Seawell Performance Bond Ruling and Final Orders
Payment under a performance bond for the vessel Seawell is ordered for Stolt Off Shore Services SA, after Harland & Wolff Ship Repair and Marine Services Ltd disputes the demand and seeks a stay pending appeal.
In this case a repair yard and a marine contractor disagreed about money that sat in the hands of a bank. The repair yard was Harland & Wolff Ship Repair and Marine Services Limited, often called H&W. The marine contractor was Stolt Off Shore Services SA, called Stolt. The bank was Ulster Bank Markets Limited. A bond for £416,337 had been issued by the bank to support the performance of work. A bond like this is a promise that the bank will pay when a demand is made in line with the bond terms. On 29 September 2000 Stolt made a demand under the bond. H&W said the bank should not pay Stolt. Because the bank was stuck between two sides, it asked the court for help. On 6 October 2000 the bank issued what is called an interpleader summons, which is a request to the court to decide who should receive the money. The court began to study the documents to find out who had the right to the bond sum under the rules set out in the bond and under the law of Northern Ireland. The judge was Campbell LJ, and the court was the High Court of Justice in Northern Ireland, Queen’s Bench Division.
The court took steps to decide who owned the money. On 22 December 2000 the court said that Stolt was entitled to the entire sum of £416,337. After that, on 12 January 2001, the court made an order about legal costs. The court ordered that the bank and Stolt should have their costs paid by H&W. The court also said that Stolt could recover its costs from H&W for an application H&W had brought to try to get an interim order. These orders about costs meant H&W would have to pay the legal expenses of the other side for the steps just described. But some points still needed a final answer. Stolt asked for interest at 7% per year on the £416,337 from 29 September 2000, the date of its demand, until the date when the money was actually received. H&W asked for a stay, which means a pause, to stop the money being paid out to Stolt until an appeal could be heard by the Court of Appeal. The money had been paid into court by the bank on 23 November 2000, so the court had to decide whether the money would go out to Stolt or stay in court while H&W tried to appeal.
Before deciding whether to award interest, the judge had to decide if the court even had the legal power to give interest in this type of proceeding. The judge looked at section 33A of the Judicature (Northern Ireland) Act 1978. That law says that, in the High Court, a judge may include simple interest in any sum given by a judgment for a debt or damages, for a period between the date when the cause of action arose and the date of judgment. The judge also looked at the Rules of the Supreme Court. Those rules say that a party must plead a claim for interest under section 33A. A pleading is usually a formal statement in an action, like a statement of claim or a defence. Here, the interpleader was started by summons and the parties filed affidavits rather than pleadings. Stolt’s claim for interest had been made in a letter dated 10 January 2001. H&W argued that because interest was not pleaded, the claim had to fail right away. The judge rejected this. He explained that in an interpleader there might be no formal pleading in the normal sense, and that did not block the court from deciding if the law allowed interest.
The judge then asked whether an interpleader is a “proceeding” for the purpose of section 33A. He cited case law to explain the wide meaning of the word “proceeding” in the court rules and in legal practice. He looked at decisions that say a proceeding can include applications and steps in the case, and that interpleader procedures are a way to force real claimants to bring their claims to court even if no one has issued a full writ. Based on these authorities, the judge decided that an interpleader is indeed a proceeding within the section. The judge also considered whether Stolt’s claim under the bond was a claim for a “debt” within the meaning of the section. He referred to high authority that explains how the words “debt or damages” are very broad and include any sum recoverable at common law, in equity, or under a statute. Because Stolt claimed to be owed payment up to the full amount of the bond, this fit the idea of a debt.
Having cleared these hurdles, the judge held that the court had the jurisdiction to award interest under section 33A. The judge still examined other possible grounds for awarding interest, in case section 33A did not apply. He looked at the court’s inherent jurisdiction and at Order 17 rule 5, which says the court may make such order as it thinks just in interpleader matters, including orders about costs or any other matter. He also noted the traditional rules in common law and equity about when interest can be given, and he discussed how a performance bond is a conditional bond and how an agreement to pay interest can sometimes be implied when the obligor delays payment after it falls due. He concluded that the court could, if needed, award interest on these alternative grounds. He finally considered the Late Payment of Commercial Debts (Interest) Act 1998. That statute gives interest on qualifying commercial debts, but it does not apply when there is a right to interest under another enactment. Because section 33A provided a route, the 1998 Act did not apply.
With the legal power question answered, the judge turned to whether it was fair to award interest. The judge looked at principles guiding the discretion to award interest. One principle is that when money is owed and a person must go to court to get it, the person who wrongly holds the money should not enjoy the use of it. But the judge asked who, if anyone, had wrongfully held the money in this case. The bank was the party that had the money. The bank had paid the bond sum into court on 23 November 2000. In the period of 21 days from the date of payment into court, the money did not carry interest under the Court Funds rules. After that, it carried interest at 3.25% per year under the Court Funds (Amendment) Rules (Northern Ireland) 1999. The judge observed that the bank could not be blamed for delay because H&W disputed the entitlement and the bank had used the interpleader to solve that conflict. The bond had a notice period so that H&W could indemnify the bank. The bank did not have the use of the money to make profits during the time the bond was in force, and it paid the money into court as soon as the court directed. Thus the judge thought it would be unjust to award interest against the bank.
The judge also looked at the wider picture between H&W and Stolt. While Stolt had succeeded in showing it was entitled to the bond money as a matter of the bond itself, there were separate legal proceedings in England about who had actually failed in performance of the underlying contract. In those proceedings H&W claimed damages against Stolt for breach of contract, and Stolt counterclaimed against H&W. If Stolt got more under the bond than its true loss in the contract dispute, H&W could recover the overpayment later. Because these larger questions about who owed whom and in what amount were going to be resolved elsewhere, the judge accepted H&W’s submission that any interest claimed by Stolt against H&W should be dealt with in those English proceedings, not in the interpleader. This reinforced the judge’s view that it would not be fair to make the bank pay interest, and it suggested that any interest claim between the contracting parties should ride along with the contract case.
The judge then took up H&W’s request for a stay of payment out of the money. A stay is not given lightly. The reason H&W offered was that Stolt was a foreign company with its seat in France. The court looked at evidence about Stolt’s solvency. A partner at Stolt’s solicitors, Michael Lynch, gave evidence that Stolt was solvent. The court also considered the Civil Jurisdiction and Judgments Act 1982 and the relevant convention on jurisdiction and enforcement of judgments in civil and commercial matters, which support the enforcement of UK judgments in other member states. The court weighed the purpose of the bond. The purpose was to give Stolt the right to immediate payment when it made a valid demand, which in this case was on 29 September 2000. Yet by 22 January 2001 several months had passed, and if an appeal took more time, the purpose of giving quick cash support to Stolt could be defeated.
The judge noted the real financial effects. Money paid into court on 23 November 2000 earned no interest for 21 days. After that it earned 3.25% per year, which was the court funds rate. Stolt had asked for 7% per year, which is closer to a commercial rate at that time. The judge explained that paying an extra 3.75% to top up the 3.25% to 7% would not be the same as giving Stolt the capital sum when it was needed. It would offer some compensation for delay, but the main purpose of the bond was quick payment. The judge also recognized that Stolt was based in France, and while the statutory regime helps with cross-border enforcement, that fact still had to be treated with care in setting conditions. To balance both sides, the judge ordered payment out of the £416,337 to Stolt, but only on one condition. Stolt had to give security to repay the £416,337 if the appeal or the English proceedings later showed that the money should go back. The security had to be to the satisfaction of H&W’s solicitors. Until that security was in place, the money would stay in court. While it stayed in court, there would be an additional charge of 3.75% per year, on top of the court funds rate, against H&W from the date of the order until further order. This created an incentive for H&W to move quickly and for Stolt to put up the security so the payment out could be made.
This approach set out a clear split of responsibility. The bank, which had only acted as a neutral stakeholder, would not be penalized with an interest award. Stolt, which had a right to prompt payment under the bond, would get the money once it posted suitable security to protect H&W. H&W, which had resisted the payment and sought a stay, would bear the cost of delay in the form of the additional 3.75% charge while the money remained in court. The court’s orders also aligned with the earlier costs rulings: the bank and Stolt were awarded their costs against H&W on 12 January 2001, and Stolt had its further costs for opposing an interim injunction by H&W. The judgment brought the interpleader part of the dispute to a practical end by identifying who should hold the money and on what conditions, while leaving the deeper contract claims to be resolved in the English litigation where they belonged.
The story of how the court reached these results also helps show how simple rules apply to complex trade. A performance bond is like a safety net. When a project goes wrong or a demand is made that fits the bond’s wording, the bank pays first and the parties argue later about who was actually at fault or what the true loss was. Here, Stolt made a demand on 29 September 2000. The bank, caught between Stolt and H&W, went to court on 6 October 2000 for guidance. On 22 December 2000 the court declared Stolt entitled to the entire bond sum of £416,337. The bank paid the money into court on 23 November 2000, the safe place where it could sit while the judge decided who should receive it. On 12 January 2001 the court awarded costs to the bank and to Stolt against H&W, and also awarded Stolt its costs for resisting H&W’s injunction request. These steps show the interpleader procedure working as designed: the stakeholder deposits the money and leaves it to the real disputants to fight out the question of title.
The interest question turned on two layers: power and fairness. The judge held that the court had power to award simple interest in interpleader proceedings under section 33A of the Judicature (Northern Ireland) Act 1978 because an interpleader is a “proceeding” and a bond claim is a claim for a “debt.” The judge also said there were backup grounds for interest in the court’s inherent jurisdiction and under the rules that allow just orders in interpleader matters. But the judge declined to award interest against the bank because the bank did not delay for its own gain, acted neutrally, and did not profit from the bond funds. The judge also pointed to the English contract proceedings between H&W and Stolt and said that any interest claim between those two parties should be decided in those proceedings along with the merits. This kept the interpleader narrow and tidy and avoided double counting or inconsistent results.
The stay question turned on balancing speed and safety. The bond’s purpose was immediate payment. Months had already passed since the 29 September 2000 demand. A further delay risked removing the value of the bond to Stolt, which may have needed cash to complete work or to cover losses. On the other hand, H&W planned an appeal and was concerned that Stolt was outside the jurisdiction. The court secured both sides by ordering payment out subject to security, leaving the money in court until security was given, and adding a 3.75% per year charge against H&W while the money stayed in court. The court also took into account the Court Funds interest of 3.25% that ran after the 21-day no-interest period, ensuring that the total effective rate from the court side rose to about 7% during the hold, which roughly matched Stolt’s requested commercial rate without declaring a final entitlement to interest against the bank.
All of these steps took place within precise dates and clear amounts so that each party knew where it stood. The demand was on 29 September 2000. The bank went to court on 6 October 2000. The bank paid the full sum of £416,337 into court on 23 November 2000. The court declared Stolt entitled to the whole sum on 22 December 2000. The court ordered costs in favor of the bank and Stolt on 12 January 2001. The court delivered this judgment on 22 January 2001. The court declined to award the requested interest of 7% per year against the bank for the period from 29 September 2000 to the date of receipt. The court held that interest at the Court Funds rate of 3.25% per year applied after 21 days from 23 November 2000 while the money was in court, and the court added a further 3.75% per year against H&W from the date of the payment-out order until further order, unless and until Stolt gave security that satisfied H&W’s solicitors. Those numbers matter because they tell each party the cost of delay and the benefit of acting promptly to complete the security and the appeal steps.
The result carries a clear legal meaning. It confirms that an interpleader is a proceeding in which section 33A of the Judicature (Northern Ireland) Act 1978 can apply, so the High Court has jurisdiction to award simple interest on a debt decided through interpleader. It also clarifies that, even with jurisdiction, the court’s discretion is guided by fairness, and a neutral stakeholder bank should not be made to pay interest when it did not delay for its own advantage. It explains that claims for interest between commercial parties about the underlying contract should follow the contract case in the proper forum, here the English proceedings where H&W sues Stolt and Stolt counterclaims. It sets out how a stay pending appeal is a special remedy, not given automatically, and that payment out can be ordered with conditions, such as security for repayment, to protect the party who seeks to appeal. Finally, it records a precise final order: Stolt is entitled to payment out of £416,337, but only after giving security for repayment to the satisfaction of H&W’s solicitors; until security is given, the sum remains in court and accrues the Court Funds interest of 3.25% per year plus an additional 3.75% per year charge against H&W; the court refuses Stolt’s request for an interest award of 7% per year against the bank for the pre-receipt period; and costs are awarded to the bank and to Stolt against H&W as ordered on 12 January 2001. This closing set of directions tells the parties exactly what to do next and marks the legal effect of the judgment: immediate payment under a performance bond can be protected by conditions, interest jurisdiction exists but is used with caution, and the court will aim to keep the stakeholder neutral while guiding the disputing parties toward the right forum for their broader contract fight.
