Wednesday February 15, 2023
As interest rates in the UK start to climb, parties are increasingly focused on the amount of interest that they can claim in relation to their litigation cases.
The basic position in England is that up until judgment (from which point interest of 8% will be awarded), interest for a contractual claim might be claimed in different ways (and are usually claimed as alternatives in claim forms/particulars of claim):
However, in the recent case of Harrington Scott Ltd v Coupe Bradbury Solicitors Ltd, the judge said that: “Certainly, so far as the position going forward is concerned, with inflation currently running at around 10% pa, and forecast to rise to ever dizzier heights, as a result of Putin’s war in Ukraine and the consequent disruption to global energy and food supply chains, a rate of 8% pa may soon fall to be considered as modest“. Although the case was one involving professional negligence, where higher rates of interest are often awarded, this may signify a departure from the usual practice of the courts when awarding discretionary interest.
A separate issue in this case was whether a contractual provision that “Interest will be payable by the Client on overdue invoices at a rate of 2.00% for each period of fourteen days’ delayed payment” amounted to an unenforceable penalty. The judge refused to strike out a claim for that amount of interest (equivalent to an annual rate of 52%) on the basis that it was a penalty (leaving the issue to be decided at trial). The basis being that at the time the parties entered into the contract, they were unlikely to have envisaged that an invoice would remain unpaid for any length of time after its due date.
Parties will certainly have to bear in mind the recent changes in interest rates when issuing claims. It may be that the conservative approach applied by Courts to recovering interest will be changing.