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 LTD AND OTHERS

HCCL 13/2011

[2024] HKCFI 2807

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO 13 OF 2011

(TRANSFERRED FROM HCA NO 961 OF 2008)

____________

BETWEEN

____________

_____________

R U L I N G

_____________

1.  This is the ruling on the further submissions filed by the parties on the issue of post-judgment interest.

2.  On 14 May 2024, this Court handed down Judgment whereby the 1^st and 2^nd Defendants (“Defendants”) were ordered to pay damages to the Plaintiff in respect of the Defendants’ breach of the promise to abide by an arbitral award. By the Order made on 9 September 2024, the damages payable were finally quantified and as a result, the Defendants are liable under the Judgment to pay to the Plaintiff damages in the sum of RMB 169,044,298.25 (“Principal”), and interest on such damages in the sum of RMB 174,272,854.28 for the period from 27 October 2006 to the date of the Judgment.

3.  The remaining issue in dispute is whether post-judgment interest should be payable, at judgment rate, on the Principal sum of damages only, or on the pre-judgment interest of RMB 174,272,854.28 as well.

4.  The Plaintiff claims that the Defendants should be ordered to pay further interest on the entire judgment debt inclusive of pre-judgment interest, at judgment rate from 10 September 2024 until full payment. The Defendants contend that they should only be liable for further interest on the Principal, at judgment rate.

5.  I agree with Counsel for the Plaintiff, that of all the Hong Kong authorities cited by the parties in this case, only the decision of Chow J (as His Lordship then was) in Waddington Ltd v Chan Chun Hoo Thomas HCA 3291/2003, 6 December 2016 is directly on the disputed question of a judgment debt and whether it includes pre-judgment interest. There was no issue raised in the other cases, as to whether a judgment creditor can seek post-judgment interest on pre-judgment interest, and there was no decision made by the courts, nor any discussion or analysis made in the decisions, on this issue.

6.  In Waddington, the dispute was precisely whether post-judgment interest is payable on pre-judgment interest under section 49 of the High Court Ordinance (“Ordinance”) (Issue 3 as identified in the Decision). At paragraph 18, the Court observed:

“As a matter of principle, pre-judgment interest forms part of the “judgment debt” for the purpose of section 49 of the High Court Ordinance and therefore also carries interest from the date of the judgment until satisfaction: see Novoship (UK) Limited v Vladimir Mikhaylyuk [2013] EWHC 89 (Comm) at paragraphs 21-23, 32-38 and 40; Miliangos v George Frank (Textiles) Ltd (No 2) [1997] QB 489 at 494E-F.

19. As in relation to the post-judgment interest on the Judgment Sum, I consider that the post-judgment interest on the Shortfall should also be paid into court.”

7.  The decision in Waddington referred to and relied on Novoship (UK) Limited and others v Vladimir Mikhaylyuk and others [2013] EWHC 89 (Comm). In Novoship, there was dispute as to whether interest under section 17 of the Judgments Act 1838 (“Act”) should be calculated from the date on which judgment on the principal sum due was given, or from the later date on which judgment on the interest payable was issued. Christopher Clarke J (as he then was) explained as follows (from paragraghs 32 to 38 of the judgment):

“32. In respect of pre-judgment interest -- that is to say interest on the principal sums down to 14 December 2012 -- the position is that there has been no judgment which determines what is the amount due. At the hearing on 14 December, the questions of rate and compounding were determined, and an estimate of some US$ 48 million was given in respect of the relevant interest.

33. I ordered the making of an interim payment of US$ 30 million, although that is subject to a stay. But no sum in respect of the totality of the interest has yet been fixed, or, save as to the US$ 30 million, ordered to be paid.

34. The claimants say that in those circumstances I should order that interest on interest should run from 14 December, pursuant to the power given to the court under CPR 40.8(2) to order that interest run from a date before the date, i.e. today, when judgment is given in respect of the interest down to 14 December.

…

37. The Nikitin defendants say that if the claimants are to get Judgments Act interest on the principal from 14 December, they should only get Judgments Act interest on the interest on and from tomorrow. The claimants will already be getting interest on the principal from 14 December. They should not get interest on the interest down to 14 December from 14 December as well. The fact that they might have got such interest if all the calculations had been in place, and there was time to argue the interest issue, on 14 December, cannot justify them getting interest on interest when those conditions did not exist.

38. I have come to the conclusion that the interest calculation should be carried down to 14 December, and that there should be Judgments Act interest on the interest thus calculated thereafter.”

8.  On behalf of the Defendants in this case, it was argued that the judgment in Novoship turned on an unanalyzed passage in the UK White Book at 40.8.9, and on the language of the English CPR 40.8, whereas the issue now in dispute turns on the interpretation of sections 48 and 49 of the Ordinance.

9.  To start, section 48 of the Ordinance allows simple interest to be included “in any sum for which judgment is given”, at such rate as the Court thinks fit on “all or any part of the debt or damages in respect of which judgment is given”.

10.  Section 49 states:

“(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”.

11.  In turn, section 17 of the Act which was considered by the English Court in Novoship provides as follows:

“1 Every judgment debt shall carry interest at the rate of 8 per cent per annum from such time as shall be prescribed by rules of court until the same shall be satisfied and such interest may be levied under a writ of execution on such judgment.

2. Rules of court may provide for the court to disallow all or part of any interest otherwise payable under subsection 1.”

12.  CPR 40.8 highlighted by Counsel for the Defendants as applicable only to Novoship states:

“(1) Where interest is payable on a judgment pursuant to section 17 of the Judgments act 1838 … the interest shall begin to run from the date that judgment is given unless –

…

(b) the court orders otherwise.

(2) The court may order that interest shall begin to run from a date before the date that judgment is given.”

13.  Paragraph 40.8.9 of the English White Book reads:

“Where there is a judgment for debt or damages, normally it will include the principal sum (say £50,000) plus any interest awarded by the court (say £5,000) and the total sum (£55,000) will constitute the judgment debt. Such a judgment may be not only a judgment given at the end of a contested trial, but a consent order or a judgment on admissions.”

14.  It is clear from the judgment in Novoship that the Court had throughout been considering the meaning of a “judgment debt” as provided for in section 17 of the Act, when it referred to the authorities and the texts considered in the judgment. I do not agree that CPR 40.8 (which provides for interest payable “on a judgment” pursuant to section 17 of the Act) can make a material distinction when this Court considers and decides on the meaning of “judgment debts”, as provided for in section 49 of the Ordinance. In Novoship, the Court concluded that a judgment debt is one under a final judgment, when there is a quantified sum in the entirety which the judgment debtor is obliged by the terms of the judgment to pay, and that such final judgment creates the judgment debt and carries interest from the time of the judgment.

15.  Chow J accordingly found in Waddington that pre-judgment interest forms part of the “judgment debt” as used in section 49, such that interest is payable thereon from the date of judgment. With respect, I agree.

16.  Counsel for the Defendants referred to the case of Cyberworks Audio Video Technology Limited (In Compulsory Liquidation) v Mei Ah (HK) Company Limited [2020] HKCFI 2792, which set out (at paragraph 12) a helpful summary of the legal principles governing the Court’s jurisdiction to award pre-judgment interest under section 48 of the Ordinance. These include the following:

(1) The aim of an award of interest is to compensate the plaintiff for being deprived of the money later awarded during the relevant period until the award.

(2) The award of interest is not intended as punishing the paying party, but to achieve appropriate restoration of the monies deprived.

(3) In the absence of contrary evidence, the settled practice is that the award of interest should reflect the theoretical cost to the plaintiff of borrowing the sums withheld, usually taken to be the prime rate +1%.

(4) Though most claims to interest sound in the award of simple interest, the court has jurisdiction in equity to award compound interest.

17.  On behalf of the Plaintiff, it was submitted that no distinction should be made between the Principal, and pre-judgment interest thereon, as they comprise an entire judgment debt and merge in the Judgment, such that the Plaintiff has only one cause of action for the entire judgment sum after judgment is entered (referring to Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2014] AC 160 at para 17 and Forever International Capital Limited v Ng Chun Sing [2019] HKCFI 2796 at para 23).

18.  Counsel for the Defendants argued that to hold that “judgment debts” as used in section 49 of the Ordinance should comprise both the amount of damages and pre-judgment interest would effectively be allowing the Plaintiff to recover compound interest on the pre-judgment interest component, and pointed out that this together with the merger submission had been rejected in Strategic Technologies Pte Ltd v Procurement Bureau of the Republic of China Ministry of National Defence [2023] EWHC 754 at para 82.

19.  On reviewing the judgment in Strategic Technologies, the Court simply stated that it preferred the defendant’s approach over the claimant’s suggestion, that pre-judgment interest on the judgment should be merged into the judgment debt thereby including an element of compounding, since the defendant’s approach on simple interest reflected the actual wording of the Singapore judgment in the case, and the Singapore Civil Law Act 1909 which expressly stated that it did not allow the giving of interest upon interest. It appears that the case is distinguishable.

20.  In Novoship, the English Court also considered the question of compound interest, and observed as follows (at paragraph 90 of the judgment):

“In ordinary course a successful claimant gets his judgment for principal and interest at the same time, at any rate in a case which is not as sizable as this one.

Depending on the facts of the case, that interest may have been compounded, as it is in the present case at quarterly basis. He is then entitled from the date of judgment to interest on the sum of the principal and the interest. But any compounding ceases. Simple interest on the interest down to the date of judgment is some recompense for the absence of further compounding after the date of the judgment.”

21.  In the Judgment, I already found against the Defendants on the general question of delay, and whether any delay on the Plaintiff’s part was the predominant cause of its being put out of its money. A period of 14 months has already been disallowed in the Plaintiff’s claim for pre-judgment interest, for its inaction after being ordered to make election between maintaining the Statutory Judgment and obtaining a judgment for damages. However, as is clear from the staggered history of the litigation between the parties in this case, the Plaintiff has been kept from the use of the money ultimately awarded to it, for a substantial period of time, since October 2006. Acknowledging that an award of interest is not to punish the paying party, I consider that to allow interest on pre-judgment interest in this case is consistent with the underlying rationale for awarding interest, to encourage the prompt satisfaction of judgment debts. The Defendants in this case should be discouraged from further delaying payment under the Judgment.

22.  For the above reasons, I will make the following order on post-judgment interest:

“Interest shall run on the judgment debt (inclusive of pre-judgment interest as ordered in paragraphs 2 and 3 of the Order dated 9 September 2024) at the judgment rate from 10 September 2024 until full payment.”