OON KIM KOH, the person appointed to represent the estate of KOH KIM CHAN, deceased v. QUEST INVESTMENTS LTD AND ANOTHER

DCCJ 6960/2019

[2025] HKDC 428

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 6960 OF 2019

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BETWEEN

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DECISION

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(I) Introduction

1.  After a 2-day trial, on 24 December 2024, I handed down my judgment (“Judgment”) in favour of the Plaintiff. At paragraph 81(2)-(3) of the Judgment, I ordered:-

(1) the 1^st Defendant to pay the Plaintiff its pre-judgment interest on the judgment sum (SGD$395,896.43 or its equivalent in Hong Kong dollars) from 28 December 2013 up to the date of the Judgment, at the commercial borrowing rate of Australian dollars in Australia; and

(2) the parties to agree to such rate or rates within 14 days, failing such agreement each party to file and serve evidence by affirmation and written submissions, and I shall determine the rate or rates by paper disposal.

2.  On 7 January 2025, the Plaintiff’s solicitors wrote to the 1^st Defendant’s solicitors, seeking agreement to adopt the statutory pre-judgment interest rates in Australia. Nevertheless, the 1^st Defendants’ solicitors did not reply.

3.  As a result, the Plaintiff filed and served the 2^nd Affirmation of Yue Wing Man (“Yue 2^nd Aff”), her handling solicitor, on 14 January 2025 and her written submissions on 21 January 2025, seeking to adopt the statutory pre-judgment interest rates in Australia for calculating the pre-judgment interest awarded herein.

4.  The 1^st Defendant did not file any evidence or written submissions.

(II) Plaintiff’s Case

5.  According to Yue 2^nd Aff, financial institutions in Australia lend money to individuals and corporations at different interest rates based on different factors. An extract of an Excel spreadsheet downloaded from the official website of the Reserve Bank of Australia, the central bank of Australia (exhibit YWM-3), demonstrated that from 2013 to 2023, the bank adopted lending rates from 2.14% pa to 10.51% pa depending on the purpose (business loan or housing loan for a property for self-use or investment), term, whether a discounted or standard rate should be adopted, etc.

6.  Moreover, there is no prime rate (ie best lending rate) in Australia which is similar or equivalent to the prime rate adopted by the Hong Kong courts for pre-judgment interest rate. Instead, according to its official website, the Reserve Bank of Australia sets a cash rate (“Cash Rate”) being the interest rate on unsecured overnight loans between banks, which is the (near) risk-free benchmark rate for the Australian dollar.

7.  Yue 2^nd Aff referred to section 51A(1)(a) of the Federal Court of Australia Act 1976, which provides that:

“(1) In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either:-

(a) order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; …”

8.  The Australian courts are therefore allowed to grant pre-judgment interest. According to the website of the Federal Court of Australia and the General Practice Note on judgment interest (GPN-INT), from 2011 to 2024, the pre-judgment interest rate in Australia was 4% on top of the Cash Rate per annum for the respective period of time (“the Australian Court Rate”), adjustable half-yearly, and such rate being agreed upon by the Discount and Interest Rate Harmonisation Committee established following a referral by the Council of Chief Justices of Australia and New Zealand. By comparison, the post-judgment interest rates were Cash Rate plus 6% per annum.

9.  Yue 2^nd Aff then set out the applicable pre-judgment interest rates, viz the Australian Court Rates, if this action were tried in Australia:-

Period	Cash Rate (% pa)	Australian Court Rates (% pa)
28/12/2013 – 31/12/2013	2.75	6.75
1/1/2014 – 30/6/2014	2.5	6.5
1/7/2014 – 31/12/2014	2.5	6.5
1/1/2015 – 30/6/2015	2.5	6.5
1/7/2015 – 31/12/2015	2	6
1/1/2016 – 30/6/2016	2	6
1/7/2016 – 31/12/2016	1.75	5.75
1/1/2017 – 30/6/2017	1.5	5.5
1/7/2017 – 31/12/2017	1.5	5.5
1/1/2018 – 30/6/2018	1.5	5.5
1/7/2018 – 31/12/2018	1.5	5.5
1/1/2019 – 30/6/2019	1.5	5.5
1/7/2019 – 31/12/2019	1.25	5.25
1/1/2020 – 30/6/2020	0.75	4.75
1/7/2020 – 31/12/2020	0.25	4.25
1/1/2021 – 30/6/2021	0.1	4.10
1/7/2021 – 31/12/2021	0.1	4.10
1/1/2022 – 30/6/2022	0.4	4.10
1/7/2022 – 31/12/2022	0.85	4.85
1/1/2023 – 30/6/2023	3.1	7.10
1/7/2023 – 31/12/2023	4.1	8.10
1/1/2024 – 30/6/2024	4.35	8.35
1/7/2024 – 24/12/2024	4.35	8.35

10.  Pausing here, I note that Yue 2^nd Aff made a mistake with respect to the period from 1 January 2022 to 30 June 2022 – the Cash Rate should be 0.1% p.a. instead of 0.4%, but the relevant Australian Court Rate was correctly stated to be 4.1% p.a.

11.  The Plaintiff submitted that the Australian Court Rates are realistic references of prime commercial borrowing rates in Australia and should be adopted for the purpose of calculating the pre-judgment interest on the judgment sum herein.

(III) Discussion

12.  In paragraphs 74 and 75 of the Judgment, I applied Chow How Yeen Margaret v Wex Pharmaceuticals Inc [2018] 3 HKLRD 163 (CA) and awarded pre-judgment interest to the Plaintiff by adopting the commercial borrowing rate for Australian dollars in Australia.

13.  In Chow How Yeen Margaret, a case involving fraudulent misrepresentation to induce the entry of an agreement for sale and purchase of company shares as well as distributorship agreements, the Court of Appeal reaffirmed that:-

(1) Though pre-judgment interest is a matter of discretion under section 48 of the High Court Ordinance (Cap 4), the norm in Hong Kong is prime rate plus 1%, and this norm is the starting point in considering what rate should be used for pre-judgment interest (paragraph 45).

(2) As stated in Tadjudin Sunny v Bank of America, National Association CACV 12/2015, unreported, 20 May 2016, any suggestion that this starting point should be changed is something that should be considered only where there is evidence before the court to support such a change, and it is not satisfactory to proceed on the basis of the impressions (however well founded they may turn out to be) of the individual judge (paragraph 51). That is not to say that there may not be a case in the future in which the necessary evidential foundation (which might, for example, consist of banking evidence as to the manner in which rates for unsecured lending are fixed, that shows clearly that prime rate is no longer, or very rarely used as a starting point) will be laid for a consideration of whether or not the time has come to move away from prime rate plus 1% as the starting point for the awarding of pre-judgment interest (paragraph 52).

(3) An award of pre-judgment interest is to compensate the plaintiff for being deprived of the money during the relevant period, and in commercial cases such compensation is reflected in interest at a rate at which a person in similar position as the plaintiffs generally would have had to pay to borrow money (paragraph 56).

14.  The Court of Appeal further held in Chow How Yeen Margaret that:-

(1) If judgment is given in a foreign currency, interest is usually taken at the rate at which that currency could be borrowed in the country in which the debt should have been paid (paragraph 68). That said, this is not an immutable rule because the court may adopt other interest rates to avoid injustice, for example due to the inability to borrow such currency in the money market at the place where the money should have been paid (paragraph 69).

(2) The fact that the plaintiffs in that case were required by the defendants to pay the consideration (in Canadian dollars) by way of Hong Kong dollars and US dollars in the 2^nd defendant’s bank accounts in Hong Kong, and the fact that the plaintiffs were Hong Kong resident and Hong Kong companies, were relevant circumstances such that it was within the reasonable options for the trial judge to exercise the discretion in awarding pre-judgment interest by reference to a reasonable notional borrowing to make good for the deprivation of the judgment sum by the plaintiffs by way of borrowing rates available in Hong Kong (paragraph 72).

(3) In that connection, since there was no evidence on the borrowing rates for Canadian dollars in Hong Kong, and no presumption that banks would lend Canadian dollars in Hong Kong based on rates published in Canada should be made, the court should proceed on the basis that the plaintiffs would not be able to borrow Canadian dollars in Hong Kong at the rates published in Canada (paragraph 73). For the purpose of the notional borrowing in Hong Kong to facilitate the interest calculation, the court adopted the notion that the plaintiffs would have to borrow Hong Kong dollars equivalent of the judgment sum at Hong Kong dollar borrowing rates (paragraph 74), and the relevant interest rates should be the Hong Kong dollar borrowing rates, viz prime rates plus 1% (paragraph 75).

15.  Recently, in PT Asuransi Tugu Pratama Indonesia TBK v Citibank NA (No 2) [2023] 6 HKC 406, the Court of Final Appeal had to determine the applicable pre-judgment interest rate for a judgment sum in US dollars. An issue arose because the period for which pre-judgment interest was to be paid included a period prior to 2009, for which HSBC had not retained a record of its prevailing best lending rate. The defendant submitted that since HSBC’s best lending rates were consistently 0.75% lower than the corresponding historical US dollar prime rates published by JP Morgan Chase & Co (“the JP Morgan US Rates”) from at least 1 January 2009 to the date of judgment in that appeal, rates that were 0.75% lower than the JP Morgan US Rates should be used as a proxy for HSBC’s best lending rate in question, and such a proxy shall be the substitute for “prime” in the applicable “prime plus 1%” rate for pre-judgment interest. The plaintiff disagreed and proposed to use US dollar prime rates published by JP Morgan and the Bank of America, and subsequently proposed that the US dollar prime rates published by Citi (i.e. the defendant) should instead be used as the basis of calculating pre- and post-judgment interest.

16.  The Court of Final Appeal reaffirmed (at paragraph 6) that pre-judgment interest is awarded on a judgment sum as a way to compensate a successful plaintiff for being kept out of his money for a period of time, and the usual practice in Hong Kong is to award interest at a rate which represents the theoretical cost to the plaintiff of going into the commercial market to borrow the amount withheld. Traditionally, this rate has been taken to be 1% above the HSBC best lending rate, unless there is evidence in a particular case which makes the adoption of an alternative rate of interest appropriate for the pre-judgment period.

17.  The Court of Final Appeal further stated (at paragraph 8) that as the judgment sum in that case was denominated in US dollars, the relevant HSBC best lending rate was HSBC’s US dollar best lending rate, applying Fargo Shipping v Hwa Haur Trading [1979] HKLR 327 at 328, as qualified by Chow How Yeen Margaret at paragraphs 65 to 68.

18.  The Court of Final Appeal accepted (at paragraph 10) that in the absence of HSBC’s US dollar best lending rate for the period prior to 2009, the proxy suggested by the defendant was an acceptable methodology for calculating the relevant prime rate for pre-judgment interest prior to 2009. The Court declined to resolve the issue raised by the plaintiff, namely whether the US dollar prime rate published by JP Morgan and the Bank of America or Citi’s own US dollar prime rate should be used in place of the HSBC best lending rate, because the plaintiff did not put affidavit or expert evidence before the Court.

19.  Here, applying PT Asuransi Tugu Pratama Indonesia TBK and Chow How Yeen Margaret, the norm of “prime rate plus 1%” should be used as the starting point for pre-judgment interest. Moreover, by reason of my ruling (see paragraph 75 of the Judgment) to adopt the commercial borrowing rate for Australian dollars in Australia, the pre-judgment interest should be calculated at the prime rate for Australian dollars in Australia plus 1%. There is no evidence or submission that the pre-judgment interest rate in this case should deviate from the norm.

20.  I accept the Plaintiff’s evidence, as supported by information published on the official website of the Reserve Bank of Australia, that different interest rates for borrowing are applied by financial institutions based on different factors, and further that the Cash Rate, being the interest rate on unsecured overnight loans between banks, has been set as the (near) risk-free benchmark rate for the Australian dollar. Moreover, in the absence of contrary evidence, I accept the Plaintiff’s evidence that there is no prime rate (ie best lending rate) in Australia which is similar or equivalent to the HSBC best lending rate in Hong Kong.

21.  I note that there is no banking evidence as to the manner in which the Cash Rate in Australia and the HSBC best lending rate in Hong Kong are fixed, or as to whether there is any formula or mechanism for converting the Cash Rate into something similar or equivalent to the HSBC best lending rate in Hong Kong.

22.  The Plaintiff submitted that the Australian Court Rates are realistic references of prime commercial borrowing rates in Australia and should be adopted for the purpose of calculating the pre-judgment interest on the judgment sum herein. Following PT Asuransi Tugu Pratama Indonesia TBK, I treat this as the proxy suggested by the Plaintiff to substitute for “prime” in the applicable “prime plus 1%” rate for pre-judgment interest.

23.  I accept, based on the website of the Federal Court of Australia and the General Practice Note on judgment interest, that from 2011 to 2024, pre-judgment interest was granted pursuant to section 51A(1)(a) of the Federal Court of Australia Act 1976 at the rate of 4% on top of the Cash Rate, such rate being reviewed and adjusted half-yearly. Nonetheless, there is no evidence or submission on the rationale for granting pre-judgment interest under the said section and adopting “Cash Rate plus 4%” as the rate.

24.  Having said that, it is well-established that in the absence of evidence of foreign law, the court will usually assume that the law is the same as Hong Kong – Hong Kong Civil Procedure 2025, Volume 2, rubric J1/59/1. Judging from the adoption of the Cash Rate with the adjustment of 4% on top as the Australian Court Rate, it can be assumed, in my judgment, that pre-judgment interest is awarded in Australia for the same rationale in Hong Kong, viz to compensate the plaintiff for being deprived of the money during the relevant period, and such compensation is reflected in interest at a rate of reasonable notional borrowing in Australia.

25.  Further, and more importantly, exhibit YWM-3, ie the extract of the Excel spreadsheet downloaded from the Reserve Bank of Australia official website, lends support to the Plaintiff’s case. The Excel spreadsheet covered the period from December 2013 to June 2023. For every month in this period, there were 5 to 9 lending rates. Some of these lending rates were for loans for small businesses, others were for housing loans for investors or owner-occupiers, at standard or discounted rates, etc. I note that the spreadsheet did not say whether the lending rates therein were exhaustive for the periods concerned. Neither was there evidence showing the exact criteria and considerations for applying a certain lending rate, or the frequency of the application of each of these lending rates during the periods concerned. For present purposes, for every half-year period, I take the average of all the lending rates, and set out such average lending rates and the corresponding Australian Court Rates in the table below:-

Period	Average lending rate (% pa) based on exhibit YWM-3)	Australian Court Rates (% pa)
1/1/2014 – 30/6/2014	6.46	6.5
1/7/2014 – 31/12/2014	6.43	6.5
1/1/2015 – 30/6/2015	6.15	6.5
1/7/2015 – 31/12/2015	5.82	6
1/1/2016 – 30/6/2016	5.80	6
1/7/2016 – 31/12/2016	5.53	5.75
1/1/2017 – 30/6/2017	5.62	5.5
1/7/2017 – 31/12/2017	5.71	5.5
1/1/2018 – 30/6/2018	5.72	5.5
1/7/2018 – 31/12/2018	5.77	5.5
1/1/2019 – 30/6/2019	5.79	5.5
1/7/2019 – 31/12/2019	5.29	5.25
1/1/2020 – 30/6/2020	4.90	4.75
1/7/2020 – 31/12/2020	4.64	4.25
1/1/2021 – 30/6/2021	4.61	4.10
1/7/2021 – 31/12/2021	4.60	4.10
1/1/2022 – 30/6/2022	4.93	4.10
1/7/2022 – 31/12/2022	6.96	4.85
1/1/2023 – 30/6/2023	8.00	7.10

26.  It can be seen that save and except perhaps the last 3 periods, the average lending rate roughly matched with the corresponding Australian Court Rate for the same half-year period. The differences in the last 3 periods may be explained by the probabilities of the existence of other lending rates not shown in exhibit YWM-3, of the more loans being granted on higher lending rates, etc. On balance, I am satisfied that the Australian Court Rates reflected the commercial borrowing rates in Australia.

27.  On the other hand, the Cash Rate for a given half-year period was much lower than any lending rate in the same period, indicating that the Cash Rate was unlikely the commercial borrowing rate in Australia.

28.  On balance of probabilities, I accept the methodology of treating the Australian Court Rate as the commercial borrowing rate of a reasonable notional borrowing in Australia. I adopt the Australian Court Rates as the pre-judgment interest rates in the present case. For clarity, given my finding that the Australian Court Rate represents the rate for a reasonable notional borrowing but not just the “prime rate” in Australia, the “plus 1%” in the norm has been factored in the Australian Court Rate, and therefore there is no additional 1% on top of the Australian Court Rate in the present case.

(IV) Disposition

29.  I order that the Australian Court Rates set out for the corresponding periods in the table in paragraph 9 above be adopted as the pre-judgment interest rates in this action.

30.  Costs should follow the event. I make a costs order nisi that the 1^st Defendant do pay the Plaintiff costs of preparing the evidence and submissions on the issue of pre-judgment interest, to be taxed if not agreed.