UK: Insurance And Reinsurance Weekly Update - 6th November 2012

Last Updated: 14 November 2012
Article by Nigel Brook

Persimmon Homes v Hall Aggregates

Discretionary interest rates following an award of damages

This case involved a commercial dispute between two large companies. The claimant was awarded damages and a dispute arose as to the appropriate rate of discretionary interest which it should be entitled to pursuant to section 35A of the Senior Courts Act 1981 (ie interest up to the date of judgment). Ramsey J decided the following points:

(1) The appropriate rate of interest should be 2% over base rate (ie 2.5%). Although there has, in the past, been a presumption of 1% over base, the judge said that this presumption should apply only up until 5 February 2009, when the base rate dropped from 1.5% to 1%. From 5 February 2009 onwards, the appropriate rate of interest should remain at 2.5%. His finding reflects a provision in the current Commercial Court Guide that there should no longer be a presumption that base rate plus 1% represents the appropriate measure of a commercial rate of interest (see para J14.1).

(2) There is caselaw preceding the CPR in which the court, exercising its discretion under section 35A, awarded interest at the Judgments Act rate of 8%. Ramsey J held that those cases did not support the use of that rate in the current climate of lower interest rates.

(3) CPR r40.8 allows the court to award interest interest at the Judgments Act rate before the date on which judgment is given. The claimant sought to argue that it would be appropriate to do so in this case because judgment was initially given for damages to be assessed and that assessment did not take place for several years. Ramsey J rejected that argument: "I do not consider that the fact there has been judgment for liability and a subsequent assessment of damages makes it appropriate for the court to impose Judgments Act interest where, as in this case, that rate would not otherwise be appropriate under section 35A".

4) The judge also rejected the argument that there should be a disallowance of interest in this case on the basis of unreasonable delay by the claimant in commencing and prosecuting the proceedings. No criticism could be made of the claimant's delay in formulating and making a claim (even though that delay was said to have lasted for 4 years and was not explained by the claimant). Furthermore, although the claimant could have pursued the assessment of damages before an appeal on liability was heard by the Court of Appeal, it could not be criticised for choosing not to do so.

COMMENT: Weekly Update 23/12 reported the case of F&C Alternative Investments v Barthelemy, in which the Court of Appeal discussed discretionary interest and Tomlinson LJ commented that he was not aware of any suggestion that the conventional uplift of 1% over base rate had become inappropriate in respect of "the usual run of corporate borrowers". However, the courts have for some time now been considering the impact which the recent economic downturn, and the fall in the base rate, should have on discretionary interest rates. This case will therefore be welcomed by large corporate claimants who have seen the value of discretionary interest awards fall in recent years.

ADS Aerospace v EMS Global

Whether defendant had been unreasonable in refusing to mediate

It is well-established that a court may depart from the normal rule that the winner of proceedings gets its costs where the winner has acted unreasonably in refusing to agree to mediate. In Halsey v Milton Keynes [2004] the Court of Appeal held that if a party reasonably believes that he/she has a watertight case, that may be sufficient justification for refusing to mediate.

In this case, the claimant sought to claim over USD 16million from the defendant but it lost on all the key issues in the case. It sought to argue that it should not be ordered to pay the defendant's costs because the defendant had unreasonably refused to mediate. Akenhead J held that the defendant had not acted unreasonably for the following reasons:

(a) The claimant had given every appearance that it strongly believed it was entitled to a substantial judgment and would not be interested in a nuisance payment.

(b) The defendant had been prepared to engage in without prejudice discussions and the judge had no doubt that these would probably have achieved the same result as a mediation would have done (notwithstanding that a good mediator might have been able to "work on" the claimant to accept a nuisance offer). WP discussions would have been quicker and cheaper.

(c) The claimant had made its offer to mediate late - less than 20 working days before trial.

Aeroflot v Berezovsky & Anor

Enforcing a foreign judgment and the principle of finality

The claimant sought to enforce a Russian judgment in England. Since there is no treaty or other legislation relating to enforcement of a Russian judgment, the common law applies. Floyd J considered the following issues:

(1) The claimant had to show that the Russian court was a court of competent jurisdiction because the defendant (a) was physically present in Russia "at the time of suit" or (b) had submitted to its jurisdiction. In this case, there had clearly been no submission and the defendant had not been present in Russia when the criminal proceedings were commenced (in Russia, there is no sharp division between criminal and civil matters). The judge rejected an argument that it was sufficient that the defendant had been present in the country when the criminal investigation had begun. The investigations might never have resulted in proceedings and, crucially, they did not invest a Russian court with the power to summon the defendant.

(2) An English court will not enforce a foreign judgment which is contrary to public policy or the European Convention on Human Rights. The judge held that the Russian judgment in this case breached the principle of finality (which is a rule of English public policy). That was because the judgment which the claimant was trying to enforce was the second judgment from the Russian courts. It reopened an earlier judgment as to the amount of damages payable by the defendant. Accordingly, the Russian judgment was not enforceable in England.

COMMENT: This case is noteworthy because it is quite rare for an English court to refuse enforcement on the ground of breach of public policy - a ground which must be interpreted narrowly. Previous examples of cases falling under this defence to enforcement have tended to arise out of (in the words of Briggs and Rees) more "colourful" circumstances such as an order to pay damages for breach of a contract to sell drugs.

Procter & Gamble v Svenska & Anor

Whether court should imply a fixed exchange rate and Rainy Sky v Kookmin considered

The first instance decision in this case was reported in Weekly Update 10/12. The judge refused to imply into a contract an agreement a fixed exchange rate (the contract provided for invoices to be in Euros but payment to be in sterling). The Court of Appeal has now dismissed the appeal from that decision.

The key issue was what the contract, construed in its commercial context, would reasonably be understood to mean. An annotation at the foot of the document (providing for an £/Euro exchange rate of 1.49) was intended to explain the rate used for the purpose of the budget and if the parties had intended to use that rate for payment, "it would have been a simple matter to express the prices of goods supplied sterling". In any event, the reason for choosing Euros was irrelevant: "it is enough that it was the currency chosen by the parties". Rix LJ added that there is a deep-rooted principle that a difference between currency of account and currency of payment leads to an exchange rate at the time of payment. If that principle is to be dislodged, it must be done clearly.

Moore-Bick LJ also commented on the application of Rainy Sky v Kookmin (see Weekly Update 39/11). Where a clause is capable of two meanings, he agreed that the court should prefer the interpretation which better accords with the overall objective of the contract or with good commercial sense. However, the starting point must be the words used by the parties and "in the case of a carefully drafted agreement of the present kind the court must take care not to fall into the trap of re-writing the contract in order to produce what it considers to be a more reasonable meaning". Here, there was no ambiguity of meaning.

Davies & Ors v Secretary of State for Energy

Limitation periods and date of knowledge of personal injury - of possible interest to employers' liability insurers

The claimants (8 representative miners) appealed against a decision that their claim was time-barred. The judge had refused to exercise his discretion under section 33 of the Limitation Act 1980 ("the Act") to disapply the statutory time limit. One of the issues in the appeal was whether the judge ought to have given greater weight to the argument that the principal reason for the delay had been that the claimants were waiting to be advised by their unions and that "one should not visit on the individual claimants the shortcomings of their unions". The Court of Appeal found that argument unconvincing.

It had been unreasonable for the claimants to do nothing to investigate their claims (eg seeking medical, legal or other expert advice). This was not a case where there had been some major scientific breakthrough or development which had changed the landscape against which the ability to claim fell to be assessed. To acquire knowledge under section 14 of the Act, a claimant must know (or ought reasonably to know) that he has suffered an injury significant enough to justify bringing a claim because of the identifiable acts of an identifiable person. What is not required is an appreciation that there is in consequence a cause of action. The fact that a claimant puts himself "into the hands of his union" does not justify him having a special privileged position as compared with other claimants.

Rubin & Anor v Eurofinance

Whether English court should enforce decision of US bankruptcy court

The first instance and Court of Appeal decisions in this case were reported in Weekly Updates 32/09 and 30/10. Broadly, receivers sought to enforce a US bankruptcy court decision in the English courts. Ordinarily, a fresh action would have to be brought at common law in England to enforce a US judgment. At first instance, it was held that there was no special rule for a bankruptcy decision but the Court of Appeal held that the ordinary rules of enforcing foreign judgments do not apply to bankruptcy proceedings (because of the Cross-Border Insolvency Regulations 2006).

The Supreme Court has now allowed an appeal from that decision. The ordinary rules at common law which apply to the enforcement of foreign judgments also cover judgments in avoidance proceedings in insolvency. As a matter of policy, there should not be a more liberal rule for avoidance judgments in the interests of the universality of bankruptcy or similar procedures. It would be for Parliament, and not the courts, to change that position.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Nigel Brook
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