Charm Master Enterprises Ltd v. Grand T G Gold Holdings Ltd and Another

HCA 397/2011

[2025] HKCFI 4992

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 397 OF 2011

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BETWEEN

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D E C I S I O N

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A. INTRODUCTION

1.I gave judgment in these proceedings on 23^rd October 2024 (“the Judgment”).  Capitalised terms below are those used in the Judgment unless otherwise indicated.  The relevant background has been set out in the Judgment, which I will not repeat here.

2.The order of DHCJ Raymond Leung SC of 26^th February 2021 provided that the issue of interest as between Charm Master, the Company and J Thomson were to be determined after the trial.

3.By summons of 10^th December 2024 (“the Summons”), J Thomson seeks:

3.1  under paragraph 1, payment out of interest accrued on the amounts of $12,000,000 and $500,000 previously paid into court by the Company (“the Sums”);

3.2  under paragraph 2, payment of further interest on the aforesaid amounts, totaling $7,721,703.76, as pre-judgment interest, for the period from 9^th March 2011 until the payment into court on 14^th January 2021 (in respect of the amount of $1,200,000)  and 22^nd March 2021 (in respect of the amount of $500,000), at the rate of 1% above prime.

4.There is now no dispute about paragraph 1 of the summons.

B.  APPLICABILITY OF SECTION 48 OF THE HIGH COURT ORDINANCE

5.The Company argues that s.48 of the High Court Ordinance, Cap.4 (“the HCO”)  does not apply, because there is no judgment against the Company, or because there was not any debt or damages capable of being the subject matter of the proceedings when instituted.[1]

6.On the first point, Ms Rachel Lam SC, appearing with Ms Sharon Yuen, submitted that the Company interpleaded and did not participate in the trial, and that the Judgment was entered against Charm Master rather than the Company.

7.However, the Judgment is binding on the Company: it directs that the Sums paid in by the Company to court are to be paid out to J Thomson, which means that Company is not entitled to obtain repayment of the same to it.  The Company did not participate in the trial not because it was no longer party to the proceedings, but because it was excused from attendance, having successfully obtained leave to interplead.  As Ms Natalie So submitted on behalf of J Thomson, on a proper understanding of the nature of interpleader proceedings, what in substance was decided at trial were the two claims (by J Thomson and Charm Master)  against the interpleading party (the Company).  See Unionix Development Ltd & another v Roe Investment Ltd & others [1999] 3 HKLRD at 6I-7C (Liu JA, citing with approval the description of the nature of interpleader proceedings given by Greene LJ in De La Rue v Hernu, Peron & Stockwell Ltd [1936] 2 KB 164).  A person can only interplead if each of the two rival claimants has a prima facie case against him.  The test is whether each of the rival claimants has a prima face case against the interpleading party, and not whether the adverse claimants have claims against each other: DLA Piper Hong Kong v China Property Development (Holdings)  Ltd [2010] 1 HKLRD 903 at [22] (Tang VP, as he then was).

8.On the second point, the phrase “debt or damages” is very wide, and covers any sum of money which is recoverable by one party from another, either at common law or in equity or under statute: BP Exploration Co (Libya)  Ltd v Hunt (No.2) [1983] 2 AC 352 at 373F (Lord Brandon, in relation to the equivalent provision in s.3(1)  of the Law Reform (Miscellaneous Provisions)  Act 1934).

9.Ms Lam submitted that the Company never had any obligation to pay the Sums[2] to J Thomson.  Any obligation would at most have been to Charm Master, the named noteholder, which held PN A (or the chose in action thereunder)  on trust as to 20% for J Thomson. J Thomson, as beneficiary, would not be suing in its own name, as there was no direct legal relationship between it and the Company.

10.However, what was effectively decided at trial was that it was J Thomson’s claim against the Company, rather than Charm Master’s claim against the Company, that should prevail, and that it was therefore J Thomson which was entitled to payment out of the Sums paid into court by the Company.  Whilst the precise nature of the obligation owed by the Company to J Thomson was not explored at trial, that does not mean that there was no obligation; it was implicit that the Company had accepted that there was such an obligation by its earlier act of interpleading and payment into court.[3]  Otherwise, as Ms So pointed out, there would not have been two legitimate adverse claims against the Company to which the Company could apply to interplead; the Company could simply have applied to strike out J Thomson’s claim altogether, and/or simply paid the Sums to Charm Master, if it considered that it was liable to pay under the promissory notes and that the only possible party to which it could be liable (if at all)  was Charm Master.  Furthermore, the logical consequence of the Company’s argument (that it has no obligation to pay J Thomson)  is that after the Judgment, it can ask for payment out of the Sums back to it, since under the Judgment, Charm Master is not entitled to payment out of the Sums, and the Company is not (on its argument)  liable to pay J Thomson either.

11.Since the payment of the Sums to J Thomson is essentially a payment by the Company (which paid in the Sums into court), it is right that the liability for interest falls on the Company rather than Charm Master.

C.  WHETHER INTEREST SHOULD BE ORDERED

12.Interest is awarded on a judgment sum to compensate a successful plaintiff for having been kept out of his money for a period of time: PT Asuransi Tugu Pratama Indonesia Tbk v Citibank NA (No.2) [2023] 6 HKC 406 at [6].

13.The power to award interest under s.48 HCO is discretionary.  Whilst interest generally runs from the date of accrual of the cause of action in respect of money then due or loss which then accrues, and in respect of loss which accrues at a date between the accrual of the cause of action and judgment, the court may depart from this: BP Exploration Co (Libya)  Ltd v Hunt (No.2) [1982] 1 All ER 925 at 975a-g.  Robert Goff J noted that there were three main groups of cases in which the court might so depart:

13.1  where, in light of all the circumstances, the position of the defendant was such that it would not be just to make him pay interest from the date of loss;

13.2  where the plaintiff’s conduct was such that he should not be awarded interest for the full period from the date of loss, for example where he was guilty of unreasonable delay in prosecuting his claim; and

13.3  where it would be unjust, in all the circumstances, to award the plaintiff interest from the date of loss.

14.The Company says that it would be unfair to order it to pay interest to J Thomson because:[4]

14.1  insofar as J Thomson was deprived of use of the Sums, this was caused by Charm Master who wrongfully denied the existence of the trust arrangement;

14.2  Charm Master unreasonably prolonged the proceedings by taking no further steps to move the case forward after the Company filed its Amended Defence in October 2011, until J Thomson applied to join the proceedings in October 2017;

14.3  despite having been aware of the existence of the proceedings, J Thomson only applied for joinder in October 2017.

15.The Company goes on to say that it has all along acknowledged its obligations under the promissory notes and acted with a genuine intention to repay them, but there were competing claims, and the Company was not in a position to ascertain the correct payee to make payment.[5]

16.In this regard, I note that the Company would have learnt of J Thomson’s claim by 12th May 2011, when J Thomson sent a letter of demand (Judgment paragraph 43).  However, it was only on 27^th September 2011 that further particulars of the claim were provided to the Company, when the former solicitors for J Thomson described the trust arrangement more clearly, enclosing the minutes of SSC Holdings’ shareholders’ meeting of 29^th April 2008, and explaining how the $500,000 came to be agreed between the Company and J Thomson (Judgment paragraph 44).

17.I further note that the 4^th Affirmation of Li Dahong (“Li 4^th”)  for the Company, having referred to J Thomson’s solicitors’ letter of 27^th September 2011, goes on to say at paragraph 39:

“ By this time, the Company had already received claims from three individuals / parties[6] each claiming to be entitled to collect the principals of the Promissory Notes, but none of which was able to prove definitely and convincingly that they were so entitled and none of them had produced the original Certificate[7] required for redemption, and therefore the Company could not pay any of the parties until the claims could be verified as to which of them is entitled to the principals, and if necessary, resolved by way of a Court proceedings.”

18.If the Company’s position was that it wanted to pay the Sums, but was unable to ascertain to whom it should pay them, and it was aware that the competing claimants’ claims would have to be verified, possibly by way of court proceedings, then what it ought to have done was to interplead so as to protect its position – as it eventually did in February 2021 – rather than to hold onto the Sums to which it knew it was not entitled.  Had it done so, then whether or not Charm Master wrongfully denied J Thomson’s claims or unreasonably prolonged the proceedings, and whether or not J Thomson had applied to join the proceedings, would have been of no concern to the Company.

19.That the Company sought to have it both ways is further shown by the fact that whilst on the one hand the Company stated in its letters of 31^st March 2016 and 6^th March 2017 that it considered J Thomson to be entitled to payment of the debt under PN D and PN E (“the Acknowledgment Letters”), on the other hand, it never provided the deed of indemnity which it said it would prepare for J Thomson to sign before paying J Thomson (see Decision on Costs [2025] HKCFI 911 at paragraphs 4 and 5).

20.Ms Lam further submitted that it is misguided for J Thomson to rely on the late interpleader by the Company, since the Company was not bound to pay J Thomson directly.  I have dealt with this point in Section B above.

21.The only qualification to all of this is that in J Thomson’s Supplemental Submissions of 5^th October 2020[8] filed in support of its application for summary judgment against the Company, at a time when the Company had not yet applied for leave to interplead, J Thomson submitted that the Acknowledgment Letters constituted free-standing contracts, separate from the promissory notes, entitling it to payment.  J Thomson further applied to amend its pleadings to include this new, alternative claim.  The Company says that it was concerned that it might be found liable to both J Thomson and Charm Master, and that interpleading at that stage would not have availed it as this would not have dealt with J Thomson’s alternative claim.  After the Company pointed this out, J Thomson indicated that it would not proceed with its proposed application to amend its pleadings.  The Company then applied to interplead on the next day, 25^th February 2021.[9]  Whilst it may said that the Company should have interpleaded earlier, the fact is that it had not done so as at 5^th October 2020 when J Thomson raised its new alternative claim based on the Acknowledgment Letters, and in those circumstances, it was reasonable for the Company to have refrained from interpleading until J Thomson abandoned its alternative claim.

22.It will be recalled that the reason why the original PN A was issued was as part of the consideration which the Company was to pay to acquire shares under the SPA of November 2007, which transaction was completed in April 2008.  After various partial redemptions and extensions of maturity date, the remaining outstanding obligations of the Company were contained in PN D and PN E, both of which fell due in 2010.  The Company has essentially not had to pay this part of the consideration until it made the payment into court in 2021, and enjoyed the use of the funds concerned, interest-free.  It is not disputed that during the period of 2011 to 2021, the upper rate of the Company’s cost of secured borrowing ranged from 7.49% to 24%.

23.In all the circumstances, I consider that it is right for the Company to pay interest to J Thomson for the period from 12th September 2011 (when J Thomson’s demand was sufficiently clearly made to the Company)  to the dates in 2021 on which the Company paid the Sums into court, save for the period from 5^th October 2020 to 24^th February 2021.

D.  DISPOSITION

24.I make an order in terms of paragraph 1 of the Summons.

25.As to paragraph 2 of the Summons, the Company is to pay to J Thomson interest at the rate of 1% above the best lending rate quoted by HSBC:

25.1  on the amount of $12,000,000 from 12th September 2011 until 4^th October 2020;

25.2  on the amount of $500,000 from 12th September 2011 until the date of payment into court on 22^nd March 2021, save for the period from 5^th October 2020 to 24^th February 2021 (the latter two dates inclusive).

26.I further make a costs order nisi that the Company pay the costs of and occasioned by the Summons to J Thomson, to be summarily assessed if not agreed.  J Thomson has already lodged and served its statement of costs.  The Company has leave to lodge and serve a list of objections within five days, in bullet point form, limited to two pages.  J Thomson has leave to lodge and serve a reply within two days thereafter, in bullet point form, limited to two pages.

Ms Rachel Lam SC leading Ms Sharon Yuen, instructed by Wellington Legal for the 1^st Defendant

Ms Natalie So, instructed by C.T. Chan & Co., for the 2^nd Defendant