Waddington Ltd v. Chan Chun Hoo Thomas and Others

HCA 3291/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3291 OF 2003

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D E C I S I O N

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INTRODUCTION

1.The main issues that I have to decide are:-

(1) whether, by reason of the terms of a previous court order made in this action and as varied by the Court of Appeal, certain pre-judgment interest on the principal judgment sum should be paid into court instead of to the party in whose favour the judgment is given;

(2) whether the post-judgment interest on the principal judgment sum should likewise be paid into court instead of to the party in whose favour the judgment is given; and

(3) whether post-judgment interest is payable on pre-judgment interest under section 49 of the High Court Ordinance.

BACKGROUND FACTS

2.This is a multiple derivative action brought by Waddington (the plaintiff) on behalf of Profit (the 5^th defendant) against Thomas (the 1^st defendant) for breach of fiduciary duty.

3.On 18 December 2013, Recorder P Fung SC gave a judgment (“the Judgment”) in favour of Profit against Thomas for the sum of HK$33,511,220.32 (“the Judgment Sum”).  On 10 March 2014, the learned Recorder made a further order (“the Order”) directing Thomas to pay the Judgment Sum together with simple interest thereon at 2.5% per annum from 28 September 2000 to the date of judgment (18 December 2013) into court within 21 days pending further directions from the court.  Since the actual terms of the Order is material to the present discussion, I shall set out the relevant parts of the Order below:

“1. the 1^st Defendant do pay to the 5^th Defendant simple interest at 2.5% per annum on the judgment sum of $33,511,220.32 from 28^th September 2000 until the date of judgment;

2.  the 1^st Defendant do pay into court the judgment sum of $33,511,220.32 together with interest thereon as aforesaid within 21 days from the date hereof pending further directions by the court.”

4.The order that the Judgment Sum and pre-judgment interest thereon should be paid into court, instead of to Profit, was made upon Waddington’s application on (inter alia) the following grounds:-

(1) Profit was a company incorporated in the BVI which had been dissolved in February 2003 and was restored upon the application of Waddington specifically for the purpose of this action;

(2) Profit did not carry on any business and there could be no prejudice to any party for the Judgment Sum and pre-judgment interest thereon to be paid into court pending further orders of the court; and

(3) the derivative action was necessitated by Thomas’ breach of fiduciary duty owed to Profit, which was still under his control. Hence, if the Judgment Sum and pre-judgment interest thereon were paid to Profit they would again come under the control of the wrongdoer.

5.Thomas did not object to the order sought by Waddington that the Judgment Sum should be paid into court, instead of to Profit, but apparently did not make clear his stance in relation to the pre-judgment interest thereon.  The learned Recorder considered, however, that the only logical course to follow was to also order the pre-judgment interest to be paid into court.  Accordingly, he ordered both the Judgment Sum and pre-judgment interest thereon to be paid into court.

6.On 21 March 2014, Thomas paid the sum of HK$44,597,466.49 (comprising the Judgment Sum and pre-judgment interest thereon at 2.5% per annum) into court.  That was 93 days after the date of the Judgment.

7.Thomas and Waddington’s appeal and cross-appeal respectively against the Judgment and Order were dismissed by the Court of Appeal on 20 May 2016, save that Waddington’s cross-appeal on the rate of pre-judgment interest was allowed such that:-

“the rate of 2.5% awarded by the judge below shall be substituted by the rate of 1% over the HSBC Best Lending Rate from time to time over the period from 28^th September 2000 until the date of judgment as the applicable rate for pre-judgment interest” (“the CA Order”).

8.On or about 17 June 2016, Thomas gave notice to Waddington that he had deposited the sum of HK$18,970,563.51, being the shortfall of pre-judgment interest as a result of the CA Order (“the Shortfall”), into Profit’s bank account.

9.By its summons dated 30 September 2016, Waddington applies to the court for an order directing Thomas to pay into court the following within 14 days:

(1) the Shortfall (there being no dispute that the amount comes to HK$18,970,563.51);

(2) post-judgment interest on the Shortfall at judgment rate from 18 December 2013 to the date of payment in under (1) above; and

(3) the sum of HK$683,078.03, being post-judgment interest on the Judgment Sum at judgment rate from 18 December 2013 to 21 March 2014.

10.Thomas opposes (1) and (2) above, but is prepared to pay the sum of HK$683,078.03 under (3) above as may be ordered or directed by the court.

(1) In respect of (1), Thomas contends that the Shortfall should be paid to Profit directly, instead of into court.

(2) In respect of (2), Thomas’ position is that the Shortfall should not carry any further interest.

11.By a summons dated 25 November 2016, Profit applies to intervene in Waddington’s summons against Thomas in order to oppose (1) and (3) above, contending that the Shortfall and the post-judgment interest on the Judgment Sum should be paid to Profit directly instead of into court. In respect of (2), Profit makes no submission on the question of whether post-judgment interest is payable on the pre-judgment interest under section 49 of the High Court Ordinance, but submits if such post-judgment interest is payable it should likewise be paid to Profit instead of into court. Profit also seeks an order that Waddington’s application be heard together with another application made by Waddington against Profit’s solicitors (Messrs Reed Smith Richards Butler) seeking disclosure of information relating to Profit’s funder(s) in this litigation.

12.In view of the fact the Judgment Sum and any interest thereon belong beneficially to Profit, it seems to me to be obvious that Profit has a sufficient interest to intervene in the present application by Waddington against Thomas.  I would therefore grant leave to Profit to intervene in Waddington’s application.  On the other hand, I do not see why this application should be heard together with Waddington’s other application mentioned above.

ISSUE 1:  WHETHER THE SHORTFALL SHOULD BE PAID INTO COURT INSTEAD OF TO PROFIT?

13.The only change that the Court of Appeal expressly made to the Order was to substitute the applicable pre-judgment interest rate on the Judgment Sum, leaving the rest of the Order intact.  That being the position, it seems to me to be clear that the effect of the Order, read together with the CA Order, is to require Thomas to pay the Judgment Sum together with pre-judgment interest thereon, calculated at the rate of 1% per annum above the HSBC Best Lending Rate from time to time from 28 September 2000 to 18 December 2013, into court.  It follows that the Shortfall ought to be paid into court instead of to Profit.

14.On behalf of Thomas, Mr Ngo argues that the 21 days’ period for payment into court under the Order had long expired by the time of the hearing of the appeal, and the Court of Appeal could not possibly have envisaged that Thomas would be required to pay the Shortfall into court within 21 days of the date of the Order.  Plainly, the time limit set by the Order for payment into court could not be complied with, and the Court of Appeal could not have intended that Thomas would be required to do the impossible.  It is, however, a different matter whether Thomas should be required to pay into court the pre-judgment interest, which the Court of Appeal held should be calculated at a higher rate.  As mentioned above, I consider it to be clear that such requirement was not intended to be disturbed by the Court of Appeal.

15.Mr Ngo next argues that Thomas has already paid the Shortfall to Profit and it would be unfair to require him to make another payment into court.  If I am correct in my view regarding the true effect of the Order as varied by the CA Order, Thomas should never have paid the Shortfall to Profit in the first place.  It is up to Thomas to seek repayment from Profit.  It has not been suggested that Profit is not in a position to repay the Shortfall to Thomas.

16.On behalf of Profit, Mr Mok argues that there is no need for the Shortfall to be paid into court because the money already paid into court (in excess of HK$44 million) is more than sufficient to protect Waddington’s costs position.  I am not, however, being asked to make a fresh order under this part of Waddington’s summons.  I am merely construing the effect of the original Order as varied by the CA Order and applying it to the facts before me.  I would observe that, in any event, the order requiring Thomas to pay the Judgment Sum and pre-judgment interest thereon into court was not designed to provide a pot of funds from which Waddington might obtain satisfaction of the costs that it had been awarded.

ISSUE 2:  WHETHER THE POST-JUDGMENT INTEREST ON THE PRINCIPAL JUDGMENT SUM SHOULD LIKEWISE BE PAID INTO COURT INSTEAD OF TO PROFIT?

17.The Order is silent on post-judgment interest.  It cannot, in my view, be construed as requiring Thomas to pay the post-judgment interest into court.  However, logic would dictate that the post-judgment interest should also be paid into court.  Since Thomas has not in fact made payment of the post-judgment interest and has indicated that he is prepared to do as ordered or directed by the court, I would order Thomas to pay into court the sum of HK$683,078.03 within 14 days of the date of this decision.

ISSUE 3:  WHETHER POST-JUDGMENT INTEREST IS PAYABLE ON PRE-JUDGMENT INTEREST UNDER SECTION  49 of the High Court Ordinance?

18.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.

20.I therefore order Thomas to pay into court within 14 days post-judgment interest on the Shortfall at the rate of 8% per annum from the date of judgment (18 December 2013) to the date of payment in.

DISPOSITION

21.In respect of Waddington’s summons dated 30 September 2016, I order Thomas to pay into court within 14 days:-

(1) the sum of HK$18,970,563.51;

(2) post-judgment interest on the Shortfall (HK$18,970,563.51) at the rate of 8% per annum from 18 December 2013 to the date of payment in; and

(3) the sum of HK$683,078.03.

22.In respect of Profit’s summons dated 25 November 2016, I make an order in terms of paragraphs 1 and 2 thereof, and dismiss the rest of that summons.

23.On the question of costs, I make the following orders nisi:-

(1) Thomas and Profit shall pay Waddington the costs of Waddington’s summons; and

(2) Profit shall also pay Waddington the costs in relation to Profit’s summons, and there shall be no order as to costs as between Profit and Thomas in relation to that summons.

Mr Justin Lam, instructed by Kao, Lee & Yip, for the plaintiff

Mr Samuel Ngo, of K & L Gates, for the 1^st defendant

Mr Johnny Mok, SC and Mr Lam Man-chung, instructed by Reed Smith Richards Bulter, for the 5^th defendant