Sabic UK Petrochemicals Ltd v Punj Lloyd Ltd

Statutory interest on damages for commercial loss is generally assessed by reference to the normal commercial rate at which the claimant would have had to borrow replacement funds. The assessment does not depend on whether the claimant was actually borrowing during the relevant period or was cash-rich. The court should not instead calculate the return the claimant might have earned by investing the money. Properly received bond monies are not themselves a debt or damages for the purposes of s 35A of the Senior Courts Act, and do not justify a contra-charge of interest.

The judgment concerned the quantum of statutory interest following the court’s main judgment, [2013] EWHC 2916 (TCC). SABIC had recovered sums representing costs incurred in completing works under an EPC contract and claimed interest from April 2009 at 2.5 per cent, with judgment interest thereafter.

PLL and Simon Carves challenged the calculation. The issues were whether interest should be excluded for SABIC personnel costs, reduced after SABIC ceased borrowing, or contra-charged by reference to bond monies received by SABIC.

1. Interest on personnel costs. The costs of SABIC personnel were recoverable because SABIC had deployed its own staff to work that departing Simon Carves staff would otherwise have performed. The costs were therefore non-productive from SABIC’s perspective, and interest was recoverable on them.
2. Rate of interest. The appropriate approach in a commercial case is to identify the rate at which the claimant would normally have borrowed money to replace funds wrongly withheld. That approach applies whether or not the claimant was actually funded by debt and whether or not it was cash-rich. The court should not assess the claimant’s actual investment return. The reasoning in BP Exploration Co (Libya) v Hunt (No 2) [1979] 1 WLR 783 and Tate & Lyle Distribution v GLC [1982] 1 WLR 149 was accepted. The normal commercial rate was adopted, consistently with Persimmon Homes v Hall Aggregates [2012] EWHC 2429 (TCC).
3. Bond monies. The bonds were properly called and the monies were correctly in SABIC’s hands. There was no logical basis for awarding interest to Simon Carves or for contra-charging interest as if the bonds had been wrongfully called. The monies had already been taken into account in SABIC’s calculation, so interest was claimed only from April 2009. In any event, the bond monies were not a debt or damages within s 35A of the Senior Courts Act.
4. SABIC was awarded £1,271,640 interest from April 2009 to judgment. Interest on the judgment sum ran from 10 October 2013 at the rate applicable under the Judgments Act 1838 until payment.