Kitcatt & Ors v MMS UK Holdings Ltd & Anor [2017] EWHC 786 (Comm) (10 April 2017)

Neutral Citation Number: [2017] EWHC 786 (Comm) Case No: CL-2015-000204 IN THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION COMMERCIAL COURT Royal Courts of Justice Strand, London, WC2A 2LL 10 April 2017 B e f o r e : MR JUSTICE MALES ____________________ Between: (1) PAUL KITCATT (2) MARC ALAN NOHR (3) YVONNE ALEXANDER (4) The estate of JEREMY DAVID JONATHAN SHAW (5) CLIVE RICHARD MISHON (6) RICHARD MADDEN (7) STEVEN IRELAND (8) ANNETTE BLUNDEN (9) LAZAR DZAMIC (10) SIMON ROBINSON (11) JAMIE TIERNEY (12) PHIL KEEVILL Claimants - and – (1) MMS UK HOLDINGS LIMITED (2) PUBLICIS GROUPE SA (a company incorporated in France) Defendants ____________________ ANDREW SUTCLIFFE QC and PAUL CHOON KIAT WEE (instructed by Fox Williams LLP) for the Claimants NIGEL JONES QC and RUPERT COHEN (instructed by Morrison Foerster (UK) LLP) for the Defendants Considered on Written Submissions ____________________ HTML VERSION OF APPROVED JUDGMENT ON CONSEQUENTIAL MATTERS ____________________ Crown Copyright © Mr Justice Males : I have to deal with interest, costs and other matters arising out of the judgment dated 4 April 2017 [2017] EWHC 675 (Comm) in which I held that the claimants were entitled to judgment against MMS for £2.6 million and that their claim against Publicis would be dismissed. The parties have made written submissions on the matters which arise. Pre-judgment interest Two issues arise as to pre-judgment interest, namely (1) the rate of such interest and (2) the date from which such interest should run. Rate The claimants contend that interest should be awarded at the rate of 5% above base rate. They rely on the decision of Owen J in Attrill v Dresdner Kleinwort Ltd [2012] EWHC 1468 (QB) where interest was awarded at that rate in favour of claimants who were not a commercial concern but employees and of Warren J in Reinhard v Ondra LLP [2015] EWHC 2943 (Ch) where 3% over base was awarded. They submit that the usual practice of the Commercial Court to award pre-judgment interest at 1% over base on judgments given in sterling is merely a starting point which can be displaced in a suitable case and that the court should have regard to the status and nature of the claimants. Here, they say, the claimants are not a commercial entity which might have borrowed on commercial terms, but are individuals. The defendants point out that the claimants' initial proposal was that interest should be awarded at the rate of 2.5% and that it was only after they challenged this rate by reference to the usual Commercial Court practice referred to above that the claimants sought the higher rate of 5% over base. They point out also that the claimants are successful business men and women, not penniless individuals, and that there is no evidence of the rate at which they or individuals like them would be able to borrow. In my judgment it is a reasonable inference, even without specific evidence, that the rates at which a commercial concern would be able to borrow are not available to the claimants as individuals. On the other hand, I accept that they are successful business men and women who may be able to achieve a better rate than some other individual claimants. It would in my view be disproportionate to provide now for the service of evidence on this issue. I propose to follow the approach of Flaux J in Lindsay v O'Loughnane [2010] EWHC 529 (QB) at [142] and [143]. This was to recognise that (1) the usual Commercial Court rate of 1% over base rate is only a presumption which can be displaced in an appropriate case and (2) as a general proposition the rate at which individuals can borrow money has been rather higher than base plus 1% in the last few years. However, in the absence of specific evidence, Flaux J was not prepared to award interest at more than 2% over base rate. The rate of pre-judgment interest will therefore be 2% over base rate. Date The claimants say that interest should run from the date on which the Deferred Consideration (i.e. calculated in accordance with the revised formula agreed as a result of the December 2012 agreement) should have been paid, that being the date on which their cause of action accrued. They say that the relevant date was Friday 14 February 2014, calculated as follows. First, clause 15 of the SPA defines the Deferred Payment date as: "… a Business Day falling not later than 45 days after the date on which Average Operating Income Margin 2012 to 2013 becomes capable of calculation (being the date on which Operating Income for 2013 becomes final and binding on the parties in accordance with schedule 5)." Second, they say that the Operating Income for 2013 was capable of calculation on 1 January 2014. Third, 45 days after 1 January 2014 was Saturday 15 February which was not a Business Day and therefore the relevant date was the previous day. The defendants say, however, that the terms of Schedule 5 of the SPA are such that the Operating Income for 2013 would only become final and binding 45 days after service on the claimants of management accounts and a certificate, which there was no obligation to serve before 31 March 2014. Accordingly, they say, the earliest date on which a cause of action for the Deferred Consideration could have accrued is 45 days after 31 March, namely 15 May 2014. However, they say, it is apparent that even then the accounts would not have been agreed because there would have been a dispute about the SSC issue. Accordingly, they say, a dispute resolution mechanism in the SPA for a decision by an independent accountant would have had to be invoked which, even if it had been operated as promptly as possible, would have meant that the Operating Income for 2013 could not have become final and binding until 19 September 2014. It is important to remember that the award of statutory pre-judgment interest is discretionary. Accordingly any principle that damages should be assessed by reference to a party's minimum level of lawful performance (cf. Durham Tees Valley Airport Ltd v Bmibaby Ltd [2010] EWCA Civ 485 , [2011] 1 Lloyd's Rep 68 ) does not apply. It seems to me that the appropriate approach is to form a reasonable view of when the Deferred Consideration of £2.6 million would probably have been paid if both parties had been acting sensibly and reasonably. It is unrealistic to think that the claimants would have submitted the necessary financial information to enable the Deferred Consideration to be calculated on New Year's Day 2014. Equally, it is unrealistic to think that the defendants would have deliberately drawn out the procedure of agreeing the figures to the last possible day. I recognise that there would in all probability have been a dispute about the SSC issue, but in circumstances where it would have been agreed that in any event £2.6 million was payable, I see no reason why payment of this minimum amount should have been held up. Adopting this approach, I rule that interest should run from 1 May 2014. Post judgment interest The defendants suggest that the date for payment of the judgment sum should be delayed from the usual 14 days to 28 days after delivery of judgment "to give [MMS] sufficient time to finance the payments to the claimants". I see no good reason to do this. There is no reason to suppose that MMS will be unable to make payment within the usual period of 14 days. If it is unable to do so, or chooses not to, interest at the Judgments Act rate will accrue thereafter. Costs The claimants say that they are successful party and should be awarded their costs of the action. The defendants say that (1) MMS should pay only 50% of the claimants' costs of the action against MMS, such costs to be paid on the standard basis and (2) the claimants should pay Publicis's costs of the action to be assessed on the indemnity basis. I deal first with the question whether the claimants should be ordered to pay Publicis's costs. I accept that the claimants' claim against Publicis failed, and that as between the claimants and Publicis, it is Publicis which can be regarded as the successful party. However, viewing the proceedings as a whole, the addition of Publicis made no (or at the most, minimal) difference to the costs of the action. MMS and Publicis were represented throughout by the same lawyers and no relevant distinction was drawn between them so far as pleadings, disclosure, witness statements or submissions were concerned. The claim against Publicis added at most a few minutes to a trial which lasted for two weeks. Accordingly, while I concluded that there was no reasonable basis for a claim against Publicis, the fact that the claimants brought such a claim added little or nothing to the claimants' costs and caused Publicis to incur no (or at the most, minimal) costs which would not anyway have been incurred by MMS. While in principle an unsuccessful defendant should not be visited with costs incurred by the claimants in its unsuccessful pursuit of a claim against the successful defendant, I do not accept that there were any significant costs to which this principle would apply. That said, I do accept the defendants' submission that the claimants' purpose in joining Publicis was to generate adverse publicity for the defendants and that the claimants made a deliberate choice to conduct the action in a way which would help them to achieve this object. As Commercial Court proceedings are conducted before judges rather than juries, that appears to me to be the best explanation for the unjustified hyperbole in the presentation of the claimants' case to which I referred at [58] and [59] of the judgment. However, even if this was the claimants' purpose, it remains the fact that the joinder of Publicis did not add significantly or at all to the costs of the action. Accordingly I decline to make any order for costs in favour of Publicis. The next question is whether there should be a reduction in the costs awarded against MMS. As between the claimants and MMS it is clear that the claimants are the successful party. They succeeded on the breach of warranty issue and on the agreement issue. Despite failing on the SSC issue, they obtained a judgment for £2.6 million which, although modest in Commercial Court terms, is nevertheless a substantial sum. The starting point, therefore, is that the claimants are entitled to the costs of the action against MMS. The defendants submit that the claimants should recover only 50% of these costs because of their conduct in the following respects: (1) They failed to follow the Practice Direction as to Pre-Action Conduct, in particular because the case pleaded differed in important respects from that set out in the claimants' letter before claim; (2) They made personal and unfounded allegations of bad faith on the part of the defendants which had the effect of inflaming the situation and entrenching the parties' positions; (3) The May 2013 letter with which I dealt at [182] to [186] and [267] of the judgment set out a false and misleading case; and (4) The claimants' case was continually changing, in particular because of (a) its initial reliance on the SI Partners model in order to found a claim for £9 million which was later abandoned, and (b) the late pleading of the December 2012 agreement. I accept that there is some force in these points. Two points are particularly relevant. First, the reliance on the SI Partners' model was only abandoned after service of experts' reports and put the defendants to considerable unnecessary work. Further, if this had been from the outset a claim for no more than £4.85 million it may well be that it could have been dealt with in a way which involved less expenditure on costs. As it was, by the time the initial claim was abandoned, the parties were committed to preparing for a 10 day Commercial Court trial. Second, the basis on which the claimants succeeded was that there was an agreement in December 2012 as to the adjustments which should be made which resulted in a Deferred Consideration of £2.6 million (or, if they had succeeded on the SSC issue, would have resulted in a claim for £3.6 million). However, that case was only pleaded in January 2017, shortly before the trial. If the claimants' case had remained as initially pleaded, it is likely that it would have failed. The claimants would not have been able to establish a binding agreement concluded in October or at any stage before December 2012 (see [256] of the judgment). They may have been able to establish a breach of warranty, although not by reference to the SI Partners model, but in the absence of the December 2012 agreement they might well have failed to prove entitlement to any remedy under clause 10.12 in circumstances where the case advanced (that but for the breach, KND would have achieved the Operating Income and Revenue set out in the Integration Plan: see [287] to [295] of the judgment) was untenable. On the other hand, it seems to me that the defendants never had any intention of seeking to settle this case and that it is unlikely that they would have sought to do so, even if the claimants had conducted the case from the outset in a more realistic and less exaggerated way. While it could be said that it was open to the defendants to protect their position on costs by making a Part 36 offer, this point has less force in the present case than it might have in other cases. In particular, until the amendment of the claimants' case in January 2017, the claimants' case was one which might well have failed at trial for the reasons explained above. Nonetheless, even after that amendment, the defendants continued their resistance to the claim on every point. It is likely, therefore, that even if the claimants had pleaded from the outset the case which ultimately succeeded, very substantial costs would still have been incurred by both parties. In these circumstances I consider that the claimants remain the successful party and that the starting point must be that they are entitled to their costs, but that in the exercise of my discretion some reduction in the costs awarded is appropriate to reflect the factors outlined above. I conclude that the appropriate order is that the claimants should recover 75% of their costs of the action from MMS. Interest on costs The claimants seek an order for payment of interest on their costs to compensate them for the loss of use of the money spent in paying their solicitors, with interest to run from the date of each solicitors' invoice. It is not apparent whether the claimants have actually paid their solicitors' invoices. I am prepared to order that interest on costs should be paid at the rate of 2% over base rate from the date of payment by the claimants, but only on costs which the claimants have actually paid. Payment on account of costs The claimants' costs budget totalled £652,843 plus VAT. The defendants' was considerably more. Bearing in mind the order for costs which I have made, there will be a payment on account of costs by MMS in the sum of £440,000 plus VAT. Permission to appeal The claimants seek permission to appeal limited to the SSC issue dealt with at [274] to [283] of the judgment. They contend that this is a question of law which, if answered in their favour, would increase the sum awarded by £1 million. I refuse permission. Although the issue is short and self-contained, I consider that the answer to the question is clear and that an appeal has no real prospect of success. Postscript After a draft of this judgment was circulated to the parties, the claimants filed further submissions, explaining that they had expected to be given an opportunity to respond to the defendants' submissions. Although the claimants had not previously indicated that they wished to file such a response, I accept that there may have been a misunderstanding and have considered their further submissions. The claimants' further submissions challenge each of the defendants' criticisms set out at [23] above. However, it is in my view clear beyond argument that the case as eventually presented at trial was materially different from the case initially put forward in the two major respects indicated at [24] above. It was a claim for £9 million which relied heavily on the SI Partners model and it did not allege the conclusion of a binding agreement in December 2012. Even if the case presented at trial was notified to the defendants before a formal amendment of the pleading was served in January 2017, the fact remains that this case was only put forward at a relatively late stage, that costs were incurred by the defendants in responding to the initial case, and that the case as initially pleaded would probably have failed. The claimants' further submissions also disclaim any allegation of bad faith on the part of the defendants, saying that this has never been part of their case. However, I doubt whether anyone who sat through the trial would have understood that the claimants made no such allegation. Certainly that was not my understanding, as I made clear in the judgment at [58]. That judgment was also circulated in draft to the parties before being handed down, but the claimants did not suggest that I had misunderstood their case. I have considered afresh what is the appropriate order for costs in the light of the claimants' further submissions. My conclusion remains that the appropriate order is that the claimants should recover 75% of the costs of the action from MMS. BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII