Metal Box v Currys
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Title:Metal Box Ltd v Currys Ltd
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Status:Positive or Neutral Judicial Treatment
*175Metal Box Co.Ltd.v Currys Ltd.
Massey Ferguson(UK)Ltd.v Same
Reckitt&Colman(Products)Ltd.v Same
[1981M.No.4290]
[1981M.No.4853]
[1983R.No.470]
Queen's Bench Division
25February1987
[1988]1W.L.R.175
McNeill J.
1987Feb.6;25
Interest—Award of damages—Insurance—Insured goods damaged in store—Claim by subrogation for damages limited to value of goods—Delay—Whether interest to be awarded—Whether at commercial rate—Supreme Court Act1981(c.54),s.35A(as inserted by Administration of Justice Act1982(c.53),s.15,Sch.1,Pt.I)
The three plaintiffs stored goods in a warehouse and,on1March1977,those goods were destroyed or damaged in a fire caused by the negligence of the defendants'employees.Except for an excess of￡10000,all the goods were insured and,in the absence of loss of profit on or use of the stored goods,the plaintiffs'claims in their actions against the defendants,pursued by their insurers,were restricted to the loss of the value of the goods.The first two plaintiffs did not issue their writs until30September1981and,although the writs were not then served,formal letters before action were sent to the defendants.In the third action,the writ was not issued until 23February1983and served on13February1984.All three actions were consolidated and judgment given for the plaintiffs in agreed sums on21May1986.
On the plaintiffs'application for interest to be awarded on the judgment sums under section35A of the Supreme Court Act19811:—
Held,(1)that a plaintiff who had been deprived of the value of his chattels was entitled to be awarded interest on the judgment sum even though he was not seeking damages for the consequential loss of the goods nor should interest only be payable from the date an insurer settled an insurance claim on the basis that it was the insurer and not the plaintiff who was seeking to recover his loss against the defendant;and that,therefore,under the provisions of section35A of the Act of1981,the court would not restrict the interest payable on the judgment sum because of the nature of the plaintiffs'loss or because their goods had been insured(post, p.180B–C).
Harbutt's“Plasticine”Ltd.v.Wayne Tank&Pump Co.Ltd.[1970]1Q.B.447,C.A.and H. Cousins&Co.Ltd.v.D.&C.Carriers Ltd.[1971]2Q.B.230,C.A.considered.
(2)That there was no good reason for the first two plaintiffs failing to issue their writs until1981 and,since the plaintiffs could not justify that delay,interest would not be awarded for the period of just over nine years between the date of the fire and the date of judgment but would be reduced to a period of seven years;and that in the case of the third plaintiff,interest*176would be payable for the period from the service of the writ in1984to the judgment in1986(post,pp. 181H–182D).
(3)That where a plaintiff or its insurers had to borrow at commercial rates or apply their own funds and so lose their investment value,then interest on the judgment sum should be payable at the commercial rate;and that,therefore,the plaintiffs'insurers and the first plaintiff,in respect of
its uninsured losses of the first￡10000of the value of the insured goods,were entitled to interest on the judgment sums at one per cent.above base rate(post,p.183A–B).
The following cases are referred to in the judgment:
Allen v.Sir Alfred McAlpine&Sons Ltd.[1968]2Q.B.229;[1968]2W.L.R.366;[1968]1All
E.R.543,C.A.
B.P.Exploration Co.(Libya)Ltd.v.Hunt(No.2)[1979]1W.L.R.783
Birkett v.Hayes[1982]1W.L.R.816;[1982]2All E.R.710,C.A.
Business Computers Ltd.v.Anglo-African Leasing Ltd.[1977]1W.L.R.578;[1977]2All E.R.
741
Chadwick v.Parsons[1971]2Lloyd's Rep.49;[1971]2Lloyd's Rep322,C.A.
Cousins(H)&Co.Ltd.v.D.&C.Carriers Ltd.[1971]2Q.B.230;[1971]2W.L.R.85;[1971]1 All E.R.55,C.A.
Cremer v.General Carriers S.A.[1974]1W.L.R.341;[1974]1All E.R.1
General Tire&Rubber Co.v.Firestone Tyre&Rubber Co.Ltd.[1975]1W.L.R.819;[1975]2 All E.R.173,H.L.(E.)
Harbutt's“Plasticine”Ltd.v.Wayne Tank&Pump Co.Ltd.[1970]1Q.B.447;[1970]2W.L.R.
198;[1970]1All E.R.225,C.A.
International Military Services Ltd.v.Capital and Counties Plc.[1982]1W.L.R.575;[1982]2 All E.R.20
Jefford v.Gee[1970]2Q.B.130;[1970]2W.L.R.702;[1970]1All E.R.1202,C.A.
La Pintada Compania Navegacion S.A.v.President of India[1983]1Lloyd's Rep.37
London,Chatham&Dover Railway Co.v.South Eastern Railway Co.[1893] A.C.429,
H.L.(E.)
Polish Steamship Co.v.Atlantic Maritime Co.[1985]Q.B.41;[1984]3W.L.R.300;[1984]3 All E.R.59,C.A.
Slater v.Hughes[1971]1W.L.R.1438;[1971]3All E.R.1306,C.A.
Tate&Lyle Food and Distribution Ltd.v.Greater London Council[1982]1W.L.R.149;[1981] 3All E.R.716
Wright v.British Railways Board[1983]2A.C.773;[1983]3W.L.R.211;[1983]2All E.R.
698,H.L.(E.)
The following additional cases were cited in argument:
B.P.Exploration Co.(Libya)Ltd.v.Hunt(No.2)[1983]2A.
C.352;[1982]2W.L.R.253;
[1982]1All E.R.925,H.L.(E.)
McDermid v.Nash Dredging&Reclamation Co.Ltd.,The Times,31July1984,Staughton J.
Pritchard v.J.H.Cobden Ltd.(unreported)1October1985,Swinton Thomas J.
Pritchard v.J.H.Cobden Ltd.[1987]2W.L.R.627;[1987]1All E.R.300,C.A.
Action
By writs issued on30June1981,the plaintiffs,Metal Box Co.Ltd.and Massey Ferguson(U.K.) Ltd.,and by a writ issued on23February1983by the plaintiff,Reckitt&Colman(Products)Ltd.,
claimed damages in tort against the defendants,Currys Ltd.,for the loss of their*177goods destroyed or damaged in a fire which occured on1March1977.The actions were consolidated by order of Master Prebble on9November1984and on21May1986McNeill J.gave judgment against the defendants.The judgment sums were agreed but there remained a dispute over interest.
The facts are stated in the judgment.
Representation
Bruce Mauleverer Q.C.and Jonathan Acton Davis for the plaintiffs.
Patrick Twigg Q.C.for the defendants.
Cur.adv.vult.
MCNEILL J.
25February.MCNEILL J.read the following judgment.On21May1986I gave judgment against the defendants in consolidated actions by three plaintiffs as follows;for the plaintiffs Metal Box Ltd.￡231202;for the plaintiffs Massey Ferguson(U.K.)Ltd.for￡183134;for the plaintiffs Reckitt &Colman(Products)Ltd.￡42226.67.In each case the sum was to be with interest to be assessed.I am now required to assess the interest.
Each of the judgment sums was an agreed sum.I was not required to assess the damages.No analysis of the make-up of the figures was before me.It was plain from the evidence that the Metal Box claim was based on the value of their goods totally destroyed in the fire,and that the Massey Ferguson claim included both total loss of some and damage to others of their harvesters.I was given no information about the basis of Reckitt&Colman's claim.
It was common ground between the parties that the litigation was in reality conducted between the respective insurers.It emerged that of the Metal Box claim part,namely,￡10000,was in respect of uninsured losses(an excess on the policy).the schedule put before me on the present application,but not agreed,indicated that Reckitt&Colman's claim was a total loss claim,but that Massey Ferguson's claim,in addition to loss and damage,included a sum for loss of profit. The total sum awarded by way of damages was￡456,562.63.The fire which caused the damage,and which was the cause of action,was on1March1977.It is accepted that the interest with which I am concerned,that for which provision is made in section35A of the Supreme Court Act1981,related to the period from that date to the date of judgment—21May 1986.Thereafter interest is recoverable under the Judgments Act1838,as amended.Section 35A as far as material reads:
“(1)Subject to rules of court,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 or as rules of court may provide,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—…
(b)in the case of the sum for which judgment is given,the date of the judgment…
(6)Interest under this section may be calculated at different rates in respect of different
periods.”
Three issues arise for my determination.(1)Mr.Twigg,for the defendants,contended that no interest should be awarded in the circumstances and for the reasons which I set out later.(2) What is the*178period in respect of which,in the case of each plaintiff,interest should be awarded?(3)At what rate,or rates,should interest be awarded?
Mr.Twigg's submissions on the first point were as follows.These claims arise,he said,out of stock losses.Each plaintiff,on1March1977,was storing goods in a warehouse in Nottinghamshire.There is no claim for loss of use of the destroyed or damaged goods,and the goods were not then,and the fire did not deprive the plaintiffs of,income-producing chattels.No substitute goods were bought in,or as happened in some other cases hired,though this would
be inappropriate here.This is not a case,he said,analogous to the claim of an income-earning plaintiff who is inJured.Until the goods were removed from the store and converted into money's worth,the plaintiffs lost nothing except the value of the goods,for which they were fully compensated by the awards of damages.It was lastly contended that unless the plaintiffs intended to sell the goods on the day of the fire,they were not entitled to interest.
Mr.Twigg accepted the principle enunciated by Lord Herschell L.C.in London,Chatham and Dover Railway Co.v.South Eastern Railway Co.[1893]A.C.429,and repeatedly thereafter cited and followed.He said,at p.437:
“…I think that when money is owing from one party to another and that other is driven to have recourse to legal proceedings in order to recover the amount due to him,the party who is wrongfully withholding the money from the other ought not in justice to benefit by having that money in his possession and enjoying the use of it,when the money ought to be in the possession of the other party who is entitled to its use.
Therefore,if I could see my way to do so,I should certainly be disposed to give the appellants,or anybody in a similar position,interest upon the amount withheld from the time of action brought at all events.”
Mr.Twigg reminded the court of the application of this principle,in Harbutt's“Plasticine”Ltd.v. Wayne Tank&Pump Co.Ltd.[1970]1Q.B.447.
Mr.Twigg stressed in these and other cases the use of the phrase“wrongfully withholding.”Lord Denning M.R.,in his analysis of the law and history of awards of interest in Jefford v.Gee[1970] 2Q.B.130,used the same phrase with emphasis.Dealing with the law in Admiralty,Lord Denning said,at p.144:
“The Court of Admiralty did not apply the common law.”—under which,until the Law Reform(Miscellaneous Provisions)Act1934,interest could not be awarded,despite Lord Herschell's strong words—“It followed the civil law and gave interest on damages whenever the non-payment was due to the wrongful delay of the defendant.”
Lord Denning M.R.went on to consider examples from the decided cases.Mr.Twigg drew attention to a later passage,at pp.144–145:
“When a profit-earning ship was sunk in a collision,the Admiralty Court awarded interest on the value of the ship,capitalised at the date of loss,from the date of the loss to the date of the trial…When a ship was not sunk,but only damaged,the Admiralty Court awarded interest on the cost of repairs,but only from the time that*179the repair bill was actually paid,because that was the date from which the plaintiff had been out of pocket…”
There was,said Mr.Twigg,no case in which interest had been awarded on the value of a non-profit-making chattel,or of a chattel which was not of use or was not repaired.Mr.Twigg argued secondly that no interest should be awarded unless there was wrongful withholding.If a defendant had no part in keeping a plaintiff out of his money,he ought not to be obliged to pay interest.In Slater v.Hughes[1971]1W.L.R.1438,for example,the Court of Appeal held that a party ought not to be treated as liable to pay interest on damages until he receives notice,of the claim.Similarly,in Chadwick v.Parsons[1971]2from earlier decisions and he asked:“What had been wrongfully done to the plaintiff to keep her out of her money?”See also Templeman J.in Business Computers Ltd.v.Anglo-African Leasing Ltd.[1977]1W.L.R.578.
Mr.Twigg contended that if a court awarded interest on the market value of a destroyed but non-profit-making chattel from the date of loss the plaintiff would be better off than if the loss had not occurred.The plaintiff might never have been able to have sold the chattel or realised its value;there might be a glut on the market.In this context,he said,the position of the insurers was immaterial;that they had paid out the plaintiff was res inter alios acta.Alternatively,he said, if it is material,the earliest date for interest is the date of payment by insurers.Accordingly,the court should look at the realities,including the insurance aspect of the case,at least as a matter of discretion and should bear in mind that,in a subrogated action,interest is of no benefit to the
plaintiffs but only on what they paid,from when they had paid it.He referred to H.Cousins&Co. Ltd.v.D.&C.Carriers Ltd.[1971]2Q.B.230,and to the judgment of Widgery L.J.,at p.240:“This principle,namely,that the contract of insurance is res inter alios acto,has since”
—and his reference is to a judgment of Lord Mansfield in Mason v.Sainsbury(1782)3 Doug.K.B.61—
“been consistently followed in regard to claims of right but,in matters of discretion such as the award of interest,I think it right that the court should look at the reality of the matter and should take note of the right of the parties under any relevant insurance cover if this is necessary in order to do justice.”
This,said Mr.Twigg,supported his alternative submission if the first were rejected.The fact that the plaintiffs were insured at least could not increase the defendants'liability to them.
Mr.Mauleverer,for the plaintiffs,was understandably surprised by Mr.Twigg's first submission. He accepted,save for the￡10000excess on the Metal Box policy,and it might be(but it was not established)an excess on the Massey Ferguson policy,the insurers would get the benefit of the interest.The decision in Harbutt's case that an award of interest being discretionary—where plaintiffs have been indemnified by their insurers,interest should be awarded for the period during which the plaintiffs were kept out of their money,and in respect of any uninsured balance (see Lord Denning M.R.,at p.468F)was distinguished in the Cousins'case by Widgery L.J.,who had been a member of the court in Harbutt's case.It is clear that in the Harbutt's case both counsel had*180accepted that interest,if paid,would be retained by the plaintiffs,and not handed over to the insurers.Where the claim was by subrogation different considerations applied,and Harbutt's case was not conclusive authority on the point:see pp.240C–243B. Putting the matter more vividly,he invited the court to consider a work of art or a Ming vase which was destroyed.That it had no profit-earning capacity was irrelevant to the question whether or not interest should be paid on the unpaid damages awarded for its destruction. Interest did not depend on the use to which the chattel was put.He submitted,and so far as my own knowledge goes I agree,that there is no authority for the proposition that the plaintiff who has been deprived of his chattel by the defendant's tort,and who is kept out of the value of the chattel(at least after knowledge of the claim and until judgment)should not be awarded interest on the judgment sum.To my mind to hold otherwise would be to confuse damages for consequential loss with interest.Indeed,it may well be that in some circumstances there can be interest upon damages for consequential loss.
It is plain to me that this claim is brought by subrogation,except so far as the excess figures are concerned,that the insurers are entitled to reimbursement and,subject to discretion and the two remaining matters of contention,interest is payable upon the judgment sum.
Next I turn to the period and the contentions on delay.The plaintiffs'solicitors provided and exhibited to an affirmation a chronology which is not in dispute and a bundle of correspondence. The fire was,as I have said,on1March1977.The following day the plaintiffs'insurers instructed loss adjusters,who wrote to the defendants on28April1977.They were then acting for Metal Box and Massey Ferguson,but not for Reckitt&Colman.Responsibility was placed upon the defendants'employees for the fire,and the destruction of and damage to those plaintiffs'goods. The defendants'insurers replied,saying investigations were being carried out and that a report was awaited from“our advisers.”On20June1977the defendants'insurers had instructed solicitors,who wrote to say that they were investigating the matter without prejudice to liability. Investigations had not been concluded by2September,but early completion was expected.No decision on liability had been reached(5September),and the loss adjusters invited agreement as to quantum.This offer was rejected.Matters dragged on in correspondence,and the defendants'insurers and solicitors never formally denied liability,but it became clear that it was to be disputed.In May1978the defendants'solicitors wrote that their investigations must continue,and in September the gentleman who was dealing with the matter was abroad.In January1979again their investigations were not complete.The plaintiffs'advisers might well have thought that this was the time to issue a writ,but they did not do so until30September 1981.It was not then served,but formal letters before action were sent;the claims were quantified and the sums in due course agreed in April1986,just before the hearing.
On behalf of the defendants,Mr.Bates,an assistant solicitor with Messrs.Herbert Smith&Co., the defendants'solicitors,deposed in an affidavit that although the plaintiffs'loss adjusters had formed the view that a claim lay against the defendants as early as28April1977,the onus was upon the plaintiffs to prosecute the claim and there was no encouragement to them to think that the claim might be paid.Miss Nicholls for the plaintiffs,deposes to the commencement of investigations*181by the defendants by21May1977;that there was an indication in April1978 that liability would be contested,but that there was never a formal denial of liability.This,I was left to infer,was unusual where the two parties to the dispute were two large insurance companies.There were,she said,on instructions,telephone calls between the loss adjusters and the defendants'insurers in late1979and through1980in the hope of negotiating resolution of the dispute.
At this stage I am not dealing with the Reckitt&Colman claim;this came later.So far as the Metal Box and Massey Ferguson actions were concerned they proceeded with reasonable despatch after service of the writ,and the order for directions was made on25May1983.There was some further particularisation and in July1984the defendants brought in the warehouse-keepers as third party.These proceedings were discontinued shortly before the hearing.The consolidated action,as it had by then become,was set down in December1984, and the date for hearing was fixed in February1985.
Mr.Mauleverer contended that interest should run from28April1977,from what he said was,in effect,the letter before action.He drew attention to the judgment of Robert Goff J.in B.P. Exploration Co.(Libya)Ltd.v.Hunt(No.2)[1979]1W.L.R.783,845F.Like that case Mr. Mauleverer said,this is essentially a commercial case—a dispute between insurers as to which should bear the loss—and the principle is simply that where a wrongdoer has failed to pay money that he should have paid,justice requires that he should pay interest over the period for which he has withheld the money:per Lord Wilberforce in General Tire&Rubber Co.v.Firestone Tyre&Rubber Co.Ltd.[1975]1W.L.R.819,836.Robert Goff J.adopted the words of Lord Salmon at p.841,saying that it was not a rigid principle,the award of interest remained discretionary.Among other factors,unreasonable delay by a plaintiff in pRosecuting a claim may lead a court not to award interest for the full period,from the date of the loss.His decision at first instance was affirmed in the Court of Appeal and the House of Lords:see[1983]2A.C.352,per Lord Brandon at p.373G.
As Mr.Twigg observed,the test of unjustifiable delay has been applied in a number of cases: see,for example,Allen v.Sir Alfred McAlpine&Sons Ltd.[1968]2Q.B.229,per Diplock L.J.,at pp.256B,257D;Birkett v.Hayes[1982]1W.L.R.816and Wright v.British Railways Board [1983]2A.C.773.Mr.Twigg argued that this was,in his words“an ordinary fire case”and should have been heard within four years of the fire.He invited the court to say that that was the maximum for which interest,if any,should be awarded.Whether a hearing where speeches and evidence occupy some10days is an ordinary case,I am not prepared to say.In La Pintada Compania Navigacion S.A.v.President of India[1983]1Lloyd's Rep.37,Staughton J.had expressed the view that reprehensible delay should be dealt with by reduction in the rate of interest rather than by reduction of the period for which it was payable.With respect to that view I do not consider that this is a case in which such a course would be appropriate.
So far as the Metal Box and Massey Ferguson claims are concerned,I am of the opinion that from an early stage it must have been clear to the loss adjusters that the defendants'insurers were not going to go down without a fight.I do not regard the failure formally to deny liability as sufficient justification to delay the commencement of proceedings.On the other side,as I found in my judgment,the*182defendants'servants on the ground had never from the outset disputed that the cause of the fire was the stacking of the cartons too close to the lamps,and it was never challenged that one of them said that they may have done so.The total period from the fire to judgment is,put broadly,nine years and two months;from writ to judgment,four years and seven months.For the reasons that I have given,I consider that the appropriate period for which interest should be awarded in those two cases is seven years.
Different considerations apply in the Reckitt&Colman's claim.The writ there was issued on23 February1983,just within the limitation period.There is uncertainty about when the claim was first notified to the defendants.These plaintiffs were originally advised by solicitors in Nottingham, and their insurers were not those insuring Metal Box and Massey Ferguson.No correspondence, or letter before action or attendance notes referring to negotiations have been produced,and Miss Nicholls was unable to obtain any explanation for the time which elapsed before the issue of
proceedings.She invited the court to assume that approaches similar to those made by the other plaintiffs'loss adjusters had been made.Mr.Bates disputed this.There was on his firm's part no correspondence whatsoever from those solicitors or anyone else on behalf of these plaintiffs.I find myself constrained to say that interest on this plaintiffs'claim should be payable only from the date of service of the writ on the defendants,namely,13February1984,that is to say for two years and three months.For completeness I should add that I reject the suggestion that the Reckitt&Colman action in some way held up progress of the Metal Box and Massey Ferguson actions.There is no evidence that this was so,and the chronology refutes it.
Finally I turn to the question of the rate at which interest is to be paid.Mr.Mauleverer contended for1per cent.over the inter-bank or base rate,which for the whole period from the fire to judgment averaged respectively,he said,at11.71per cent.In other words he was contending for a rate of12.71per cent.Mr.Twigg accepted the figure of11.71per cent.He agreed that a further and accurate calculation might throw up an average of11.74per cent.,but disputed the addition of1per cent.He argued that the lower figure was appropriate between insurers.This was not,he said,a commercial dispute in the strict sense.
It is accepted on both sides that once I have fixed the rate in principle,the relevant figures can be calculated and agreed.The authorities to which I was referred on the question of rate included the B.P.Exploration case,where Robert Goff J.referred to the usual practice in the Commercial Court to award interest on the basis of bank rate or minimum lending rate plus1per cent.He saw no reason to depart from the usual rule in that case.Forbes J.took the same course in Tate &Lyle Food&Distribution Ltd.v.Greater London Council[1982]1W.L.R.149,154–155;see also Kerr J.in Cremer v.General Carriers S.A.[1974]1W.L.R.341,335D;and Slade J.in International Military Services Ltd.v.Capital&Counties Plc.[1982]1W.L.R.575,587.In the Court of Appeal,in Polish Steamship Co.v.Atlantic Maritime Co.[1985]Q.B.41,Robert Goff J.'s dictum in the B.P.Exploration case was approved by Kerr L.J.at p.67,also referring to his own decision in the Cremer case.Of course I was reminded of Jefford v.Gee[1970]2Q.B.130,and the cases which followed it in relation to interest in personal inJury claims,but this is not such a claim.
*183
It seems to me,as it seemed in different factual circumstances to Forbes J.and others,that if insurers have to borrow at a commercial rate or apply their own funds and so lose their investment value to meet a claim by their insured,then recovery of that amount against a wrongdoer in an action by subrogation should carry interest at the commercial rate,and I so conclude.This is so in the case of Metal Box in respect of the￡10000excess as well;the principle is the same.Accordingly,for the periods in question interest will be calculated,and hopefully agreed,at the figure of12.71per cent.Accordingly that interest is awarded to the plaintiffs,Metal Box and Massey Ferguson,for seven years,and to Reckitt&Colman for two and a quarter years at the commercial rate.If the parties are unable to agree,there will be liberty to apply to me.It think it is now a simple matter of mathematics.
[Reported by GERALDINE FAINER,Barrister-at-Law]
Representation
Solicitors:Berrymans;Herbert Smith.
Order accordingly.
1.Supreme Court Act1981,s.35A:see post,p.177G–H.
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