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Pre-Judgment Interest: Introduction

Pre-judgment interest is possibly the least sexy topic imaginable. But there is perhaps no better vehicle for a discussion of the fundamental issues involved in financial loss quantification. 

A short article of mine dealing with a very large PJI award (over $70M) appears in this week’s edition of Lawyers Weekly* (here). The court decision I discussed contains a useful discussion of some of the key issues relating to PJI, and I tried to summarize as many of them as I could within the claustrophobic confines of an 800-word limit, but there is much more that can be said. In the coming days, I will post on the following issues relating to PJI:

  • What it is meant to measure, and whose rate should be used?
  • The issue of hindsight and risk in financial loss quantification
  • The interaction between capital, profit and interest.
  • PJI and income taxes

Why do I say that PJI is the perfect lens through which to analyse loss quantification? There is no noise, no uncertainty. By the time the court arrives at the point of calculating PJI, all of the inputs into the damages award have been decided – the grey areas have been shaded in, and the picture of what the “but for” world would have looked like has been sharply defined. All that remains is to translate the award for past damages into a current amount.

But the confusion is only just in fact just beginning…

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