Commercial Disputes: Interest Awards After Trial

Commercial Disputes: Interest Awards After Trial

When might the court order enhanced rates of interest when a claimant’s offer to settle is rejected - but the claimant later achieves a greater award at trial?  A recent ruling has given important guidance for the parties in commercial disputes1. The specialist commercial litigation lawyers at Bahamas law firm Parris Whittaker are highly experienced in successfully acting for clients involving all kinds of commercial disputes.

This ruling is from the UK’s Court of Appeal which has important persuasive authority on the courts in The Bahamas.

What’s the background?

Between 1993 and 1996, 32 shipments of oil were made to the claimant.  However, the claimant started proceedings for the tort of deceit because the defendant’s predecessor had in fact supplied a blend of less quality crude oils which were misleadingly described.

The claimant made a Part 36 offer to settle (under the UK’s Civil Procedure Rules on which the Rules of the Supreme Court are based) in the sum of US$35m including costs and interests - but this was neither acknowledged or accepted by the defendant.

What was at issue?

Under the CPR, where a judgment against the defendant was at least as advantageous to the claimant as in a claimant’s Part 36 offer, the court could, unless it considered it unjust to do so, order that the claimant was entitled to:
• enhanced interest on the award
• indemnity costs
• enhanced interest on the indemnity costs
• an additional amount up to £75,000

At issue on appeal was the amount of interest the Court may award when the defendant rejected a Part 36 offer under the CPR – and the claimant was then awarded a higher award at trial.  The Court of Appeal overturned an earlier decision not to award 10% interest on damages where the defendant failed to beat the claimant’s Part 36 offer.

This particular case was one where the levels of interest were at issue, rather than the decision to actually award enhanced rates of interest. The Court said that the specified rate of 10% was not a starting point, rather the maximum possible enhancement - intended as an incentive to claimants to make reasonable offers, and defendants to accept them.  It found that the award of interest at lower rates by the judge at first instance was wrong – the enhanced rate should have been imposed. 

The Court considered the wide discretion open to it in relation to the appropriate rate of enhancement, but pointed out the need for proportionality in the circumstances of the case.  Here, for instance, the defendant’s refusal to engage with or respond to the offer to settle were important factors – and justified the award of a 10% enhanced interest rate in the circumstances.

What does this mean?

Both sides need to act reasonably – both in making reasonable offers to settle a claim, and in reasonably engaging with, and considering offers to settle.  A refusal to respond to, or accept an offer to settle may well be penalised by the court if the matter goes to trial.

How can we help?

We advise and represent commercial clients with their commercial contracts and disputes. If you have a potential claim or need to defend a claim against you, contact the expert commercial lawyers at ParrisWhittaker for strategic advice and representation.

1 OMV Petrom SA v Glencore International AG 2017 EWCA Civ 195