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Cite as: [2000] EWHC 191 (Comm)
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Case No: 1991 Folio No 1735
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 19th April 2000
| (1) KUWAIT AIRWAYS CORPORATION (2) THE MINISTER OF FINANCE OF THE STATE OF KUWAIT |
Claimants |
|
| - v - | ||
| (1) KUWAIT INSURANCE COMPANY S.A.K. (2) WARBA INSURANCE COMPANY S.A.K. (3) AL AHLEIA INSURANCE COMPANY S.A.K. (4) GULF INSURANCE COMPANY KSC |
Defendants |
The Hon. Mr Justice Langley
COPIES OF THIS JUDGMENT ARE AVAILABLE IN WORD 6 for WINDOWS 3.1 ON PROVISION OF A CLEAN DISC. APPLY TO THE CLERK TO THE HONOURABLE MR JUSTICE LANGLEY Telephone 0207-947-6395
Mr Justice Langley:
On December 15, 1999, I gave judgment on an application for summary judgment/interim payment made by the Claimants (to which I will refer as KAC) against the Defendant companies (to which I will refer as KIC). I decided that KAC was entitled to an order for an interim payment in the sum of US $150m. KIC has not sought permission to appeal that order.
KIC insured KAC against war risks. KIC was reinsured in the London market. The reinsurers are conducting the defence to KAC's claims under the insurance. KAC is the national airline of the State of Kuwait. On August 2, 1990 Iraq invaded Kuwait. The invaders removed a large quantity of spares and equipment (as well as aircraft) from Kuwait International airport. The limit of the insurance cover for spares and equipment was $150m any one location. That was the amount of the interim payment because I was satisfied that there was a high degree of likelihood that KAC would establish at a trial that its loss exceeded the limit. The limit of the cover for aircraft was $300m each occurrence. In previous proceedings Rix J held that all the aircraft and all the spares and equipment were lost in a single occurrence on August 2, 1990.
The major outstanding question to which this judgment relates is what order should be made for interest on the interim payment. It is agreed that the court has power to order interest and that the discretion to do so is to be exercised in a manner akin to the discretion which arises when a court awards interest on a judgment sum.
What is very much in issue is both the period over which and the rate at which interest should be awarded. The size of the interim payment and the length of the period from the invasion to the date of payment mean that substantial sums are involved in both questions.
KAC submits that interest should be awarded from August 2, 1990 as the date KIC failed to hold KAC harmless from loss. The basis for that submission is that August 2 is the date the cause of action arose and so the date when payment from KIC to KAC was due. KAC also submits that the appropriate rate of interest is US Prime rate plus 1%. Over the relevant period US Prime rate has averaged about 7.85%. Total interest from August 2, 1990 to December 31, 1999 at US Prime plus 1% amounts to some $125m.
KIC submits that interest should only be awarded from June 30, 1993 which is the date 6 weeks after the date (May 14), when KAC's solicitors provided KIC's solicitors with seven volumes of information containing particulars of the spares and equipment alleged to have been lost. The basis for this submission is that it represents the date when insurers acting honestly and reasonably would first have been able to assess and so to pay the claim. KIC also submits that the appropriate rate of interest is US $ 6 month LIBOR plus 0.5%. Over the relevant period US $ 6 month LIBOR has averaged about 5.375%. Total interest from June 30, 1993 to December 31, 1999 at US $ 6 month LIBOR plus 0.5% amounts to some $58.3m.
I should perhaps record that insurers' position on both the period and rate has not been constant. In the Defence and Counterclaim dated September 10, 1999 it was contended that June 30 1993 was appropriate in respect of only part of the claim and that the rate of interest should be US Prime rate itself or "with a very slight percentage increase i.e. of no more than 0.25%". Other starting dates have been put forward but the principle contended for has not changed. The difficulty lay in identifying the date when insurers may be said first to have been in a position to assess the claim.
The parties have helpfully agreed a chronology of the more important events in what has become protracted litigation. I will summarise it.
KAC had separate covers for "All Risks" and War Risks. Willis Faber were the brokers for both covers. In May, June and July 1990 KAC sought and All Risks reinsurers agreed an increase in the location limit of cover for spares under the All Risks policy from $150m to $250m on the basis of stock valuation reports indicating a value of some $275m for spares of which some 88% were located at the airport. A similar increase on the same basis was under negotiation with War Risks reinsurance leaders at the time of the Iraqi invasion on August 2.
On the day of the invasion Emergency Directions were enacted which forbad any payments to be made in response to requests from persons resident in Kuwait except with permission granted on behalf of the Treasury.
By a letter dated August 7 KAC advised KIC (following an earlier telephone conversation) that 15 aircraft which had been parked at the airport had been taken into the control of Iraqi forces. The letter added:
Furthermore please note that all our spares stock have also been taken and nothing is left in the stores.
Please treat this letter as notice of claim under the [War Risks] policy.
The letter was in fact delivered on August 9 by pushing it under the door of KIC's premises in Kuwait in circumstances in which it is no surprise that it remains unclear when or by whom it may have been seen.
On August 20 Willis Faber sent the first notification of loss to reinsurers. The details of loss were given as "various correspondence IRO potential losses/damage to assureds fleet arising out of invasion by Iraq." The notification emphasised that it was "purely an advice of loss not a settlement request".
On September 9 KIC notified Willis Faber that:
Our assured are claiming that all 15 aircraft are constructive Total Losses. In addition there will be further claims in respect of loss of spare parts and other insured risks. We have asked our assured to communicate with you direct giving such particulars of losses as reinsurers necessarily require.
On the same day KIC, with the consent of KAC, appointed Willis Faber as attorneys to act for KIC in relation both to the direct insurance and the reinsurance.
On September 12 Willis Faber wrote to reinsurers at the request of KIC "to notify you formally" that KAC was making a claim under the War Risks policy and the reinsurance. The letter enclosed a copy of Willis Faber's appointment, gave "formal notice of a claim" in respect of the 15 aircraft, made a formal request for settlement of that claim, and stated that:
In addition the assured will be making further claims in respect of loss of spare parts and other insured property.
The next day Willis Faber produced a "first notification of loss" in respect of the spares. The "details of loss" referred to "potential losses and damage to spares and ground equipment at Kuwait Airport due to Iraqi invasion". This notification stated expressly that it was "NOT A SETTLEMENT REQUEST".
At a meeting between Willis Faber and lead reinsurance underwriters that day, September 13, a claim was presented for the loss of the aircraft and it was noted that "the claim in respect of spares is to be separately presented in view of the difficulties Willis Faber have experienced in obtaining evidence .... [Willis] went on to say that most of the spares have apparently been cleared from the hangers ...."
It appears from paragraph 32 of an undated Witness Statement from Mr Qaddourah, KAC's Insurance manager in 1992, that the decision not then to make a claim for the spares was a deliberate one as KAC was anxious to obtain payment for the aircraft loss and aware of the likelihood of a dispute as to whether any sum beyond $300m was payable.
Thus at September 13:
(1) Reinsurers were aware that spares to a value very substantially in excess of the limit of $150m had been at the airport at the time of the invasion;
(2) It had been intimated that a claim would in future be made for the loss of spares in contrast to the aircraft for the loss of which a claim had been made and settlement sought; and
(3) KAC and KIC had positively stated through Willis Faber that settlement was not then being requested for the loss of spares.
Willis Faber's letter of September 12 was shown to one of the leading reinsurance underwriters (Stephen Merrett) who endorsed it on September 18:
Agree settle war loss under section 1(a) with reference to 2.08.90, for this slip's proportions of the Maximum Ground Limit of US $300m, subject to Leading Underwriter having been satisfied as to entitlement/legitimacy of Claimants/appropriate safeguards on payment of claim. Basis of claim as presented on detention/seizure/confiscation on various dates rejected. Any claim in excess of $300m rejected. Position fully reserved on any further claims as intimated.
To put that endorsement in context, KAC was claiming separate occurrences in respect of the aircraft losses in an attempt to recover more than the limit of $300m for aircraft. KAC was also to claim that the spares loss was subject to its own and separate limit of $150m each location on the basis that the loss did not arise under section 1(a) of the policy (from which spares were expressly excluded) but in respect of "seizure" under section 1(e) and that the losses were in any event at a number of different locations within the airport and so the limit itself was inapplicable. It was these claims which KAC had rightly appreciated would probably be disputed.
Thus, at September 18 1990, reinsurers had effectively determined:
(1) To pay the aircraft claim on the basis of a single occurrence on August 2 to the limit of $300m.
(2) To reject any further claim and in particular any claim for spares whether advanced as a single claim up to the limit or several claims within the limit.
Treasury permission under the Emergency Directions was granted on September 26, 1990. It was for
permission for any payment to be made pursuant to a contract of insurance or reinsurance in respect of any risk of a category specified in paragraph 1 of the Schedule hereto, being made by or on behalf of a person specified in paragraph 2 thereof to or to the order of a person specified in paragraph 3 thereof.
The Schedule provided that
1. Category of Risk up to US $700m.
2. Payer Willis Faber.
3. Payee KAC.
On November 12, 1990 KIC wrote to Willis Faber in terms which it is accepted formally notified the making of claims by KAC for loss of spares ("such claims have now been made") and a claim by KIC under the reinsurance in respect of "the same claims". On the same day Willis Faber notified reinsurers that the sum of $300m was accepted entirely without prejudice to claims in excess of that sum "whether in respect of the 15 aircraft lost, or for spares, equipment or additional expenses".
On December 5 Mr Merrett endorsed KIC's letter of November 12:
Noted. Underwriter's view is unchanged from that expressed on 18th September 1990; namely that there is no cover i.r.o. spares/equipment under section 1(a) of the wording.
Thus, by December 5, 1990 a claim for spares had been formally notified, albeit as yet unquantified, but rejected on the basis that it was precluded by the wording.
At least by the end of the year there were no relevant sanctions against payment to KAC and the existing Treasury permission was itself in terms wide enough to cover payments up to $700m even though that figure was probably derived from the full insured value of the 15 aircraft without reference to the value of any spares or equipment. Between December 1990 and February 1991 the majority of reinsurers paid their proportions of $300m direct to KAC.
The liberation of Kuwait was complete on February 28, 1991.
On July 30, 1991 KAC issued the Writ in these proceedings claiming an indemnity under the insurance both in respect of the aircraft (up to their full value) and spares. Points of Claim were served on October 22, 1991. The claim for spares alleged that "the great majority" of the spares listed in Annex 3 to the pleading were looted and taken from several locations within the airport or, if not, they were damaged. The total value of the spares listed was (after conversion from Kuwaiti Dinars) some $275m.
KAC faced very considerable difficulties in establishing precisely what spares had been at the airport at the time of the invasion and in what location. All the relevant records had been destroyed. The task was made even more difficult following the discovery and return of considerable quantities of spares from Iraq under the aegis of the United Nations. Underwriters were understandably and reasonably concerned to receive further information. They sought particulars of the claim. An illustration of the problems facing KAC can be found in a report by a Lloyds Aviation Department surveyor to Clyde & Co dated February 14, 1992 which states:
It has to be recorded that at the present time, KAC has no idea of the total number or value of parts removed by Iraqi personnel. All the original records have been destroyed as was the main frame computer on which they were stored. Efforts are being made by KAC to obtain information from other sources, however it is at this moment extremely dubious as to whether or not an original listing of parts held by KAC will ever be established.
Mr Hapgood relied on this to ask rhetorically how could reinsurers be expected to pay in such circumstances.
From early 1992 until May 1993 Clyde & Co were seeking particulars of KAC's claim and in particular regarding the location of storage facilities at the airport and which spares were located in them. In the course of this period it was agreed in early 1993 that quantum issues in respect of spares should not be included as part of a first trial. On May 14, 1993 KAC served seven volumes of particulars of the spares inventory at August 2, 1990 prepared by expert accountants as a reconstruction from surviving hard copy documents. The reply to the request for particulars of the claim was then served on June 21, 1993.
Neither party has sought to criticise the conduct of the other party during this period. KAC faced a monumental task and the skill and care with which it was carried out is borne out by the (in the event) lack of any substantial sustainable criticism of the details and figures to which it gave rise. KIC, for its part, was fully entitled to insist on the particulars it sought albeit I think substantially so because KAC had chosen, for obvious reasons, to present the spares claim as one which involved a number (6) of different locations. Whilst it would be wrong to say that the claim must inevitably in total have exceeded $150m the probability that it would do so must I think have been apparent from the nature of the invasion, the limit itself, the negotiations before the invasion to increase it to which I have referred, and the very fact that KAC were seeking to contend that the losses occurred in more than one location. Moreover I think that was so with or without recoveries which in any event would normally accrue to insurers and would be likely at best to be in poor condition.
Rix J gave judgment on December 21, 1995 and held that all of the aircraft and all of the spares were totally lost in a single occurrence on August 2, 1990. Rix J also decided that on the wording KAC was not entitled to any sum in excess of $300m. KAC appealed. The appeal was dismissed by the Court of Appeal on May 21, 1997. KAC appealed to the House of Lords. Judgment was given by the House of Lords on March 11, 1999. The House decided that KAC was entitled under the wording to indemnification in respect of spares up to the maximum amount of the limit of $150m in addition to the $300m limit for aircraft.
The spares claim then came before me on the applications by KAC for summary judgment in the sum of $150m alternatively for an interim payment in that amount. As I have already noted I gave judgment for an interim payment in that amount on December 15, 1999. I did so on the basis that (after allowing for recoveries) I was quite satisfied "that the likely amount of a judgment in favour of KAC would be $150m because the claim would exceed that sum by a significant amount" and there was no set-off or counterclaim available to KIC.
So far as material to the question of interest on the spares claim, I would summarise the chronology of the claim as follows:
(1) The loss occurred on August 2, 1990.
(2) Notice of a claim for the loss was given to KIC on August 7.
(3) Advice of loss was given to reinsurers on August 20 in terms which expressly did not request settlement.
(4) On September 12 settlement was requested for the aircraft claim only. On September 13 it was expressly repeated that no request for settlement of the spares claim was being made. That was a deliberate decision taken for KAC's own "tactical" reasons.
(5) By September 18 reinsurers (or a leader) had decided to pay the aircraft claim to a single limit but to reject any spares claim in any amount.
(6) On November 12 a claim in respect of spares was formally notified. In effect a request for settlement of it was then made for the first time. On December 5 it was rejected for lack of cover as determined on September 18.
(7) The Writ was issued on July 30, 1991.
(8) Points of Claim were served in October 1991.
(9) Full particulars of the claim and loss were provided on May 14, 1993.
I would also add the following:
(10) As I have said, I think in the particular circumstances of this case it was or at least should have been apparent to reinsurers that if and when a claim for spares was to be made it was likely to be at least of a value which would exceed and so equal the limit of $150m. The real issues from September 1990 onwards were whether any claim at all was sustainable and, if it was, whether the limit could be exceeded on the basis of multiple locations.
(11) There is no basis on which to justify penalising either party for delay or unreasonable conduct nor for concluding that KAC bears any responsibility for the lapse of time which has occurred in the company receiving the payment which it has been decided is due to it.
(12) Plainly (but see McGregor on Damages 16th Edn at paras 666 and 1130) there could be at least a reasonable argument that for so long as it was (if it was) unlawful for monies to be paid by KIC to KAC it would be inappropriate to award interest because KAC could not be said to have been deprived of a sum which could not lawfully have been paid to it. However, as Mr Gaisman submitted, the only prohibition on payment was against payment without Treasury permission. Permission was granted on September 26 1990 in the context of reinsurers' decision to pay the aircraft claim up to $300m but the permission itself was quite general in its terms and available up to $700m. The inference, as a matter of probability, is that once sought in these circumstances permission was and would have been readily forthcoming. The permission in fact given would have permitted payment of the spares claim and, as Mr Gaisman also submitted, payment by reinsurers to Willis Faber on behalf of KAC would not have been subject to any restriction in any event and would have been normal practice. In my judgment, for these reasons, the existence of the Emergency Directions is not a material factor in the determination of the appropriate commencement date for an award of interest and in the course of his oral submissions Mr Hapgood sensibly conceded as much.
The power to award interest is to be found in Section 35A of the Supreme Court Act, 1981. The Section provides (so far as relevant) that:
(1) ... in proceedings ... before the High Court for the recovery of a debt or damages, there may be included in any sum for which judgment is given simple interest, at such rate as the court thinks fit ... on all or any part of the debt or damages in respect of which judgment is given ... for all or any part of the period between the date when the cause of action arose and -
(a) ...
(b) ... the date of the judgment.
....
(6) interest under this section may be calculated at different rates in respect of different periods.
There is, therefore, a discretion both as to the period and rate of interest save that the period cannot commence earlier than the cause of action arose and must end no later than the date of judgment. Like many discretionary powers, however, there is a volume of authority which sets the proper parameters within which they should be exercised.
The date the cause of action arose.
There is now no dispute that the loss arose and was complete at August 2, 1990. As I held, payment from KIC to KAC became due then: see The Fanti [1991] 2 AC 1 per Lord Goff at pages 35-6. So the cause of action arose then. The reason is that indemnity insurance is a contract by insurers to hold the insured harmless against loss and so the fact of loss itself constitutes a breach of contract. Again, this is not in dispute, albeit Mr Hapgood makes the point that the principle is somewhat anomalous: see Clarke, Law of Insurance Contracts, 3rd Ed., paras 30-7A, 30-7A1.
The Starting date: The Authorities.
In General Tire and Rubber Co v Firestone Tyre & Rubber Co Ltd [1975] 1 WLR 819 the question arose in a successful action for infringement of a patent from when interest should run on the damages awarded to the Plaintiff.
Details of the relevant invention were published in 1951 when the claimants applied for a U.K. patent. The patent was granted in January 1963. The defendants began to infringe in March 1958, and damages fell to be calculated from that date.
The House of Lords decided (Lord Salmon dissenting) that under the 1949 Patents Act the claimants' right of action depended on publication in 1951 and not on grant. But as to interest, Lord Wilberforce said at page 836:
The discretion (to award interest) must be exercised judicially and for reasons which can be stated. Where a wrongdoer has failed to pay money which he should have paid, justice, in principle requires that he should pay interest over the period for which he has withheld the money. But other considerations may enter into it. In a commercial setting, it would be proper to take account of the manner in which and time at which persons acting honestly and reasonably would pay. Correspondingly, account ought to be taken of any unreasonable or delaying or obstructive conduct of the debtor .... In the present case I do not find any conduct of the latter kind .... On the other hand there was independent evidence that in normal commercial practice royalties in respect of use before grant are not expected to be paid until grant .... I think therefore that a discretion exercised in the light of normal commercial practice calls in the present case for interest to run from the date of grant that is January 16, 1963.
This passage is the foundation of Mr Hapgood's submissions. There is, however, no "independent evidence" before me as to any normal commercial practice in relation to insurers' settlements of indemnity claims. The aircraft claim was paid (albeit within weeks) without interest. As a matter of commercial and common sense it is, I think, also evident that insurers will usually and reasonably require some period to assess and consider a claim, but it does not necessarily follow that interest is not payable or paid for that period.
Viscount Dilhorne and Lords Diplock and Kilbrandon agreed with Lord Wilberforce.
Lord Salmon, in his dissenting speech, at page 841 said:
Interest is not awarded as punishment against a wrongdoer for withholding payments which he should have made. It is awarded because it is only just that the person who has been deprived of the use of the money due to him should be paid interest on that money for the period during which he was deprived of its enjoyment. No one suggests that the (defendants) acted dishonestly or unreasonably in withholding the money for five years; nor that they caused any of the delay in the granting of the patent. This, however, in my view has little relevance. They enjoyed the use of the money during the whole of this time and in law it is deemed to have been due to (sic) them from the beginning of that period.
The (defendants) chose, as they were entitled to do, to keep the money and wait until such time, if ever, as the patent was sealed. It was sealed in January 1963. Once the patent was sealed, the money was deemed to have been due from 1958 onwards.
There was very little evidence of the normal commercial practice. I am, however, willing to assume that infringers usually wait until the date of grant before paying up, but there is certainly no evidence that, when they do, they do so without paying interest on the money which was due and which they have withheld and enjoyed since publication.
Lord Salmon alone, therefore, would have upheld the award of interest by the trial judge from March 1958 the date both of infringement and from when damages were to be calculated.
Dissenting speech though it was, it is Lord Salmon's words which are the foundation of Mr Gaisman's submissions. The approach by way of asking whether the successful claimant has been deprived of the use of money due to him (with the corollary that the defendant has enjoyed the use of money due from him) might lead to the result that interest must always run from the date the cause of action arises for loss or damages. But that would not be consistent with the statutory discretion in Section 35A. On the other hand if Lord Wilberforce's approach was followed literally then the existence of a genuine dispute as to liability and perhaps quantum would postpone the start date for an award of interest, whereas it is generally accepted that such is not the case (see below).
That awards of interest are not intended to "punish" a wrongdoer and that delay and other impugned conduct by either party may legitimately be taken into account in the exercise of the discretion are matters on which all the members of the House were agreed.
In BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783, BP successfully claimed that it was entitled to an award under section 1 of the Law Reform (Miscellaneous Provisions) Act 1934 on the basis that its contract with the defendant had been discharged by frustration in December 1971 by the Libyan Government's expropriation of its rights, and because the defendant had obtained a valuable benefit from BP's performance of the contract prior to the discharge. Robert Goff J (as he then was, and whose judgment was upheld in the House of Lords) held that the claim was a claim for a debt and therefore the court had power to award statutory interest upon it, but he granted interest only from the date when BP made it clear to the defendant that it intended to make a claim in restitution (June 1974) and not from December 1971 when he held the cause of action arose. The relevant parts of the judgment are to be found at pages 845 to 850 of the report. Robert Goff J quoted from the speeches of both Lord Salmon and Lord Wilberforce in General Tire in support of "the fundamental principle" "that interest is not awarded as a punishment, but simply because the plaintiff has been deprived of the use of the money which was due to him". He continued (at page 846):
It is for this reason that interest will generally run from the date of accrual of the cause of action in respect of money then due or loss which then accrues; and in respect of loss which accrues at a date between accrual of the cause of action and judgment, from such date. For convenience, I shall refer to these dates compendiously as the "date of loss", although I recognise that the term is not altogether appropriate in a case of restitution.....
But the power to award interest is discretionary, and there is certainly no rule that interest will invariably run from the date of loss. It is no part of my task to attempt to define the circumstances in which the court will depart from the fundamental principle; indeed, since the discretion to award interest is unfettered, it would be improper to do so. There appear, however, to be three main groups of cases in which, in the exercise of its discretion, the court may depart from the fundamental principle.
The first group of cases concerns the position of the defendant. The court may consider, in the light of all the circumstances, that his position was such that it would not be just to make the defendant pay interest from the date of loss. It may do so if, for example the circumstances were such that the defendant neither knew, nor reasonably could have been expected to know, that the plaintiff was likely to make a claim, and so was in no position either to tender payment, or even to make provision for payment if the money should be found due. In such a case, the court may in its discretion only grant interest from the date of the plaintiff's claim, or even from such a date as will allow reasonable investigation of the claim. Again, to quote from Lord Wilberforce's speech in the Firestone case, at page 836:
"In a commercial setting, it would be proper to take account of the manner in which and the time at which persons acting honestly and reasonably would pay"
....
The second group of cases concerns the conduct of the plaintiff. If, for example, the plaintiff has been guilty of unreasonable delay in prosecuting his claim, the court may decline to award interest for the full period from the date of loss. This may be to encourage plaintiffs to prosecute their claims with diligence, and also because such conduct may lull a defendant into a false sense of security, leading him to think the claim will not be pursued against him...
The third group consists of other cases in which it would be unjust, in all the circumstances, to award interest from the date of loss. Into this group fall those cases in which an assessment of damages is made on such a basis that it would be just to award interest from a later date, as for example was held in Jefford v Gee, in respect of interest on general damages ....
The basic principle is, however, that interest will be awarded from the date of loss. Furthermore, the mere fact that it is impossible for the defendant to quantify the sum due until judgment has been given will not generally preclude such an award. Thus, in Admiralty, in collision cases where the ship is totally lost, interest has been held to run from the date of the loss (see eg The Berwickshire [1950] P. 204 and Owners of Leisbosch Dredger v Owners of SS Edison [1933] AC 449, 468) and in the case of a salvage award, from the date of the rendering of the salvage services: see The Aldora [1975] Q.B. 748. There must have been many cases in the commercial court in which, although the quantum of damages was in doubt until the date of the judgment, interest was awarded from the date of loss. Similarly, the mere fact that it is doubtful whether the plaintiff's claim will succeed, and it is reasonable to contest his claim, will not generally require any departure from the general principle; nor generally will any doubt, however justified, as to the principles of law which will be applied. Another matter which is generally ignored is the financial situation of the plaintiff; ....
I have quoted at length from the judgment as it is not only a clear statement of principle but one which I think has stood the test of time, reconciles (if they need it) the speeches of Lords Wilberforce and Salmon, and remains both applicable and apposite today. In particular it makes clear that "the fundamental principle" is to award interest from the date of loss, doubts as to the amount of loss or damages and as to the merits of a claim are generally immaterial to the exercise of the discretion but that in particular circumstances it may be a proper exercise of discretion to depart from the fundamental principle.
It needs to be kept in mind, however, that the actual decision in the case was that interest should run only from the date when the defendant knew that BP was going to make a claim against him, which was some 2½ years after the cause of action arose, and despite the finding that the defendant was aware from the outset of all the relevant facts which gave rise to the cause of action. The basis for the decision was (page 848) that BP's intention to make a claim came as a genuine surprise to the defendant "the circumstances being so unique and both parties attention having been concentrated upon their respective rights vis a vis the Libyan Government and upon their rights to the oil, rather than upon any claim in restitution". Robert Goff J held that it was "in just such a case" that the commencement of the period might be postponed but he was not prepared to postpone it further "to allow time for the making of investigations by (the defendant) because the circumstances giving rise to the claims were well known to him".
I have been referred to a number of other authorities in the particular context of insurance but, apart from the Popi M [1984] 2 LL R 555, I do not derive great assistance from them. Mr Hapgood understandably referred me to MacGillivray on Insurance Law, 9th Ed., para 19-62 ("In indemnity insurance a time will be allowed for investigation of the claim" : citing the Popi M); Clarke para 30-84: "if there is a bona fide dispute over proof of loss, interest will not be awarded against the insurer until the dispute has been resolved; 'until the claim has been presented, and he has investigated it, it is not fair to regard him as withholding payment'" citing Knoller v Evans (1936) 55 LL L Rep 40 and De Maurier v Bastion Ins. Co [1967] 2 LL Rep 550 and quoting from Law Commission Report No 88 (1978) section 72; and to Halsbury's Laws of England, 4th Ed; vol 25, para 203 ("If the insurers have reasonably required an opportunity of deciding whether to meet a claim, it seems that interest will be awarded only from the date by which they have enjoyed such an opportunity"). Mr Gaisman submitted trenchantly that these statements were "wrong". Knoller was a case of burglary in circumstances in which it was held that "the underwriters were perfectly entitled to investigate" and the matter substantially went by concession. In De Maurier the point was conceded. I should also add that I accept Mr Gaisman's submission that the early cases, such as Macbeth v Maritime Insurance Company [1908] 24 TLR 559 to which Mr Hapgood referred me, which were decided prior to the enactment of Section 35A (and its predecessor in 1934) proceeded on a very different principle (interest by way of damages) and have no relevance to the exercise of discretion under Section 35A.
The Popi M involved a claim by ship owners on insurers for the loss of the vessel. The major issue was whether the loss was caused by a peril of the sea which the court held that it was. The loss occurred on August 5, 1978. The Writ was issued in September 1980. But on the basis (to quote the headnote) that "it would be wrong to treat the plaintiffs as having been kept out of their money when they had put forward their claim on a basis substantially different from that which had proved successful" the judge held that the order for interest should be much less favourable than would ordinarily follow and awarded interest only from January 1, 1983.
On appeal, the Court of Appeal, noting that an insured was prima facie entitled to have a loss made good to him directly it happened, held that by the time the Writ was issued the insurers must have made up their minds to reject the claim and awarded interest from October 1, 1980. The reasoning of the members of the court was not, however, entirely consistent. Again it is obvious from the particular facts that this was another case where the circumstances of the loss were "unusual and bizarre".
Sir John Donaldson, M.R., at page 559, on the basis of the unusual nature of the case and thus that "underwriters could not reasonably be expected to pay immediately that the claim was presented" considered that October 1, 1980 provided sufficient time for them to make up their minds and so "from October 1, and perhaps considerably earlier, I think it can be said that the underwriters were in breach of their contract to indemnify the owners and were thereafter enjoying the use of the owners' money". O'Connor LJ agreed with Sir John Donaldson.
May LJ considered the question in rather more detail. Mr Gaisman submits that it is his reasoning which is correct in principle and properly to be applied in this case.
At page 561 May LJ said:
.... left to myself, I confess that I would have ordered interest in favour of the owners from an even earlier date than my Lords. There is no question but that the award of interest is a matter of discretion. However the fundamental basis for exercising that discretion is to compensate a party for being kept out of the money which the Court has adjudged he should have been paid.; the award or refusal to award interest should not be used as a means of penalizing a party for instance in the way in which negotiations or litigation have been conducted on his behalf. (The emphasis is mine).
May LJ then referred to the passage in Lord Wilberforce's judgment in General Tire which I have quoted and continued:
However, I also remember that a contract of insurance is a contract of indemnity. Where an insured suffers a loss due to a peril insured against he is prima facie entitled to have that loss made good to him by insurers directly it happens. A contract of insurance is different in this respect from, for example, a contract for the sale of goods under which the buyer is by its terms of custom allowed credit for a period .... In the insurance situation, although reasonableness and commercial practice may on the authorities lead a Court to deny an insured interest on his indemnity monies for a period after the loss, in my opinion this should be limited. Of course in most cases insurers will in practice need to investigate claims made upon then by their assured, but it should be remembered after a claim has been ultimately admitted or proved after litigation, that in law insurers had been liable to pay the admitted or proved amount from the date of the loss and that prima facie at least interest should be awarded accordingly.
As I have said, for these reasons I myself might well have been persuaded to award the owners interest from a date even prior to October, 1980.
Mr Gaisman submitted May LJ's approach was "right" and recognised the consequence of the indemnity nature of insurance in the context of awards of interest which both before and since the decision had to an extent remained unappreciated. However it should be noted that May LJ did not in terms say that an award from the date of loss (August 1978) was appropriate and averted to that date only as the prima facie date from which interest should be awarded. Mr Gaisman also referred to the decision of Staughton LJ in McLean Enterprises v Ecclesiastical [1986] 2 LL R. 416 at 427-8, in which interest was awarded against fire insurers on the sum awarded for the loss in value of buildings and land consequent upon a fire from August 1, 1983. Staughton LJ said:
I should explain in setting the date of August 1, I do so not because of ruling in any way that the insurers should not have investigated this claim nor the time taken to investigate it. But if upon investigation the material which they assemble is not sufficient to establish that it is not a proper claim under the policy, it seems to me that the interest on the money which they have retained meanwhile and which the insured has not had meanwhile, should be transferred from one to the other.
The fire in fact occurred on June 24 so it appears that interest was ordered to run from some 5 weeks after the indemnity was held to be due.
The courts have not always been consistent in their approach to the application of the principle that an award of interest should be based on one party keeping the other out of his money and having the use of it himself. In Harbutt's Plasticine v Wayne Tank & Pump Co Ltd [1970] 1 QB 447, Lord Denning MR at page 468 appears to have concluded that interest should run from "the date when the defendants ought in all the circumstances to have paid the sum awarded (such as the letter before action or the writ)". However, whilst the date a claim is first formally advanced might, in a given case, be a proper starting point I do not think in the light of the other authorities and the Act it can be justified as such as a matter of principle. An earlier example of an award of interest (on a successful claim under a business interruption policy) only from the date the insured first called upon the insurers to pay is the decision of Lawton J in Burts & Harvey Ltd v Vulcan Boiler & General Insurance [1966] 1 LL R 161 and 354. Whilst the date appears to have allowed for the fact that it was reasonable for the parties to negotiate for a period of some months after the loss "to find out exactly how much was due" it is not at all clear from the report that the insured sought interest from a date earlier than that taken. Certainly the decision is a flimsy basis for the statement in Halsbury's Laws which I have referred to above which cites it in support.
The Starting Date: Application in this case.
The competing submissions as to the effect of these authorities in the context of an assured's claim on insurers and on the facts of this case can be shortly summarised from the respective skeleton submissions of counsel.
Mr Gaisman's submission is that:
(1) Interest should prima facie run from the date of loss.
(2) in this case nothing occurred which should displace that prima facie position. The claim for spares was made "immediately"; KIC did not in fact investigate the merits of the claim but rejected it in principle on a ground that turned out to be wrong in law; there was no delay by KAC and the basic circumstances and facts of the claim were in any event obvious.
Mr Hapgood's submission is that:
(1) The commercial reality is that insurers would not ordinarily be expected to pay (a) until they are presented with a claim; (b) where the amount payable has to be worked out until they are presented with a quantified claim; and (c) where it is reasonable for insurers to carry out an assessment and investigation of the claim, until they have had a reasonable opportunity and time to do so.
(2) In this case interest should commence (a) no earlier than June 30, 1993 being the date 6 weeks after the Claimants first submitted a properly quantified claim for spares which the underwriters could properly and commercially have been asked to pay; or (b) alternatively on November 30, 1991 being the date 6 weeks after service of the original Points of Claim.
In my judgment the authorities to which I have referred establish the following principles and factors as material to the exercise of discretion:
(1) In principle interest is to be awarded to compensate the claimant for being kept out of the money from the date when it has been established that it was due to him; it is not based on fault or the wrongful withholding of payment by the defendant.
(2) The starting date will therefore normally be the date to which the Act refers, namely the date the cause of action arose and so, in indemnity insurance (subject to any express terms of the cover) the date of loss.
(3) It follows from (1) that generally the existence of and need to investigate a genuine dispute as to liability is not a material factor in postponing the running of interest. The position is not so clear where there is a dispute or uncertainty as to the quantum of the claim. It can be said that money is not due until it is at least claimed to be due in a specific amount and, as Mr Hapgood submitted, quantification of a claim is, unlike liability issues, likely to be a matter only within the knowledge of the insured. It can equally be said, however, that there is no real difference in principle from a dispute as to liability : once the answer is known it establishes not only that payment was due but also what was due and when it became due. In my judgment the latter is the better view, more in accord with the basic principle and clearly expressed by Goff J in the passage I have quoted from BP v Hunt. I would add that in the case of War Risks insurance there is, I think, and as Mr Gaisman submitted, often likely to be particular reason not to permit delays in quantification to affect interest payments as insurers must be taken to appreciate that such delays may be an inevitable consequence of losses arising from the risks they are insuring.
(4) The application of these principles may be tempered by re-phrasing the question as one in terms of when the claimant could reasonably and commercially have expected to be paid. But that has never been applied to extend the starting date beyond the date when a reasonable investigation would have been completed, even if it would have resulted in a decision to resist the claim, and even then it has been used substantially in cases in which the claim can properly be viewed as sufficiently unusual as to inspire special investigation or where there is evidence of a commercial practice as to a later date of payment without an interest obligation.
(5) Where a claimant assured has been guilty of excessive delay, whether in making the original claim or in pursuing it, then the starting point (or on occasion the rate of interest) may be adjusted adversely to him. The rationale for such an approach has sometimes been expressed as a form of sanction for delay but can, I think, equally and more consistently with principle, be expressed in terms that in such a case it is wrong to view the claimant as kept out of or deprived of the use of money payment of which he has delayed in seeking. A more striking illustration would be circumstances in which a claimant consciously and for his own reasons chose not to pursue a claim immediately and notified the potential defendant to that effect. To a limited extent that is said to have been the position of KAC in this case. It is not, I think, sensible to regard a party who positively chooses not to make a claim when first available to him as one who is deprived of or kept out of his money.
I accept, therefore, Mr Gaisman's basic submission that, absent express agreement, interest should generally be payable from the date the cause of action for the relevant payment arose because it is from and after that date that the Claimant has been kept out of his money. Nor do I think the authorities justify a different approach in commercial or insurance cases based upon a starting date of when the payer acting honestly and reasonably would pay. They do, however, justify taking account of such considerations but only in my judgment generally on the assumption (however artificial) that the eventual outcome of disputes both on liability and quantum are resolved as they have in fact been resolved. In other words once the legal process has produced a "right" result that result is treated as relating back to the date the cause of action arose.
In principle, therefore, once it was clear, as it was on November 12 1990, that a claim in respect of the loss of spares was now being pursued and insurers had had a little time both to appreciate that fact and consider or re-consider it, in my judgment interest on the sum eventually found to be due should accrue. In fact KIC rejected the claim in its entirety on December 5 1990 and it is on and from that date that I think it appropriate to award interest.
I would add that even if I had determined that the general test was as Mr Hapgood contends, in the particular circumstances of this case I would have reached the same conclusion. The real issues on the claim were ones of principle not amount and were known to be such by December 5. I also think insurers were in a position to appreciate that if they lost on principle their exposure would probably be of at least the order of $150m. They had no difficulty in deciding to meet the aircraft claim to a single limit as early as September 18, 1990, that is some 6-7 weeks after the invasion. In those circumstances I think, granted foresight of the outcome of the disputes, they could, acting honestly and reasonably, have been expected to pay or at least provide for the spares claim in the sum of $150m by December 5.
The End Date
I was told in KIC's outline submissions that the parties were agreed that the end date for interest should be the date of payment by each insurer or reinsurer of its respective proportion of the sum of $150m, although the defendants reserved their position in respect of any delays in collection or remittal which might be attributable to the brokers (which has not to date arisen). At the conclusion of the argument questions arose as to whether it was appropriate to enter a final judgment and if so from when judgment interest should run. Those questions have not yet been resolved or argued and nothing in this judgment is intended to prejudice the parties' position on them.
The Rate: The Facts.
The numerical difference between US Prime rate and LIBOR over the 10 year period has of course varied but in very general terms the former has been some 2½% above the latter as illustrated by a graph which forms Annexe 2 to a Report prepared by Mr Richard Fox an independent consultant instructed on behalf of reinsurers on this issue.
US Prime rate is the rate commercial banks charge their most creditworthy business borrowers. It includes an element of profit to the banks which is why such borrowers can borrow at prime itself. It is a short-term borrowing rate. The British equivalent is bank base rate except that the bank's profit element is expressed in terms of a percentage over base rate so the rate to the customer, however creditworthy, will be base rate plus an agreed percentage.
LIBOR is a rate quoted in both sterling and US dollars. It is generally used for term borrowings, and often for loans the subject of facility agreements containing security arrangements and other covenants where the loans are for the acquisition of specific assets. Thus LIBOR might well be the basis of a rate in a term facility for the purchase of aircraft where the aircraft also form the or part of the security for the lending institution. The evidence also suggests that the longer the term of the loan and the better the security usually the lower the rate. By way of illustration, KAC's financial statements for the year ended June 30, 1993 refer to "long-term debt" to finance newly purchased aircraft consisting of two elements:
(i) "Loans payable to institutional lender, 8.75% to 9%, secured by aircraft and due in 2002" in a total sum of KD 94m; and
(ii) "Loan from a bank in the amount of US $80m (some 24m KD) ½% over 6 months LIBOR, payable in 14 equal instalments of $4m each and a final instalment of $24m payable in 2000."
Libor was 3.5% at the time.
KAC itself is and was wholly owned by the Government of Kuwait. Apart from the period following the invasion and until about 1993, during which for obvious reasons the perception of KAC as a risk was seriously affected, KAC was viewed as a sound and indeed first rate risk. Mr Fox's opinion is that, with the qualification in respect of the period from August 1990 to about 1993, KAC could have borrowed the sum of $150m over 10 years at a rate of 0.5% over 6 months LIBOR, as the accounts in fact demonstrate for the sum of $80m.
Quite apart from submitting that this is a wrong approach as a matter of principle Mr Gaisman submits that on the evidence before the court Mr Fox has ignored a number of matters of fact in expressing this opinion, namely that:
(i) there is no logical basis for applying the approach to financing of aircraft purchases to spares, let alone to assume or apply a 10 year term or the provision by KAC of security. The only evidence is that on an aircraft purchase perhaps 10% of the price would represent spares bought at the same time. There is no evidence to suggest the purchase of spares as such would or could normally be financed on such a basis and that is hardly surprising in a case where over 2¼ million items were said to have been "looted and taken" and at most spares could be the subject of a floating charge unlike aircraft.
(ii) the relevant time at which KAC needed to borrow the money was the very time (1990 to 1992 or 1993) when it is accepted that the company's financial position and standing was seriously affected by the Gulf war.
(iii) the loan relied upon in KAC's accounts was in any event on unusually favourable terms as an accommodation to KAC; and
(iv) such loans often also involve a commission to the lender, and arrangement and commitment fees, albeit the evidence is that such payments would have a minimal effect on the overall cost of a term loan of the size under consideration.
(2) The Rate: The Authorities.
There are a number of statements of principle in the authorities about the purpose which an award of interest is intended to achieve in the particular context of the appropriate rate to be applied.
In Tate & Lyle Food and Distribution Ltd v GLC [1982] 1 WLR 149 at 154 E-F, Forbes J said:
I feel satisfied that in commercial cases the interest is intended to reflect the rate at which the plaintiff would have had to borrow money to supply the place of that which was withheld. I am also satisfied that one should not look at any special position in which the plaintiff may have been; one should disregard, for instance, the fact that a particular plaintiff, because of his personal situation, could only borrow money at a very high rate or, on the other hand, was able to borrow at specially favourable rates. The correct thing to do is to take the rate at which plaintiffs in general could borrow money. This does not, however, to my mind, mean that you exclude entirely all attributes of the plaintiff other than that he is a plaintiff. There is evidence here that large public companies of the size and prestige of these plaintiffs could expect to borrow at 1 per cent. over the minimum lending rate, while for smaller and less prestigious concerns the rate might be as high as 3 per cent. over the minimum lending rate. I think it would always be right to look at the rate at which plaintiffs with the general attributes of the actual plaintiff in the case (though not, of course, with any special or peculiar attribute) could borrow money as a guide to the appropriate interest rate. If commercial rates are appropriate I would take 1 per cent. over the minimum lending rate as the proper figure for interest in this case.
In Banque Keyser Ullman S.A. v Skandia (UK) Insurance Co Ltd (Unreported December 1987) Steyn J said:
The issue of the appropriate rates of interest must now be considered. The selection of an appropriate interest rate is a matter of discretion. But it is not an entirely open textured discretion. A practical and consistent approach has emerged. The purpose of an award of interest is to achieve restitutio in integrum. The enquiry does not focus, in a case such as the present, on the profit to the defendant of the use of the money. It is directed to an estimation of the cost to the plaintiff of being deprived of the money which he should have had. But for practical reasons the court will not allow an enquiry into the plaintiff's actual loss. To do so might sometimes involve enquiries, in relation to the ancillary relief of interest, approximating the length of the trial. Instead, in cases such as the present, the courts award a commercial rate of interest or the rate which somebody in the position of the plaintiff would have had to pay to borrow the money. In the interests of a cost effective administration of civil justice, the courts must adopt a fairly broad brush approach to the award of interest. On the other hand, in the light of the over-riding criterion of fairness, the courts are vigilant to ensure that the broad brush approach does not become too blunt an instrument.
Steyn J quoted the passage from the judgment of Forbes J in Tate & Lyle which I have quoted, and then turned to deal with whether Chemical Bank (one of a group of banks which had succeeded in a claim for damages against two insurance companies) should be distinguished from the other banks as regards the rate of interest to be awarded to it on those damages.
Steyn J continued:
Bearing in mind that the selection of an appropriate rate of interest is a discretionary matter, it seems to me entirely consistent with the pragmatic approach of our courts to rule that in this particular case, my ruling as to interest rates should reflect that a prime bank, such as Chemical Bank, was at all times able to borrow significantly more cheaply than small banks. In doing so I am not enquiring into Chemical Banks' special position but I am simply recognising the reality that market leaders such as Chemical Bank have a well established advantage over other banks when they borrow money. It is, as Forbes J so lucidly explained, a question of categorisation of the plaintiff in an objective sense. And, I regard it as essential to a fair decision in this case to recognise Chemical Bank's dominant position when compared with that of the other plaintiff banks. By way of alternative arguments, it was pointed out on behalf of Chemical that banks (having borrowed) are able to relend profitably. So be it. I take into account the position of the banks in relation to their borrowing capability, and the special position of prime banks. But, it would be contrary to principle and practice to enquire into the profitability of bank lending generally, or of the banks involved in the present case. It follows that I uphold Skandia's submission that a distinction ought to be made between Chemical and the other banks.
Mr Hapgood accepts that it is the usual practice of this court to award interest on sterling sums at 1% over the applicable base rate, citing F.M.C. Meat Ltd v Fairfield Cold Stores Ltd [1971] 2 LL Rep 221 and Shearson Lehmann v Maclaine Watson (No 2) [1990] 1 LL Rep 441. However he points to the fact that in B.P.v Hunt and Banque Keyser Ullman the awards of interest on US $ and Swiss Francs were made on the basis of the appropriate 6 month LIBOR rates. Dealing with the rate of interest, at page 849, Goff J said:
So far as the sterling part of the award is concerned I shall, in accordance with the usual practice in this court, award interest on the basis of bankrate or minimum lending rate plus 1 per cent ....
I turn next to interest on the dollar element of the award. On the evidence before me, a British company wishing to borrow US dollars for purposes not specifically relating to operations in the United states would probably have borrowed on the London Eurodollar market. On that market the interest charged is made up of two parts - the London interbank offered rate, and the margin or banker's turn charged to the borrower. I had evidence before me that the appropriate London interbank offered rate to take was the six-month rate ... an average offered rate for [the relevant] period of 8.24 per cent.
So far as margin is concerned, there was evidence before me that this would depend on the nature of the borrowing. One possibility is a medium term committed facility ....the other possibility is an advised line of credit, which is similar to an overdraft .... It is difficult to say whether a reasonable borrower would have borrowed on the basis of a committed facility or an advised line of credit .... In these circumstances, it is inevitable that the court should adopt a somewhat rough and ready approach ....
The award made was 6 month LIBOR plus 1%. Mr Gaisman made two separate points about this decision. He submitted first that at this date it was early days for the courts' power to give judgments in currencies other than sterling and so no practice had developed as regards different interest rates for different currencies. Whilst Goff J appears to have had that in mind, there was a LIBOR rate for sterling as well as dollars, which was not adopted, and the submission gains some support from the case of Colin Baker v Black Sea (see below). Second he submitted (rightly, I think), that the report suggested that the actual award was the one in fact sought by B.P. but opposed by Mr Hunt.
The evidence before this court is, as Mr Hapgood agreed, that US Prime rate is analogous to base rate plus 1 per cent for borrowing dollars and sterling respectively.
The principle remains that the award and so the rate is intended on a broad brush basis to restore the position of the Claimant to what it would have been had it sought to borrow the money which it has been awarded. Moreover that rate has almost invariably been expressed in terms of a short term rate without reference to the possibility of lower rates for secured loans but with the acknowledgement that the better the "personal" covenant of the borrower the lower the rate is likely to be. Further examples of the current practice, which in my judgment reflect the principle, cited by Mr Gaisman, are
(1) Colin Baker v Black Sea [1995] LRLR 287n (Potter J) and [1997] LRLR 353 at 360 (Staughton LJ) and 364 (Otton LJ). Staughton LJ there described US Prime Rate as the rate at which reliable borrowers could actually borrow money and so "close enough to the base-rate-plus-one that is used in commercial cases for sterling awards", adding that "the same principles should apply in the case of foreign currencies". That accords with the evidence before this court. The actual award in the case was 2% above a non-existent base rate and the parties in fact agreed upon "the one-week LIBOR rate in London".
(2) The Giuseppe di Vittoria [1998] 1 LL. R. 661 at 672 per Clarke J (US prime plus 1%); and
(3) Re Duckwari [1999] 2 WLR 1059 at 1063 per Nourse LJ: "my impression is that Forbes J's suggestion that the rate should vary according to the size and prestige of the concern which is taken to have borrowed the money has not won general acceptance. The practice of the Commercial Court is to award interest at base rate plus 1 per cent".
The Rate: Application in this case.
In my judgment the well-established practice of this court to award interest at base rate plus 1% save at least in exceptional circumstances, is in accordance both with principle and authority. It is not, I think, necessary to comment on the difference of view reflected in Nourse LJ's judgment in Re Duckwari as to the relevance or otherwise of the general attributes of the successful party and so hypothetical borrower. The award is not and should not be a precise exercise. The losing party is unlikely to be penalised by a rate which itself assumes a reputable borrower. On the other hand I can see no justification for awarding rates which apply only to term or secured borrowing. That, I think, is to extend any examination of the financial affairs of the successful party beyond legitimate boundaries as well as to apply hindsight in the knowledge of how long it may take for the losing party to pay and what free assets may be available for security. As the period for which interest is to be awarded cannot start before the date the cause of action arose the successful party is in a real sense entitled to have the sum awarded from that date without reference to repayment or security obligations. It is also entitled to do what it wishes with the monies it recovers from insurance. As Mr Gaisman submitted, KAC was not obliged to seek replacement of any let alone all the spares which were looted. It was entitled to be paid their value up to the limit of $150m as "cash in the hand".
The nearest equivalent of base rate plus 1% is US Prime rate. In normal circumstances that in my judgment would be the appropriate rate and, if it be material, a rate at which KAC could have borrowed. Nor do I think the fact that for two or three years KAC might not have been able to borrow at that rate without some small percentage increase should affect that approach anymore than the possibility that sympathetic lenders might have lent at a lower rate. That again would be to look too closely into the actual status of the successful party. I see no injustice to KAC in applying the same rate over the whole period now known to be involved, nor do I think in the overall context the facts of this case are sufficiently exceptional to justify a departure from the norm. In my judgment therefore the appropriate rate of interest is US Prime without any addition.
In summary, for the reasons I have sought to express, KAC will be awarded interest on the sum of $150m from December 5, 1990 to (subject to the reservation stated) payment at US Prime rate from time to time.