Habib Bank Ltd. v Dawood

The rule against recovering sums accruing after issue is generally a rule of practice, not an inflexible rule of law. The court may permit an amendment to plead post-writ contractual interest, including interest claimed against a guarantor, whether sued as surety or principal debtor. Permission depends on the overriding objective: the amendment should enable the real dispute to be adjudicated, prejudice should be compensable in costs, and the efficient administration of justice should not be significantly harmed. Lateness alone is not decisive. Where the lower court exercised its discretion on an erroneous legal basis, the appellate court may exercise the discretion afresh. An amendment may be allowed while interest remains unresolved, particularly where the opposing party suffers no material prejudice beyond paying the contractual sum.

Habib Bank sought sums under a guarantee signed by Mohammed Ali Dawood securing Barry McColgan's obligations, subject to a principal limit of £300,000 plus interest and charges. After prolonged proceedings, the High Court entered judgment for the principal sum and later refused permission to amend the claim to include contractual compound interest, while allowing statutory interest for a shorter period. The bank then issued a second action for compound interest. That action was struck out on the basis that the claim should have been brought in the first proceedings. The bank appealed both decisions. It abandoned its argument that the original writ already claimed compound interest and challenged the refusal to amend and the dismissal of the second action. The central issue was whether the amendment should have been permitted.

1. Disposition. The first appeal was allowed with costs. Permission was granted to amend the statement of claim, and judgment was given for compound interest of £147,607.51. The second appeal was adjourned sine die.
2. Post-writ contractual interest. The judge was wrong to hold that the bank could claim accruing contractual interest only by treating the guarantor as a principal debtor. A claim for post-writ contractual interest may be made against a guarantor whether the guarantor is sued as surety or as principal debtor.
3. The rule that a claimant cannot recover for a cause of action accruing after issue is a rule of practice rather than law and may be departed from where justice requires. This approach was supported by Toepfer v Cremer [1975] 2 Lloyd's Rep 118, and by later decisions including Hendry v Chartsearch Ltd [1998] CLC 1382 and Maridive and Oil Services (SAE) v CNA Insurance Co (Europe) Ltd [2002] EWCA Civ 369.
4. Amendment principles. Applying the principles summarised in Cobbold v London Borough of Greenwich, amendments should generally be allowed so that the real dispute can be adjudicated where prejudice can be compensated in costs and the efficient administration of justice is not significantly harmed. The judge's discretion had been exercised on a wrong legal basis, so the Court of Appeal exercised it afresh.
5. The amendment was late, but it was sought before any relevant final judgment on interest. Questions of interest remained live until judgment was fully entered on 29 April 2003. The only identified prejudice was the possibility that the defendant might have sought an earlier trial, which was too remote to justify refusal. The formal amendment and the calculations could be dealt with by the Court of Appeal without remittal. The judgment and calculation were to be served on the defendant, and the order was not to be drawn up until 15 November to allow an application disputing the calculations.

1. Court of Appeal (Civil Division): On 7 October 2004 the first appeal was allowed with costs. Permission to amend was granted and judgment was entered for compound interest. The second appeal was adjourned sine die.
2. High Court of Justice, Queen's Bench Division, Mercantile List: His Honour Judge Hegarty QC gave judgment on liability on 30 January 2002, refused permission to amend for contractual compound interest in a judgment dated 20 November 2002, and later struck out the second action on 20 December 2003.