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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Granville Technology Group Ltd & Ors v LG Display Co. Ltd & Anor [2023] EWCA Civ 980 (16 August 2023) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2023/980.html Cite as: [2023] EWCA Civ 980, [2024] 2 WLR 372, [2024] KB 179, [2023] WLR(D) 361 |
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CA-2023-000366 |
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING'S BENCH DIVISION
COMMERCIAL COURT
Adrian Beltrami KC (Sitting as a Judge of the High Court)
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE MALES
and
LADY JUSTICE WHIPPLE
____________________
1) GRANVILLE TECHNOLOGY GROUP LIMITED (IN LIQUIDATION) 2) VMT LIMITED (IN LIQUIDATION) 3) OT COMPUTERS LIMITED (IN LIQUIDATION) |
Appellants/Claimants |
|
- and – |
||
(1) LG DISPLAY CO. LIMITED (2) LG DISPLAY TAIWAN CO. LTD |
Respondents/Defendants |
____________________
Daniel Piccinin KC & Sarah O'Keeffe (instructed by Cleary Gottlieb Steen & Hamilton LLP) for the Respondents
Hearing date: 3 August 2023
____________________
Crown Copyright ©
Lord Justice Males:
Background
The proceedings
The judgment
"37. As it emerged during the course of the hearing, the issue for determination is a narrow one. Is the allegation of deliberate concealment, as pleaded, sufficient to engage equity's jurisdiction within Lord Brandon's first limb, or is it arguably sufficient so as to leave the matter for trial? I have come to the clear conclusion that it is not. This is for the following reasons:
38. First, I will assume without deciding that, in theory at least, conduct which involves the deliberate concealment of a wrong, may in appropriate circumstances be capable of being characterised as an equitable fraud, given the very broad scope of the concept described in Grant & Mumford. This seems most likely where the concealment is itself a breach of duty but I do not need to explore the limits.
39. Second, however, that can only be the beginning of the enquiry. Especially given that broad scope, it cannot be enough for a party merely to point to some conduct which might fall within the definition of the term. So much is clear from Black v Davies. What has to be established is that 'money had been obtained and retained by fraud'.
40. Third, as it seems to me, this must mean that the 'fraud' must be the cause of action or at least an element of the cause of action and, in any event, that it is the fraud which has caused money to be obtained and retained. Further, and as per Black v Davies, the money must be a 'fund which [the fraudster] has had in hand which he has, or is deemed to have, made use for his own benefit.'
41. Fourth, applying this analysis, the contention fails at multiple levels. The allegation of deliberate concealment is not itself a cause of action. Nor is it even alleged to be part of the cause of action, appearing only in the Reply for a different purpose. In any event, the deliberate concealment is not alleged to have caused LG to obtain and retain a fund for their own benefit. LG might or might not have benefited by the receipt of monies from the LCD cartel but that is not something which is explored on the pleaded case. And the only contention in the Answers to the request for information is that the concealment prevented the pursuit of damages but that is clearly not sufficient. Ultimately, the contention fails for similar reasons to those in Black v Davies, namely that it is not enough merely to contend that the wrong caused the Claimants to lose money."
The application to amend
"I do not accept that the proposed amended pleading adequately sets out a case on causation by reference to a deliberate concealment, nor that he has pleaded a case of a sufficient fund obtained or retained by fraud in order to satisfy the requirements of the jurisdiction to award compound interest. It does seem to me that it is a generalised pleading of benefit which is only loosely linked to deliberate concealment and that it does not satisfy the requirements for the equitable rule and, on the contrary, would run directly against the observations of the House of Lords and the Supreme Court which I referred to in my judgment. …"
Submissions on appeal
(1) The claimants' claim is (at least arguably) based upon a cause of action which equity would regard as "fraud" or as having "fraud" as an ingredient, i.e. intentional and unlawful price-fixing, intended to benefit the cartelists by causing the claimants and other purchasers to pay inflated prices, which was deliberately concealed throughout the period of the cartel and afterwards.
(2) Alternatively, this is not a necessary requirement for the award of compound interest in equity. It is sufficient that the defendant has engaged in conduct which equity would regard as "fraud" and that there is a causal link between that conduct and the obtaining and retaining of money. Here, the defendants obtained money by deliberately breaking the law in order to benefit from inflated prices, and retained that money by deliberate concealment of the wrongdoing over a period.
(3) The judge was wrong to refuse permission for the amendment proposed by the claimants, which adequately pleads a case that the defendants received a "fund" by reason of fraud or deliberate concealment; it is sufficient that the defendants benefited financially from involvement in the cartel by obtaining money (in the form of inflated prices) on which they would have been able to earn compound interest or which they would have been able to utilise in their business.
Grasping the nettle
Lord Brandon's summary of the equitable jurisdiction
"The Chancery courts, again differing from the common law courts, had regularly awarded simple interest as ancillary relief in respect of equitable remedies, such as specific performance, rescission and the taking of an account. Chancery courts had further regularly awarded interest, including not only simple interest but also compound interest, when they thought that justice so demanded, that is to say in cases where money had been obtained and retained by fraud, or where it had been withheld or misapplied by a trustee or anyone else in a fiduciary position."
"If it is plain and obvious to all and sundry that loss would be suffered in the event of late payment, it cannot be recovered; but if the loss only results from peculiar circumstances known to the two parties to the contract, it can be."
The nature of the claim
"61. The Claimants are entitled to complete compensation for all of their losses, including for lost return on investments and/or for additional financing costs and/or for interest losses incurred as a result of having to pay unlawful Overcharge amounts in respect of LCD Panels and LCD Products throughout the relevant period and having been kept out of and denied the commercial use of monies.
62. Throughout the Relevant Period the Claimants and each of them borrow money from banks and other creditors, on which interest was payable at prevailing rates. In the absence of the Overcharges to which the Claimants were subjected throughout the Relevant Period, the Claimants would have offset such savings against their respective borrowings and/or would have borrowed less and/or would have reinvested the amounts in their respective businesses."
"It would neither be possible, practicable nor proportionate to seek to trace the precise supply chains in respect of the hundreds of thousands of LCD Panels and LCD Products that were purchased by the Claimants".
The purpose of a civil remedy in competition cases
"182. The claims of the merchants in these appeals are for damages for loss caused to them by the tortious acts of the operators of the payment card schemes in breach of their statutory obligations under the 1998 Act. It is not in dispute, as we discuss below, that the fundamental principle underlying the merchants' claims is that the damages to which they are entitled are compensatory; the merchants are entitled to be placed, so far as money can achieve that, in the position which they would have been in but for the tortious acts which have caused them loss."
"192. The merchants' claims are for the added costs which they have incurred as a result of the MSC, which the acquiring banks have charged them, being larger than it would have been if there had been no breach of competition law. Sainsbury's claims damages measured by the difference between the sums which it paid the acquirers through the MSC and the sums which it would have paid if the acquirers' market had not been distorted by the MIF. Similarly, AAM's principal pleaded case is that they are entitled to recover the basic amounts by which they have been unlawfully overcharged with an alternative case that in so far as the unlawful overcharges have been passed on in their selling prices to their customers, they have suffered a loss of profit on the sales of the goods concerned through a reduced volume of sales.
193. In each case the merchants' primary claim of damages is for the pecuniary loss which has resulted directly from the breach of competition law by the operators of the schemes. That direct loss is prima facie measured by the extent of the overcharge in the MSC.
194. It is trite law that, as a general principle, the damages to be awarded for loss caused by tort are compensatory. The claimant is entitled to be placed in the position it would have been in if the tort had not been committed. A classic statement of this principle is that of Lord Blackburn in Livingstone v Rawyards Coal Co (1880) 5 App Cas 25, 39; (1880) 7 R (HL) 1, 7:
'I do not think there is any difference of opinion as to its being a general rule that, where any injury is to be compensated by damages, in settling the sum of money to be given for reparation of damages you should as nearly as possible get at that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation'."
"147. Once one has cleared the legal ground and appreciated that the claim made in the present case is a claim that the defendants should disgorge the profit which they have made from their breach of statutory duty in operating the cartel the difficulties of the claim become apparent. No one suggests that, to the extent the claimant has in fact suffered a loss because it has paid too high a price which it has been unable (for any reason) to pass on to its own purchasers, that loss cannot be recovered. If, however, the claimant has in fact passed the excessive price on to its purchasers and not absorbed the excess price itself, there is no very obvious reason why the profit made by the defendants (albeit undeserved and wrongful) should be transferred to the claimant without the claimant being obliged to transfer it down the line to those who have actually suffered the loss. Neither the law of restitution nor the law of damages is in the business of transferring monetary gains from one undeserving recipient to another undeserving recipient even if the former has acted illegally while the latter has not."
"161. Devenish is entitled to be compensated for any loss it has suffered as a result of the cartel, no more and no less."
The availability of compound interest at common law
"93. In La Pintada [1985] AC 104 the House made clear that, contrary to the general understanding of the effect of the London, Chatham and Dover Railway case [1893] AC 429, claims for damages for interest losses suffered as a result of the late payment of money are not taboo. That is plainly right. Those who default on a contractual obligation to pay money are not possessed of some special immunity in respect of losses caused thereby. To be recoverable the losses suffered by a claimant must satisfy the usual remoteness tests. The losses must have been reasonably foreseeable at the time of the contract as liable to result from the breach. But, subject to satisfying the usual damages criteria, in principle these losses are recoverable as damages for breach of contract. This is so even if the losses consist of a liability to pay borrowing costs incurred as a result of the late payment, as happened in Wadsworth v Lydall [1981] 1 WLR 598. And this is so irrespective of whether the borrowing costs comprise simple interest or compound interest.
94. To this end, if your Lordships agree, the House should now hold that, in principle, it is always open to a claimant to plead and prove his actual interest losses caused by late payment of a debt. These losses will be recoverable, subject to the principles governing all claims for damages for breach of contract, such as remoteness, failure to mitigate and so forth.
95. In the nature of things the proof required to establish a claimed interest loss will depend upon the nature of the loss and the circumstances of the case. The loss may be the cost of borrowing money. That cost may include an element of compound interest. Or the loss may be loss of an opportunity to invest the promised money. Here again, where the circumstances require, the investment loss may need to include a compound element if it is to be a fair measure of what the plaintiff lost by the late payment. Or the loss flowing from the late payment may take some other form. Whatever form the loss takes the court will, here as elsewhere, draw from the proved or admitted facts such inferences as are appropriate. That is a matter for the trial judge. There are no special rules for the proof of facts in this area of the law.
96. But an unparticularised and unproved claim simply for 'damages' will not suffice. General damages are not recoverable. The common law does not assume that delay in payment of a debt will of itself cause damage. Loss must be proved. To that extent the decision in the London, Chatham and Dover Railway case remains extant. The decision in that case survives but is confined narrowly to claims of a similar nature to the simple claim for interest advanced in that case. Thus, that decision is to be understood as applying only to claims at common law for unparticularised and unproven interest losses as damages for breach of a contract to pay a debt and, which today comes to the same, claims for payment of a debt with interest. In the absence of agreement the restrictive exception to the general common law rules prevails in those cases.
97. The common law's unwillingness to presume interest losses where payment is delayed is, I readily accept, unrealistic. This is especially so at times when inflation abounds and prevailing rates of interest are high. To require proof of loss in each case may seem unduly formalistic. The common law can bear this reproach. If a party chooses not to prove his interest losses the remedy provided by the law is to be found in the statutory provisions."
"100. For these reasons I consider the court has a common law jurisdiction to award interest, simple and compound, as damages on claims for non-payment of debts as well as on other claims for breach of contract and in tort."
The purpose of the equitable jurisdiction to award compound interest
"The principles on which the courts of equity acted are expanded in a series of cases … Those judgments show that, in equity, interest is never awarded by way of punishment. Equity awards it whenever monies misused by an executor or a trustee or anyone else in a fiduciary position – who has misapplied the money and made use of it himself for his own benefit. The court:
'presumes that the party against whom relief is sought has made that amount of profit which persons ordinarily do make in trade, and in these cases the Court directs rests to be made,' i.e. compound interest: see Burdick v Garrett 5 Ch App 233, 242, per Lord Hatherley LC.
The reason is because a person in a fiduciary position is not allowed to make a profit out of his trust: and if he does, he is liable to account for that profit or interest in lieu thereof.
In addition, in equity interest is awarded whenever a wrongdoer deprives a company of money which it needs for use in its business. It is plain that the company should be compensated for the loss thereby occasioned to it. Mere replacement of the money – years later – is by no means adequate compensation, especially in days of inflation. The company should be compensated by the award of interest. That was done by Sir William Page Wood V-C (afterwards Lord Hatherley) in one of the leading cases on the subject, Atwool v Merryweather (1867) LR 5 Eq 464n, 468-469. But the question arises: should it be simple interest or compound interest? On general principles I think it should be presumed that the company (had it not been deprived of the money) would have made the most beneficial use open to it: cf. Armory v Delamirie (1723) 1 Stra 505. It may be that the company would have used it in its own trading operations; or that it would have used it to help its subsidiaries. Alternatively, it should be presumed that the wrongdoer made the most beneficial use of it. But, whichever it is, in order to give adequate compensation, the money should be replaced at interest with yearly rests, i.e. compound interest."
"It is well established in equity that a trustee who in breach of trust misapplies trust funds will be liable not only to replace the misapplied principal fund, but to do so with interest from the date of the misapplication. This is on the notional ground that the money so applied was in fact the trustee's own money and that he has retained the misapplied trust money in his own hands and used it for his own purposes. Where a trustee has retained trust money in his own hands, he will be accountable for the profit which he has made or which he is assumed to have made from the use of the money. In Attorney-General v Alford 4 De GM & G 843, 851, Lord Cranworth LC said:
'What the court ought to do, I think, is to charge him only with the interest which he has received, or which it is justly entitled to say he ought to have received, or which is so fairly to be presumed that he did receive that he is estopped from saying that he did not receive it.'
This is an application of the doctrine that the court will not allow a trustee to make any profit from his trust. The defaulting trustee is normally charged with simple interest only, but if it is established that he has used the money in trade he may be charged compound interest: see Burdick v Garrick 5 Ch App 233, per Lord Hatherley LC at 241 and Lewin, Trusts, 16th ed (1964), p.266, and the cases there noted. The justification for charging compound interest normally lies in the fact that profits earned in trade would be likely to be used as working capital for earning further profits. Precisely similar equitable principles apply to an agent who has retained moneys of his principal in his hands and used them for his own purposes: Burdick v Garrick.
The application of this rule is not confined to cases in which a trustee or agent has misapplied trust funds or a principal's property, nor is it confined to trustees and agents. It was enunciated by Lord Herschell in Bray v Ford [1896] AC 44, 51 in these terms:
'It is an inflexible rule of a court of Equity that a person in a fiduciary position … is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where is interest and duty conflict'."
"From these cases it can be seen that compound interest may be awarded in cases where the defendant has wrongfully profited, or may be presumed to have so profited, from having the use of another person's money. The power to award compound interest is therefore available to achieve justice in a limited area of what is now seen as the law of restitution, viz. where the defendant has acquired a benefit through his wrongful act (see Goff & Jones, The Law of Restitution, 4th ed (1993), p.632 et seq; Birks, An Introduction to the Law of Restitution, pp. 313 et seq; Burrows, The Law of Restitution (1993), pp. 403 et seq. The general question arises whether the jurisdiction must be kept constrained in this way, or whether it may be permitted to expand so that it can be exercised to ensure that full justice can be done elsewhere in that rubric of the law."
"209. All that said, the judge did not make his award of interest as a matter of, or in connection with, a claim for debt, breach of contract or damages for tort. He made it as part of a restitutionary award of compensation for breach of fiduciary duty. Such a claim made on the basis of trusteeship and available to the claimants in the circumstances of the case, is by its origin and nature an equitable proprietary claim moulded and used for the purpose of achieving restitution by a person called to account by equity on the basis of a defaulting trustee. Since there is no jurisdiction in the court to award compound interest at common law or by statute, it was indeed the only basis on which the judge could make an award of compound interest. The jurisdiction which he exercised is that which Lord Brandon stated in the La Pintada case at p.116 is confined to situations
'where money had been obtained and retained by fraud, or where it had been withheld or misapplied by a trustee or anyone else in a fiduciary position'
and which the majority of the House of Lords declined to expand further in the Westdeutsche Bank case (see per Lord Browne-Wilkinson at 717F, Lord Slynn of Hadleigh at 718F-719B and Lord Lloyd of Berwick at 739B-741A).
210. In such a case, the award of compound interest is made on the basis that a trustee misapplying monies for his own benefit, and a person obtaining or retaining money by fraud who is to be similarly treated, should be obliged either to account in full for the benefit he has unjustly derived or, in lieu of such account, to pay compound interest when the circumstances justify an award on that basis. The rationale is historically and essentially that of restitution i.e. that a fiduciary should not be permitted to make a profit from his trust. As explained by Lord Denning MR in Wallersteiner v Moir (No.2) at page 388, it is also a means of ensuring full compensation where the wrongdoer deprives a person or company of monies employed in trading operations. It is noteworthy that the judgments of Buckley LJ and Scarman LJ did not refer to that aspect as constituting the basis for a compound award. It is nonetheless an element which usually plays a part in the reasoning of the court when considering whether or not to make such an award in modern conditions.
211. It seems to us that the court's power in such circumstances to award compound interest (although discretionary in the sense that it will be exercised in accordance with established equitable principles) is not only distinct, but different in character, from its broad powers under s.35A of the 1981 Act, being a necessary adjunct of the claimant's substantive right to restitution. …"
La Pintada revisited
"10. Thirdly, there is the equitable jurisdiction. Interest may be awarded as ancillary relief in respect of equitable remedies such as specific performance, rescission or the taking of an account. Furthermore, the payment of interest may be ordered where money has been obtained and retained by fraud, or where it has been withheld or misapplied by an executor or trustee or anyone else in a fiduciary position."
"In order to guard against any possible misapprehension of their Lordships' views, they desire to say that, in their opinion, there is no doubt whatever that money obtained by fraud and retained by fraud can be recovered with interest, whether the proceedings be taken in a Court of equity or in a Court of law, or in a Court which has a jurisdiction both equitable and legal, as the Supreme Court of Sierra Leone possesses under the Ordinance of November 10, 1881." (emphasis added)
"85. While it is correct to say that, as a matter of language, Lord Browne-Wilkinson [in Westdeutsche] took fraud cases out of his analysis of the equitable jurisdiction, Mr Justice McCombe had earlier expressed the view (para 9) that he could not be taken to have been deciding that all cases of fraud fell within that jurisdiction. We entirely agree. But since it is as important for this court as it was for the judge to understand the full import of Lord Browne-Wilkinson's views, it is necessary to refer to the material passage in his speech more closely.
86. At [1996] AC 701C, under the heading "Compound interest in equity", Lord Browne-Wilkinson said:
'In the absence of fraud courts of equity have never awarded compound interest except against a trustee or other person owing fiduciary duties who is accountable for profits made from his position. Equity awarded simple interest at a time when courts of law had no right under common law or statute to award any interest. The award of compound interest was restricted to cases where the award was in lieu of an account of profits improperly made by the trustee. We were not referred to any case where compound interest had been awarded in the absence of fiduciary accountability for a profit.'
He proceeded to read passages from the judgments of Lord Hatherley LC, sitting in the Court of Appeal in Chancery, in Burdick v Garrick (1870) LR 5 Ch.Ap. 233, 241, and of Buckley LJ in Wallersteiner v Moir No.2 [1975] QB 373, 397. Having then read the first passage and the second part of the last sentence of the second passage (sc. "Courts of Chancery only in two special classes of case, awarded compound, as distinct from simple, interest") we have quoted from the speech of Lord Brandon in La Pintada, Lord Browne-Wilkinson continued, at p.702D:
'These authorities establish that in the absence of fraud equity only awards compound (as opposed to simple) interest against a defendant who is a trustee or otherwise in a fiduciary position by way of recouping from such a defendant an improper profit made by him.'
87. When this passage from Lord Browne-Wilkinson's speech is read as a whole, in particular his quotations from Lord Brandon's speech in La Pintada, it is demonstrated that his two references to 'absence of fraud' cannot have been intended to go beyond the type of case referred to by Lord Brandon, that is to say a case where money has been obtained and retained by fraud; in other words, where the fraudster has had in hand a fund which he has, or is deemed to have, made use of for his own benefit. It follows that the correct view of the Westdeutsche Landesbank case is that three, not two, of their lordships were firmly of the view that the equitable jurisdiction to award compound interest was limited to the two categories of case identified by Lord Brandon. Like that case (where the claim was a common law claim for money had and received) the present case does not fall into either category. Mr Davies' fraudulent misrepresentation did not cause him to obtain and retain money belonging to the Black parties; it caused them to lose money by trading in the markets. In that state of affairs the present case is covered by the decision of the majority in the Westdeutsche Landesbank case. So far as this court is concerned, that is an end of the compound interest question. It cannot be reopened at this level of decision."
Obtained and retained by fraud
Disposal
Lady Justice Whipple:
Lord Justice Bean:
Note 1 “Tender-handed stroke a nettle, And it stings you for your pains: Grasp it like a man of mettle, And it soft as silk remains.” (Aaron Hill, c. 1750). [Back]