Interest on Judgment Debts: Keep It Simple

Section 49 (“Interest on judgments”) of the High Court Ordinance (Cap. 4)

“(1) Judgment debts shall carry simple interest –

(a) at such rate as the Court of First Instance may order; or

(b) in the absence of such order, at such rate as may be determined from time to time by the Chief Justice by order…”

In some difficult trading conditions and an active disputes resolution market, at present, it is (perhaps) no surprise to see parties become involved in disputes concerning entitlement to pre- and post-judgment interest, following judgments in certain high value claims.

Some of these developments are summarised in Industry Insights for August (“Pre-judgment Interest Rate”) and November 2016 (“Post-judgment Interest”).

In the more recent case of Lo Yuk Sui v Fubon Bank (Hong Kong) Ltd [2016] HKEC 2909, HCA 409/2005, besides claims for enhanced costs and pre-judgment interest pursuant to the regime for sanctioned offers, the successful plaintiff also sought a higher rate of post-judgment interest than the 8 percent per annum as determined by order of the Chief Justice (which has not changed since 2009)*.

Given that the defendant paid the judgment debt soon after judgment was handed down, the amount of the extra post-judgment interest claimed by the plaintiff does not appear to have been that significant; particularly, when compared with the plaintiff’s claim for pre-judgment interest. However, the court still recognised the practical importance of the issue generally – in particular, the express power of the court to order post-judgment interest at a different rate.

The court went out its way to clarify that this power (s. 49(1)(a) of the Ordinance) should not be exercised in the absence of “special circumstances” and that the convention is to award post-judgment interest at the rate set down by the Chief Justice from time to time. As the court notes, this is justified on the basis of a need for consistency and certainty. Furthermore, the “normal” post-judgment interest rate should be justification enough for a judgment debtor who can pay to do so.

At the time of writing, it appears that the certain appeal points arising from the case are headed to the Court of Appeal (CACV 47/2017). In recent years, the Court of Appeal has shown a strong disposition for keeping things simple when it comes to determining issues relating to pre- and post-judgment interest rates.

In the absence of any contractual entitlement, the default rate for pre-judgment interest is prime rate (“best lending rate”) plus 1 percent; in order to compensate the plaintiff on the basis of having notionally had to borrow to fund a shortfall pending judgment. Absent special circumstances (which would appear to be exceptional), post-judgment interest is based on the rate as determined by the Chief Justice and does not look like it is going to change anytime soon.


* See http://www.judiciary.hk/en/crt_services/interest_rate.htm.

Jurisdictions: 

Senior Associate, Smyth & Co in association with RPC