DBE Energy Ltd v Biogas Products Ltd
| Jurisdiction | England & Wales |
| Judge | Joanna Smith |
| Judgment Date | 20 May 2020 |
| Neutral Citation | [2020] EWHC 1285 (TCC) |
| Date | 20 May 2020 |
| Docket Number | Case No: HT-2019-000123 |
| Court | Queen's Bench Division (Technology and Construction Court) |
[2020] EWHC 1285 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Rolls Building
Fetter Lane
London, EC4A 1NL
Joanna Smith QC SITTING AS A DEPUTY OF THE HIGH COURT
Case No: HT-2019-000123
Mr Mathias Cheung (instructed by Reynolds Porter Chamberlain LLP) for the Claimant
Miss Nicola Atkins (instructed by Mills & Reeve LLP) for the Defendant
Hearing date: 18 May 2020
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Further to my judgment following the trial of this matter (“ the main judgment”) ( [2020] EWHC 1232 (TCC)), I must now address a number of consequential matters relating to interest and costs. These matters were argued before me on 18 May 2020 by Mr Cheung, on behalf of the Claimant (“ DBE”) and by Miss Atkins on behalf of the Defendant (“ Biogas”).
This judgment should be read together with the facts and findings in the main judgment, details of which are not repeated here. I use the same abbreviations in this judgment as I have used in the main judgment.
During the hearing, I decided that interest would be paid by Biogas at a rate of 1% over base, that Biogas would pay interest on costs awarded at the same rate and that Biogas would have 28 days in which to make payment of the judgment debt. There was no dispute between the parties that from the date of judgment (18 May 2020) to the date of payment, interest should run at the statutory judgment rate of 8%.
The remaining matters to which I now turn in this judgment are (i) the period from which interest should run on the judgment debt; (ii) the payment of costs; (iii) the scope of the costs order and (iv) DBE's application for a payment on account of costs.
The Period from which interest should run
In my main judgment, I have awarded £224,303.77 by way of damages to DBE. This figure is made up of (i) costs which have already been incurred in installing temporary Landia Tanks, (ii) costs which are yet to be incurred in relation to the replacement and reinstallation of the Pasteuriser Tanks and (iii) future loss of revenue that will be suffered once the AD Facility is fully operational.
DBE submits that in respect of each of these three forms of loss, it is fair and just to exercise the court's discretion pursuant to section 35A of the Senior Courts Act 1981 by awarding interest from the end of January 2019 (when the Pasteuriser Tanks failed and the cause of action accrued) to the date on which the Judgment debt is satisfied. However Biogas contends that the court should not treat each of these different forms of loss in the same way for the purposes of interest; Biogas submits that interest on costs already incurred should run from the date on which they were incurred, but that there should be no interest in respect of future costs of replacement and loss of revenue because these are damages which are yet to be incurred.
The court's jurisdiction to award interest under the 1981 Act is discretionary. The purpose of an award of interest is fairly to compensate the recipient of interest for being deprived of money which he should have had.
(i) Costs incurred prior to judgment
In my judgment there is little difficulty with the costs that have already been incurred by DBE in relation to the temporary Landia Tanks. The conventional approach to economic loss of this type, suffered between the date of accrual of the cause of action and the date of judgment, is to award interest from the date on which the loss occurred (see B.P. Exploration Co v Hunt (No. 2) [1979] 1 WLR 783 per Robert Goff J at 846D, upheld on this point in the House of Lords, and the approach taken by this court in West v Ian Finlay [2013] EWHC 868 (TCC) per Edwards-Stuart at [389]). Miss Atkins provided a table in her skeleton argument setting out the various dates of loss in relation to incurred costs and, absent any submissions from Mr Cheung to the contrary, I accept the dates set out there together with her calculation of the days to judgment in respect of each head of loss. Interest on all costs incurred is to run from the date when each item of expenditure was incurred.
(ii) Costs to be incurred after judgment in respect of the replacement of the
Pasteuriser Tanks
In support of his submissions that interest should run from the date of failure of the Pasteuriser Tanks (i.e. the date on which the cause of action accrued), Mr Cheung relied on Aerospace Publishing Ltd v Thames Water Utilities Ltd [2007] EWCA Civ 3. In that case, the Court of Appeal, carrying out a re-hearing on quantum, held that Aerospace was entitled to recover damages for the loss and destruction of a private archive on a diminution in value basis by reference to the cost of reinstatement of the archive. In circumstances where the archive had not yet been restored, it was argued that no interest was recoverable. The Court of Appeal rejected this argument:
“ In my view there is a fallacy at the heart of Mr Rainey's argument. It jumps from the true proposition that no remedial costs have yet been incurred to the false proposition that no loss has yet been incurred. The loss was incurred on 3 July 2001 and the fact that in the end the Judge – correctly so we are holding – favoured a computation of most of the loss by reference to the cost of a restoration not yet conducted does not alter the date of the loss. Informing therefore the Judge's exercise of discretion to award interest under s. 35A of the Act of 1981 should have been “the basic principle that interest will be awarded from the date of loss”. So said Robert Goff J in a passage undisturbed on appeal in BP Exploration Co (Libya) Ltd v Hunt (No. 2) [1982] 1 ALL ER 925 at 975j; and he proceeded to add that “the mere fact that it is impossible for the defendant to quantify the sum due until judgment has been given will not generally preclude such an award”” (per Longmore LJ at [93]).
In Woodlands Oak Ltd v Conwell [2011] EWCA Civ 254, the Court of Appeal followed the approach taken in Aerospace and rejected an argument that the Recorder had been wrong to award interest on a counterclaim in circumstances where, at the date of judgment, the sums claimed by way of counterclaim had not been incurred (per Sir Anthony May at [35]–[36]).
In light of these authorities, I accept Mr Cheung's submission that, insofar as the cost of the replacement and reinstallation of the Pasteuriser Tanks is concerned (together also with management fees and the costs of a programmer (which have been invoiced but not yet paid), I should award interest from the date of accrual of the cause of action.
Miss Atkins argues that this approach would result in overcompensation because, if one takes the loss as arising on the date of accrual of the cause of action, it would not have been necessary for DBE to carry out the temporary replacement. I do not, however, follow that argument. The evidence was clear in this case that it was not possible to obtain a permanent replacement for the Biogas Pasteuriser Tanks sufficiently quickly after their destruction to ensure that the seed already in the Digester Tanks would not start to deteriorate and die. That is why it was necessary to source a temporary solution.
In summary, therefore, I award interest on the costs of replacement and reinstallation of the Pasteuriser Tanks, together with management fees and the costs of a programmer from the 29 January 2019.
(iii) Loss of Revenue
In my judgment, the loss of revenue claim cannot be treated in the same way as the claim in respect of future remedial costs.
The loss of revenue claim was argued at trial on the basis that a loss would be incurred once the AD Facility had ramped up to full capacity (which, as at the date of trial it had not yet done). DBE argued that the delay caused by the failure of the Pasteuriser Tanks was critical in that it affected the ultimate date of commencement of operations at the AD Facility, pushing that date back by (as I have found) a period of two weeks.
During the course of the hearing on consequentials, Mr Cheung sought to argue, by reference to a Facility Agreement and an Amended Facility Agreement, that DBE had been forced to borrow at high rates of interest in circumstances where it had suffered loss by reason of the failure of the Pasteuriser Tanks. However, this evidence was not before the court at trial and there is no evidence whatever from DBE to link its borrowing at varying times between April 2019 and February 2020 with the failure of the Pasteuriser Tanks in January 2019. Indeed, the evidence at trial showed that the AD Facility encountered other problems in commissioning and ramping up which caused delay but which had nothing whatever to do with the Pasteuriser Tanks' failure. Accordingly, I fail to see how this point has any relevance to the question of the date from which interest should run in respect of the loss of revenue claim.
There is no evidence before the court that the AD Facility has yet reached full capacity.
Doing the best I can to ensure a just result which reflects the fact that the loss of revenue claim did not crystallise in January 2019, was not an inevitable claim for loss and was expressly claimed at trial as a loss that would only be incurred upon the AD Facility finally reaching full capacity, I am not going to award any interest in relation to this head of loss.
Costs
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