Black & Ors v Davies

A court has no jurisdiction to award compound interest on a common-law judgment for damages for deceit. The equitable jurisdiction to award compound interest is confined to recognised equitable situations, such as cases involving a proprietary claim, an account, a trust or fiduciary duty, or money obtained and retained by fraud where an equitable remedy is available. It does not extend generally to compensatory damages for deceit. Any further extension of the jurisdiction is a matter for Parliament. The court nevertheless indicated that, if jurisdiction had existed, commercially active claimants would ordinarily be presumed to have obtained normal commercial benefit from money lost through the fraud, unless the defendant pleaded and proved otherwise.

The claimants had succeeded at trial before Mr Justice Buckley on a claim in deceit arising from fraudulent representations concerning copper futures trading. The judgment sum was expected to be approximately US$20 million. A further hearing was directed to determine whether interest on that judgment sum should be calculated on a simple or compound basis.

The parties agreed that the issues were whether the court had jurisdiction to award compound interest on damages for deceit and, if so, whether that discretion should be exercised on the facts. Mr Justice McCombe was not required to decide the separate issue of interest included in the judgment sum itself.

1. Jurisdiction. The court held that it had no jurisdiction to award compound interest on a judgment for damages for deceit. At common law, interest was unavailable as damages on a money claim, while section 35 A of the Supreme Court Act 1981 authorised only simple interest. The equitable jurisdiction to award compound interest did not constitute a general jurisdiction applicable to every case involving fraud.
2. The court explained that Johnson v R [1904] AC 817 was confined to money obtained and retained by fraud, where an equitable remedy such as an account was likely to coexist. It did not support compound interest on ordinary common-law damages for deceit. The authorities concerning trusts, fiduciaries, proprietary claims and accounts were materially different.
3. The reasoning in Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 supported refusing a judicial extension of the jurisdiction, particularly since Parliament had considered the award of interest and had not authorised compound interest on common-law claims. The preponderance of authority therefore required the claim to fail.
4. Alternative discretion. If jurisdiction had existed, the court would have awarded compound interest with yearly rests. The commercially active claimants would be presumed to have applied the money to normal commercial advantage. The defendant would have had to plead and prove that they would have lost the money or obtained less than an ordinary commercial return. This alternative reasoning was unnecessary to the decision.
5. The application for compound interest was accordingly refused.

The judgment followed a trial before Mr Justice Buckley, whose judgment was handed down on 29 April 2004. The present hearing was directed to resolve the separate question whether interest on the judgment sum should be simple or compound. Permission to appeal on other matters had been given, but no appeal was determined in this judgment.