06 August 2020
In Rich Profit Creation Ltd v Ko Chung Lun and others  HKCFI 1459, Deputy High Court Judge Paul Lam SC allowed the plaintiff’s appeal and acceded to the plaintiff’s application for interim payment against some of the defendants for two sums totalling around RMB 33 million.
The Court provided a helpful summary of the relevant principles concerning an interim payment application under Order 29 of the Rules of the High Court (Cap. 4A).
The plaintiff has to show, on the material before the judge at the time of the application and on balance of probabilities, that he would succeed in his claim, and would obtain a substantial amount of damages at trial. The Court must also be satisfied that the defendant has no arguable defence, if not having sufficient doubts regarding the genuineness of the defence. The test on “merits” of the defendant’s case is similar to that for granting conditional leave to defend in a summary judgment application, i.e. whether the defendant’s defence is shadowy (§15).
In addition, although Order 29, rules 11 and 12 are worded slightly differently and would appear to cater for different situations, the Court should read rules 11 and 12 together and ask the single question whether the application fulfils the requirements of those rules as a whole, rather than considering separately and exclusively the applicant’s entitlement under each rule (§16).
Turning to the facts, in gist, the plaintiff’s case was that it gave two sums of money (“the two sums”) to the defendants as loans to be advanced to a Mainland joint venture in 2011. Subsequently, it was discovered that the defendants purported to lend the two sums to the Mainland joint venture on their own behalves, instead of under the plaintiff’s name, and the defendants refused to return to the plaintiff the two sums after such monies were returned to the defendants. The plaintiff pursues the defendants for repayment of the two sums.
The Court came to the view that the defendants’ defence is shadowy. An order for interim payment was granted, whereby the defendants have to make interim payment of the two sums to the plaintiff.
An interim payment application is strategically useful for the following reasons:-
1. An interim payment application is in many ways similar to a summary judgment application. Hence, very often, the two applications can be brought together. In some ways, interim payment is procedurally advantageous.
2. If the court comes to the view that the defence is shadowy, interim payment will usually be ordered for payment to be made to the plaintiff, subject to any objection based on the potential inability of the plaintiff to repay such sums to the defendant if the plaintiff fails the claim at trial. On the other hand, where the defence is shadowy in a summary judgment application, the court would usually grant conditional leave to defend, with the condition imposed on the defendant to make payment into court (as opposed to making payment to the plaintiff).
3. In addition, where the plaintiff’s case involves a fraud allegation, the fraud exception under O.14 r.1(2)(b) would be engaged and the court would have no jurisdiction to deal with the summary judgment application (see e.g. A-1 Business v Chau Cham Wong Patrick  5 HKLRD 579; Zimmer Sweden AB v KPN Hong Kong Ltd  1 HKLRD 1016). For an interim payment application, there is no similar “fraud exception”.
4. The downside of an interim payment application is that the need for a trial is not averted. However, the same may be said of a summary judgment application which ultimately led to the defendant being granted conditional leave to defend.
5. For the above reasons, when a litigant has a strong case on the merits, it would seem appropriate in most cases to consider whether to bring a summary judgment application and an interim payment application concurrently.
Order 29, rule 11(1)(c), RHC:
“If, on the hearing of an application under rule 10 in an action for damages, the Court is satisfied…that, if the action proceeded to trial, the plaintiff would obtain judgment for substantial damages against the respondent or, where there are two or more defendants, against any of them, the Court may, if it thinks fit and subject to paragraph (2), order the respondent to make an interim payment of such amount as it thinks just, not exceeding a reasonable proportion of the damages which in the opinion of the Court are likely to be recovered by the plaintiff after taking into account any relevant contributory negligence and any set-off, cross claim or counterclaim on which the respondent may be entitled to rely.” (emphasis added)
Order 29, rule 12(c), RHC:
“If, on the hearing of an application under rule 10, the Court is satisfied that, if the action proceeded to trial, the plaintiff would obtain judgment against the defendant for a substantial sum of money apart from any damages or costs, the Court may, if it thinks fit, and without prejudice to any contentions of the parties as to the nature or character of the sum to be paid by the defendant, order the defendant to make an interim payment of such amount as it thinks just, after taking into account any set-off, cross-claim or counterclaim on which the defendant may be entitled to rely.” (emphasis added)
Vincent Chiu acted for the Plaintiff