Claymore Services Ltd v Nautilus Properties Ltd

Under section 35A of the Supreme Court Act 1981, interest on a restitutionary quantum meruit claim for building work should not necessarily run from handover. It should ordinarily run when the contractor has supplied a final account and the owner has had a reasonable opportunity to assess the sum due.

Unreasonable delay in commencing or pursuing proceedings may justify either disallowing interest for a period or reducing its rate. The assessment must be realistic in a commercial dispute and must account for the defendant’s continued use of the money. In a commercial claim, interest should reflect the ordinary cost of borrowing for a claimant of the relevant general type, rather than the fixed statutory judgment rate.

Claymore Services Ltd, a building contractor, carried out refurbishment works for Nautilus Properties Ltd. The parties intended to enter a formal building contract but did not do so. Claymore’s claim was therefore advanced on a restitutionary quantum meruit basis.

Shortly before trial, the parties settled the principal claim and counterclaim for £750,000, leaving only interest under section 35A of the Supreme Court Act 1981. The issues were when interest should begin, whether Claymore’s conduct warranted an adjustment for delay, and the appropriate rate.

1. Judgment was given for Claymore on its interest claim. The principal claim had been settled. Jackson J determined the remaining discretionary interest under section 35A of the Supreme Court Act 1981.

2. The settled claim was a restitutionary quantum meruit claim. Although a demand was unnecessary to complete the cause of action, interest should not run before the amount due was ascertainable. The appropriate starting point was when the contractor supplied its final account and the owner had a reasonable time to assess it. This approach was consistent with the reasoning in BP Exploration Co (Libya) Ltd v Hunt (No 2), [1979] 1 WLR 783.

3. Nautilus ought to have paid £145,000 on 16 April 2003, after its quantity surveyor had identified that minimum further sum. It ought to have paid the remaining £605,000 on 2 June 2004, three months after Claymore supplied its full final account.

4. Following the guidance reviewed in Birkett v Hayes, [1982] 1 WLR 816, and the other cited authorities, unreasonable delay may be reflected by either withholding interest for a period or reducing its rate. The court must make a realistic assessment in commercial litigation and consider that the defendant has retained use of the money. Claymore acted reasonably in adjudicating, but unreasonably pursued enforcement after the adjudicator had found no relevant contract. The resulting unreasonable delay was one year, from 21 December 2004 to 21 December 2005. Interest was therefore reduced by 50% during that period.

5. The fixed rate in section 17 of the Judgments Act 1838 was unsuitable for this commercial dispute. A commercial rate should compensate for the ordinary cost of borrowing by a claimant with Claymore’s general attributes. The evidence justified 2% above base rate. Proposed contractual late-payment rates were not binding, but had slight relevance to the discretionary assessment.

6. Nautilus was ordered to pay interest at 2% above base rate on £145,000 from 16 April 2003 and on £605,000 from 2 June 2004, in each case until payment of the settlement sum on 8 March 2007. The rate was halved for the identified 12-month period. Permission to appeal was refused to both parties.

High Court (Technology and Construction Court): First instance determination of the remaining interest issue after settlement of the substantive quantum meruit claim.

An adjudicator had found that there was no relevant construction contract and nevertheless made an award. Claymore discontinued its subsequent enforcement proceedings. The present proceedings were then commenced after the Protocol process.