Strong Offer Investment Ltd v. Nyeu Ting Chuang
Read the full judgment text of FACV 21/2006 on BabelCite. This Court of Final Appeal judgment was delivered on 28 April 2008 before Chung J.
Civil procedure – money-lending – judgment debt – compound interest – removal of compound interest – report to Court of Final Appeal – vouched account exercise – discovery of documents – the plaintiff, Strong Offer Investment Limited, was a licensed money-lender which provided credit facilities to the defendant, Nyeu Ting Chuang, a former customer of a stockbroker closely related to the plaintiff – the defendant defaulted repayment and the plaintiff obtained judgment against him in HCA 10541/2000 – the defendant's appeals to the Court of Appeal (CACV 384/2004) and the CFA (FACV 21/2006) were dismissed – during the CFA appeal, the defendant raised for the first time the argument that compound interest had been charged against him without proper basis, which impropriety the plaintiff accepted – the CFA's order dated 30 March 2007 directed that the judgment debt (totalling $41,220,569.84 exclusive of interest and costs) be reduced by removing any element of compound interest, with liberty to apply to a single judge of the High Court for determination if the parties could not agree – the parties failed to agree and the plaintiff made the present application – by the time of the hearing, the full set of documentation was no longer available by common ground, with neither party possessing all relevant documents – whether a report can be prepared to the CFA in these circumstances – held: yes, the CFA's direction presupposes the existence of a judgment debt and accepting the defendant's stance would render the judgment debt forever incapable of enforcement, which cannot be the result intended by the CFA – what approach should be used to determine the amount of reduction – held: based purely on the plaintiff's calculation, as the court is not obliged to formulate a case for a litigant who does not wish the court to do so, and the defendant was given more than adequate opportunity to present his case but refused to do so – the plaintiff filed its written statements in October 2007 and even obtained an order in February 2008 directing the defendant to put forward his case – the amount to be removed from the judgment debt determined to be $1,640,311.96, calculated as the difference between the judgment debt of $41,220,569.84 and the total of principal debt ($17,713,692.40 for margin account M3001 plus $9,207,400.42 for margin account M3480 totalling $26,921,092.82) plus simple interest ($8,637,987.09 for M3001 plus $4,021,177.97 for M3480 totalling $12,659,165.06) – the defendant's alternative figure of approximately $5 million (about 39.7% of the simple interest) rejected as excessive given the magnitude of errors discovered – the plaintiff's benevolently offered total reduction of $2 million also not adopted as not necessary or appropriate – costs of the report hearing to be paid by the defendant to the plaintiff from 25 July 2007, to be taxed if not agreed – report to be made to the CFA accordingly.
Legal issues: Whether report to CFA can be prepared without full documentation · Approach to determine amount of compound interest to be removed · Amount of compound interest to be removed from judgment debt · Costs of the report hearing
Outcome: The court determined that the amount to be removed from the judgment debt is $1,640,311.96 and that the defendant shall pay the costs of the hearing. The report will be made to the Court of Final Appeal accordingly.
Cites 1 case
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FACV 21/2006 IN THE COURT OF FINAL APPEAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION FINAL APPEAL NO. 21 OF 2006 (CIVIL) (ON APPEAL FROM CACV NO. 384 OF 2004) ____________ BETWEEN
____________ Before: Hon Chung J in Chambers Date of Hearing: 21 April 2008 Date of Report: 28 April 2008 ______________________________________ REPORT TO ______________________________________ 1.The order of the Court of Final Appeal (“CFA”) dated 30 March 2007 directs:-
2.The said judgment debt totalled $41,220,569.84 (exclusive of interest and costs). The parties have been unable to agree on the amount to be reduced. The plaintiff therefore makes this application pursuant to the above direction. This is the report to the CFA. Background Facts 3.The plaintiff was a licensed money-lender which provided credit facilities to the defendant, the former customer of a stockbroker which was closely related to the plaintiff. 4.When the defendant defaulted repayment, the plaintiff commenced legal proceedings, and obtained judgment against him. The defendant’s appeals to both the Court of Appeal and the CFA failed. 5.However, in the appeal to the CFA, the defendant raised, for the first time, an argument that compound interest had been charged against him without proper basis. The impropriety was accepted by the plaintiff, which resulted in the CFA’s above direction (and other related relief). The Post-CFA Proceedings 6.The Court of First Instance made an order on 6 September 2007 for the discovery of documents by the plaintiff regarding the defendant’s margin accounts. 7.It should be noted that, at trial, the defendant accepted that he had received (albeit allegedly belatedly) all the documents relating to his share trading, such as the bought notes and sold notes and the daily transaction reports. 8.In an affirmation dated 14 March 2008, the defendant says (among other things) he no longer has any of those documents apart from those discovered in the action (which, because of the issues then raised, were not fully discovered by the plaintiff). 9.Similarly, the plaintiff affirmed that neither it nor its related stockbroker company now possesses the full set of documentation. 10.Consequently, by the time of this hearing, it is common ground the full set of documentation is no longer available. The Issues 11.In its written statements filed pursuant to the directions given by the Court of First Instance, the plaintiff contends that:-
The total of sub-para. (a) and (b) above is $39,580,257.88. The amount to be reduced from the judgment debt is therefore $1,640,311.96 ($41,220,569.84 - 39,580,257.88). 12.The defendant disagrees with the plaintiff’s above contentions. His stance is, in short, that the court is not yet ready to prepare a report, and will never be ready unless there is a material change of circumstances. That stance arises from the history of the proceedings since the CFA judgment (summarised above). 13.Several reasons are put forth by the defendant in support of his stance. Because neither he nor the plaintiff possesses all the relevant documents, the parties are unable to present their respective case for the purpose of reporting to the CFA. To find out the precise amount of the debt, all relevant documents are required. This is particularly so because:-
14.An example of para. 13(2) above is set out in the letter of Messrs. Grant Thorton, the defendant’s specialist:-
It is however fairly accepted during the hearing the discrepancy worked in the defendant’s favour in the example given in the letter (delay in recording the purchase of 1 million shares). The other example is the omission of 3 sale transactions (admittedly not substantial in amounts) from the daily transaction reports. Should a Report be Prepared ? 15.The CFA’s direction was given after the defendant’s CFA appeal was dismissed. The CFA order has been perfected in April 2007. 16.At the time of the making of the CFA’s direction (for a report to be prepared), it can be inferred that the difficulties set out above were unknown to, and not anticipated by, the court or the parties. 17.What appears to have been intended is a “vouching” exercise, similar to what sometimes happens in the taking of an account. Hong Kong Civil Procedure 2008, Vol. 1 describes the practice as follows:-
In the present case there appears no need for verifying affidavits, and none has been made. But otherwise a generally similar approach seems to be apt. 18.I am not in a position to speculate what the CFA would have done if the above difficulties had been known at the time; nor is this relevant for present purposes. But the dismissal of the appeal must mean that the judgment entered against the defendant has been upheld by the CFA. 19.By reason of the above matters, I agree with the plaintiff that the CFA’s direction presupposes the existence of a judgment debt. 20.Such being the case, if the defendant’s stance were to be accepted, the judgment debt, which has been determined by the CFA to be valid and subsisting (subject to the direction of reduction), will become forever incapable of enforcement. 21.That cannot possibly be the result intended by the CFA. I therefore have no hesitation in rejecting the defendant’s stance. 22.By way of footnote, it may be that in extreme cases, there is valid reason for concluding that a report is not ready to be prepared. Two examples are, one, both parties (including the plaintiff) fail to present an amount of reduction, or, two, the amount of reduction presented by both parties is obviously excessive or inadequate. What the plaintiff has done here comes nowhere near the above examples. Can a Report be Prepared? 23.As stated above, it is common ground that the plaintiff’s documentation is not complete or totally accurate. 24.The defendant has refused to put forth any amount of reduction, insisting that the matter is wholly not yet ready. The most he is prepared to say about this is:-
25.There are at least two ways of approaching the matter. 26.The first is to examine the available documents and determine the amount of reduction, taking into account the possible margin of error which may result from the discrepancies or inaccuracies referred to by the defendant. 27.The other is to determine the amount of reduction based purely on the plaintiff’s calculation. 28.Neither approach will produce an amount which is totally accurate. But I conclude that the second approach is more appropriate. 29.First, the court is not obliged to formulate a case for a litigant, especially if that litigant does not wish the court to do so. In the present case, the defendant argues that any amount of reduction is arbitrary; this is because (so he argues) unless the full set of documents have been examined, the amount of compound interest charged cannot be properly ascertained. 30.More importantly, the defendant has been given more than adequate opportunity to present his case. The plaintiff filed and served its written statements in October 2007 (about 6 months before this hearing). The plaintiff’s affirmation disclosing it does not possess all the documents was filed earlier (in September 2007). The plaintiff even went to the trouble of obtaining an order in February 2008 directing the defendant (among other alternatives) to:-
31.This being the defendant’s deliberate choice, it is only fair the risk of the court disagreeing with his choice rests with him. 32.Reliance has been placed by the defendant on the discovery order of 6 September 2007 as showing that the margin account documents from 10 May 1995 to 7 January 1999 are also relevant to my determination. 33.This argument is misconceived for two reasons:-
34.I should note that the plaintiff has benevolently offered a total reduction of $2 million out of prudence (an error margin of about 3% above the calculated amount) if the court finds that to be necessary. I do not consider it necessary or appropriate to adopt this sum. 35.Finally, the defendant has during the hearing said that, when his skeleton argument mentions:-
the “higher” amount is something in the region of $5 million (that is, about 39.7% of the simple interest calculated by the plaintiff (see para. 11(b) above)). This sum is excessive considering the magnitude of the errors so far discovered (see para. 13 and 14 above) and the total amount of simple interest arrived at by the plaintiff (about $12.6 million). 36.By virtue of the above matters, I will report to the CFA that I determine the amount to be removed from the judgment debt to be $1,640,311.96. 37.It is not entirely clear if I have the power to deal with the costs of this hearing. 38.The parties have put forth submissions on costs on the assumption I have power to deal with the matter. The plaintiff seeks the costs of this hearing. The defendant argues, on the other hand, these costs should form part of the costs of the CFA appeal (for which an order has already been made by the CFA). 39.I do not agree with the defendant’s argument. It may have substance if the matter had remained “non-contentious”. But once it has become full-blown litigious, the matter has in effect taken on a life of its own. 40.For this reason, if it is within my power to report to the CFA, I conclude that the costs of this hearing (from 25 July 2007 at the latest) should be paid by the defendant to the plaintiff to be taxed if not agreed.
Mr Paul Shieh, SC leading as Mr Lee Yee Hung, instructed by Messrs J Chan & Lai, for the Plaintiff Mr Russell Coleman, SC, instructed by Messrs Gallant Y T Ho & Co., for the Defendant |
Cases cited in this judgment
Further hearings and rulings under FACV 21/2006