WAN CHI HING v. LAU WAI FAN t/a FAN’s TRADING CO

HCA 1554/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1554 of 2013

(transferred from DCCJ 1497/2006 and 1498/2006)

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HCA 1555/2013

AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1555 OF 2013

(transferred from DCCJ 1673/2006)

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REASONS FOR JUDGMENT
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A.  INTRODUCTION

1. In my judgment dated 26 June 2015 (“the Judgment”), I gave partial judgment in favour of the plaintiff in HCA 1554/2013 and dismissed the plaintiff’s claim in HCA 1555/2013.  I also made an order nisi that the plaintiff’s costs in HCA 1554/2013 (including any reserved costs) be paid by the defendant (Strong Master) to be taxed if not agreed, and that the costs of the defendant (FTC) in HCA 1555/2013 (including any reserved costs) be paid by the plaintiff to be taxed if not agreed.

2. Since then, the parties have taken out a total of six applications by way of summons.  Some of them have now been resolved by consent.  There were four remaining issues for my determination:

(1)  Whether paras 98 and 111(3) of the Judgment should be varied so that partial judgment be given in favour of the plaintiff in HCA 1555/2013 in the sum of HK$8,153.20 (“the Reconsideration of Judgment Issue”).

(2)  Whether interest on the Judgment sums should be granted, and if so, for what period and at what rate (“the Interest Issue”).

(3)  Whether the costs order nisi at para 113(1) of the Judgment should be varied so that the plaintiff’s costs in HCA 1554/2013 (including any reserved costs) be paid by the defendant incurred before 5 August 2013 be paid by the defendant on the District Court scale, and those costs incurred thereafter be paid by the defendant on the High Court scale, to be taxed if not agreed (“the Court Scale Issue”).

(4)  Whether the costs order nisi at para 113(2) of the Judgment should be varied so that the defendant’s costs in HCA 1555/2013 (including any reserved costs) be paid by the plaintiff to be taxed if not agreed with a certificate for two counsel (“the Certificate for 2 Counsel Issue”).

3. At the conclusion of the hearing,

(1) I ruled against the plaintiff on the Reconsideration of Judgment Issue;

(2) I ordered that the pre‑judgment rate to be prime rate (as quoted by HSBC) plus 1% per annum and disallowed interest for the period from July 2008 to June 2009, and ordered that interest on the deposits would run from 16 December 2011 and 15 October 2009 respectively for the Yuen 5 Carpark and Kai 2 Carpark;

(3) I ruled against the defendant on the Court Scale Issue;

(4) I allowed the defendant’s application for a certificate for two counsel in HCA 1555/2013; and

(5) I made an order that each party bears their own costs of the various summonses before the court and of the hearing.

4. I now give my reasons for the Judgment.

B.  THE RECONSIDERATION OF JUDGMENT ISSUE

5. As pointed out in para 91 of the Judgment, the plaintiff only sought payment of his profits entitlement for the period from 1 to 29 November 2005 under the Tai 3A Agreement in HCA 1555/2013.  I construed clause 3 of the Tai 3A Agreement to mean that outgoings such as Government rent needed to be paid by the plaintiff before FTC was obliged to pay any profits.  The plaintiff’s claim was dismissed in the end because the plaintiff failed to pay his share of the Government rent to FTC for November 2005, and FTC was therefore not obliged to pay to the plaintiff his share of the profits for the same month (see paras 98 and 111(3) of the Judgment).

6. The plaintiff asked me to change my dismissal of his claim in the Judgment to a judgment in his favour.

7. In seeking to support his application, the plaintiff submitted that:

(1) the court has jurisdiction to reconsider its judgment before it is sealed;

(2) the Tai 3A Agreement was terminated on 29 November 2005 and there was no continuing obligation on the plaintiff to tender rent;

(3) the court should do an accounting exercise and determine whether there were any profits net of rent;

(4) the issue of the writ was effectively a payment of rent; and

(5) I should exercise the jurisdiction to reconsider the Judgment and find that the plaintiff was entitled to a share of profits in the sum of $8,153.20.

8. I reject the plaintiff’s submissions.

9. The principles regarding the court’s jurisdiction to reconsider its judgments before they are perfected can be summarised as follows:

(1) Until an order has been perfected, the court retains control over its judgment and its decision, and can permit argument to be reopened.  As a result it may modify or even reverse a decision to which it has already come, and which it has communicated to the litigants. See Noga v Abacha [2001] 3 All ER 513 at [12] (Rix LJ).

(2) The power to reopen or reconsider its judgment or order must only be exercised in exceptional circumstances: Stewart v Engel [2000] 1 WLR 2268 at 2276D (Sir Christopher Slade) & 2294A (Roch LJ); Noga v Abacha (above) at [41]; Keen Lloyd Holdings Ltd v Commissioner of Customs and Excise (unreported, HCAL 113/2012), 16 April 2015) §3 (McWalters JA).

(3) The reason why the power to reopen or reconsider must only be exercised in exceptional circumstances is that public interest demands the need to maintain finality in litigation.  See Stewart v Engel (above) at 2275G; Noga v Abacha (above) at [42].

(4) A balance must be struck to maintain the need for finality in litigation with the duty of the court to do justice between the parties and avert an unnecessary appeal: Sun Jianqiang v Trans‑Island Limousine Service Ltd [2004] 1 HKC 533 at §29 (Woo JA); Keen Lloyd (above) at §3.

(5) “Strong reasons” is an acceptable alternative to “exceptional circumstances”.  The case must raise considerations, in the interests of justice, which are out of the ordinary or exceptional before a litigant is entitled to ask the judge to think again.  See Noga v Abacha (above) at [43].

(6) Examples of when the jurisdiction might justifiably be invoked before the order in question is drawn up include: (a) a plain mistake on the part of the court, (b) a failure of the parties to draw to the court’s attention a fact or point of law that was plainly relevant, and (c) discovery of new facts subsequent to the Judgment being given.  See Re Blenheim Leisure (Restaurants) Ltd (No 3), The Times, 9 November 1999 (Neuberger J); Sun Jianqiang (above) at §28 (Woo JA).

10. As mentioned earlier, I dismissed the plaintiff’s claim for his profits entitlement for the period from 1 to 29 November 2005 in HCA 1555/2013 as a result of my construction of clause 3 of the Tai 3A Agreement and the admitted fact that the plaintiff did not pay Government rent for the same period.  The issue of the writ by the plaintiff in HCA 1555/2013 was not coupled with any payment or offer to pay the Government rent to FTC, and I cannot see how the issue of the writ can be said to be a tender of Government rent.  The points now advanced by the plaintiff do not in my view take the matter any further.  They do not raise any considerations in the interests of justice which are out of the ordinary, and do not constitute strong reasons or exceptional circumstances as to why I should exercise my discretion to reconsider my conclusions in paras 98 and 111(3) of the Judgment.

11. For these reasons, I dismissed the plaintiff’s application to vary paras 98 and 111(3) of the Judgment.

C.  THE INTEREST ISSUE

12. In para 112 of the Judgment, I asked the parties to agree on the exact form of the order to give effect to the Judgment and gave to them liberty to apply in the event of disagreement within 14 days of the date of the Judgment. 

13. Neither party applied for directions in relation to interest within the specified time, namely on or before 10 July 2015.

14. On 12 October 2015, the plaintiff took out two summonses in the present two actions to amend his earlier summonses to ask the court to vary the Judgment so that “interest at judgment rate calculated from the date of the Writ up to the date of payment by the defendant” be paid on the Judgment sums. 

15. The defendants accepted that the court may make an award of interest before the order is sealed: Tadjudin v Bank of America, National Association (No 2) [2015] 3 HKLRD 331 at §4 (To J).  In these circumstances, I gave leave to the plaintiff at the hearing to amend his earlier summonses.

16. As far as interest on the deposits wrongfully withheld by Master Strong is concerned, the parties agreed that interests on the Yuen 5 deposit and the Kai 2 deposit should only run from 16 December 2011 and 15 October 2009 respectively. 

17. The parties cannot agree on two matters in relation to interest: (1) what interest rate should be used from the date of the Writ and (2) whether the plaintiff is entitled to interest during the period from 23 July 2007 to 14 December 2010 when the plaintiff allegedly took no action in the proceedings.

C1.  Rate of interest

18. The plaintiff submitted that that he should be entitled to interest at the Judgment rate from the date of the Writ.  He contended that Strong Master was unjustly enriched by reason of its conduct since October 2005 and that he was unlawfully being kept out of his money.  He asserted that he should be entitled to interest at a rate higher than the usual commercial rate.  No basis was put forward as to why judgment rate was an appropriate higher rate.

19. I reject the plaintiff’s submissions:

(1) It is well‑established that pre‑judgment interest is awarded not to punish a defendant, but to compensate a plaintiff for the return which he could have expected had he invested the amount in question, or to deprive a defendant of the profit which he wrongfully made out of the money he withheld: see Tate & Lyle Distribution v Greater London Council [1982] 1 WLR 149 at 154B‑F (Forbes J); Komala Deccof & Co SA v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina) [1984] HKLR 219 at 223D‑G (Cons JA).

(2) Post‑judgment interest, on the other hand, is a penal rate imposed where a judgment for a quantified sum has not been paid.  It is charged at a rate determined periodically by the Chief Justice by order, at a rate significantly higher than commercial rates of interest, designed to encourage prompt satisfaction of judgment debts: see Ming An Insurance Co (HK) Ltd v Ritz‑Carlton Ltd (No 2) (2009) 12 HKCFAR 158 at §65 (Ribeiro PJ).  The purpose of post‑judgment interest is not to compensate a successful party, but to encourage the paying party to honour a money judgment as soon as possible: see Man Ping Nam v Man Fong Hang (No 2) (2007) 10 HKCFAR 140 at §23 (Ribeiro PJ).

(3) Section 49 of the High Court Ordinance (Cap 4) provides that interest on a judgment debt should be paid at the Judgment rate in the absence of any specific order from the Court of First Instance.  A judgment debt only comes into existence upon the making of a judgment.  Therefore, interest at judgment rate is only applicable from the date of the Judgment.

(4) In the present case, I see no reason why the usual commercial interest rate should not be used as the pre‑judgment interest.

20. At the hearing, the plaintiff recognised the difficulty in asking for judgment rate as pre‑judgment interest and submitted that I could consider an alternative rate, such as the best lending rate.

21. 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 (above) at 221‑223 (Cons JA); Polyset Ltd v Panhandat Ltd (unreported, FACV 28/2000, 25 April 2002) §13 (Ribeiro PJ). 

22. The Court of Final Appeal followed this practice in Man Ping Nam (above) at §25 (Ribeiro PJ).

23. Strong Master submitted that I should instead apply the rate used by To J in Tadjudin (above) at §11, namely 2.85%, as the pre‑judgment rate in the present case.  In Tadjudin, To J at §§10 and 11 stated:

“10. … I think as a rule of thumb 12‑month HIBOR plus two percent (which is equivalent to prime minus 2%) would more realistically represent the average cost of consumer borrowing. I therefore adopt this formula as a starting point for fixing the pre‑judgment rate. But bearing in mind the principles in Komala, I would adjust this rate upwards or downwards depending on the actual circumstances. If by reason of being deprived of his money, the plaintiff was required to borrow at a higher rate, I shall revise the rate upwards.

11. From the information available from the Hong Kong Monetary Authority, prime rate has been kept at 5% from 2009 to date, reflecting a very stable and low interest rate environment.  From the same source, 12‑month HIBOR ranges from 0.45% to 1.00% between January 2010 and April 2015.  For most of the time during that period, the rates were on the high side.  Using 12‑month HIBOR at 0.85% as the mean rate, I adopt 2.85% per annum as the starting point for pre‑judgment interest rate.  Despite the submission of the plaintiff’s solicitors, I have not been shown any evidence of the plaintiff having to borrow at a cost above that rate.  Accordingly, I award her pre‑judgment interest at the rate of 2.85% per annum.”

24. It is unclear to me from To J’s judgment what evidence was adduced by the defendant in that case to support the departure from the “prime plus 1%” practice.  To J did not regard the authorities cited by the defendant as representing a departure from the principles in Komala as approved by the Court of Final Appeal in Polyset.  It seems to me that there must have been some evidential basis for To J to come to 2.85% as the pre‑judgment interest rate in the case.

25. In the present case, no evidence has been adduced by Strong Master to show that there is some other rate which is more appropriate than the conventional “prime plus 1%”.  The citation of Tadjudin is not sufficient for this purpose because, as I said earlier, it is not clear to me what evidence was laid before To J for him to arrive at 12‑month HIBOR + 2%, or 2.85%.

26. In these circumstances, I ordered that the pre‑judgment rate to be prime rate (as quoted by HSBC) plus 1% per annum.

C2.  Period of interest

27. Strong Master accepted that it is liable to pay interest on the Judgment sums from the date of the Writ to the date of the Judgment except for the dates between 23 July 2007 and 14 December 2010 during which the plaintiff is said to have made no effort to prosecute his claim.

28. The relevant principles were summarised by Jackson J in Claymore Services Ltd v Nautilus Properties Ltd [2007] BLR 452 at §55:

(1) Where a claimant has delayed unreasonably in commencing or prosecuting proceedings, the court may exercise its discretion either to disallow interest for a period or to reduce the rate of interest.

(2) In exercising that discretion the court must take a realistic view of delay.  In the case of business disputes, litigation is for all parties an unwelcome distraction from their proper business.  It is not reasonable to expect any party to take every litigious step at the first possible moment, or to concentrate on litigation to the exclusion of all else.  Delay should only be characterised as unreasonable for present purposes when, after making due allowance for the circumstances, it can be seen that the claimant has neglected or declined to pursue his claim for a significant period.

(3) When determining what disallowance or reduction of interest should be made to mark a period of unreasonable delay, the court should bear in mind that the defendant has had the use of the money during that period of delay.

These principles have been applied in Hong Kong: see eg The Hong Kong Electric Co Ltd v Commissioner of Rating and Valuation (unreported, LDGA 224/2004, 12 April 2010) §19(2) (Au J and Member Lo); Pfeiffer GmbH v Cheung Hay Kit (unreported, HCA 1369/2011, 21 November 2013) §11 (Zervos J).

29. The plaintiff filed no evidence to explain his inaction in these proceedings between 23 July 2007 and 14 December 2010.  In the skeleton submitted on his behalf, his counsel submitted that the plaintiff’s side presented winding up petitions against Mr Wong’s side in May 2006 and the action was tried before Barma J between May and July 2008.  Even assuming that the plaintiff was tied up in the winding up proceedings (on which there is no evidence), there is still an unexplained period of inactivity in these proceedings from July 2008 (when the trial before Barma J was finished). 

30. Nonetheless, there is evidence that the plaintiff was asking for consent from the defendants in June 2009 for transfer of proceedings to the High Court in June 2009, and was asking for specific discovery from the defendants in September 2010.  Therefore, it is not accurate to describe the plaintiff as being inactive from 23 July 2007 to 14 December 2010.

31. Making all due allowance for the circumstances, I disallowed interest for the period from July 2008 to June 2009.

D.  THE COURT SCALE ISSUE

32. Strong Master submitted that the plaintiff’s costs incurred before 5 August 2013 (the date when then consolidated actions were transferred from the District Court to the High Court) should be paid by Strong Master on the District court scale, and the costs incurred thereafter be paid on the High Court scale, to be taxed if not agreed.

33. There is no dispute between the parties that I have discretion under section 52D(1) of the High Court Ordinance (Cap 4) and section 44A of the District Court Ordinance (Cap 336) to order costs in HCA 1554/2013 to be taxed on the District Court scale.  The issue is whether I should exercise that discretion.

34. Strong Master’s principal basis for asking me to order the costs before the transfer to be on the District Court scale was that the bulk of the work in the proceedings was done in the District Court before the transfer in August 2013.  It seems to me that whether or not a winning party’s costs before the transfer of proceedings should be on the District Court scale cannot just depend on the extent of work done in the District Court.  If the transfer of proceedings from the District Court to High Court was correctly made, the case should be regarded as a High Court case in all respects.  The fact that the parties spent a relatively longer time in the District Court before transferring the case to the High Court should not in my view affect the nature of the case.

35. Strong Master also made some mild criticisms about the plaintiff’s conducts in the District Court in relation to the various applications for specific discovery.  I did not consider such matters sufficient to justify awarding costs on the District Court scale.

36. For these reasons, I was not persuaded that I should exercise my discretion to order the plaintiff’s costs incurred before 5 August 2013 to be paid by Strong Master on the District Court scale.

E.  THE CERTIFICATE FOR 2 COUNSEL ISSUE

37. The defendant (FTC) in HCA 1555/2013 submitted that I should vary the costs order nisi at para 113(2) of the Judgment so that FTC’s costs (including any reserved costs) be paid by the plaintiff to be taxed if not agreed with a certificate for two counsel.

38. According to para 113 of the Judgment (as well as RHC Order 42, rule 5B(6)), the costs order nisi would become absolute 14 days from the date of the Judgment (ie on 10 July 2015).

39. FTC did not take out its summons to vary the costs order nisi under 22 July 2015.  Indeed, FTC acknowledged that its application to vary was made out of time.

40. Once a costs order nisi has become absolute, it is not permissible to seek to vary it: see The Incorporated Owners of Tung Lo Court v Tsui Wai Yip (unreported, CACV 27/2015, 25 November 2015) §3‑5 (Poon JA).

41. Nonetheless, Mr Robert Pang SC, counsel for the plaintiff, very fairly made the observations that the plaintiff made an application to vary the costs order nisi in HCA 1555/2013 within time, and that his client’s application might be taken to mean that the costs order nisi at para 113(2) of the Judgment has not yet been made absolute so as to enable the defendant to seek to vary it in its (the defendant’s) favour.

42. It seems to me that Mr Pang’s observations are correct. Because of the plaintiff’s application to vary the costs order nisi at para 113(2) of the Judgment (which was made within time), that order did not become absolute on 10 July 2015.  That provided a basis for the defendant to subsequently ask for the variation of the order in its favour. 

43. Given that there was agreement between the parties that these consolidated proceedings merited the instruction of two counsel, I exercised my discretion to grant a certificate for two counsel in HCA 1555/2013 in favour of the defendant.

44. As both parties were not entirely successful in their respective applications, they agreed that an appropriate costs order for the various summonses and for the hearing would be for each party to bear their own costs. I considered that was a fair order to make in the circumstances and accordingly made such an order.