Interest on court judgments. How very interesting…
This blogpost addresses interest charged by the courts upon judgment debts.
That means that there has been a claim before a court. Proceedings have been issued. Judgment has been obtained either by consent between the parties, or by order of a Judge, and there is a judgment sum to be paid by a certain date (usually within 14 days of judgment being made).
This blogpost does not address what interest might be charged prior to judgment being obtained.
Briefly, however, if there was a contract between the parties, and a sum set for interest, that is usually the rate of interest to be applied up to the date of judgment. Otherwise, the court looks towards either Section 35a of the Senior Courts Act 1981, or Section 69 County Courts Act 1984, depending upon whether one has obtained judgment in the High Court of Justice, or a County Court to determine a value.
The current statutory rate of interest is 8% per annum. If you had judgment for say £10,000, you would calculate the daily rate of interest which would be £10,000 divided by 365 days = daily rate. In this case, £2.19 per day. Then multiply by the number of days, from the date money fell due to be paid, until the date of judgment.
Alternatively, interest might be charged if applicable, under the Late Payment of Commercial Debts (Interest) Act 1998. The 1998 Act in its applicability of interest, is punitive by nature.
That is not the same in application of what interest might apply for indebtedness before a Judge to decide. Although the statutory rate is 8%, the court has, from observer experience, charged at its discretion anything from 2% to 8%.
Statutory Interest Rates – Highs & Lows.
Interest on judgment debts is governed by Section 17 Judgments Act 1838. The rate changes from time to time, but at its last setting in 1993, the figure was set at 8%, by Statutory Instrument 1993/564, articles 1 and 2.
Interested you may be, amongst the trainspotters and geeks, to know that for 133 years between October 1838 and April 1971, the rate of interest of judgment debts was set at 4%. It then rose progressively as high as 14% to 15% in 1980. It came down in stages to around 12% in 1982, and then in 1985 increased to 15%. However, since 1993, the rate applicable is 8%.
Considerations In Calculating Post-judgment Debts.
Post-judgment, therefore, there are a number of Acts of Parliament to consider:
- Section 74 County Courts Act 1984.
- County Courts (Interest on Judgment Debts) Order 1991
- Rule 40.8 Civil Procedure Rules 1998.
All refer back to Section 17 Judgments Act 1838 which sets the post-judgment statutory rate.
Should it be higher? Should be lower? Should it be punitive?
Certainly, in the case of commercial debts business to business, the Late Payment of Commercial Dents (Interest) Act 1998 is punitive in nature, punishing someone with high interest rates for not paying on time.
Equally in the system of Part 36 Civil Procedure Rules 1998, the costs consequences to the loser of not beating any offer, is that punitive interest is charged, and compensation.
What Might Determine The Post-judgment Statutory Rate?
In Reed Executive plc v Reed Business Information Limited [2004] EWCA Civ 159, Lord Justice Jacobs, said:
‘I think the appropriate rate is the commercial rate. The judgment rate is artificial. I can see no reason for an artificial rate being imposed by the Court save in these cases where it must (i.e., where there has been judgment for that sum)’.
In Shearson Lehman Hutton Inc v Maclaine Watson & Co & Ors (No 2) [1990] 3 ALL ER, it was considered that the applicable rate of interest ought to be 1% above base rate.
Statutory Interest Rate of 8% is in force...
Irrespective of the speculative nature of discretionary powers to award interest as part of judgment, at a rate lower than the statutory rate, post-judgment, the rate of interest remains 8% per annum, until such time as that figure is amended at Section 17 Judgments Act 1838.
Professor Rosen is a solicitor-advocate in practice and principal of David Rosen & Co, specialising in counter-fraud and counter-corruption in both criminal and civil jurisdictions of English Law, as well as divorce and finance. He is an independent mediator (not yet for family law). He holds memberships with the Association of Certified Fraud Examiners, Resolution, the Royal United Services Institute, and the Society of Legal Scholars amongst others. He is a full academic Professor of Professional Practice at Brunel University Law School where he lectures one day each week.