Hangzhou Jiudang Asset Management Co Limited & Anor v Kei Kin Hung

A foreign judgment is not a judgment for multiple damages merely because a separate default-interest obligation is calculated by reference to the judgment debt. The relevant question is whether the judgment itself awards compensation arrived at by multiplying the compensatory sum. Default interest imposed to encourage compliance with a judgment may be enforceable at common law where its rate is not manifestly excessive and it pursues a legitimate deterrent or compensatory policy. A foreign judgment remains enforceable for the principal and contractual interest where the default-interest obligation arises only upon a later failure to pay.

The claimants sought summary judgment to enforce two unsatisfied final judgments of courts in the People’s Republic of China concerning loans and guarantees. The defendant, a protected party, resisted enforcement on the grounds that the judgments, or alternatively their default-interest provisions, were excluded by section 5 of the Protection of Trading Interests Act 1980, and that the default interest was an unenforceable penalty.

The parties agreed that the original default-interest calculations were overstated and that judgment could be entered only for the reduced amounts. The central issues were whether the Chinese judgments were judgments for multiple damages, whether any relevant part was severable, and whether enforcement of the default interest offended English public policy.

1. Summary judgment. The court accepted the established summary-judgment principles, including that the claimant bears the burden of showing that the defendant has no real prospect of successfully defending the claim. The court could determine the legal issues because the necessary evidence was before it.
2. Common-law enforcement. The Chinese judgments were final and conclusive, the Chinese courts had jurisdiction because the defendant had appeared and participated and had agreed to jurisdiction under the loan agreements, and the judgments were for fixed or arithmetically ascertainable sums.
3. Protection of Trading Interests Act 1980. Section 5 was directed to judgments for amounts arrived at by multiplying compensation. The principal and contractual-interest awards were not multiplied. The default interest arose only if the judgment debtor failed to comply within the specified period. It was a separate, superadded obligation arising from a later breach of the payment order, rather than a multiplier of compensation within section 5.
4. The court followed and regarded as correct the approach in SAS Institute Inc v World Programming Ltd, but distinguished it. That case concerned a judgment expressly awarding triple damages. It did not determine whether a judgment containing a contingent default-interest obligation was itself a judgment for multiple damages. The reasoning in Lewis v Eliades supported enforcement of the unaffected part where the obligations were effectively referable to separate causes of action.
5. Penalty and public policy. Although foreign penal laws are generally not enforced, a non-state obligation may still be objectionable if it is contrary to English public policy. The court accepted that a penal rate of interest could raise that issue, but held that the modern law on penalties permitted legitimate deterrent provisions which were not extravagant or unconscionable. The Chinese default interest pursued legitimate aims of encouraging compliance and compensating for being kept out of money. Its annualised rate was not manifestly excessive.
6. The claimants were therefore entitled to summary judgment for the enforceable judgment debt, contractual interest, and default interest as recalculated. The parties were directed to draw up an order giving effect to the judgment.