Top Winton Ltd v. Lam Chun Man
Read the full judgment text of DCCJ 5090/2017 on BabelCite. This District Court judgment was delivered on 20 July 2018.
1. This is the plaintiff’s appeal against the decision of Master Liza Tung dated 24 April 2018, by which she allowed post-judgment interest at the judgment rate, rather than at the contractual rate.
Cited by 2 cases · Cites 5 cases
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DCCJ5090/2017 [2018] HKDC 864 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO 5090 OF 2017 --------------------------------------
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---------------------- DECISION ---------------------- 1.This is the plaintiff’s appeal against the decision of Master Liza Tung dated 24 April 2018, by which she allowed post-judgment interest at the judgment rate, rather than at the contractual rate. BACKGROUND 2.The plaintiff is a licensed money lender. It lent HK$850,000.00 to the defendant pursuant to a loan agreement dated 20 September 2017 (“the Loan Agreement”). On the same day, the plaintiff and the defendant also executed a deed of loan for the same sum of money (“the Deed of Loan”). 3.The Loan Agreement provided that the loan shall accrue interest at 3% per month, or 36% per annum. Clause 10 on p 2 of the Loan Agreement set out the calculation of interest as follows:-
4.A similar term can also be found in Clause 2 of the Deed of Loan, which reads:-
5.The defendant signed the Loan Agreement, and executed the Deed of Loan. The plaintiff claimed that the loan was released to the defendant according to his instructions. 6.The defendant failed to make any payment other than HK$79,816.00 in interest. The plaintiff thus commenced the present case for repayment of the loan and interest accrued at 36% per annum. 7.The defendant did not defend the action. The plaintiff issued a summons under Order 83A rule 4 of the Rules of the District Court for default judgment under the Money Lenders Ordinance. 8.On 24 April 2018, Master Liza Tung gave judgment against the defendant for repayment of the loan. Pre-judgment interest on the outstanding loan was allowed at 36% per annum, but post-judgment interest was only allowed at the judgment rate. 9.The plaintiff thus appeals against the part of the learned Master’s order regarding the post-judgment interest, and contends that it ought to be calculated at 36% per annum up to the date of full payment. 10.The defendant did not appear at the hearing before me. After considering the plaintiff’s affirmation of service, I was satisfied that the defendant had due notice of this appeal hearing[2]. I ordered the appeal hearing to proceed in the defendant’s absence. 11.I remind myself that this is an appeal by way of an actual rehearing of the plaintiff’s application and I should treat the matter as though it came before me for the first time. I will give the weight it deserves to the learned Master’s decision but I am in no way fettered by the exercise of her discretion: Hong Kong Civil Procedure 2018, para 58/1/2. THE PLAINIFF’S SUBMISSIONS 12.Mr Raymond Chu, counsel for the plaintiff, submits that when an independent term or covenant of a loan agreement provides for a rate of interest to apply post-judgment, such rate should be adopted. The contractual interest rate does not merge in the judgment ordering the repayment of the principal sum[3], and thus can be given effect by a separate order awarding post-judgment interest. 13.In his written submissions, Mr Chu submits that Freeway Finance Co Ltd v Tam Chuen On Raymond [2010] 4 HKC 448, a decision by Deputy High Court Judge L Chan (as L Chan J then was), is binding on me. In that case, the deputy judge was also asked to set aside a Master’s order allowing post-judgment interest at the judgment rate instead of the contractual rate. 14.The relevant term of the loan agreement in Freeway Finance provided as follows:-
15.The deputy judge referred to, amongst other cases, Economic Life Assurance Society v Usborne & Ors [1902] AC 147, and London Borough of Ealing v El Isaac & Anor [1980] 1 WLR 932. At para 14 of the deputy judge’s decision, he quoted the following judgment of Templeman LJ in El Isaac:-
16.The deputy judge then held that the term I quoted at para 14 above was an independent covenant, and had not merged with the judgment on outstanding principal and interest. He allowed post-judgment interest to be calculated at the contractual rate, ie 48% per annum, rather than at the judgment rate. 17.At the hearing, Mr Chu referred me to the Court of Appeal’s decision in Honip Credit Ltd v Asia China Tea Export Co Ltd HCMP 399/2016 (Lam VP & G Lam J; 2 June 2016), which (he submitted) is consistent with Freeway Finance. He also put before me Guangdong Finance Ltd v Wong Wai Hing DCMP 2370/2014 (HH Judge Andrew Li; 12 June 2015), in which Freeway Finance was followed; and Konew Capital International Ltd v Wong Mei Ling DCMP 816/2017 (HH Judge Yee; 10 July 2018), in which Honip Credit was followed. 18.It suffices for me to refer to para 21 of the Court of Appeal’s judgment in Honip Credit:-
19.In short, the Court of Appeal endorsed the approach in Freeway Finance that if, on interpretation of a contract term, there was an independent covenant to pay post-judgment interest at the contractual rate, the contractual rate would apply instead of the judgment rate. ECONOMIC LIFE ASSURANCE SOCIETY v USBORNE 20.Apart from Freeway Finance, Usborne was also considered locally by Ng J in the first instance judgment of On Sky Enterprise (HK) Ltd v Lanco International Holdings Ltd [2017] 1 HKLRD 941. The plaintiff therein cited Usborne and the commentary at para 42/1/16 of Hong Kong Civil Procedure 2015 (in which Usborne was cited as an authority) in support of its argument that post-judgment interest should be calculated at the contractual rate of 48% per annum, rather than at the judgment rate. 21.However, Ng J held at para 103 about Usborne:-
22.Ng J went on to decide that post-judgment interest should be allowed at the judgment rate only, as the contractual rate would grossly over-compensate the plaintiff, and undermine the certainty and consistency established by the practice of the courts in awarding post-judgment interest at the judgment rate. 23.The commentary at para 42/1/16 of Hong Kong Civil Procedure 2018 now reads:-
MY ANALYSIS 24.With the Court of Appeal’s decision in Honip Credit, it is clear that I should follow the approach in Freeway Finance and Honip Credit, rather than the approach in On Sky. 25.I note that neither Honip Credit nor Freeway Finance were cited by Ng J, and his Lordship did not appear to have been alerted to them. 26.In any event, with respect to Ng J, I prefer Freeway Finance’s interpretation of Usborne, that it supports the proposition that an independent covenant in an agreement does justify post-judgment interest to be awarded at the contractual rate rather than at the judgment rate. I think the learned authors of Hong Kong Civil Procedure 2018 describe the effect of Usborne too narrowly in para 42/1/16 of their commentary. 27.When one reads the House of Lords’ judgment in Usborne, it can be seen that Lord Davey at 152 referred to Popple v Sylvester (1882) 22 Ch D 98, and observed that that case concerned the enforcement of a demand for personal payment. It was then the question whether the covenant to pay interest was independent of or ancillary to the payment of the principal money arose. On the facts, Fry J in Popple v Sylvester concluded that the payment of interest was an independent covenant. Lord Davey at 153 approved of Fry J’s judgment. Hence, whilst the facts of Usborne concerned with the construction of a mortgage deed, I read it as supportive of the legal principles identified by Freeway Finance. 28.Applying the above to the present case, I need to decide whether Clause 10 of the Loan Agreement and/or Clause 2 of the Deed of Loan was a covenant independent of the payment of the principal. 29.The learned Master does not appear to have set out her reasoning in not adopting the contractual rate for post-judgment interest. I agree with Mr Chu that, compared to the clause in Freeway Finance, Clause 10 of the Loan Agreement and/or Clause 2 of the Deed of Loan are even clearer in defining the obligation to pay contractual interest up to the date of full payment as one completely separate from the payment of the principal. In my judgment, it is not conducive to the freedom of contract and commercial certainty to deny the plaintiff the contractual rate for post-judgment interest. DECISION 30.I will allow the appeal. Paragraph 2 of the learned Master’s judgment should be set aside, and replaced with an order that the defendant do pay the plaintiff interest on the principal sum of HK$850,000.00 at the rate of 36% per annum, from 3 January 2018 until full payment. 31.I also make a costs order nisi that the costs of this appeal be to the plaintiff (with certificate for counsel), to be taxed on the indemnity basis[5]. The plaintiff has provided me with its skeleton bill of costs, asking for a total sum of $58,400.00. Although costs are to be taxed on the indemnity basis, I still find the plaintiff’s claim excessive, as the time claimed for the preparation of this appeal appears unreasonable. I summarily assess the costs payable by the defendant to be $44,600.00. This costs order nisi shall become absolute unless an application for variation is made within 14 days from this decision. 32.The defendant may make an appointment with my clerk for interpreting this decision to him in Chinese, if he so wishes. 33.I thank Mr Chu for his assistance.
Mr Raymond Chu, instructed by Philip T F Wong & Co, for the plaintiff The defendant, being unrepresented, absent [1] There was no guarantor for the loan. [2] The plaintiff also produced to me the letter of its solicitors dated 10 July 2018, which showed that its solicitors served the hearing bundle and the plaintiff’s written submissions on the defendant. The defendant signed on the letter to acknowledge receipt. The plaintiff’s solicitors undertook to file an affirmation to prove the due service of the hearing bundle and the plaintiff’s written submissions within 7 days of the appeal hearing, which I accepted. [3] Merger results in the liability of the debtor to make payment stemming from the judgment, and not the loan contract. And thus, according to s.50 of the District Court Ordinance, the applicable interest rate will either be the rate that the court orders, or in default, the judgment rate. [4] I must confess, with respect, I do not entirely understand the meaning the learned authors would like to convey in this sentence. [5] As agreed by the defendant in Clause 6 of the Loan Agreement, and Clause 8 of the Deed of Loan. | ||||||||||||||||||||||
Cases cited in this judgment