| Date | 2 May 2007 |
|
|
| Judgment | Claymore Services Ltd v Nautilus Properties Ltd, TCC 20 March 2007 |
|
|
| The Issue | The application of interest in the event of non-payment. |
|
|
| Implication |
Interest will normally begin to run on unpaid sums from the date at which the contractor’s final account is submitted in fully substantiated form and the employer has had proper opportunity to consider it; the period of application of interest may be reduced if the claimant has unreasonably delayed prosecuting its case. |
printNautilus Properties Ltd own a property at Cavendish Square in London which used to be the Spanish Embassy. In late 2000, Nautilus decided to refurbish and convert the property into a number of bars, an eight bedroom hotel, a restaurant and a nightclub. In December 2001 Nautilus engaged Claymore Services Ltd to carry out design and construction works on the properties by issuing a letter of intent to Claymore, in which Nautilus indicated that it was their intention, subject to contract, to enter into an agreement with Claymore to carry out the works on the basis of the JCT Design and Build Form. The works were carried out to completion, but the formal building contract was never executed. By November 2002, the building had opened for business, but there remained a substantial dispute between the parties concerning the value of the final account for the works. In May 2004, fully 18 months after completion of the works and having only by that stage completed the presentation of its detailed final account, Claymore commenced adjudication proceedings to recover approximately £900,000 which it regarded as due. As might be expected, Nautilus immediately contended that there was no contract between the parties and that, accordingly, there could be no jurisdiction for an adjudicator to act. The adjudicator agreed that there was no contract, but somewhat surprisingly went on to hold that he nevertheless had jurisdiction. He found that Claymore was entitled to £575,000.00 plus interest. Nautilus refused to pay and in May 2004 the matter came before the Technology and Construction Court for enforcement of the adjudicator’s decision, where it was quickly realised that the proceedings were doomed to failure as it was clear on the face of the decision itself that the adjudicator did not have jurisdiction. By July 2006, over two years later, it had become obvious that the account would not be settled by agreement and proceedings were commenced afresh in the Technology and Construction Court. The claim by this time had risen to £1.5 million. Curiously, by this stage Claymore had accepted that there was no contract and therefore claimed that its sums should be paid as a quantum meruit. The litigation duly proceeded, expert reports and witness statements were exchanged, and the matter was listed for trial in March 2007. Shortly before trial, the main issues in the litigation were settled on terms that Nautilus would pay £750,000 to Claymore. This payment was agreed to be in full and final settlement of all claims and counter claims except for Claymore’s claim for interest which remained to be decided by the court. The court was asked to determine the period during which interest should apply and to fix an appropriate rate of interest. Claymore argued that interest should start to run from the date of completion of their works. The fact that their claim for payment had not been fully detailed by that stage was irrelevant. Alternatively, Claymore accepted that interest should run from June 2004, when it had first produced its detailed final account and Nautilus had had time to consider this account. Nautilus contended that no interest should be payable until the sum due to Claymore became apparent in December 2006 when serious discussions took place between the experts instructed in the litigation. Mr Justice Jackson concluded that where a claim was based in quantum meruit, interest for non payment should only run from the date when the sum due was ascertainable. It was clear that most of the relevant information for computation of the sum due resided with the contractor and therefore interest should start to run when the contractor had presented its detailed final account and the building owner had had a reasonable opportunity to assess the account. The next issue to consider was whether the delay in commencing litigation should be taken into account in calculating interest payable. Nautilus argued that it had been inappropriate to refer the matter to adjudication and in any event the delay between the conclusion of the adjudication and the commencement of the litigation was unreasonable. Justice Jackson carefully reviewed the relevant authorities and concluded that where a claimant has delayed unreasonably in commencing or prosecuting proceedings, the court may exercise its discretion, either to disallow interest for a period or to reduce the rate of interest. He made it clear that in exercising that discretion, the court must take a realistic view of the delay and should also bear in mind that the defendant has had the use of the money during any period of delay. Taking into account all the facts of this case, he concluded that the interest payable to Claymore should be reduced by one half for a period of one year. Finally, the court was asked to consider the rate of interest that should be awarded. Following the 1982 decision in Tate & Lyle Food and Distribution Ltd v Greater London Council, Justice Jackson agreed that the correct thing to do was to take the rate at which the claimants in general could borrow money. Given that Claymore was a relatively small business it was held that this would approximate to 2% over the Bank of England’s base lending rate.
CJ-0717
|
|||
|
© Brewer Consulting |
|||
 |
|||