Sycamore Bidco Ltd v Sean Breslin and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Mann |
| Judgment Date | 14 February 2013 |
| Neutral Citation | [2013] EWHC 174 (Ch) |
| Court | Chancery Division |
| Date | 14 February 2013 |
| Docket Number | Case No: HC10C03460 |
[2013] EWHC 174 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
London, EC4A 1NL
Mr Justice Mann
Case No: HC10C03460
Adam Smith (instructed by Addleshaw Goddard LLP) for the Claimant
Andrew Neish QC (instructed by PriceWaterhouseCoopers Legal LLP) for the Defendants
Hearing date: 21 st January 2013
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
Introduction
In my two previous judgments in this case I awarded the claimant £5.25m by way of damages for breach of warranty. The next issue that arises in this case is as to interest on that sum. The only thing that is common ground in relation to that interest is the amount of the principal (now that I have decided it) and the fact that such interest should be paid. Beyond that not much else is agreed — there are disputes as to the correct starting date, end date and rate. Unfortunately substantial sums of money turn on the debates that have arisen. If the claimant is right in its highest case then the interest on the judgment sum would be approximately £1.31m; if the defendants are right to the fullest extent of their argument, then the aggregate interest for which they would be liable is about £81,000. It is unnecessary for the purposes of this debate and this hearing to distinguish between the respective positions of the defendants.
The cases of the parties
So far as the starting date is concerned, the claimant contends for what it says is the normal starting date, that is to say the date the cause of action accrued. That date is the date of completion of the SPA — 9 th November 2007. It disputes that there is any reason for departing from that. So far as the end date is concerned, it says that the relevant "judgment" for the purposes of section 35A Senior Courts Act 1981 and section 17 of the Judgments Act 1838 is the date on which I handed down the second of my two judgments, on the "upper figure" point — 15 th January 2013. On that date the section 35A interest stops and the Judgments Act interest starts.
So far as rates are concerned, the claimant argues for a rate of 3% above base rate as being justifiable on the facts as the rate applicable to companies of the type of Sycamore, alternatively applicable to SMEs (small and medium enterprises). Alternatively, if the presumed rate of 1% would otherwise be applicable, the higher rate of base rate plus 2% (which means in substance 2.5% as an overall rate) should be applied from 5 th February 2009, which is when base rate slumped to 1%, followed by a further fall to 0.5% a month later.
The defendants contend for a variety of later commencement dates and end dates. The various permutations are as follows:
(i) The start date should be 16 th January 2012, which is the date when they say they had their first opportunity fully to consider a properly formulated quantum claim, which was first submitted by the claimant on 22 nd December 2012.
(ii) Alternatively the start date should be 24 th September, 2010, which is the date of the letter before action, before which the warrantors say they did not know there was a claim.
(iii) In the further alternative, if the start date is the date of accrual of the cause of action, interest should not be awarded for the period between the letter before action and 16 th January 2012 because the quantum of the claim was not properly formulated and communicated.
(iv) In the yet further alternative, there should be no interest between a date which is said to be the refusal to provide further information on quantum (in the form of an inadequate response to a request for particulars) and the date when the quantum information was supplied in an expert's report (22 nd December 2011).
(v) If there is not to be any disallowance of any period under the foregoing claims, the rate of interest should be half of what it would otherwise be for the period from 9 th November 2007 (completion) and mid-January 2012 (acquisition of understanding of the quantum case); alternatively for the period between the letter before action (24 th September 2010) and mid-January 2012 (say 16th January).
(vi) The end date for section 35A interest (and the commencement date for Judgments Act interest) should be the date when all consequential matters are finalised and an overall order made. That has not yet arrived, because after the delivery of this judgment there is still a debate to be had on costs and permission to appeal. The debate on costs apparently cannot take place until interest has been dealt with.
(vii) Subject to the foregoing, any interest should be at the Commercial Court presumed rate of 1% over base rate. The factors relied on by the claimant do not justify any departure from that rate.
These issues raise questions of law and fact which require consideration in some detail. It might be thought that this exercise, which took the best part of a day in court, justifies the broad brush approach of a standard, presumed rate so as to avoid satellite litigation, as suggested in some of the authorities. However, the issues have been raised, and a lot of money is involved in this point, so it is necessary for me to deal with the issues. In any event, the thrust of the authorities and other material might be thought to be acknowledging that a standard rate, at least in current interest rate conditions, may not be as appropriate as it was and attention will have to be given to detail in appropriate cases.
The principles — date
As both parties before me essentially agreed, the starting point for a consideration of the principles is the judgment of Goff J in BP Exploration Co (Libya) Ltd v Hunt [1979] 1 WLR 783. He said:
"… The fundamental principle is that interest is not awarded as a punishment, but simply because the plaintiff has been deprived of the use of the money which was due to him."
He then quoted from General Tire & Rubber Co v Firestone Tire & Rubber Co Ltd [1975] 1 WLR 819:
"… [Interest] is awarded because it is only just that the person who has been deprived of the use of the money due to him should be paid interest on that money for the period during which he was deprived of its enjoyment.… [The defendants] enjoyed the use of the money during the whole of this time and in law it is deemed to have been due to them from the beginning of that period." [Lord Salmon]
Then he cited from the speech of Lord Wilberforce:
"Where a wrongdoer has failed to pay money which he should have paid, justice, in principle, requires that he should pay interest over the period for which he has withheld the money."
And then Goff J went on:
"It is for this reason that interest will generally run from the date of accrual of the cause of action in respect of money then due or loss which then accrues; and in respect of loss which accrues at a date between accrual of the cause of action and judgment, from such date.…
But the power to award interest is discretionary, and there is certainly no rule that interest will invariably run from the date of loss. It is no part of my task to attempt to define the circumstances in which the court will depart from the fundamental principle; indeed, since the discretion to award interest is unfettered, it would be improper to do so. There appear, however, to be three main groups of cases in which, in the exercise of its discretion, the court may depart from the fundamental principle.
The first group of cases concerns the position of the defendant. The court may consider, in the light of all the circumstances, that his position was such that it would not be just to make the defendant pay interest from the date of loss. It may do so if, for example, the circumstances were such that the defendant neither knew, nor reasonably could have been expected to know, that the plaintiff was likely to make a claim, and so was in no position either to tender payment, or even to make provision for payment if the money should be found due. In such a case, the court may in its discretion only grant interest from the date of the plaintiff's claim, or even from such a date as will allow reasonable investigation of the claim. Again, to quote from Lord Wilberforce's speech in the Firestone case, at page 836:
'In a commercial setting, it would be proper to take account of the manner in which and the time at which persons acting honestly and reasonably would pay.'
On that principle, the majority of the House took account of a normal commercial practice under which royalties in respect of use before grant of a patent are not expected to be paid until grant, and so awarded interest only from the date of the grant. There are no doubt other examples.
The second group of cases concerns the conduct of the plaintiff. If, for example, the plaintiff has been guilty of unreasonable delay in prosecuting his claim, the court may decline to award interest for the full period from the date of loss. This may be to encourage plaintiffs to prosecute their claims with diligence, and also because such conduct may lull a defendant into a false sense of security, leaving him to think that the claim will not be pursued against him.…"
He went on to describe a third group, which is not said to be relevant to the present application, and went on:
"The basic principle is, however, that interest will be awarded from the date of loss. Furthermore, the mere fact that it is impossible for the defendants to quantify the sum due until judgment has been given will not generally preclude such an award.… There must have been many cases in the commercial court in which, although the quantum of damages...
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