Harlequin Property (SVG) Ltd & Anr v Wilkins Kennedy

[2016] EWHC 3233 (TCC)

One of the issues thrown up by this case was the question of the applicable rate of interest. The Claimant had been found to have made certain overpayments which it was entitled to recover. Mr Justice Coulson was referred to a number of cases  including Hunt v Optima (Cambridge) Ltd [2013] EWHC 1121 (TCC). The Judge noted that all the cases made it clear that :

“the object of an award of interest is to compensate a claimant for being kept out of the money that should have been paid to him as damages”.

In the case here, the Judge concluded that:

(i) This was not a case in which interest was claimed as special damages. The claimant did not borrow any money so it did not incur any interest charges or suffer any actual loss in consequence of the overpayments.

(ii) In fact, the attempt to claim interest as general damages was an “unsubtle attempt to create a windfall for the claimant by recovering interest at a rate which it never incurred and would never have incurred, even if there had been no overpayments”.

(iii) The claimant did not borrow money and, on the balance of probabilities, it would never have been lent any money because of its complete lack of financial security and credit-worthiness. Therefore it would be “wholly wrong in principle” for the claimant to try and increase the recoverable interest rate.

(iv) Any comparison with a hypothetical company who may have been able to borrow money was artificial and unhelpful.

(v) The rate of interest should reflect “the real cost of borrowing incurred”. The real cost of borrowing at the relevant period was low and he right approach was to award a percentage over the base rate.

Accordingly, Mr Justice Coulson concluded that the real cost of borrowing in the case here would be reflected by a rate of 1.5% above base for the relevant period. This reflected the “commercial reality of borrowing and investing at the relevant time”, yet did not reward the claimant.

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