XCHRX NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, P.A. v. GRAND UNION INSURANCE COMPANY AND ANOTHER

C.L. No. 113 of 1990

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. On 29th October 1993, Deputy Judge Yeung gave judgment against both Defendants in the sum of DM345,436.00. On 18th March 1994, his decision was upheld by the Court of Appeal. The issue before me is the date from which interest under section 48 of the Supreme Court Ordinance should run. Fortunately, the parties have agreed that the rate of interest shall be the prevailing rate for Deutchmarks at the German Discount Rate plus 3% from time to time.

2. The Defendants' liability was based upon a reinsurance slip dated 2nd June 1983.

3. The writ was issued on 14th September 1990 but not served until 4th February 1991.

4. The Plaintiff made the various payments for which it is now entitled to reimbursement on 16 dates between 14th December 1994 and 15th June 1989.

5. Mr. Scott, who appears for the Plaintiff, invites me to order interest at the agreed rate from a date 60 days after the date of each of the above 16 payments.

6. Mr. Bleach, who appears for the 2nd Defendants, submits that interest should not run from a date earlier than 5th November 1991 which is the date on which it is said that the Plaintiff's insurance brokers informed the 2nd Defendants of the amount that was due and owing, alternatively, he submits that the earliest date shall be 20th September 1991 which was the date of the Statement of Claim.

7. Mr. Scott submits that one of the problems with this case is that the 2nd Defendants have fallen out with its agents and that although the Plaintiff may well have forwarded information to the agents, there may be some doubt as to whether this was all passed on to the 2nd Defendants. He invites me to be wary of the 2nd Defendants' version that they knew little about the quantification of these claims until the very last minute and he submits that I should approach the matter on the basis that in the normal course of events within the insurance industry, claims are passed on in the usual way shortly after the reinsurer was asked to settle the claims.

8. Mr. Scott has pointed to a number of documents well before the writ which he says, on their proper construction and in the light of commercial reality, show quite clearly that the 2nd Defendants did have knowledge of the existence of and, probably, the quantification of these claims. However, in his usual frank manner, he accepted that the documentation was not as clear as it might be and that all he could do was point to various documents and invite me to draw the reasonable inference that the 2nd Defendants were aware of these claims far earlier than they now accept.

9. Mr. Scott also submitted that I should take into account the Simultaneous Claims Clause as an indication that it was agreed between the parties that the 2nd Defendants would pay as and when the Plaintiff had to pay and that this would somehow assist me in relation to the question of interest. However, it is fair to point out that no claim is pleaded for contractual interest and I do not think this point takes the matter very much further.

10. Mr. Bleach invites me both to be pragmatic and realistic. He points out that there was no letter before action and he too has referred me to a number of documents which he submits indicate uncertainty as to whether or not the 2nd Defendants knew prior to the Statement of Claim the quantification of the claims made against them.

11. Both counsel agree that under section 48 of the Supreme Court Ordinance, I have an unfettered discretion. Nevertheless, Mr. Bleach submits that I should only order his clients to pay interest from the date when the sum due should reasonably have been paid. He relies upon Komala Deccof v. Perusahaan Pertanbangan etc. [1984] HKLR 219. He submits that the 2nd Defendants could not reasonably have paid before they knew how much they had to pay.

12. Mr. Bleach also relies upon the judgment of Robert Goff J. (as he then was) in B.P. Exploration v. Hunt (No. 2) [1979] 1 WLR 793 at 846. He relies particularly upon the following passage :

" But the power to award interest is discretionary, and there is certainly no rule that interest will invariably run from the date of loss. It is no part of my task to attempt to define the circumstances in which the court will depart from the fundamental principle; indeed, since the discretion to award interest is unfettered, it would be improper to do so. There appear, however, to be three main groups of cases in which, in the exercise of its discretion, the court may depart from the fundamental principle.

The first group of cases concerns the position of the defendant. The court may consider, in the light of all the circumstances, that his position was such that it would not be just to make the defendant pay interest from the date of loss. It may do so if, for example, the circumstances were such that the defendant neither knew, nor reasonably could have been expected to know, that the plaintiff was likely to make a claim, and so was in no position either to tender payment, or even to make provision for payment if the money should be found due. In such a case, the court may in its discretion only grant interest from the date of the plaintiff's claim, or even from such a date as will allow reasonable investigation of the claim. Again, to quote from Lord Wilberforce's speech in the Firestone case at p. 836 :

'In a commercial setting, it would be proper to take account of the manner in which and the time at which persons acting honestly and reasonably would pay.'"

13. Relying upon these passages, Mr. Bleach submits that the most appropriate date is 25th October 1991 which is the date that the 2nd Defendants received the final Borderaux (insurance jargon for a schedule) which was sent to them from Lowndes Lambert.

14. I think there is sufficient confusion in this case to make it unlikely that either side are correct when they invite me to adopt their respective dates from which interest should run.

15. In all the circumstances and being as pragmatic as possible and, I hope, as realistic as possible, I exercise my discretion to order interest to run from 15th August 1989, which is the date 60 days after the last payment in the Schedule exhibited to Mr. Nicholas Stone's 5th Affidavit dated 8th July 1994.

16. I should make it clear for the avoidance of doubt that there are two errors in this Schedule which appear at p. 279. The first date should be the 11th, and not the 5th, September 1986 and the third date should be 16th December 1988 and not 1986. In the event, these typographical errors are irrelevant.

17. I therefore order that both Defendants pay interest at 3% above the rate prevailing for Deutchmarks at the German Discount Rate from time to time on the judgment sum from 15th August 1989 until judgment.

18. I propose to make a costs order nisi in favour of the Plaintiff in respect of this application for interest.