Mimi Monica Wong v. Mirko Saccani and Another

HCA 2061/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2061 OF 2004

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BETWEEN

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Before: Deputy High Court Judge Muttrie in Chambers

Date of Hearing: 20 November 2006

Date of Ruling: 23 November 2006

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R U L I N G

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1.In giving judgment for the plaintiff for sums of US$1,940,000 and £3,217,590.93 I awarded interest on those sums at prime rate plus 1% from the date of the writ until the date of judgment and thereafter at the judgment rate until payment.  It was anticipated that counsel would wish to be heard on the matter of interest once judgment had been given, and accordingly the award of interest was made nisi.

2.Subsequently the defendants applied by summons for variation of the order nisi by replacing “prime rate plus 1%” with “the best deposit rates for US dollar and pound sterling one-month time deposits as offered by a leading commercial bank in Hong Kong to personal customer or such other rate as the court thinks fit.”

The figures involved

3.It is as well to set out, at the outset, the figures concerned here.

4.The plaintiff obtained a Mareva injunction on 3 September 2004, and issued the Writ on 4 September 2004.  The injunction was discharged by agreement on 14 September 2004 when the defendants paid into court the sums ultimately awarded to the plaintiff.  The consent order provided for payment out of interest to the defendants.  The monies in court were invested in 7 days time deposit accounts and I am advised that the sums of interest which accrued until payment out on 15 September 2006 were US$116,395.22 and £247,177.93.  The equivalent in Hong Kong dollars is about $4.6 million.

5.Notwithstanding the terms of the defendants’ summons, Mr Coleman SC argues that the plaintiff cannot be entitled to any more that was actually received by the defendants as interest on the monies in court.  Mr Westbrook SC argues that the prime rate plus 1% is the proper rate.  The plaintiff’s solicitors have calculated, using the Hong Kong dollar prime rate from time to time, but applying it to the US dollar and sterling sums, that the proper figures should respectively be US$294,335.21 and £488,170.25, which equates to about HK$9.5 million.  They have also calculated figures on the deposit rates as sought by the defendants in their summons.  The figures are based on the LIBOR and equate to about HK$5.6 million.

Principles

6.These are not in dispute.  The award of interest is not intended to punish the unsuccessful party but an attempt to achieve restitutio in integrum; see the judgment of Forbes J in Tate & Lyle Distribution v GLC [1982] 1 WLR 149, cited with approval by Cons JA in Komala Deccof & Co. S.A. & Ors v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina) [1984] HKLR 219 at 221 and 223. 

7.So far as the rate is concerned, in Komala Deccof Cons JA said this at 223C-G:     

“The practice in the Commercial Court of England seems to be a rule of thumb at 1% above that, with a possible increase to 2% or even 3% in the case of smaller or less well established concerns.  Forbes, J. sets it out fully in the Tate & Lylecase [1982] 1 WLR 149, immediately after the passage which I have already set out: 

‘One looks, therefore, not at the profit which the defendant wrongfully made out of the money he withheld  —  this would indeed involve a scrutiny of the defendant’s financial position  —  but at the cost to the plaintiff of being deprived of the money which he should have had.  I feel satisfied that in commercial cases the interest is intended to reflect the rate at which the plaintiff would have had to borrow money to supply the place of that which was withheld.  I am also satisfied that one should not look at any special position in which the plaintiff may have been; one should disregard, for instance, the fact that a particular plaintiff, because of his personal situation, could only borrow money at a very high rate or, on the other hand, was able to borrow at specially favourable rates.  The correct thing to do is to take the rate at which plaintiffs in general could borrow money.  This does not, however, to my mind, mean that you exclude entirely all attributes of the plaintiff other than that he is a plaintiff.  There is evidence here that large public companies of the size and prestige of these plaintiffs could expect to borrow at 1 per cent over the minimum lending rate, while for smaller and less prestigious concerns the rate might be as high as 3 per cent over the minimum lending rate.  I think it would always be right to look at the rate at which plaintiffs with the general attributes of the actual plaintiff in the case (though not, of course, with any special or peculiar attribute) could borrow money as a guide to the appropriate interest rate.  If commercial rates are appropriate I would take 1 per cent over the minimum lending rate as the proper figure for interest in this case.’

I would venture to suggest that a similar approach should be adopted here.”

Discussion

8.Mr Coleman argues that this is not a commercial case, so the logic applied in the above cases does not apply here.  Reference was made to assertions by Mr Westbrook in his opening that we were not here “dealing…with commercial relations between commercial people” and to the fact of the close personal relationship between the parties.  It is also argued that while the plaintiff lost the benefit of money which could have earned interest for her, there is no evidence that she borrowed money to replace it.

9.I am not sure what is meant by “commercial case”.  We have a Commercial List, but there is no exhaustive list of matters considered appropriate to be heard in it.  See the Hong Kong Civil Procedure 2006 at paragraph 72/2/8.  In Idmiston Ltd v Asian Master Enterprises Ltd & Anor, CACV 1 of 1989 Cons JA referred to the Commercial List as having been introduced in Hong Kong, following the precedent set in England at the end of the 19th century when a special list was set up to deal with “causes arising out of the ordinary transactions of merchants and traders; amongst others, those relating to the construction of mercantile documents, export or import of merchandise, affreightment, insurance, banking and mercantile agency and mercantile usages”, and went on to say that these rules still provided very useful guidance as to what is a commercial cause.

10.This case did not come within the above list of causes, but it was a case arising out of a series of contracts undertaken in the ordinary course of business by the operators of a commercial dance school.  In that sense it was pretty clearly a commercial case.  However, if it is not so to be regarded, I do not see that the principles set out in Komala Deccof and the cases referred to therein are restricted only to cases of a commercial nature.  Cons JA at page 221, after referring to personal injury cases as falling into a class of their own went on to consider the principles as they apply to “other cases”.  I cannot see that his reference to the Commercial Court, above, was intended to restrict the use of the rule of thumb of interest at prime plus 1% to cases in some way heard in the Commercial List or in some other way classified as commercial.  In fact, interest at that rate is awarded commonly enough in cases other than those heard in the Commercial List.

11.There is, however, a sense in which this is not a commercial case.  In the normal case, a merchant or trader uses the money he expects to get, e.g. from the sale of goods, to pay his supplier for the goods, or for his next purchase.  If his buyer does not pay him, then in the normal way, he must borrow, or his business might go under.  He may have ample reserves, but this is not usual.  The reference to “commercial cases” in the authorities above is probably intended to reflect this sort of reality.  

12.The plaintiff’s situation is rather different.  She paid the money, which she apparently got from bonuses received as part of her remuneration package, to the defendants as advance fees for dance tuition.  She paid it for her own pleasure, to pursue her absorbing interest in Latin dance.  It was money used for a hobby rather than for business.  She was not, therefore, in quite the same position as the trader kept out of his money pending suit, who has to borrow in order to carry on trading.

13.It may be said that the plaintiff’s position is no different in that, if she wanted to pursue her dancing, she would have to pay for it; and she should be recompensed for the cost of borrowing in order to do so.  But it might equally be said that, if she had enough money coming in from further bonuses to continue paying for dance tuition, what she lost was not the cost of borrowing, but the return on money which could otherwise have been invested.  There is no presumption, as there might be in the case of a trader, that borrowing was necessary and there is no evidence that it was necessary.

14.The other major point relied on by the defendants is the fact that the money was paid into court by agreement.  Both sides knew that, until judgment, the money was frozen and would only earn interest at the deposit rate available for funds in court.  It was argued that the plaintiff had chosen to obtain security by freezing money in court.  The money was bound then not to be available to be used other than to obtain the deposit rate payable.  Therefore the parties must be taken to have accepted that the money would get no more than the deposit rate.

15.In fact the plaintiff applied for the Mareva injunction because she considered that there was a real risk of dissipation.  It is true that the application was heard ex parte on notice, and never got as far as the full inter partes hearing, but Barma J considered the question at some length before concluding that there was indeed a real risk.  I do not think it can be assumed that, if the application had gone on to an inter partes hearing, the finding would have been different.

16.I do not think that the parties’ agreement to settle the Mareva issue in this way binds either of them to accept the deposit rate payable or that it fetters the court’s discretion.  However, the fact is that by this agreement the plaintiff accepted that the money frozen would attract interest at a rate not much different, if at all, from that which it would have attracted on deposit with a bank.  There is no evidence that she had to borrow, and there is no evidence that, if the money had been paid over to her and invested, she could or would have got a better rate.    

17.It seems to me therefore that in the particular circumstances of this case, in the absence of evidence of the need for borrowing, the rule of thumb referred to above is not to be followed; the plaintiff should have interest based on the loss of return on the money rather than the cost of borrowing to replace it. 

18.It seems to me that interest should be awarded separately on the Hong Kong dollar and sterling claims because the contracts provided for payment in those currencies.  The rates should be the rates available in Hong Kong.  I do not know what difference there is, if any, between the rates on the one-month deposits referred to in the summons, and the one-week deposits actually used.  I do not think the plaintiff’s figures, based on London rates, should be accepted.  The best evidence is afforded by the actual figures obtained.

Result

19.The order for interest at prime rate plus 1% from the date of the writ until the date of judgment and thereafter at the judgment rate until payment will be set aside and in its place there will be an order that the plaintiff be awarded interest of US$116,395.22 on the award of US$1,940,000 and £247,177.93 on the award of £3,217,590.93 for the period from the date of the Writ until the date of judgment and thereafter on those sums at the judgment rate until payment.

20.I realise that the interest paid is actually for the period from 14 September 2004 to 15 September 2006 whereas the date of the Writ was 4 September 2004 and the judgment was sealed on 6 September 2006 but if there is any technical objection arising from that, the practicality is that the duration of the two periods is almost the same.

Mr Simon Westbrook, SC, instructed by Messrs Herbert Smith, for the Plaintiff

Mr Russell Coleman, SC, instructed by Messrs Clifford Chance, for the Defendants