OWT ASIA LTD v. CPCNET HONG KONG LTD

HCA 6436/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 6436 OF 2000

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R U L I N G

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Introduction

1.  On 23 December 2005, I handed down judgment in favour of the Plaintiff in these proceedings, making an award of damages in its favour.  However, as I had not had the benefit of submissions from the parties as to the period for which and the rate at which interest should be awarded on such damages, I invited the parties to make written submissions as to this.

2.  The Plaintiff lodged such written submissions on 12 January 2006, in accordance with that invitation.  It seeks interest from 17 October 1999 (the date on which it terminated its contract with the Defendant) until the date of judgment at 3% over the Hongkong & Shanghai Banking Corporation (HSBC)'s prime lending rate.

3.  The Defendant did not lodge any written submissions within the time indicated in my judgment.  Instead, on 17 January 2006, its solicitors wrote to those acting for the Plaintiff, proposing that interest should be awarded at 1% over HSBC prime, but only from the date of the writ (27 June 2000).  This letter does not appear to have been responded to by the Plaintiff.  That letter also dealt with a number of other matters which had been raised in other correspondence by the Plaintiff relating to outstanding costs orders.  In the event, these other matters were disposed of by agreement between the parties.

4.  On 26 January 2006, the court wrote to the parties, pointing out that although the Defendant had made a counter proposal, it had not lodged any submissions with the court, and gave the Defendant until 6 February 2006 to lodge submissions if it wished to do so.  The Plaintiff was given until 13 February 2006 to reply.  On 6 February 2006, the Defendant lodged its submissions, setting out its reasons for contending that interest should be dealt with as it had suggested.  No reply submissions were received from the Plaintiff.

5.  It appears that the Plaintiff may not have received the court's letter to the parties.  Accordingly, following an inquiry as to the status of the matter from the Defendants in mid July this year, the court provided the Plaintiff with an opportunity to put in reply submissions by 28 July 2006.  The Plaintiff has not availed itself of that opportunity, and is presumably content to rely on its written submissions of 12 January 2006.

Period for which interest should be awarded

6.  I deal first with the question of the period for which interest should be awarded.  The Plaintiff contends that interest should be awarded in accordance with the basic principle that interest should run from the date of accrual of the cause of action in respect of money then due, or loss which had by then accrued (see Komala Deccof & Co. S.A. v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara [1984] HKLR 219, per Cons JA at 221J-222A), and that in order to depart from this principle, the onus was on the losing party to show sufficient reason for doing so, showing something exceptional.  The Plaintiff says that there is nothing exceptional that justifies a departure from the basic principle.

7.  The Defendant, however, submits that in this case, it can and has shown that the Plaintiff has delayed in the bringing and prosecution of its claim, so as to justify a departure from the basic principle.  It points to two periods of alleged delay.  The first is from the accrual of the cause of action on 17 October 1999, when the Plaintiff terminated the contract between the parties and the issue of the writ on 27 June 2000.  The second is in respect of a period of some 16 months between about October 2001 and February 2003, when the action was dormant, no steps being taken during that period until the Plaintiff proferred an amended Statement of Claim under cover of its solicitors' letter dated 28 February 2003.

8.  So far as the first period of alleged delay is concerned, I do not think that there is anything particularly out of the ordinary in respect of it.  The writ was issued within about 9 months of the cause of action arising.  This is not an exceptionally long period, and there is, in my view, no sufficient justification for disallowing interest because of it.

9.  The position in relation to the second period, however, is different.  The Plaintiff has not provided any explanation for its inactivity over this period, despite having had the opportunity to do so by lodging submissions in reply to the Defendant's submissions.  While it may be that no adjustment should be made in a situation where the proceedings progress rather more slowly than one might think necessary, it seems to me that where there is a significant period of inactivity on the part of the Plaintiff, it is open to the court to take this into account in considering the period for which interest should be awarded.

10.  In the circumstances, it seems to me that the Defendant has shown that there are exceptional circumstances justifying a departure from the basic rule.   The Defendant has suggested that interest should run from the date of issue of the writ, 27 June 2000.  This would involve a loss of interest of slightly over 9 months.  Given that the delay during the proceedings was rather greater, it seems to me that adoption of the Defendant's position would, in all the circumstances, provide a reasonable outcome.  Accordingly, I rule that pre-judgment interest should run on the damages awarded to the Plaintiff from 27 June 2000 until 23 December 2005, with interest at judgment rate on all sums due under the judgment thereafter.

Rate at which interest should be awarded

11.  So far as the rate of interest is concerned, the Plaintiff has submitted that while the usual rate of interest awarded in commercial disputes is 1% over prime lending rate, given that the purpose of an award is interest is to compensate a plaintiff for being kept out of his damages, it should reflect the rate at which he would have had to borrow the amount in question.  The Plaintiff submits that while 1% over prime might be in general a reasonable rate to adopt, in this case, taking into account the fact that the Plaintiff was a start up business in a highly competitive field, and that its business expenses were funded by its principal shareholder, Mr David Chen, personally, its size and financial status were such that it would have been likely to have had to pay a higher rate of interest if it were to borrow commercially.

12.  The Defendant submits that there is no evidence that the Plaintiff borrowed any money, let alone as to the rate of interest which it had to pay, and that in the circumstances, there is no reason to depart from the usual approach.

13.  In my view, while it is fair to say that the Plaintiff was a small company, it is nonetheless the case that the Plaintiff has not put forward any material to show the sort of rates of interest which a company like it would have had to pay to borrow money.  Nor does there appear to be any suggestion that it did in fact have to borrow money at the relevant time.  In the circumstances, I do not think that there is any compelling reason to depart from the general rule, and shall award interest for the period indicated in paragraph 10 above at 1% over the HSBC prime lending rate.

Costs

14.  So far as the costs of the submissions in respect of this matter are concerned, as the Defendant has succeeded on both of the points which it has taken, I shall order that the Plaintiff should pay the Defendant's costs of preparing its written submission dated 6 February 2006, such costs to be taxed on the party and party basis if not agreed.