PT ASURANSI TUGU PRATAMA INDONESIA TBK v. CITIBANK N.A.

FACV No. 11 of 2022 [2023] HKCFA 25 IN THE COURT OF FINAL APPEAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION FINAL APPEAL NO. 11 OF 2022 (CIVIL) (ON APPEAL FROM CACV NO. 548 OF 2018) ___________________________ BETWEEN PT ASURANSI TUGU PRATAMA INDONESIA TBK (formerly known as PT TUGU PRATAMA INDONESIA) Appellant (Plaintiff) and CITIBANK N.A. Respondent (Defendant) ___________________________ Before: Chief Justice Cheung, Mr Justice Ribeiro PJ, Mr Justice Fok PJ, Mr Justice Lam PJ and Lord Sumption NPJ Date of Decision: 18 August 2023 DECISION The Court: On 6 February 2023, the Court handed down its judgment allowing this appeal and entering judgment for the appellant (“Tugu”) for the amount of certain unauthorised debits together with interest thereon. Under the order, interest on the judgment sum was to be paid “at the prime rate plus 1% from 6 October 2006 until judgment and thereafter at the judgment rate”. Thereafter, the respondent (“Citi”) has paid the judgment sum in the amount of US$43,122,729.35. Citi has also paid the sum it has calculated as being due by way of pre-judgment interest, in the sum of HK$31,137,859.56, and also post-judgment interest. For the rate to be applied in calculating pre-judgment interest, Citi used the “prevailing US Dollar best lending rate offered by HSBC in Hong Kong” as the basis for “prime rate”. An issue has arisen between the parties as to the correct amount of interest. That is because the period for which interest is to be paid includes a period, prior to 2009, for which HSBC has not retained a record of its prevailing best lending rate. Citi therefore used a methodology (described below) to calculate a proxy for HSBC’s best lending rate for the period from 6 October 2006 to 31 December 2008 and employed that proxy as a substitute for “prime” in the applicable “prime plus 1%” rate for pre-judgment interest. The methodology used by Citi to calculate the proxy used by it to calculate a substitute for the prime rate of interest was based on the fact that, from at least 1 January 2009 until the date of judgment in this appeal, 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”). Citi therefore used rates that were 0.75% lower than the JP Morgan US Rates as a proxy for prime and so was thereby able to apply prime plus 1% in calculating the pre-judgment interest. For its part, Tugu disputes the appropriateness of the proxy used by Citi for pre-judgment interest in the period prior to 2009. In correspondence between the parties, it proposed that pre-judgment interest should be calculated based on the US Dollar prime rates published by JP Morgan and the Bank of America. This would result in an additional amount of interest in the sum of approximately US$5.3 million as compared with the method of calculation adopted by Citi. Subsequently, Tugu further proposed that the US Dollar prime rates published by Citi should instead be used as the basis of calculating pre- and post-judgment interest. 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. The usual practice in Hong Kong, since at least 1984, 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. These propositions are set out in Komala Deccof & Co SA v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina) [1984] HKLR 219. The Court of Final Appeal endorsed these propositions in Polyset Limited v Panhandat Limited, FACV 28/2000, Determination dated 25 April 2002 at [13] and repeated them in The World Food Fair Limited (formerly known as Wealth State Investsments Limited) and Anor. v Hong Kong Island Development Limited, FACV 6/2006, Determination dated 30 March 2007 at [11]-[12]. The Court’s intention when ordering interest payable at “prime rate plus 1%”, in paragraph [35] of the judgment, was to follow the usual practice described above. Therefore, the reference to “prime rate” is a reference to the HSBC best lending rate. Tugu acknowledges that this would be the generally understood way that the judgment would be read. Since there is no evidence of any other applicable rate at which Tugu could have borrowed the judgment sum in Hong Kong during the period in question, that is prima facie the appropriate applicable rate. Further, as the judgment sum is denominated in US Dollars, the relevant HSBC best lending rate is HSBC’s US Dollar best lending rate: see Fargo Shipping v Hwa Haur Trading [1979] HKLR 327 at 328, as qualified by Chow How Yeen Margaret v Wex Pharmaceuticals Inc [2018] 3 HKLRD 163 at [65]-[68]. Somewhat speculatively, Tugu questions the use of Citi’s proxy for HSBC’s best lending rate. It suggests a more forensic approach is merited given the circumstances of this case. However, instead of putting affidavit or expert evidence before the Court, Tugu merely suggests that the Court should consider the US Dollar prime rate published by JP Morgan and the Bank of America, or Citi’s own US Dollar prime rate. We decline to resolve the issue in that manner. We accept that, in the absence of HSBC’s US Dollar best lending rate for the period prior to 2009, Citi’s suggested proxy calculated as being 0.75% below the JP Morgan US Rates is an acceptable methodology for calculating the relevant prime rate for pre-judgment interest prior to 2009. It would be for Tugu to adduce contrary evidence if it wished to contend that, if it were to have borrowed the judgment sum at the relevant time, it would have cost more in interest to do so. In the absence of such evidence, there is no proper basis to use any other proxy for prime. The pre-judgment interest payable under the judgment should be calculated accordingly. In the light of the dispute between the parties, Citi issued a summons dated 31 March 2023 to seek clarification of what was meant by “prime rate” in the judgment and, further or in the alternative, an assessment of pre-judgment interest in the amount it has paid, calculated using the proxy it has proposed. Tugu contests the costs of the summons. It argues that the summons, which is returnable before a single permanent judge of the Court or the Appeal Committee, is jurisdictionally flawed because only the Court as a whole could dispose of the issue of the amount of interest payable under the judgment. Further, and in any event, it argues that clarification of the issue of what proxy to use for the unavailable HSBC US Dollar best lending rate could have been sought from the Court by way of joint letter from the parties’ solicitors. We consider that it is appropriate to make no order as to the costs of the summons. The determination of the amount of interest payable on the judgment sum is properly a matter for the Court as a whole rather than a single permanent judge or the Appeal Committee, whose jurisdiction does not extend to matters involving the decision of the appeal. However, in the interests of procedural economy, the matter has been dealt with on the papers by the Court as a whole rather than by a single Permanent Judge. In practice, no additional costs have been incurred. For these reasons and in the light of the Court’s disposition of the application (at [10] above), we make no order as to the costs relating to this issue. (Andrew Cheung) Chief Justice (R A V Ribeiro) Permanent Judge (Joseph Fok) Permanent Judge (M H Lam) Permanent Judge (Lord Sumption) Non-Permanent Judge Written Submissions by Mr Charles Sussex SC and Mr Tom Ng, instructed by Holman Fenwick Willan, for the Appellant (Plaintiff) Written Submissions by Mr Jat Sew-tong SC and Mr John Hui, instructed by Clifford Chance, for the Respondent (Defendant)