MIRUVOR LTD v. NATIONAL INSURANCE CO LTD

CACV 3937/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 3937 OF 2001

(ON APPEAL FROM HCCL NO.160 OF 1996)

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REASONS FOR DECISION

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1. This was an application by the Plaintiff for (1) payment out of a sum paid into court and (2) an order that the Defendant pay interest on part of that sum at judgment rate, less the interest accrued in court.

2. The Defendant did not object to payment out of the sum in court,

but objected to paying the difference in interest. At the conclusion of the hearing, I gave an order in terms of the Plaintiff's application (save for an amendment of a date which was not controversial) and said I would reduce the reasons for my decision into writing, to be handed down later. I do so now.

Background

3. The background of the matter is as follows. The Plaintiff, a Hong Kong company, was the assured and the Defendant was its insurer in respect of certain goods which were exported to South America where they were stolen. On 7 June 1996, the Plaintiff commenced proceedings against the Defendant for payment under its insurance policies.

Judgment

4. On 24 October 2001, Stone J gave judgment in favour of the Plaintiff ("the Judgment"). The Judgment (as varied by his order of 16 November 2001) included the following terms:

"(1) the Defendant do pay to the Plaintiff the sum of US$807,253.50;

(2) the Defendant do pay to the Plaintiff interest on the said sum of US$807,253.50 from the date of issuance of the Writ herein, namely 7 June 1996, until the date of this Judgment, namely 24 October 2001, at the rate of 1% over 6 month HIBOR, and thereafter interest on such sum of US$807,253.50 at the judgment rate from time to time prevailing until payment".

5. It is clear from the terms of the Judgment that, apart from the interest for the period from the issue of the writ to the date of the Judgment, the Defendant was liable to pay interest on the sum of US$807,253.50 at judgment rate as from the date of the Judgment until it paid that sum to the Plaintiff.

Application for Stay of Execution

6. After the Judgment, there was correspondence between the parties' solicitors regarding the Defendant's proposal for a stay of execution of the Judgment pending appeal. This proposal was rejected by the Plaintiff's solicitors who threatened to issue a statutory demand. This correspondence is discussed in a later part of these Reasons for Decision.

7. On 20 December 2001, the Plaintiff made an application before Stone J for a stay of execution upon the Judgment pending the disposal of the appeal. On 7 January 2002, Stone J dismissed this application.

8. The Defendant's solicitors indicated that they might appeal to a single judge of the Court of Appeal for a stay of execution of the Judgment. This was followed by further discussions between the respective solicitors.

Consent Order

9. On 8 February 2002, a Consent Summons was signed by the respective solicitors which was made a Consent Order by Le Pichon JA on 18 February 2002.

10. The Order included the following terms:

"(1) the Defendant do make the following payments in the total sum of US$1,152,545.56 being the judgment sum under the Final Judgment made by the Honourable Mr Justice Stone dated 24 October 2001 ('the Judgment') as varied by Order dated 16 November 2001 together with interest up to and including 18 January 2002 within the next 14 days:-

(a) US$691,527.34 to Deacons, solicitors for the Plaintiff; and

(b) US$461,018.22 into Court;

(2) upon compliance of (a) and (b) above, execution of the Judgment be stayed pending the determination or other disposal of the Defendant's appeal against the Judgment in CACV 3937/2001 or until further order of the Court;

(3) the said payment in paragraph 1(b) shall remain in Court in an interest bearing account pending the determination or other disposal of the Defendant's appeal against the Judgment in CACV 3937/2001 or until further order of the Court".

11. It is not disputed that the sums set out in paragraphs 1(a) and 1(b) of the Consent Order represented 60% and 40% respectively of a sum of US$1,152,545.56, being

- the principal sum of US$807,253.50 i.e. the Judgment sum, plus

- interest on that principal sum at 1% above 6 month HIBOR from 7 June 1996 to 24 October 2001, and

- interest on that principal sum at judgment rate from 25 October 2001 to 18 January 2002.

12. On 6 March 2002, the Defendant paid the sum set out in paragraph 1(a) (i.e. US$691,527.34) to the Plaintiff's solicitors, and the sum set out in paragraph 1(b) (i.e. US$461,018.22) into Court.

Appeal

13. The Defendant's appeal was dismissed on 16 April 2003. On 28 April 2003, Rogers V-P gave a Consent Order that the Defendant have leave to appeal to the Court of Final Appeal.

Application for payment of difference in interest

14. On 3 June 2003, the Plaintiff made the present application for (1) payment out of the sum paid into court, together with accrued interest, and (2) payment of interest at judgment rate on the sum of US$322,901.40 (being the principal part of the sum of US$461,018.22 paid into court ) from 19 January 2002 until payment out to the Plaintiff, less interest accrued on the sum paid into court.

15. The Defendant objected to payment of the difference in the interest on the basis that it had satisfied the Judgment by making the payment to the Plaintiff's solicitors and the payment into Court on 6 March 2002 pursuant to the Consent Order.

16. According to the 2nd Affidavit of Mr Satpal Gobindpuri, the Defendant's solicitor, "the intention of the Defendant was to ... crystallise the judgment sum and all interest due under the Final Judgment so that further interest at the judgment rate would no longer be payable".

Terms of the Consent Order

17. In my view however, whatever the Defendant's intention may have been, the Consent Order is clear. Objectively construed, it said no more than that execution upon the Judgment is stayed on the Defendant making the two payments, one to the Plaintiff's solicitors and the other to court.

18. The Consent Order did not amend the Judgment which ordered the Defendant to, amongst other things, pay interest at judgment rate until it paid the sum of US$807,253.50 to the Plaintiff. Payment into court was not payment to the Plaintiff. The money in court was not at the Plaintiff's disposal - that was precisely the security provided to the Defendant pending appeal.

19. Nor did the Consent Order say that the payments were in full and final settlement of the Judgment subject to the disposal of the appeal. It provided merely for a stay of execution of the Judgment pending appeal provided certain payments were made.

20. It is therefore clear that the Consent Order did not have the effect of "crystallising" the principal and interest owed by the Defendant to the Plaintiff under the Judgment.

Correspondence

21. It was submitted on behalf of the Defendant however that there was an understanding between the parties that the interest would be "crystallised", even if that understanding had not been reflected in the terms of the Consent Order.

22. Mr Gobindpuri relied on a letter dated 13 December 2001 from the Plaintiff's solicitors, written prior to the application before Stone J. This was in reply to the Defendant's proposal the previous day that "the Judgment sum plus interest be held by you in escrow in a high interest bearing account or alternatively the Judgment sum plus interest be paid into Court pending the appeal".

23. In the letter dated 13 December 2001, the Plaintiff's solicitors offered the view that the Defendant's proposal was nothing more than a device to prevent payment being made to the Plaintiff. They made "a further, practical, point ... that interest currently accrues on the judgment amount at the judgment rate, namely 9.82%. However, interest paid on US$ deposits is extraordinarily low at present. The figures published by HSBC show that for deposits of US$500,000 or more (even when deposited for 12 months, the highest rate at present), interest is paid at only 0.89%".

24. It was suggested by Mr Gobindpuri that the reference in the letter of 13 December 2001 to the difference between the judgment rate of interest and the US$ deposit rate of interest shows that "the Plaintiff fully appreciated that by accepting the Defendant's proposal ... further interest at the judgment rate would no longer be payable otherwise there was no reason for the Plaintiff to bring this up as an objection to accepting the Defendant's proposal".

25. With respect, the letter of 13 December 2001 showed no such thing. The Plaintiff's solicitors were responding to a proposal (at that time) that the entire Judgment sum plus interest be withheld from the Plaintiff pending appeal. They raised strong objections to that proposal, and added a practical reminder (perhaps as a friendly warning to the paying party) that the very high judgment rate made it commercially more sensible to make payment without any further delay. In my view, much clearer language would be required before it could be said that the Plaintiff had waived its entitlement to interest at (what was known to be) a high judgment rate.

26. As for Mr Gobindpuri's submission that the parties took a value date of 18 January 2002 for calculations of interest, I take the view that the point favours the Plaintiff. If no further interest was to be payable to the Plaintiff for the period pending disposal of the appeal, it would be surprising that it would be content with a gap of 21 days between 18 January 2002 and the filing of a Consent Summons on 8 February 2002, and a further period of 14 days for payment into court to be effected.

Order

27. Accordingly I gave an order in terms of the Plaintiff's summons as amended, which included an order that the Defendant bear the Plaintiff's costs of the application in any event.