Paul Kitcatt and Others v MMS UK Holdings Ltd and Another

Approved Judgment on Consequential Matters

I have to deal with interest, costs and other matters arising out of the judgment dated 4 April 2017 [2017] EWHC 675 (Comm) in which I held that the claimants were entitled to judgment against MMS for £2.6 million and that their claim against Publicis would be dismissed. The parties have made written submissions on the matters which arise.

Pre-judgment interest

Two issues arise as to pre-judgment interest, namely (1) the rate of such interest and (2) the date from which such interest should run.

Rate

The claimants contend that interest should be awarded at the rate of 5% above base rate. They rely on the decision of Owen J in Attrill v Dresdner Kleinwort Ltd[2012] EWHC 1468 (QB) where interest was awarded at that rate in favour of claimants who were not a commercial concern but employees and of Warren J in Reinhard v Ondra LLP[2015] EWHC 2943 (Ch) where 3% over base was awarded. They submit that the usual practice of the Commercial Court to award pre-judgment interest at 1% over base on judgments given in sterling is merely a starting point which can be displaced in a suitable case and that the court should have regard to the status and nature of the claimants. Here, they say, the claimants are not a commercial entity which might have borrowed on commercial terms, but are individuals.

The defendants point out that the claimants' initial proposal was that interest should be awarded at the rate of 2.5% and that it was only after they challenged this rate by reference to the usual Commercial Court practice referred to above that the claimants sought the higher rate of 5% over base. They point out also that the claimants are successful business men and women, not penniless individuals, and that there is no evidence of the rate at which they or individuals like them would be able to borrow.

In my judgment it is a reasonable inference, even without specific evidence, that the rates at which a commercial concern would be able to borrow are not available to the claimants as individuals. On the other hand, I accept that they are successful business men and women who may be able to achieve a better rate than some other individual claimants. It would in my view be disproportionate to provide now for the service of evidence on this issue. I propose to follow the approach of Flaux J in Lindsay v O'Loughnane[2010] EWHC 529 (QB) at [142] and [143]. This was to recognise that (1) the usual Commercial Court rate of 1% over base rate is only a presumption which can be displaced in an appropriate case and (2) as a general proposition the rate at which individuals can borrow money has been rather higher than base plus 1% in the last few years. However, in the absence of specific evidence, Flaux J was not prepared to award interest at more than 2% over base rate.

The rate of pre-judgment interest will therefore be 2% over base rate.

Date

The claimants say that interest should run from the date on which the Deferred Consideration (i.e. calculated in accordance with the revised formula agreed as a result of the December 2012 agreement) should have been paid, that being the date on which their cause of action accrued. They say that the relevant date was Friday 14 February 2014, calculated as follows.

First, clause 15 of the SPA defines the Deferred Payment date as:

"… a Business Day falling not later than 45 days after the date on which Average Operating Income Margin 2012 to 2013 becomes capable of calculation (being the date on which Operating Income for 2013 becomes final and binding on the parties in accordance with schedule 5)."

Second, they say that the Operating Income for 2013 was capable of calculation on 1 January 2014.

Third, 45 days after 1 January 2014 was Saturday 15 February which was not a Business Day and therefore the relevant date was the previous day.

The defendants say, however, that the terms of Schedule 5 of the SPA are such that the Operating Income for 2013 would only become final and binding 45 days after service on the claimants of management accounts and a certificate, which there was no obligation to serve before 31 March 2014. Accordingly, they say, the earliest date on which a cause of action for the Deferred Consideration could have accrued is 45 days after 31 March, namely 15 May 2014. However, they say, it is apparent that even then the accounts would not have been agreed because there would have been a dispute about the SSC issue. Accordingly, they say, a dispute resolution mechanism in the SPA for a decision by an independent accountant would have had to be invoked which, even if it had been operated as promptly as possible, would have meant that the Operating Income for 2013 could not have become final and binding until 19 September 2014.

It is important to remember that the award of statutory pre-judgment interest is discretionary. Accordingly any principle that damages should be assessed by reference to a party's minimum level of lawful performance (cf. Durham Tees Valley Airport Ltd v Bmibaby Ltd [2010] EWCA Civ 485, [2011] 1 Lloyd's Rep 68) does not apply.

It seems to me that the appropriate approach is to form a reasonable view of when the Deferred Consideration of £2.6 million would probably have been paid if both parties had been acting sensibly and reasonably. It is unrealistic to think that the claimants would have submitted the necessary financial information to enable the Deferred Consideration to be calculated on New Year's Day 2014. Equally, it is unrealistic to think that the defendants would have deliberately drawn out the procedure of agreeing the figures to the last possible day. I recognise that there would in all probability have been a dispute about the SSC issue, but in circumstances where it would have been agreed that in any event £2.6 million was payable, I see no reason why payment of this minimum amount should have been held up. Adopting this approach, I rule that interest should run from 1 May 2014.

Post judgment interest

The defendants suggest that the date for payment of the judgment sum should be delayed from the usual 14 days to 28 days after delivery of judgment "to give [MMS] sufficient time to finance the payments to the claimants". I see no good reason to do this. There is no reason to suppose that MMS will be unable to make payment within the usual period of 14 days. If it is unable to do so, or chooses not to, interest at the Judgments Act rate will accrue thereafter.

Costs

The claimants say that they are successful party and should be awarded their costs of the action.

The defendants say...