Lonestar Communications Corporation LLC v Daniel Kaye & Ors

For United States dollar awards in the Commercial Court, the default rate of interest should be US Prime. The default applies irrespective of the claimant’s place of operations or the commercial sector. It may be displaced by evidence showing that another rate better reflects the claimant’s borrowing cost.

There is no automatic uplift above US Prime. An uplift may be justified by the claimant’s general characteristics, but a higher uplift will usually require evidence. In exercising its costs discretion, the court may take a Calderbank offer and the costs order ultimately made into account. A successful party whose quantum claim was substantially excessive may receive only a reduced proportion of its pre-offer costs.

This was a first-instance consequential judgment following the court’s merits judgment, [2023] EWHC 421 (Comm). Lonestar had recovered damages and interest of about US$5.4 million from Orange Liberia.

The court had to determine the appropriate interest rate on the United States dollar award, the costs consequences of two without-prejudice-save-as-to-costs offers made by Orange Liberia, and the allocation of costs and contribution between the defendants. The central questions were whether US Prime or six-month US dollar LIBOR was the proper starting rate, whether any uplift was justified, and what costs consequences followed from Lonestar’s limited success on quantum and its failure to accept the first offer.

1. Consequential orders made. Interest on the United States dollar award was ordered at US Prime without an uplift. The court made the stated costs orders on the standard basis and ordered contribution between the defendants in the same proportions as the damages contribution order.

2. The appropriate default rate for United States dollar awards in the Commercial Court is US Prime. That rule applies regardless of the claimant’s operations or whether the claim is maritime. US Prime reflects commercial borrowing more closely than LIBOR, which is an interbank rate and is being discontinued. The default remains rebuttable on evidence.

3. US Prime is the rate offered to the most creditworthy customers, but there should be no automatic premium above it. The claimant’s general characteristics may show that it would borrow at a higher rate, and may justify an uplift of one or two per cent. Larger uplifts will generally require evidence. Lonestar’s association with a substantial multinational group did not justify assuming a higher borrowing cost.

4. Applying Civil Procedure Rules 1998, the court treated Lonestar as the successful party before the effective offer but reduced its recovery to 40 per cent of its costs against Orange Liberia. Its recovery was only about 10 per cent of the sum claimed. Its speculative and disproportionate quantum case had driven excessive costs. Those matters did not, however, justify a reverse costs order because Lonestar had obtained a substantial money judgment.

5. The first without-prejudice-save-as-to-costs offer would have left Lonestar economically better off. In considering it under Civil Procedure Rules 1998, the court could take account of the costs order ultimately made. It rejected a reduction of interest after the offer, since Orange Liberia had retained use of the offered money. Lonestar was to pay Orange Liberia’s costs from 6 December 2021, but not on an indemnity basis: the relevant conduct had already been reflected in the reduction of Lonestar’s pre-offer costs.

This first-instance consequential decision followed the judge’s merits judgment [2023] EWHC 421 (Comm). No appeal history is stated.