Granville Technology Group Limited (in liquidation) & Ors v LG Display Co Limited & Anor

The equitable jurisdiction to award compound interest remains confined to its established special categories. Under the fraud category, the defendant must have obtained and retained a fund belonging to the claimant and used, or be deemed to have used, it for the defendant’s benefit. The jurisdiction is restitutionary. It does not arise merely because the defendant acted intentionally, dishonestly or fraudulently.

Compound interest may instead be recovered as common law damages where actual interest loss caused by a tort or breach of contract is pleaded and proved, subject to ordinary principles of causation, remoteness and mitigation. A claimant that suffered no such loss cannot use equity to obtain compound interest on compensatory damages. Civil damages for breach of competition law compensate proved loss; they do not require the wrongdoer to disgorge profits.

The claimant computer manufacturers sought follow-on damages arising from a price-fixing cartel affecting liquid crystal display panels. They claimed compound interest for periods before and after entering administration. They accepted that no borrowing interest accrued after administration and therefore that no post-insolvency interest loss could be proved under the common law principles governing damages.

Adrian Beltrami KC, sitting as a judge of the High Court, struck out the post-insolvency claim and refused permission to amend the particulars of claim: [2022] EWHC 3271 (Comm). The claimants appealed. They argued that intentional price-fixing and its deliberate concealment constituted equitable fraud and that the defendants had financially benefited from the cartel.

The central issue was whether equity could award compound interest when the defendants had not obtained or retained money belonging to the claimants and the claim itself sought compensation rather than restitution.

1. Appeal dismissed. The post-insolvency claim for compound interest in equity had no prospect of success. The proposed amendment did not overcome its fundamental defects. Males LJ gave the judgment, with which Whipple and Bean LJJ agreed.

2. An application for strike-out or summary judgment presenting a self-contained question of law may properly be determined where the court has the necessary evidence, no disputed factual findings are required and determination serves the interests of justice. The equitable-interest issue met those conditions.

3. The equitable jurisdiction described in President of India v La Pintada Compania Navigacion SA [1985] AC 104 is limited to two special categories: money obtained and retained by fraud, and money withheld or misapplied by a trustee or other fiduciary. Its historical purpose is restitutionary. It restores the claimant’s property and the profits earned, presumed to have been earned, or properly attributable to the wrongdoer’s use of that property.

4. The fraud category therefore requires the wrongdoer to have obtained and retained a fund belonging to the claimant and to have used, or be deemed to have used, that fund for the wrongdoer’s benefit. Compound interest is not awarded merely because conduct was serious, intentional, dishonest or fraudulent. Nor is its purpose punishment or deterrence. The analysis in Black v Davies [2005] EWCA Civ 531, although obiter, was correct.

5. The defendants had not obtained or retained the claimants’ money. The pleaded losses did not correspond to any benefit obtained by the defendants or the cartel. The action was a conventional tort claim for compensation for breach of statutory duty, not a restitutionary claim or an account of profits. Competition-law damages compensate victims for proved loss, no more and no less.

6. Under Sempra Metals Ltd v Inland Revenue Commissioners [2007] UKHL 34, compound interest is recoverable as common law damages where actual interest loss is pleaded and proved, subject to ordinary rules including causation, remoteness and mitigation. That supported the arguable pre-insolvency claim. It could not support the post-insolvency claim because the claimants accepted that they suffered no such loss after administration.

7. The claimants could seek discretionary simple interest under section 35A of the Senior Courts Act 1981. Whether intentional participation in a price-fixing cartel amounted to equitable fraud was left undecided because it could not affect the result.

1. Court of Appeal (Civil Division): By [2023] EWCA Civ 980, unanimously dismissed the claimants’ appeal and upheld the strike-out of the post-insolvency claim for compound interest and the refusal of permission to amend.
2. High Court, Commercial Court: Adrian Beltrami KC struck out the post-insolvency claim for compound interest and refused permission to amend because the defendants had not obtained and retained a relevant fund by fraud: [2022] EWHC 3271 (Comm).