INTEREST WHERE THE CLAIM WAS OVER A PROLONGED PERIOD:JUDGMENT ACT RATE NO LONGER APPROPRIATE

There were many procedural issues in the Court of Appeal decision in Oyesanya -v- Mid-Yorkshire Hospital Trust [2015] EWCA Civ 1049.  Some of them will be looked at in later posts. Here we look at the appropriate approach of the court to the issue of interest when the debt is a long-standing one.

“Whilst I can see the convenience of using the Judgment Act rate, which is well known and has not changed for many years, it is now so much in excess of the rate generally awarded as to make it, in my view, inappropriate”

THE CASE

The claimant was seeking payment of moneys owed following his work for the defendant Trust. The work had been carried out in 200 and a claim form issued in 2006.  Part of the action had been declared statute barred and the balance referred to the small claims track. An appeal against this decision was allowed. The question arose as to the appropriate rate of interest on the sums due.

KEY POINTS

  • The Judgement Act rate is considerably out of kilter with commercial rates and should no longer be applied.
  • The usual order is 1% over  Base Rate
  • In this case the claimant had delayed unduly and interest was allowed only for part of the period at 5% per per annum (amounting to 40%).

THE JUDGMENT ON INTEREST

Lord Justice Christopher Clarke

  1. “…. So far as interest is concerned, there are two issues: (a) over what period should interest run; and (b) at what rate. As to the latter, two indications were given as to why 8% was appropriate.

  2. First, CPR 12.6 provides :

“(1) A default judgment on a claim for a specified amount of money obtained on the filing of a request may include the amount of interest claimed to the date of judgment if –

(a) the particulars of claim include the details required by rule 16.4;

(b) where interest is claimed under section 35A of the Supreme Court Act 1981 or section 69 of the County Courts Act 1984, the rate is no higher than the rate of interest payable on judgment debts at the date when the claim form was issued; and

(c) the claimant’s request for judgment includes a calculation of the interest claimed for the period from the date up to which interest was stated to be calculated in the claim form to the date of the request for judgment.

(2) In any case where paragraph (1) does not apply, judgment will be for an amount of interest to be decided by the court.”

So the rules provide for what is, in effect, an entitlement to interest up to the judgment rate, on a default judgment.

  1. Secondly, the notes to CPR 7, at page 372 of the White Book, say this:

“What if the debt is disputed? Generally the judgment rate will still be used where judgment is given following a trial on the small claims track or where judgment is given on a successful application for summary judgment under Pt 24. Thus the judgment rate is frequently applied in cases dealt with by Masters and judges.

However, as a general rule the judgment rate is not the correct rate to be awarded after a trial.”

  1. Whilst I can see the convenience of using the Judgment Act rate, which is well known and has not changed for many years, it is now so much in excess of the rate generally awarded as to make it, in my view, inappropriate. The default position in commercial cases is to award 1% above Base Rate unless that would be unfair in either direction. The rates for the last 10 years are set out on page 373 of the White Book. Since March 2009 the rate has been 0.50%. So from March 2009 8% has been 5.33 x Base Rate + 1 % i.e. 1.5%.

  2. So far as the period is concerned the delay between the accrual of the cause of action and the trial – from 30 November 2000 to July 2010 – was some 9.5 years. The appellant, who allowed 6 years to pass before he began proceedings and appears to have allowed the claim to remain dormant for about a year in 2007/8, should not, in my view, be awarded interest for the whole period but only for about half of it. There was then a 5 year delay between July and the hearing before us. Some of that delay is, also, down to the appellant.

  3. In the light of the above I would be minded to award interest on the net amount due to the appellant for 8 years at 5%. I have chosen 5% to reflect the fact that in the early years (from 2001), when the delay was less pronounced, Base Rate was much higher.”

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One comment

  1. Rob Carter · · Reply

    This approach could have big implications for costs between the parties if more widely applied.

    May be only a small amount per case but it all adds up to a large total for a defendant insurer

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