The English Court of Appeal in Watson v Kea Investments Limited [2019] EWCA Civ 1759 has given guidance on how interest is claimed and assessed in breach of trust cases. This is the latest case in the long-running litigation brought by Sir Owen Glenn against his former business partner Eric Watson.

The Court accepted that interest ought to be awarded at 6.5% as a proxy for profit, and upheld the equitable compensation award of £43.5m owing to Sir Owen's Kea Investments Limited. The rate of 6.5% represented approximately the return expected by trustees with a medium risk profile at the relevant time.

Mr Watson argued that the rate should have been fixed by reference to borrowing or deposit rates, which would have reduced the sum payable by as much as £20m. The Court rejected this: interest ought to represent the return that the trust fund should have received, in reality.

This case demonstrates the courts’ discretion to make awards that align with a hypothetical total return with regard to economic realities over the time period in question.

In addition, the Court held that for awards of interest payments, the liability of a constructive trustee is the same as that of an express trustee. Therefore, higher interest rates based on objective evidence can be awarded in any case where the defendant is liable as a constructive trustee, including many fraud cases.

See the Court's decision here.