Sycamore Bidco Ltd v Breslin & Anor

In my two previous judgments in this case I awarded the claimant £5.25m by way of damages for breach of warranty. The next issue that arises in this case is as to interest on that sum. The only thing that is common ground in relation to that interest is the amount of the principal (now that I have decided it) and the fact that such interest should be paid. Beyond that not much else is agreed – there are disputes as to the correct starting date, end date and rate. Unfortunately substantial sums of money turn on the debates that have arisen. If the claimant is right in its highest case then the interest on the judgment sum would be approximately £1.31m; if the defendants are right to the fullest extent of their argument, then the aggregate interest for which they would be liable is about £81,000. It is unnecessary for the purposes of this debate and this hearing to distinguish between the respective positions of the defendants.

So far as the starting date is concerned, the claimant contends for what it says is the normal starting date, that is to say the date the cause of action accrued. That date is the date of completion of the SPA – 9^th November 2007. It disputes that there is any reason for departing from that. So far as the end date is concerned, it says that the relevant “judgment” for the purposes of section 35A Senior Courts Act 1981 and section 17 of the Judgments Act 1838 is the date on which I handed down the second of my two judgments, on the “upper figure” point – 15^th January 2013. On that date the section 35A interest stops and the Judgments Act interest starts.

So far as rates are concerned, the claimant argues for a rate of 3% above base rate as being justifiable on the facts as the rate applicable to companies of the type of Sycamore, alternatively applicable to SMEs (small and medium enterprises). Alternatively, if the presumed rate of 1% would otherwise be applicable, the higher rate of base rate plus 2% (which means in substance 2.5% as an overall rate) should be applied from 5^th February 2009, which is when base rate slumped to 1%, followed by a further fall to 0.5% a month later.

The defendants contend for a variety of later commencement dates and end dates. The various permutations are as follows:

These issues raise questions of law and fact which require consideration in some detail. It might be thought that this exercise, which took the best part of a day in court, justifies the broad brush approach of a standard, presumed rate so as to avoid satellite litigation, as suggested in some of the authorities. However, the issues have been raised, and a lot of money is involved in this point, so it is necessary for me to deal with the issues. In any event, the thrust of the authorities and other material might be thought to be acknowledging that a standard rate, at least in current interest rate conditions, may not be as appropriate as it was and attention will have to be given to detail in appropriate cases.

As both parties before me essentially agreed, the starting point for a consideration of the principles is the judgment of Goff J in BP Exploration Co (Libya) Ltd v Hunt[1979] 1 WLR 783. He said:

The same general position in relation to these matters appears from the judgment of Forbes J in Tate & Lyle v GLC[1982] 1 WLR 149 at page 154:

In Kuwait Airways v Kuwait Insurance [2000] 1 All ER (Comm) 972 Langley J summarised the position as follows (at page 986g):

I was taken to various successful and unsuccessful attempts to postpone the start date for the interest payable on a judgment.

McGregor on Damages, 18^th Edition, at paragraph 15-081, cites insurance cases which suggest that those types of cases might be exceptions to the general rule to allow a short time for an insurer to consider claims, or a longer time in complex claims.

In Claymore Services v Nautilus [2007] EWHC 805 (TCC) Jackson J considered a quantum meruit claim made by a building contractor. He was prepared to allow some delay in the start date, bearing in mind the usual sort of facts in such cases, which do not permit an easy and immediate calculation of sums due as soon as the cause of action accrues. At paragraph 39 of his judgment he said:

This case can be regarded as a case like Firestone, where normal commercial practice would not require payment on any date earlier than the date referred to by Jackson J. It is not a departure from the clearly stated general principle set out in the earlier cases. It is within one of the expressed qualifications.

In Banque Keyser Ullman SA v Skandia (UK) Insurance Co Ltd (unreported) 11^th December 1987 Steyn J had to adjudicate on a claim that interest should not start to run on a claim until it had been formulated. He rejected that claim on the facts:

His reasoning for its not succeeding was that the inability to formulate a claim was based on the same non-disclosure by an underwriter which led to the claim itself, and it would be illogical to allow it to lead to a claim but at the same time allow it to justify an abatement of interest. Mr Neish relied on the case as justifying a proposition that a failure to formulate a claim was a good ground, by itself, for postponing interest until such time as it was formulated. I do not think that the decision should be read in that way. The proposition put forward in that case was found to be only “superficially” attractive. Mr Neish’s submission was that this was in effect a compliment to the claim. I do not so read it. I think that it demonstrates a weakness in the point, from the judge’s point of view. I think that the judge was doing no more than paying the point a sort of backhanded compliment, and did not deal with it further because it failed on the facts in any event.

Westdeutsche Landesbank v Islington BC was a case in which the financial consequences of ultra vires local authority interest rate swap contracts was determined. Having found liability, the first instance Judge (Hobhouse J) awarded interest from a date later than the date on which the ultimately recovered payment was made (18th June 1997). The Court of Appeal [1994] 1 WLR 938 overturned that decision as being factually and legally flawed. It also addressed the question of whether or not interest should run before it was ultimately known whether the transaction was ultra vires, which took a decision of the House of Lords.

I have set out these authorities at greater length than might normally be thought to be necessary on an argument as to interest because of the content of Mr Neish’s submissions. He accepted that the basic position was to be extracted from Tate & Lyle and BP v Hunt but said that the discretion of the court was unfettered. Robert Goff J had identified only broad classes of cases where interest would be postponed and that those classes were not closed. I consider that he is right in relation to the second and third of his propositions, but care must be taken in relation to his first. The jurisdiction is undoubtedly to be exercised in accordance with the discretion of the court, but it is not unfettered in the sense that the court can do what it likes on a case-by-case basis. The basic position, or starting point, is that set out in those two cases, which is that interest will normally start running when the cause of action accrues (assuming that loss accrues then too). The exceptions are true exceptions, and, in my view, are not to be taken as making significant inroads into that basic proposition. Mr Neish cannot simply appeal to the discretion of the court, and indeed in his submissions he did not do so. He said that he sought to bring the present case within the first of Robert Goff J’s class of exceptions, though actually on analysis I think that he sought to rely on the second one as well. I shall approach this matter on the footing that there is a strong and well-established limit on the exercise of my discretion in that interest should run from the date of accrual of the cause of action unless there is a strong and particularly good reason why it should not.

I therefore turn to consider the basis on which Mr Neish advances his later dates.

Mr Neish’s primary submission was that interest should be abated so that it does not run for the entire period up until the first full formulation of the quantification of the claim, plus a short time for consideration, which takes one to mid-January (say, 16^th January) 2012. The reasoning behind this submission is as follows.

Mr Neish described the position of the defendants (Mr Breslin and Mr Dawson) as being an unusual one. Normally, he said, the warrantors in a company sale case are the same people as were managing, or otherwise actively involved in, the company, who could be expected to be personally responsible for, and to have personal knowledge of, the financial affairs of the company. The present situation was different. Mr Breslin and Mr Dawson had withdrawn from the active day to day management of the company, and, at least so far as the Liberata moneys and AXA moneys were concerned, did not predict, and could not reasonably have predicted, the impact of what was a highly technical issue as to accounting treatment. They gave their warranties on the back of what the auditors had certified. The degree of their personal involvement was not such that they themselves can have known that there was a problem.

Furthermore, they were not the beneficiaries of all the proceeds. Between them they enjoyed less than 50% of the proceeds of sale, the balance going to trusts. Although they were trustees of those trusts, they did not give the relevant warranties in their capacity as trustees.

He also pointed to the fact that Sycamore was not itself exposed to inflated interest liabilities during the whole of this period, because, although the purchase was in part funded by bank borrowing to the tune of some £8m, it appears that in the year ended 30^th September 2009, Dunedin had bought in the bank debt (at a discount) and waived interest.

In those circumstances they gave the warranties in good faith, and in complete ignorance of any problem, and then heard nothing about the matter until the letter before action arrived out of the blue in September 2010. Stopping the clock there for the moment, Mr Neish submitted that that brought Mr Breslin and Mr Dawson within the first category of exceptions in BP v Hunt.

If Mr Neish seeks to bring this case within Robert Goff J’s first category of exceptions, I do not think that his points about the defendants being beneficiaries of less than the whole of the proceeds, and the buying in of the bank debt, assist him. The real question is whether their state of ignorance of the possible claim means that interest should not run.

Mr Adam Smith, who conducted the argument on interest for Sycamore, disputed the state of complete ignorance painted by Mr Neish. He pointed out that on the evidence Mr Breslin, at least, considered that the Liberata sums were, and should be treated as, turnover. However, in the light of my other conclusions on this point I do not have to consider the impact of this.

In my view Mr Neish’s arguments under this head fail. I assume for these purposes that Mr Breslin and Mr Dawson knew that they had given warranties, but knew nothing about the likelihood of a claim until the letter before action as Mr Neish submits. However, that does not bring them within the first category. The first point to make is that if matters were as Mr Neish says they are, the “exception” would apply in so many cases that it would cease to be an exception. There will be a large number of contractual claims where, for a period after breach, the defendant will not know that there has been a breach – for example, many share warranty claims and many claims involving faulty goods. The period of ignorance may be short or it may be long, but it has not been suggested that ignorance in such cases is a reason for postponing the commencement of interest on the resultant damages claim. The present case is no different.

Furthermore, it is not clear why mere ignorance should be a reason for not paying interest. As appears from the above authorities, the reason why interest is paid is because the defendant has had the use of the money (damages) for a time for which he should not have had that use. That is true whether or not the defendant is ignorant. This is perhaps most strikingly illustrated by the Westdeutsche case, where neither side of the swaps transaction knew, definitively, that the transaction was illegal until the House of Lords pronounced upon the point, and even then there were question marks about recovery which were not resolved until some heavy litigation had occurred. It is hard to imagine a more complete case of ignorance than that. At one level the parties in the present case were less ignorant than the council in the authority. Mr Breslin and Mr Dawson did know that they had given warranties, and must be taken to have known that, at least in theory, they were exposed, that the warranty had meaning and was available to the purchaser.

In fact if one reads Robert Goff J’s first category carefully, it is not a category comprised of ignorant defendants. The category is a general one which considers the position of the defendant. The ignorant defendant referred to by the judge is one sub-category of the overall class, and must be taken to be a special sort of ignorant defendant, for the reasons given in the preceding paragraph. The other illustration the judge gives is where, as an ordinary matter of commerce, one would not expect payment to be made on a claim as early as the accrual of the cause of action. In those cases it is clearly understandable that a defendant should be able to resist the notion that he should in any sense have paid before the date when commercially he ought to have done. This explains the decision in Claymore. Nobody would expect a client to pay a builder on a quantum meruit claim before the builder has prepared proper accounts and submitted a proper claim, notwithstanding the fact that the cause of action may have accrued earlier. The same explanation applies to the limited time given in some insurance claims for the insurer to make proper investigations. In both those cases all the facts relevant to the claim are in the hands of the other party (or at least most of them) and it is obvious as a matter of commerce that the proper, commercially justifiable, date for payment does not arise when the cause of action may have arisen.

Since the present case is nothing like the other examples within Robert Goff J’s first category, Mr Neish can get no comfort or support from those cases. So far as timing and the knowledge of the claim is concerned, the case against Mr Breslin and Mr Dawson was a normal one and does not attract exemption from the normal rule.

Mr Neish also prayed in aid the fact that, even at the date the claim was made, Mr Breslin and Mr Dawson did not know, and cannot realistically have known, the amount of the claim made against them, and so, even if they had wanted to, could not have paid up. The letter before action had a section entitled “Quantum”, but it set out a largely unparticularised claim, a claim which failed and a claim which was different from that ultimately advanced. So far as the first is concerned, it set out, in general terms without particulars, a claim based on an assumption that Sycamore would not have entered into the deal in the first place had it known of the true position. That is effectively a rescission-based claim (in terms of calculation) which I ruled against in my judgment. There is an alternative claim based on applying a lower multiple to EBITA than Sycamore paid and subtracting that sum (whatever it was – it was not set out) from the amount paid. This is not how Mr Hine ultimately approached his calculations. There is a further alternative particularised claim (in terms of specifying sums of money) for aggregate losses whose calculation basis is not set out. Accordingly at that stage, Mr Neish submits, the defendants could not have worked out what money claim was being made against them.

The matter did not get any clearer in pleadings. Sycamore’s primary damages case is pleaded in a manner similar to the generalised claims set out in the letter before action, with no particulars. On 22nd February 2011 the defendants sought particulars of the actual EBITA (or EBITDA) relied on, and what an appropriate multiplier would have been. The response was that an appropriate multiplier would have been five or less, but that any further details would be a matter for witness and expert evidence. As a result of that, it was only when Mr Hine’s report was served on 22^nd December 2011 that the defendants could have known exactly how the quantum case was put against them. They were therefore ignorant of quantum until then.

In my view this additional “ignorance” does not add any material amount of strength to Mr Neish’s case on ignorance of the cause of action. Again, in the period leading up to the assertion of a claim, the defendants in this case were in the same position as the defendants in a large number of other cases in not knowing the amount of the claim which has not yet been made. That is not sufficiently exceptional to take the case out of the general rule. So far as the period following on from the letter before action is concerned, the refusal to give some of the particulars sought is, on the face of it, surprising, but it was not challenged in the proceedings themselves, no doubt because at about the same time it was agreed that the losses would be particularised in experts’ reports. Nor is it right to say that the defendants can have had no idea of the sums for which they might be liable. They could have formed some idea themselves, based on the generalised claims that had been made, had they chosen to do so. If they did not have relevant accounting information, doubtless it could have been supplied to them. Furthermore, it is far from unusual for quantum issues to be clarified during the course of the interlocutory stages in an action and the events in this case are not sufficiently unusual to take the case away from the normal rule.

To summarise, therefore, on this area of the case, I find that the period of ignorance of the claim as a whole up to the letter before action, and the obscurity of quantum in the period up until December 2011, are not sufficient to postpone the normal interest start date until January 2012; nor are they sufficient to start interest running only from the date of the letter before action. It follows that there is similarly no warrant for allowing interest up to the letter before action and then disallowing it for the period up to January 2012. That would simply be illogical if the other points failed.

Mr Neish’s fourth alternative is to disallow interest for the period between the refusal to provide particulars of loss in response to the request referred to above until that loss was finally clarified in Mr Hine’s report. I am afraid that the logic of this alternative completely escapes me, but in any event it fails on the facts, and it fails as a matter of principle. So far as the latter is concerned, if the previous periods of ignorance had not been sufficient to take the case out of the norm, then this period cannot be either. Although he did not put it this way, Mr Neish might, I suppose, have tried to squash this period into Robert Goff J’s second category of exceptions (conduct of the plaintiff and unreasonable delay), but it does not really amount to delay, and certainly not conduct which should attract the sanction of disallowing interest for that period. In any event, it seems to fail on the facts. Mr Neish suggested that it was as a result of the failure to give particulars of the quantum that it was agreed that quantum experts’ reports would be passed sequentially, not exchanged, with Sycamore going first. This was, he said, to overcome the difficulties posed by the failure to give proper particulars. In fact, that turns out not to be the case. It seems that the agreement to have sequential reports on quantum was reached before the failure to give the particulars, and indeed before the request was made. So to that extent Mr Neish’s point fails on the facts. In any event, even if he had been right his point would have had no real relevance to the question of interest start dates. If his clients did not like the answer, and felt hampered, their remedy was to seek an order that they be provided. That application was not made, presumably because they thought that getting more detail in an expert’s report was a better idea.

Last, there is Mr Neish’s point (v), which is an abatement of rate in lieu of an abatement of interest as a whole. On the assumption that a proper commercial rate of interest is prima facie appropriate to this case (which it is – a point dealt with below) the only basis for reducing it below what it would otherwise be on the basis of the points made above would be some sort of disciplinary basis. I can see no basis for this whatsoever, and none was articulated by Mr Neish in his argument.

It follows, therefore, that the start date for the running of section 35A interest should be the date the cause of action accrued and on which loss accrued, which is (as is common ground) 9^th November 2007 (the date of the SPA and the completion date). That would be the normal position, and there is no good reason for departing from it.

There is a small debate about this. The parties’ cases are set out above. Two points arise – what is the appropriate “judgment” within the meaning of both relevant acts, and (I suppose) whether I should use my discretion to supplant that date (which it is accepted I have jurisdiction to do).

The wording of section 35A is that interest can be awarded:

In order to make sense of that scheme, the word “judgment” should be construed so as to mean the same thing in all three provisions, though I doubt that that is determinative of the issue that arises in this case.

Mr Smith submitted that the relevant “judgment” was the judgment in this case which finalised the amount of liability. Because of the way that matters developed in this case, that means my decision of 15th January 2013. On that date I delivered a judgment on a damages point left over from my main judgment. It was not possible to finalise the damages until I had done so. From that date the amount of damages was rendered certain. Mr Neish accepted that “judgment” means “judgment”, but that does not take the debate that much further. The essence of his submissions was that the appropriate date to take in this case would be the date when a final order is made tying up all outstanding matters – ordering damages to be paid, fixing interest, dealing with costs and (so far as applications are made) dealing with applications for permission to appeal.

In most cases that distinction will not make much difference. There is usually no significant period of time between the handing down of a judgment and the making of an order embodying that judgment in an order of the court. However, two factors combine to make the point of some significance in this case. The first is the extended nature of these proceedings since I handed down my first judgment. That extended period arises from the need to have separate argument on the “upper figure” point which was left open in my first judgment; the intervention of the Christmas holidays; and the need (agreed by both parties) to have a separate hearing on interest before a further hearing on costs (and other matters) could take place. All that means that a period of over 2½ months will have elapsed between first judgment and final order. The second is the amount of the damages in this case and, by extension, the amount of interest. Judgment debt interest would run at 8%. Section 35A interest will be running at a maximum of 3.5% (the highest the claimant puts its rate). The difference between those rates is capable of amounting to several hundred pounds per day, I was told. Hence apparently the point is worth arguing about.

As a matter of construction, I do not think that the point needs to detain me long. My first judgment did not finally arrive at a money judgment in favour of the claimant. It required my second judgment to do that so that the “upper figure” could be fixed and the amount of damages finally determined at £5.25m. That, in my view, was the “judgment” in this case for the purposes of all three provisions. The order which embodies the fruits of that judgment is a different thing, and is an order not a judgment. In my view that is clear. Mr Neish did not strenuously argue to the contrary.

However, Mr Neish did go on to say that I should exercise my discretion under both Acts so as to ensure that section 35A interest should stop, and Judgments Act interest should start, on the date when I finally dispose of these matters and make an order. He did little more than to assert that this was the “just date”, because the delays between my first judgment and the ultimate order date are not anyone’s fault. Interest starts from the date when everything else is dealt with, whenever that is, because that is what would normally happen.

I am not sure that that is what would “normally” happen, but if it is that is doubtless because the interval between the two events is normally insignificant. In this case it is significant. The prima facie position under the rules and the statutes is that the change of interest basis should take place when judgment is delivered. The mere fact of delay is no reason for departing from that prima facie case. In fact it is a good reason for sticking with the original date. Were it otherwise then the change of interest rate would depend on the vagaries of judicial availability, court listing, counsel’s availability and all the other factors which may operate to introduce some delay into the period between the hand-down of a judgment and final disposal of the matter. This is even more so under the modern practice which allows a hand-down of judgment without the attendance of the parties with a view to a subsequent attendance to deal with outstanding matters. It is desirable that the matter should remain clear – interest changes on the date of the judgment. Whether or not this benefits a claimant or a defendant will depend on the interest rate differential between the two Acts. There was a time when it would have suited a claimant to postpone that date because interest under section 35A was greater than under the 1838 Act. Under current economic conditions the position is reversed. But that is a fact of economic life. There has to be a good reason for departing from the provisions of the Acts and rules, and Mr Neish is unable to advance one. In the circumstances the end date for the running of section 35A interest shall be the date of my second judgment.

The claimant accepts that in commercial cases the presumption is (or at least was until recently) that the rate of interest under section 35A was 1% above base rate and this was the general practice in the Commercial Court. However, the latest Commercial Court Guide indicates that in the light of recent developments in interest rates, there is no presumption that that rate “is an appropriate measure of a commercial rate of interest”. Furthermore, there are a number of cases which indicate that the court’s approach can be more flexible than applying one standard rate across the board.

Tate & Lyle at page 154D-F sets out the starting point of the approach. It is said there that, as a matter of principle, the correct approach is to take the rate at which the claimant could borrow money. That makes it look as though the claimant is viewed as a potential borrower rather than a potential saver. However, that position is not, or at least was not until recently, pursued to its logical conclusion. According to Colin Baker v Black Sea and Baltic General Insurance Co Ltd [1996] LRLR 353 the presumed Commercial Court rate was said to be a pragmatic compromise between the position of a notional borrower and a notional saver:

It should be noted that the exercise envisaged by Otton LJ and by Forbes J in Tate & Lyle, in order to consider whether to depart from what was perceived as the commercial norm, does not involve simply looking at the actual claimant. It involves looking at the class to which the claimant belongs and, if the circumstances require it, awarding that sort of generalised rate to the claimant in view of an assumed or standardised rate. That is how the court approached the matter in Colin Baker – see the description of what the trial judge had done, and the evidence on which it was based at page 364 and the approval of that approach at page 365. What the plaintiff had done was to:

This approach has been adopted in a number of cases. However, in some of those cases, and despite the fact that the personal borrowing characteristics of the claimant are per se irrelevant, and that the rates at which the claimant actually borrowed are not per se relied on, it was nonetheless held that those rates can be used as evidence of what borrowers of that class would pay – a sort of self-generated comparable. This approach was apparently adopted in Fiona Trust v Privalov [2011] EWHC 664 (see the general approach described by Andrew Smith J at para 16, and his particular approach in that case at paras 24-5); and Bridge UK.Com Ltd v Abbey Pynford plc [2007] EWHC 728 at para 146. It was probably the approach of HH Judge Toulmin QC in PGF II SA v RSA[2010] EWHC 1459 (TCC) – although he does not articulate the fact that he is taking the claimant’s own borrowing rates as being comparables, he does identify the relevant passage in Tate & Lyle as containing the proper approach (see para 344) and at para 345 he refers to the market rate. In Keyser Ullman (supra) Steyn J adopted the classification approach to the extent of distinguishing between classes of claimants.

All that, in my view, sets out the proper approach of the court in relation to interest rates, which I shall follow. I also note, and follow, the view of Steyn J in Keyser Ullman that:

Mr Neish sought to play down the effect of the cases in which the court departed from the presumed rate of 1% above base rate as being exceptional cases involving small businesses, and he pointed to Ahmed v Jaura [2002] EWCA Civ 210, Bridge v Abbey Pynford (above), Attrill v Dresdner Kleinwort [2012] EWHC 1468 (QB) and Claymore v Nautilus [2007] EWHC 805 (TCC) as falling into that category. They are indeed (probably) all examples of the smaller business, but they are not to be dismissed on that footing. It is apparent from the judgment of Mummery LJ in Ahmed that the rate that was allowed was one determined by reference to the class of small businesses:

There is no reason to treat that class differently from other classes that can be identified. It is therefore open to Sycamore to establish that it is a member of a class whose borrowing rates would be more than the conventional (presumed) rate and to argue that fairness requires that it should receive that rate.

One factor which is capable of making it fair to depart from the presumption is the effect on interest rates of the credit crunch. That is doubtless what lies behind the wording of the current Commercial Court guide, though of course that is only a guide and not binding. It was, however, recognised in Persimmon Homes (South Coast) Ltd v Hall Aggregates (South Coast) Ltd [2012] EWHC 2429 (TCC), where Ramsey J recognised that since the credit crunch (marked by the lowering of Bank of England base rate to 1% in February 2009 and 0.5% in March 2009) 1% above base rate was no longer a rate at which borrowing could be obtained. He awarded 1% over base rate until 5^th February 2009 and 2.5% overall (2% above base rate) for the period thereafter. He did not have any evidence of the rate that companies like Persimmon would have paid to borrow money (see paragraph 16 of his judgment) and doubtless that is why he applied 1% above base rate. It is, however, implicit in his remarks that had he had such evidence he might well have ordered a rate in accordance with what it showed if it had been greater than 1% over base rate.

I now turn to apply those considerations to the case before me.

Mr Smith invites me to find that Sycamore was in the class of “newcos” formed to effect the acquisition of a business in a private equity transaction. In 2007 that class could borrow at the sort of rates referred to in the evidential points (i) to (iii) above. There is therefore sufficient evidence to demonstrate that the borrowing by Sycamore (which is the prima facie measure of the interest payable under section 35A) would be at those rates, and that evidence is sufficient to displace the presumption of 1% over base rate. He says it is fair, in this case, to acknowledge that fact and to displace it.

Mr Neish says that this case is not sufficiently different from the norm to justify that. He says:

that the evidence just shows the personal characteristics of the claimant, and not of a class.

The rates are not the rates necessary to supply the place of that which was withheld (in the words of the authorities) but were the rates of borrowing for the period up to the credit crunch.

Given that, on my findings, Dunedin overpaid, it was not Sycamore who have been out of the money; it is Dunedin and its banks.

It is the borrowing characteristics of Dunedin’s class that are relevant, not Sycamore’s. Dunedin itself was able to borrow on favourable terms in order to do so.

If general attributes are important, it is GAS’s, not Sycamore’s because the lending banks in this case will have been looking to the income stream from GAS to fund the loans and the appropriate comparator class is that of which GAS is a member – a well-established commercial brokerage operation employing over 50 people.

Dunedin repaid the borrowing early (see above).

I prefer Mr Smith’s submissions. I am satisfied that it is appropriate to look at Sycamore’s position, not Dunedin’s, because Sycamore was the borrower and the purchaser of the business. Dunedin was not treated as the borrower. If it had been, then the actual borrowing would have been at lower rates if it in fact borrowed at those lower rates in order to take out the bank loans. It is the damages payable to Sycamore, not Dunedin, which were “withheld” during the period which has elapsed since completion of the purchase, and, on the authorities, that is the sum which is looked to in order to assess interest.

In the circumstances I consider that enough has been done to displace the presumption. It has been demonstrated that persons of the class to which Sycamore belongs would have to borrow at rates greater than 1% above base rate and that that rate should be taken to be 3% above base rate for what I will call the first part of the period. Taking base rate rather than LIBOR works slightly in the defendants’ favour, because for that period LIBOR was slightly greater than base rate.

However, that is only from the first period. In my view it would be appropriate to reflect the fact that interest rates were significantly reduced from February/March 2009, and at the same time to acknowledge that borrowing at 1% above base rate was, from that time, pretty well impossible. In doing so I follow the approach of Ramsey J in Persimmon Homes v Hall. If I differentiate for this period (which I do) Mr Smith says that I should award 2% above base rate, which he says yields a rate of 2.5% across the period. That is right if one takes the period from the date when base rate hit 0.5% in March, rather than February when it went down to 1%. Striking an appropriate balance, I find that it is appropriate to step the interest down from 5^th February 2009 and to allow interest at 2.5% from that date, rather than take 3.5% for the month between the February and March changes.

I therefore find:

The start date for section 35A interest should be 9^th November 2007.

The end date for section 35A interest should be 15^th January 2013.

The appropriate rate of interest on the debt is to be 3% above base rate from time to time until 5^th February 2009, and 2.5% from that date up to the end date.