsel for H, appearing with Ms B Cheng) that the factual context is material in terms of the existence of such inherent power. 

34.  Further, the power of the court, and in this case it is the High Court, to award interest is expressly provided for in Section 49 of the High Court Ordinance.  It provides for award of simple interest for judgment debts which may be calculated at different rates in respect of different periods.

35.  We have not received any submissions on the applicability of this section in the present case.  Hence we refrain from deciding the question of interest on the basis of Section 49.

36.  However, as observed by Lord Hope in Sempra Metals Ltd v IRC [2008] 1 AC 561 at [4], the jurisdictional routes to an award of interest can be found in statute, equity or common law.  We agree with Ms Eu that this authority provided some support for W’s claim for interest in the present case though it was actually cited by Mr Yu for the proposition that under common law the court has no power to award interest as compensation for the late payment of a debt or damage in the absence of any agreement.  We do not regard the additional money payable by H upon the rectification of the Amended Order as debt or damage.  It is more in the nature of money payable upon the rectification of a mistake, thus akin to a restitutionary claim, like the overpayment of tax in Sempra Metals.  By reason of the mistake in the Amended Order, W had been deprived of $15,768,500 from 11 May 2015 until the payment by H upon rectification of such mistake.  At the same time, H was unjustly enriched by having the benefit of such sum of money.

37.  We therefore order H to pay W interest at the rate of prime plus 1% in respect of the $15,768,500 from 11 May 2015 to date of payment.

38.  As W is successful on both interest and costs, we order H to pay W’s costs of these issues, such costs are to be taxed if not agreed.