Kerry Underwood


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Watson v KEA Investments Ltd [2019] EWCA Civ 1759 (23 October 2019)

the Court of Appeal provided guidance on setting the rate of interest in equitable compensation claims.

The court has a wide discretion to set a suitable rate of interest that a constructive trustee should pay in compensation for misuse of funds.

In this case, the High Court held the constructive trustee liable to pay interest at the rate of 6.5%, which represented the investment return the claimant could have expected to receive if trustees had invested the misapplied funds in proper trustee investments.

The judge referred to the performance indices for investment managers published by STEP and Asset Risk Consultants, assuming a medium risk profile.

The Court of Appeal confirmed that, although a constructive trustee was not formally appointed as a trustee, it would still be liable to account for wrongful receipt of funds as if it were a formal trustee.

Case law showed that awards of interest would reflect the economic conditions that applied at the particular time.

The rate of interest should reflect the type of claimant involved and might, therefore, involve taking into account what both capital and income beneficiaries might have received, for example.

This case provides a useful summary of the case law on interest rates for equitable compensation.

Written by kerryunderwood

November 6, 2019 at 1:00 pm

Posted in Uncategorized

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