TADJUDIN SUNNY v. BANK OF AMERICA, NATIONAL ASSOCIATION

HCA 322/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 322 OF 2008

(Transferred from LBTC 5551 of 2007)

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D E C I S I O N

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Introduction

1.  On 24 December 2014, I handed down judgment in this action awarding the Plaintiff, Tadjudin, a sum of $3,900,000 as damages for loss of bonus for the year 2007 under her employment with Bank of America (the “Defendant”), without at the same time making an award of interest.  Before the judgment was perfected and sealed, the Plaintiff’s solicitors, Oldham, Li & Nie, applied by letter for direction as to whether interest should be included in the draft order. 

2.  The Defendant’s solicitors, Mayer Brown JSM, objected on the ground that it was too late to ask for interest as judgment had already been passed and the omission could not be remedied by Order 20 rule 11 of the Rules of the High Court, ie the ‘slip rule’.  They argue that the power to amend judgment and order under the ‘slip rule’ is limited to clerical mistake in a judgment or order or an error arising from an accidental slip or omission, for example arithmetical error in the calculation of damages or if there is some ambiguity in expression in an unambiguous decision. They submit that the error or omission must be an error in expressing the manifest intention of the court.  The court cannot correct a mistake of its own in law or otherwise.  They also insist that the Plaintiff’s solicitors should identify the factual basis for the application and pay costs of the application whatever the outcome. 

3.  I consider the objection frivolous and gave directions for filing of written submissions on the issue of interest for disposal in chambers without a hearing.  I do not even find it necessary to rely on the ‘slip rule’ to remedy any omission. There was no clerical mistake or errors in calculation to be rectified.  There was no omission by the Plaintiff as a claim for interest had been made.  There was no mistake in law to correct.  Though an award of interest was not made, that claim was not dismissed.  Thus, insofar as the award of interest is concerned, no intention of the court has been manifested.  There was no error in expressing the manifest intention of the court to be corrected.  What was left was for the parties to wait the manifestation of the intention of the court. 

4.  This was a long trial, at the end of which judgment was reserved.  There was no omission in asking for interest and no intention of the court has been manifested.  Award of interest is a topic which could not have been addressed before the result was known.  It would have been normal for the court to give judgment on damages and then invite submission on interest: see for example: Waddington Ltd v Chan Chun Hoo Thomas[1], quoted by the Defendant’s solicitors themselves.  This court still has jurisdiction to adjudicate on the claim, especially as the order has not been sealed.  The directions were given as part of the court’s case management function in an action which has not yet been concluded.  There was no need for the Plaintiff to apply for interest or for amendment of the order by summons. 

5.  Furthermore, in Man Ping Nam and Man Fong Hang (No 2)[2], which was also an authority cited by the Defendant’s solicitors, Ribeiro PJ held that the discretion conferred by the ‘slip rule’ under Order 20 rule 11 should be liberally approached to ensure that the court’s decisions are properly given effect[3]. The Court of Final Appeal invoked the ‘slip rule’ to save an omission by the party in failing to ask for interest even after the order has been sealed.  A fortiori, I do not see why the failure to award interest at the time of delivery of judgment, assuming that failure to be an omission, could not be remedied by the ‘slip rule’.  But of course, for reasons as already explained, there is no need to invoke the ‘slip rule’.  I consider the Defendant’s solicitors’ objection wholly devoid of merit.

6.  The Plaintiff has succeeded on her claim for bonus for the year 2007.  She has been deprived of the use of her money for nine years.  The case took a long time to come up for trial because of discovery, striking out application by the Defendant and the subsequent appeal. The Plaintiff has not been guilty of delay in persecuting her claim.  There is no reason why she should not be awarded interest for being deprived of the use of her money before judgment was given and after.  Post-judgment interest rate is provided by statute.  The evidence of the Defendant’s human resource department is that assessment under the performance incentive programme for the year would complete in February of the following year.  Had the Defendant considered her eligible, the Plaintiff would have been paid her bonus by the end of February 2008.  Thus, the Plaintiff should be entitled to interest on the bonus awarded from 1 March 2008 until 24 December 2014.  The remaining question is the rate of pre-judgment interest to be awarded.

The pre-judgment interest rate

7.  The Plaintiff’s solicitors referred to Komala Deccof & Co SA v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina)[4] in which the Court of Appeal held that the prima facie position should be that a losing party should pay interest at a reasonable rate from the date when the sum due should reasonably have been paid.  The onus is on the losing party to show sufficient reason to depart from this prima facie position.  As for interest rate, the Court of Appeal held that it should be a rate which reflects the cost to the plaintiff of being deprived of the money which he should have had and in commercial cases the rate should reflect the rate at which the plaintiff would have had to borrow money to supply the place of that which was withheld. The principles in Komala have been widely adopted in Hong Kong since 1984 until recently.  The principles were approved by the Court of Final Appeal in Polyset Ltd v Panhandat Ltd[5] and pre-judgment interest rate is taken to be prime plus 1%.

8.  The Plaintiff’s solicitors also refer to Sun Legend Investments Limited v Ho Yuk Wah David (No.2)[6] in which the court held that where the winning party is a small or less well-established entity, the appropriate rate of interest could be 3% over prime.  On the strength of that authority, they submit that an appropriate rate of interest is 8%, being 2.25 to 3% over and above the prevailing prime rate of between 5.75% and 5% per annum in 2008.  They justify the departure from prime plus 1% by arguing that the Plaintiff not being a commercial party has no access to commercial lending rate; that the Plaintiff having been out of employment was not in a position to negotiate for any favourable rate of interest; and that as the Plaintiff had to fund this litigation, she was not in a position to pay interest accrued on the loan resulting in compound interest being accrued against her.

9.  However, the Defendant’s solicitors argue that the conventional formula of prime plus one percent has been overtaken by the recent decision of the Court of Final Appeal in Libertarian Investments Ltd v Hall[7]. In that case, the Court of Final Appeal awarded pre-judgment interest at the rate of 2% over the Bank of England base rate in a case involving sterling pounds and English company shares.  That approach was adopted in Waddington Ltd v Chan Chun Hoo Thomas in which Mr Recorder Patrick Fung SC awarded pre-judgment interest at the rate of 2.5%.  That rate was adopted after taking into consideration the following factors:

(i) the substantial downturn in the economic landscape in Hong Kong since 1996 which has resulted in a constant state of low interest rate;

(ii) the Report by the Law Commission in the United Kingdom on “Pre-Judgment Interest on Debts and Damages” published in 2004 in which the Law Commission recommended pre-judgment interest should be set at the Bank of England base rate plus 1% with the court being given discretion to depart from such rate for such period for good reasons;

(iii) the United Kingdom base rate of 0.5%;

(iv) the 12-month HIBOR then in Hong Kong of 0.87%; and

(v) the then prime rate in Hong Kong of 5%.

On the strength of Libertarian Investments, the Defendant’s solicitors submit that the interest rate should be no more than 2.5% per annum.

10.  No particular principles have been given by the Court of Final Appeal as to how the interest rate was arrived at.  I think Libertarian Investments does not represent a departure from the principles in Komala as approved by the Court of Final Appeal in Polyset Ltd, but a more realistic assessment of the appropriate interest rate under the prevailing money market condition.  The guiding principle, as the Court of Final Appeal in Polyset Ltd put it, is to compensate a successful plaintiff for being kept out of his money.  There are many different interest rates in the money market, such as prime rate, Interbank rate or “HIBOR”, mortgage rate, saving rate, fixed deposit rate etc.  For very many years, Hong Kong has found itself in a persistently low interest rate environment with money in good supply.  Saving rate and fixed deposit rate are ridiculously low.  Under such an environment, prime rate seems to have fallen out of favour.  HIBOR, particularly for 12 months, seems to be more reflective of the money market condition and a more realistic index to use in assessing the cost of money.  It is used as a base rate for a lot borrowing.  Interest for many mortgages and commercial lending is expressed in terms of HIBOR plus, with or without a cap based on prime plus or prime minus.  That fixed percentage is a matter for negotiation depending on the bargaining power of the borrower, the size of the loan and the money market condition.  It is below one percent for a borrower with good security and repayment ability and higher for ordinary consumer borrowing.  Prime plus or minus nevertheless continue to be used for consumer mortgages and lending.  I think as a rule of thumb 12-month HIBOR plus two percent (which is equivalent to prime minus 2%) would more realistically represent the average cost of consumer borrowing.  I therefore adopt this formula as a starting point for fixing the pre-judgment interest rate.  But bearing in mind the principles in Komala, I would adjust this rate upwards or downwards depending on the actual circumstances.  If by reason of being deprived of his money, the plaintiff was required to borrow at a higher interest, I shall revise the rate upwards.

11.  From the information available from the Hong Kong Monetary Authority, prime rate has been kept at 5% from 2009 to to-date, reflecting a very stable and low interest rate environment.  From the same source, 12-month HIBOR ranges from 0.45% to 1.00% between January 2010 and April 2015. For most of the time during that period, the rates were on the high side. Using 12-month HIBOR at 0.85% as the mean rate, I adopt 2.85% per annum as the starting point for pre-judgment interest rate.  Despite the submission of the Plaintiff’s solicitors, I have not been shown any evidence of the Plaintiff having to borrow at a cost above that rate.  Accordingly, I award her pre-judgment interest at the rate of 2.85% per annum.

Conclusion

12.  For the above reasons, I award the Plaintiff pre-judgment interest on the bonus award of $3,900,000 at the rate of 2.85% per annum from 1 March 2008 until 24 December 2014; and thereafter post-judgment interest at judgment rate until payment.  I also award costs of this application to the Plaintiff, such costs are to be taxed if not agreed.