Standard Chartered Bank v Ceylon Petroleum Corporation
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hamblen |
| Judgment Date | 01 August 2011 |
| Neutral Citation | [2011] EWHC 2094 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2009 FOLIO 375 |
| Date | 01 August 2011 |
[2011] EWHC 2094 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Hamblen
Case No: 2009 FOLIO 375
Mr R Dicker QC and Mr J Goldring (instructed by Linklaters LLP) for the Claimant
Mr A Malek QC, Mr C Freedman and Mr J MacDonald (instructed by Gibson & Co) for the Defendant
INTRODUCTION
This further judgment concerns the post-judgment interest payable to SCB.
The issues which arise are as follows:
(1) Should the post-judgment interest payable to SCB on the sum of $166,476,281 (the 'judgment sum') ordered to be paid in paragraph 1 of the Order of 11 July 2011 by 8 August 2011 be calculated by reference to:
(a) the rate under the Judgments Act 1838 (which is currently 8%);
(b) the US Prime Rate (which is currently 3.25%); or
(c) the contractual rate laid down by Section 9(h)(i)(1) of the Master Agreement (which is currently 1.63%)?
(2) Should the Judgments Act rate of interest payable on SCB's costs be postponed or apply from the date of Order?
THE RELEVANT LEGISLATION AND RULES OF COURT
Sections 17 and 18 of the Judgments Act (as amended) provide as follows:
"17 Judgment debts to carry interest.
(1) Every judgment debt shall carry interest at the rate of 8 pounds per centum per annum from such time as shall be prescribed by rules of court until the same shall be satisfied, and such interest may be levied under a writ of execution on such judgment.
(2) Rules of court may provide for the court to disallow all or part of any interest otherwise payable under subsection (1).
18 Decrees and orders of courts of equity, &c. to have effect of judgments.
All decrees and orders of courts of equity, and all rules of courts of common law whereby any sum of money, or any costs, charges, or expenses, shall be payable to any person, shall have the effect of judgments in the superior courts of common law, and the persons to whom any such monies, or costs, charges, or expenses, shall be payable, shall be deemed judgment creditors within the meaning of this Act; and all powers hereby given to the judges of the superior courts of common law with respect to matters depending in the same courts shall and may be exercised by courts of equity with respect to matters therein depending and all remedies hereby given to judgment creditors are in like manner given to persons to whom any monies, or costs, charges, or expenses, are by such orders or rules respectively directed to be paid."
Section 44A of the Administration of Justice Act 1970 (as amended), which came into force on 1 November 1996 following enactment of the Private International Law (Miscellaneous Provisions) Act 1996, provides:
"44A. Interest on judgment debts expressed in currencies other than sterling.
(1) Where a judgment is given for a sum expressed in a currency other than sterling and the judgment debt is one to which section 17 of the Judgments Act 1838 applies, the court may order that the interest rate applicable to the debt shall be such rate as the court thinks fit.
(2) Where the court makes such an order, section 17 of the Judgments Act 1838 shall have effect in relation to the judgment debt as if the rate specified in the order were substituted for the rate specified in that section."
Where the judgment is expressed in a currency other than sterling, the Court therefore has a discretion under s 44A of the AJA 1970 to vary the statutory rate.
CPR 40.8 deals with the date from which interest under the Judgments Act begins to run. It provides as follows:
"40.8 Time from which interest begins to run
(1) Where interest is payable on a judgment pursuant to section 17 of the Judgments Act 1838 … the interest shall begin to run from the date that judgment is given unless – (a) a rule in another Part or a practice direction makes different provision; or (b) the court orders otherwise.
(2) The court may order that interest shall begin to run from a date before the date that judgment is given".
INTEREST ON THE JUDGMENT SUM
The first question that arises is whether the rates and period of interest otherwise applicable under the Judgments Act should be altered because of SCB's contractual entitlement to interest under Section 9(h)(i)(1) of the Master Agreement, which provides (underlining added):
"If a party defaults in the performance of any payment obligation, it will, to the extent permitted by applicable law and subject to Section 6(c), pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as the overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment … at the Default Rate."
It is to be noted that the parties agreed that English law would apply, and that the English Courts would have non-exclusive jurisdiction: Section 13(a) and (b) of the Master Agreement.
As SCB submitted, there is no rule that interest under the Judgments Act is not payable, or the rate should be reduced, if interest is payable for the post-judgment period under a contract, whether or not the contract expressly provides for interest post-judgment.
The position contrasts with that applicable to discretionary awards of pre-judgment interest on debts or damages under Section 35A of the Senior Courts Act 1981. Section 35A(4) of the SCA makes plain that no interest can be awarded under that section for a pre-judgment period during which interest already runs. Section 35A(4) (set out in the White Book, Vol 2, p.2464) provides "Interest in respect of a debt shall not be awarded under this section for a period during which, for whatever reason, interest on the debt already runs". This means that, where the contract itself fixes interest, the court can only enforce that provision: its statutory power does not override the contractual provision, so that it cannot fix a different interest rate: see Chitty on Contracts (30th ed) paras. 26–177 and 26–182.
In relation to post-judgment interest I agree with SCB that the reason for the underlined provision in Section 9(h)(i)(1) is to preserve the innocent party's right to claim contractual interest following judgment rather than to cap the rate of interest to which it is entitled under the Judgments Act. As Lord Bingham explained in First National Bank v. D-G of Fair Trading [2002] 1 AC 481:
"3. The bank's stipulation that interest shall be charged until payment after as well as before any judgment, such obligation to be independent of and not to merge with the judgment, is readily explicable. At any rate since In re Sneyd; Ex p Fewings (1883) 25 Ch D 338, not challenged but accepted without demur by the House of Lords in Economic Life Assurance Society v Usborne [1902] AC 147, the understanding of lawyers in England has been as accurately summarised by the Court of Appeal at p 682 of the judgment under appeal:
"It is trite law in England that once a judgment is obtained under a loan agreement for a principal sum and judgment is entered, the contract merges in the judgment and the principal becomes owed under the judgment and not under the contract. If under the contract interest on any principal sum is due, absent special provisions the contract is considered...
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