CPR Pt 36—Enhanced Interest Should Not Function as Punitive Damages for Malicious Defence

Abstract

This note critically comments on the Court of Appeal’s decision in OMV Petrom SA v Glencore International AG. By introducing a penal element to the enhanced interest rate pursuant to CPR Pt 36, the Court of Appeal has extended the justificatory reasons for those awards beyond compensation. This note argues that Petrom-like awards should not be ordered in the future and that the Civil Procedure Rule Committee should amend the CPR accordingly. One issue is that the Petrom award was based on analogical application of the CPR, which implies that the Court of Appeal’s reasoning was in fact not governed by CPR Pt 36. Another issue is that the existing common law principles—as the next best source of law for the Court of Appeal’s decision—do not support the ruling either. This is because, first, the Petrom award was made in respect of the defendant’s malicious defence even though malicious defence does not constitute a common law tort. Secondly, the penal element in Petrom functioned as punitive damages even though the existing common law principles regarding punitive damages prevent courts from making such awards in similar cases.

Keywords: Civil procedure, Damages, Punitive damages, Exemplary damages, Part 36 offers, Penalty interest, Enhanced interest, CPR, CPR Pt 36, Petrom, CPR Committee, Legislation, Statutory Interpretation, Analogy, Common law, Statute law, Delegated legislation, Settlement, Malicious defence

JEL Classification: K1, K13, K41