Fiona Trust & Holding Corporation v Privalov

When damages require assessment of a hypothetical investment return, the court may adopt a liberal but fair approach where precise calculation is impossible. The court should avoid speculative reliance on one comparator and may select a fair figure within the evidential range. Amounts which would have been required to fund other transactions are excluded from the hypothetical investment fund. Agreed contractual or judgment-interest arrangements may be applied to the resulting damages.

Following an earlier judgment in the same proceedings, the parties were unable to agree the damages payable to the defendants. The remaining issues concerned the amount of hypothetical resale proceeds that would have been available for investment with Wegelin, the appropriate rate of return on those proceeds, and interest.

The court was required to quantify the defendants’ loss by determining what funds would notionally have been available for investment and what return those funds would probably have generated between February 2009 and December 2010.

1. The parties’ experts agreed that the total cost of the defendants’ newbuilding programme was US $556.82 million. The court accepted that a shortfall of US $99.02 million would have been funded from earlier resale proceeds used to meet delivery instalments on later vessels. Those sums would therefore not have been available for investment. The appropriate notional resale proceeds were US $552.16 million.
2. The evidence showed that comparable accounts had earned returns of approximately 3% and 7% over the relevant period. It was impossible to determine precisely how the hypothetical resale proceeds would have been invested. Applying the liberal but fair approach identified in the earlier judgment, the court selected the midpoint of 5% rather than adopting either comparator wholesale.
3. Applying that rate produced an investment return of US $27.61 million. After accounting for the profit on the newbuildings, sums actually earned, and the return not earned on Wegelin funds, the defendants’ damages were US $59.8 million.
4. It was agreed that pre-judgment interest would run from 18 December 2010 at three-month LIBOR plus 2.5%, compounded quarterly. Post-judgment interest would continue at the same rate on a simple-interest basis.

The judgment followed the court’s earlier merits judgment in the same proceedings, [2016] EWHC 2163 (Comm). No appeal history is stated.