Socimer International Bank Ltd ((in Liquidation)) v Standard Bank London Ltd

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMRS JUSTICE GLOSTER, DBE,Mrs Justice Gloster, DBE
Judgment Date17 November 2006
Neutral Citation[2004] EWHC 1041 (Comm),[2006] EWHC 718 (Comm),[2006] EWHC 2896 (Comm)
Docket NumberCase No: 2003 Folio 344

[2006] EWHC 2896 (Comm)

IN THE HIGH COURT OF JUSTICE

COMMERCIAL COURT

QUEEN'S BENCH DIVISION

Before:

Mrs Justice Gloster, Dbe

Case No: 2003 Folio 344

Between:
Socimer International Bank Limited
(in Liquidation)
Claimant
and
Standard Bank London Limited
Defendant

Richard Millett Esq, QC & Iain Quirk Esq (instructed by Allen & Overy) for the Claimant

Stephen Auld Esq, QC (instructed by Jones Day) for the Defendant

Hearing dates: 22 May 2006; 16 th June 2006

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.

MRS JUSTICE GLOSTER, DBE Mrs Justice Gloster, DBE
1

Various issues arise as a consequence of my judgment dated 31 March 2006 (to which reference should be made for the background to this dispute).

Issue (i): length of interest period

1

The first issue is whether there should be any reduction in the period in respect of which the claimant, Socimer International Bank Limited ("Socimer"), seeks interest pursuant to s35(a) of the Supreme Court Act 198Socimer claims that it is entitled to interest at the rate of US Prime (which I have already decided) from 20 February 1998 (the date when the claimant's cause of action arose) to the date of judgment (31 March 2006). Thereafter interest on the judgment debt will run at the statutory judgment rate of 8% until payment.

2

The contention of the defendant, Standard Bank London Limited ("Standard"), is that I should exercise my discretion under CPR 3.1.6 to disallow all interest in respect of the period between termination and the institution of these proceedings on 9 April 2003 and that, in any event, Socimer should not recover any interest on the SOCMA element of the claim, or at the latest, only from December 2004 when Socimer's primary case on the SOCMA DRs was first advanced.

3

In relation to the non-SOCMA assets, Mr Stephen Auld QC, on behalf of Standard, contends that there should be no award on interest before commencement of the proceedings in 2003 because Socimer was guilty of unreasonable delay in prosecuting its claim. He contends that Socimer, in delaying well over four years before notifying Standard of its claim, during which time Standard did not know that Socimer would be making a claim, has been guilty of excessive delay. He contends that it was quite clear from the contemporary documents during 1998 that, from the outset, there was never any suggestion by the Socimer liquidator that Standard should have carried out some form of valuation on 20 or 23 February 1998, or that the liquidator had a claim for breach of contract against Standard of the type which subsequently emerged many years later. He points to the fact that it was not until December 2002, when Allen & Overy wrote a letter to Standard, that there was any claim that there should have been a valuation in late February of early March 1998. Up until then, all there had been was a dispute whether Standard had got the best price on the sale of the assets which it effectively held as security. Mr Auld submitted that the Socimer liquidator knew that Standard had sold the assets over time, and that the assets had fetched less due to changes in market conditions over which Standard had no control. He said that if the liquidator, or his legal advisors, had raised the Clause 14 claim (i.e., the duty to carry out a notional valuation as at the date of termination) at an earlier stage, the matter would have been addressed much earlier, and the loss could have been avoided, if not entirely, then at least substantially, because the assets could have been realised sooner and prior to the extremely adverse market conditions in April 1998. Accordingly, submits Mr Auld, the delay which occurred was entirely the responsibility of Socimer and not of Standard.

4

Moreover, in particular in relation to the SOCMA claim, Mr Auld emphasised that the liquidator had not analysed the case properly, notwithstanding having spent a substantial amount of costs in relation to it. He complains that the SOCMA primary case did not emerge until service of the Reply on 29 September 2004, and was not included in the Particulars of Claim until 18 March 2005. So, he submits, it was clear that, even in 2003, when the proceedings were commenced, the claimant did not have a clear idea of its own case.

5

I was referred to a number of cases including, in particular, the decision of Colman J in The Athenian Harmony [1998] 2 Lloyd's Reports 425, most notably at 427, followed by Aikens J in The Vergina (No 3) [2002] 1 Lloyds Reports 238. I was also referred to the decision of Langley J in Kuwait Airways Corporation and Another v Kuwait Insurance SAK and Others [2000] 1 All ER (Comm) 972, [2000] 1 Lloyd's Rep 678].

6

In The Athenian Harmony, Colman J made the following points, quoting Birkett v Hayes [1982] 1 WLR 816, that:

i) "… in the great majority of cases the plaintiff could have proceeded with greater dispatch; and yet it may well be wrong to deprive him of his interest particularly as the defendant will have had the use of the money … if interest is withheld the defendant receives a windfall. He has free use of funds which, if he had performed his obligation to pay, would not have been in his hands.";

ii) "If there were no material prejudice to the defendant by reason of the delay, it is difficult to see why the interests of justice should normally require that when he knows the amount claimed he should have an even larger benefit bestowed upon him than he would derive from his unjustifiably refusing to pay the claim.";

iii) "… the justification for depriving a successful plaintiff of interest must be that he has caused his loss of use of his money by his own fault rather than that it would be unfair or unjust to the defendant that he ought to pay interest during the delay."

iv) "In cases where the delay and degree of fault are so substantial that the predominant cause of the plaintiff being out of his money can be seen to be his own failure to prosecute the claim, rather than the defendant's maintenance of his defence, it is not difficult to see that the policy should be that a successful plaintiff should not be compensated from loss of use of the money."; and

v) "The delay in question would have to be very substantial and not merely relatively short periods of weeks or months during which in commercial litigation lulls in activity inevitably occur and the plaintiff's fault would have to be substantial, as where an action has inexcusably been allowed to go to sleep for years."

7

In The Vergina (No 3), Aikens J, having referred to The Athenian Harmony, said the following, at paragraph 33:

"The claimant submits that the Court will not disallow interest for a period unless there has been both very substantial delay and also very substantial fault on the part of the claimant. [Counsel for the claimant] relied on statements to that effect made by Mr Justice Colman in Derby Resources AG v Blue Corinth Marine Co Ltd (No 2) (The Athenian Harmony). I respectfully agree with the approach of Mr Justice Colman in that case. In my view the Court should not disallow interest unless it can be shown that the 'predominant cause' of the claimant being kept out of money that the Court had held he is entitled to is the claimant's own failure to prosecute the claim, as opposed to the defendant's maintenance of its defence."

8

In Kuwait Airways, Langley J articulated the principles in the following terms:

"In my judgment the authorities to which I have referred establish the following principles and factors as material to the exercise of discretion:

(1) In principle interest is to be awarded to compensate the claimant for being kept out of the money from the date when it has been established that it was due to him; it is not based on fault or the wrongful withholding of payment by the defendant.

(2) The starting date will therefore normally be the date to which the Act refers, namely the date the cause of action arose and so, in indemnity insurance (subject to any express terms of the cover) the date of loss.

(3) It follows from (1) that generally the existence of and need to investigate a genuine dispute as to liability is not a material factor in postponing the running of interest. The position is not so clear where there is a dispute or uncertainty as to the quantum of the claim. It can be said that money is not due until it is at least claimed to be due in a specific amount and, as Mr Hapgood submitted, quantification of a claim is, unlike liability issues, likely to be a matter only within the knowledge of the insured. It can equally be said, however, that there is no real difference in principle from a dispute as to liability: once the answer is known it establishes not only that payment was due but also what was due and when it became due. In my judgment the latter is the better view, more in accord with the basic principle and clearly expressed by Goff J in the passage I have quoted from BP v Hunt. I would add that in the case of War Risks insurance there is, I think, and as Mr Gaisman submitted, often likely to be particular reason not to permit delays in quantification to affect interest payments as insurers must be taken to appreciate that such delays may be an inevitable consequence of losses arising from the risks they are insuring.

(4) The application of these principles may be tempered by re-phrasing the question as one in terms of when the claimant could reasonably and commercially have expected to be paid. But that has never been applied to extend the starting date beyond the date when a reasonable investigation would have been completed, even if it would have resulted in a decision to resist the claim, and even then it has been used substantially in...

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