Commercial Court refuses to award compound interest where interest losses not specifically pleaded

The Commercial Court has refused to award compound interest on sums in excess of US$1.5 billion paid away by the claimant bank as a result of a fraud: JSC BTA Bank v Ablyazov & ors [2013] EWHC 867 (Comm).

The decision serves as a reminder that if a party wishes to claim compound interest as damages at common law (following the House of Lords decision in Sempra Metals v IRC [2008] 1 AC 561 - see our post on the decision) it must plead and prove its actual interest losses. This might for example be the use the claimant would have made of sums paid away as a result of the defendant's wrongful conduct, or it might be the interest paid on funds borrowed to replace lost sums.

Here the claimant bank had not made any allegation as to the use it would have made of monies paid away as a result of the fraud if there had been no fraud. Accordingly, it could only claim simple interest in the court's discretion under section 35A of the Senior Courts Act 1981. The judge (Teare J) considered the appropriate rate to be 7.3% since, on the evidence, this was the rate at which borrowers with the general attributes of the claimant (i.e. Kazakh banks) could have borrowed money over the relevant period.