Hackney Empire Ltd v Aviva Insurance UK Ltd

Interest on damages normally runs from the date the claimant was deprived of the money, which may be later than accrual of the cause of action. A claimant’s delay justifies withholding or reducing interest only where it is truly exceptional and inexcusable. The court may nevertheless take the extent of delay into account when setting the rate. The assessment is broad-brush. The court should consider the claimant’s class and typical financial characteristics, rather than assume that every claimant would borrow at commercial rates. A charity funded mainly by grants, donations and interest-free loans should not automatically receive a commercial borrowing rate, but need not be limited to reimbursement of interest actually paid.

The judgment concerned interest following the claimant’s successful claim under a bond securing a building contractor’s performance. The contractor had entered administration before completing refurbishment works. The principal judgment had been handed down on 21 September 2011, and the defendant’s appeal was dismissed on 19 December 2012. The remaining issues were the start date, duration and rate of interest.

The claimant sought interest on the bond sum for nearly ten years. The defendant relied on delay in bringing and pursuing the claim and argued for a lower rate. The central questions were when the claimant suffered the relevant loss, whether its delay should affect the award, and what rate fairly reflected its circumstances.

The court determined the three outstanding issues concerning interest.

1. Start date. Interest did not run automatically from the date on which the cause of action accrued. Although the cause of action may have accrued on or before 1 July 2003, the relevant loss arose when the defendant failed to pay the bond after receiving the necessary demand. The appropriate start date was three weeks after the demand, namely 29 March 2004 (paras [10]–[14]).
2. Delay. Unreasonable delay in commencing or prosecuting proceedings may justify withholding interest for a period or reducing the rate. Delay should be assessed realistically, allowing for ordinary litigation lulls and practical difficulties. The threshold for withholding interest was truly exceptional and inexcusable delay. The claimant’s delay did not meet that threshold, although its extent remained relevant to the rate (paras [15]–[29]).
3. Rate. The assessment required a broad-brush and proportionate approach. The court should consider the class of litigant to which the claimant belonged and treat it as a typical member of that class, while not ignoring individual characteristics. The claimant was a charity funded mainly by grants, donations and interest-free loans, with more limited commercial borrowing. It was therefore wrong to treat it as a medium-sized commercial company that would replace every shortfall by borrowing at market rates (paras [30]–[39]).
4. Order. The appropriate rate from 29 March 2004 until payment of the principal sum was 2% above Barclays base rate (paras [40]–[41]).

The principal judgment was handed down on 21 September 2011. The defendant obtained permission to appeal, but the appeal was dismissed by the Court of Appeal on 19 December 2012. This judgment determined the outstanding interest issues.