Persimmon Homes (South Coast) Ltd v Hall Aggregates (South Coast) Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Ramsey |
| Judgment Date | 28 August 2012 |
| Neutral Citation | [2012] EWHC 2429 (TCC) |
| Date | 28 August 2012 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-07-260 |
[2012] EWHC 2429 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon Mr Justice Ramsey
Case No: HT-07-260
Richard Wilmot-Smith QC and John Denis-Smith (instructed by Boodle Hatfield) for the Claimant
Thomas Keith (instructed by Eversheds LLP) for the Defendants
Judgment No 3
Introduction
In this judgment I deal with the claims made by the Claimant ("Persimmon") for interest on sums that have been awarded against the Defendant ("RMC") pursuant to two judgments.
In the first judgment dated 10 October 2008 ("the First Judgment") Coulson J awarded Persimmon £46,920.10 in respect to works to Sandhills Lane. That sum was ordered to be paid by 24 October 2008. Interest was ordered to be paid at a rate to be agreed by the parties or to be assessed by the Court. Payment was only made by RMC on 8 April 2010.
RMC accepts that interest is payable under s.17 of the Judgments Act 1838 at 8% on the sum awarded from 24 October 2008 to 8 April 2010. It also accepts that interest is payable up to October 2008 but it contends that it should be at a rate of 1% over base rate and that an abatement should be allowed for the delay between the date on which the works were paid for, in January to October 2003, and the first intimation of a claim against RMC in a letter from Persimmons' Solicitors to RMC's Solicitors dated 3 April 2007, a period of some 3 1/2 to 4 years.
Persimmon claims interest at 2% over base from the date when the sums were paid until October 2008 and does not accept that there should be any period of abatement.
In the second judgment dated 11 January 2012 ("the Second Judgment") I awarded Persimmon damages in the sum of £1,146,257.70 for works which RMC failed to carry out.
RMC contends that Persimmon's entitlement to interest on such sums should, again, be limited to 1% over base rate and that there should be abatement for periods of unreasonable delay. The first period being the period referred to above of 3 1/2 to 4 years between 2003 and 2007 and the second period of delay being from 10 October 2008 until 14 October 2010 during which Persimmon failed to seek directions for the trial of quantum following the hearing on liability.
Persimmon claims that in the period up to 10 October 2008, the date of the First Judgment, it should be entitled to interest at 2% above base and that there should be no abatement for the period 2003 to 2000. In addition Persimmon submits that in the period from 10 October 2008 to payment it should be entitled to interest at 8%. It relies on section 17 of the Judgments Act 1838 and contends that the Court should Order interest to begin from 10 October 2008 rather than 11 January 2012 under the discretion given to the Court under CPR 40.8(2). Persimmon says that, as originally directed, liability and quantum were both to be dealt with in October 2008 but that Coulson J deferred the assessment of damages for reasons for which RMC was responsible. Persimmon therefore contends that it should be entitled to interest from the date when it obtained judgment for damages to be assessed rather than the date on which the damages were actually assessed. Alternatively, Persimmon submits that, on the basis of those circumstances, the equivalent interest should be awarded under section 35A of the Senior Courts Act 1981.
Persimmon also says there should be no period of abatement for the period 2003 to 2007 or from October 2008 to 2010. In relation to the earlier period, whilst it accepts that there was delay in bringing the claim, it submits that this should not lead to abetment of interest in the particular circumstances of the case. In relation to the period between 2008 and 2010 Persimmon say that, after the First Judgment, given that there was to be an appeal it acted reasonably in agreeing with RMC that it should not proceed with the assessment of damages pending the resolution of that appeal. Following the judgment of the Court of Appeal on 22 October 2009 Persimmon says that it appropriately sought to resolve matters by without prejudice negotiations between January 2010 and July 2010, prior to seeking directions in October 2010 leading to the hearing and Second Judgment.
On that basis there are essentially three issues which have to be determined in this case:
(1) Whether for the period prior to 10 October 2008 the appropriate rate of interest is 2% over base, as Persimmon contend or 1% over base as RMC contends.
(2) Whether, in relation to the damages assessed in the Second Judgment, Persimmon is entitled to interest at 8%, as Persimmon contends or 1% over base rate, as RMC contends.
(3) Whether any interest should be abated for the delay in commencing proceedings between 2003 and 2007 and the delay in Persimmon seeking the assessment of damages between 2008 and 2010.
The principles upon which interest is awarded
The first issue concerns the rate of interest to be awarded under section 35A of the Senior Courts Act 1981, absent Persimmon's contention that judgment rate interest at 8% is the appropriate rate. The starting point in this respect is the well known passage in the judgment of Forbes J in Tate and Lyle Food and Distribution Limited v Greater London Council [1982] 1 WLR 149 at 154 to 155 where, in summary, he held that the appropriate rate had to reflect the rate at which a claimant would have to borrow money to provide the money which was withheld. He held that the rate was not one which took into account the special position of a claimant but rather it was the rate at which claimants like the particular claimant could, in general, borrow money, taking into account the general attributes of the class of claimants to which the claimant belonged.
In coming to the conclusion that in that case the attributes of the claimant meant that the appropriate rate was 1% over the base rate (at that time the rate being the minimum lending rate) Forbes J said as follows:
"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 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 peculiar attribute) could borrow money as a guide to the appropriate interest rate."
In Claymore and Nautilus Properties Limited [2007] BLR 452 Jackson J (as he then was) reviewed the relevant authorities on the rate of interest at [70] to [74]. In those decisions the court had generally awarded 1% over base rate. However Jackson J held that the claimant in the case he was dealing with would have had to pay more than 1% over base rate in order to borrow the relevant sums at the relevant time. He concluded that the appropriate rate was 2% over base rate. In Fitzroy Robinson Limited v Mentmore Towers Limited (No. 3) [2009] EWHC 2265 (TCC) Coulson J referred to the decision of Jackson J in Claymore and at [59] said that: "It is common, but not inevitable, that interest under the 1981 Act to be a rate of 2% over base."
In Lindsay v O'Loughnane [2010] EWHC 529 (QB) Flaux J dealt with a claim by a professional investment advisor for damages arising from fraudulent misrepresentation. After accepting the submission that 1% over base was only a presumption which could be displaced in an appropriate case, he said this at [143]:
"Although there is no specific evidence as to the rate of interest which the claimant would have had to pay to borrow the money (and indeed was no such evidence in Claymore) I accept the general proposition that the rate at which individuals can borrow money has been rather higher than base plus 1% in the last few years. In the absence of specific evidence I am not prepared to go as high as 4% over base which was Mr Maclean's upper limit, being the rate imposed by FX on its customers for late payment under clause 5.8 of the Terms and Conditions. However, I will award interest at 2% over base rate."
That reflects the guidance given in the Admiralty and Commercial Courts Guide in relation to interest where it says:
"J14.1 Historically the Commercial Court has generally awarded interest at base rate plus one percent unless that was shown to be unfair to one party or the other to be otherwise inappropriate. In the light of recent interest rate developments there is no presumption that base rate plus one percent is the appropriate measure of a commercial rate of interest."
The references above to the rate at which individuals can borrow money being higher than base plus 1% in the last few years and to there not being a presumption that such a rate is the appropriate measure of commercial interest are clearly references to the fact that between July 2007 and March 2009 the Bank of England Base Rate dropped from 5.75% to 0.5% where it has now remained for over 3 years.
In the present case, as was the position in both Claymore and Lindsay, there is no specific evidence as to the rate of interest which companies in the position of Persimmon would now have to pay to borrow money. However, as recent decisions and the reference to the Admiralty and Commercial Courts Guide show, there is no longer a presumption that 1% over base rate still reflects a commercial rate of interest when the base rate has dropped to low levels. However, that is only the position in more recent past and I consider that the presumption remains good historically.
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