Assetco Plc v Grant Thornton UK LLP
| Jurisdiction | England & Wales |
| Judge | Mr Justice Bryan |
| Judgment Date | 22 February 2019 |
| Neutral Citation | [2019] EWHC 592 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 22 February 2019 |
[2019] EWHC 592 (Comm)
BUSINESS AND PROPERTY COURT
OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Rolls Building
Fetter Lane
London, EC4A 1NL
Mr Justice Bryan
Mr M. Templeman QC, Mr R. Blakeley and Mr T. Pascoe (instructed by Mishcon De Reya LLP) appeared on behalf of the Claimant.
Mr D. Wolfson QC, Mr S. Colton QC and Ms S. Wood (instructed by Clyde & Co.) appeared on behalf of the Defendant.
APPROVED JUDGMENT
Introduction
The parties appear before me today on the hearing of the consequential issues arising out of my liability judgment of 31 January 2019 [2019] EWHC 150 (Comm) (the “Liability Judgment”), in which I found the defendant, Grant Thornton, liable to the claimant, AssetCo, in relation to Grant Thornton's admittedly negligent audit of AssetCo's accounts in 2009 and 2010 in the respects identified therein, and my subsequent quantum judgment, on 7 February 2019 [2019] EWHC 191 (Comm), in which I found that AssetCo was entitled to recover damages of £22 million-odd from Grant Thornton before questions of interest and costs (the “Quantum Judgment”).
In directions of 30 January 2019, I ordered that the parties were to lodge written submissions on interest, costs (including payments on account), and any other consequential issues for this morning's hearing which was fixed to resolve any matters that could not be agreed. In the event, the parties were unable to reach agreement on any such matters.
Accordingly, the issues for determination today arise under the following headings: (i) interest on the damages Grant Thornton is to pay to AssetCo; (ii) costs, including a payment on account; (iii) the time for payment, and (iv) Grant Thornton's application for permission to appeal and a stay pending any appeal.
In relation to the applications before me today, a number of witness statements have been lodged. Specifically for AssetCo, the second witness statement of Mark Davis and the third and fourth witness statements of Tudor Davies, whilst, for Grant Thornton, the ninth and tenth witness statements of James Roberts. I confirm that I have read and had regard to such witness statements and the exhibits thereto. Grant Thornton has also served an expert's report from Simon Cuerden, dated 15 February 2019 (“Cuerden3”) in relation to interest rates on borrowings. No application was made, or permission granted, for the service of expert evidence. AssetCo initially objected to the introduction of such evidence but ultimately abandoned that objection, and I have had regard to that report to the extent I think fit.
The parties' Part 36 offers
Before considering the matters that arise for determination, I should first identify that each party made Part 36 offers during the course of proceedings, which are relevant to the court's approach to interest and costs. The offers were as follows:
(i) On 8 December 2015 Grant Thornton made a Part 36 offer to settle the claim for £3.5million, inclusive of interest;
(ii) On 22 November 2016 AssetCo made a Part 36 offer to settle the claim for £10 million, inclusive of interest; and
(iii) On 26 July 2017 AssetCo increased its previous Part 36 offer to settle the claim to £17.5 million, inclusive of interest.
The position, therefore, is that AssetCo has recovered very substantially more than its original and revised offer, even before interest is taken into account.
The consequences of this are set out in CPR r.36.17. In summary where, as here, the claimant has obtained a judgment against the defendant which is at least as advantageous to the claimant as proposals contained in a claimant's Part 36 offer, the court must, unless it considers it unjust to do so, order that the claimant is entitled to (a) interest on the whole or part of any sum of money, excluding interest awarded at a rate not exceeding 10 per cent above base rate, for some or all of the period starting with the date on which the relevant period expired; (b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired; (c) interest on those costs at a rate not exceeding 10 per cent above base rate, and (d) an additional amount which shall not exceed £75,000, calculated as set out in CPR 36.17. CPR 36.17(5) provides:
“In considering whether it would be unjust to make the orders referred to in [ inter alia CPR 36.17 sub-paragraph (4)], the court must take into account all the circumstances of the case including—
(a) the terms of any Part 36 offer;
(b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;
(c) the information available to the parties at the time when the Part 36 offer was made;
(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and
(e) whether the offer was a genuine attempt to settle the proceedings.”
There is no suggestion that AssetCo's Part 36 offers were not compliant with Part 36 or were not genuine attempts to settle and, in the light of the Liability and Quantum Judgments, and AssetCo's Part 36 offers, Grant Thornton does not resist an order that it pays (i) costs assessed on the standard basis up to 14 December 2016, together with compensatory interest on such costs; (ii) costs assessed on the indemnity basis from 15 December 2016, together with compensatory interest on such costs; (iii) interest on the principal sum due at a compensatory rate up to 14 December 2016 and at an enhanced rate from 15 December 2016, and (iv) an additional amount of £75,000.
The parties, however, disagree as to the appropriate compensatory rate and as to the appropriate enhanced rate. For its part, AssetCo submits that it should be awarded a rate above EIBOR, alternatively LIBOR, and for its part, Grant Thornton submits that the starting point should be UK Base Rate plus an uplift from that. I will come on in due course to what it is submitted the uplift in each case should be.
AssetCo does not seek an order for a specific sum of interest at this hearing. It will calculate the detailed figures and seek to agree them with Grant Thornton in due course. Rather, AssetCo seeks orders as to the appropriate rates of interest to be applied.
Compensatory interest
Pre-14 December 2016 interest rate
Applicable principles
Paragraph J.14.1 of the Commercial Court Guide states:
“Historically the Commercial Court generally awarded interest at base rate plus one percent unless that was shown to be unfair to one party or the other or to be otherwise inappropriate. There is now no longer a presumption that base rate plus one percent is the appropriate measure of a commercial rate of interest.”
What is appropriate is to be assessed by reference to the real cost of borrowing by an entity with similar characteristics to the claimant. This, and the abandonment of a “default rate” of 1 per cent above Base, is reflected in the Court of Appeal's judgment in Jaura v Ahmed [2002] EWCA Civ. 210, where Rix LJ said at [26]:
“It is right that defendants who have kept small businessmen out of money to which a court ultimately judges them to have been entitled should pay a rate which properly reflects the real cost of borrowing incurred by such a class of businessmen. The law should be prepared to recognise, as I suspect evidence might well reveal, that the borrowing costs generally incurred by them are well removed from the conventional rate of 1% above base (and sometimes even less) available to first class borrowers.”
In Tate & Lyle Food and Distribution v Greater London Council [1982] 1 WLR 149 [154 C-E], Forbes J stated, in passages that have since been quoted in many subsequent cases on interest, as follows:
“One looks, therefore, not at the profit which the defendant wrongly made out of the money he withheld – this would indeed involve a scrutiny of the defendant's financial position – but at the cost to the plaintiff of being deprived of the money which he should have had. I feel satisfied that in commercial cases the interest is intended to reflect the rate at which the plaintiff would have had to borrow money to supply the place of that which was withheld. I am also satisfied that one should not look at any special position in which the plaintiff may have been; one should disregard, for instance, the fact that a particular plaintiff, because of his personal situation, could only borrow money at a very high rate or, on the other hand, was able to borrow at specially favourable rates. The correct thing to do is to take the rate at which plaintiffs in general could borrow money. This does not, however, to my mind, mean that you exclude entirely all attributes of the plaintiff other than that he is the plaintiff. There is evidence here that large public companies of the size and prestige of these plaintiffs could expect to borrow at 1 per cent. over the minimum lending rate, while for smaller and less prestigious concerns the rate might be as high as 3 per cent. over the minimum lending rate. I would think it would always be right to look at the rate at which plaintiffs with the general attributes of the actual plaintiff in the case (though not, of course, with any special or particular attribute) could borrow money as a guide to the appropriate interest rate.”
And he continued at p.155C:
“But in commercial cases it seems to me that the rate at which a commercial borrower can borrow money would be the safest guide. I should add, perhaps, that the proper question is: At what rate could the plaintiff borrow the required sum and not what return could the plaintiff have expected if he had invested it? It is immaterial, therefore, to consider, as Mr Davies suggested, whether the plaintiff...
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