Claiming interest can often be overlooked when bringing a monetary claim through the courts, not least when trying to keep costs to a minimum by litigating in person, ie; without the assistance of a solicitor. Still, even though the primary concern in this context is understandably recovery of the substantive outstanding sum, if that sum is significant, the interest accrued can also be sizeable.
What is a statutory right to interest?
In most monetary claims, the claimant will seek to recover interest on the debt or damages claimed through the courts, where section 35A of the Senior Courts Act 1981 gives the court a discretion to award interest on the judgment sum at a rate it sees fit, typically 8% per annum.
Ideally, the claimant must state that they seek an award of discretionary interest in their claim form and particulars of claim, although the effect of s35A means that even if interest on the sum(s) sought has not been pleaded, the court can still order the defendant to pay interest. This will not be the case, however, if the claimant was entitled to claim contractual interest but has failed to do so.
What is a contractual right to interest?
A contractual right to interest is a right to interest as specified within any written agreement between the parties, typically at the stated rate or set percentage rate above the Bank of England base rate.
However, in the recent decision of Rolls-Royce Holdings plc v Goodrich Corporation [2023] EWHC 2002, the High Court held that it did not have the power, under s35A of the 1981 Act, to award any interest when the claimant had failed to plead their claim for contractual interest, to which they were entitled, from the outset. On its facts, Goodrich obtained judgment against Rolls-Royce Holdings and then sought to claim pre-trial interest on the judgment sum. Notably, Goodrich were entitled to contractual interest on sums due to them, but failed to plead a claim for the same.
In denying Goodrich’s claim for interest, both statutory and contractual, the court relied upon s35A(4) of the Act which states: "Interest in respect of a debt shall not be awarded under [s35A] for a period during which, for whatever reason, interest on the debt already runs." Mr Justice Foxton held that as Goodrich already had a contractual right to claim interest, which they had failed to plead, s35A(4) meant that Goodrich would not be entitled to statutory interest either.
What is the easiest way to claim interest?
Undoubtedly, the easiest way to claim interest is to incorporate an express right to interest within the terms and conditions of any business-to-business agreement. A contractual right to interest will not only permit the parties to negotiate an automatic entitlement to interest, but also the rate.
However, once provision has been made for contractual interest, this must be specifically pleaded in the event that a monetary claim proves necessary. As such, the safest way to ensure that this additional, and often sizeable sum, is successfully recovered before the courts, is for the claimant to instruct a competent solicitor to plead this on their behalf. In this way, the claimant can ensure that the interest accrued on the value of the claim is not lost through lack of pleading. By instructing a solicitor, this will also help to maximise the prospects of a successful outcome to the claim itself.
Legal disclaimer
The matters contained within this article are intended to be for general information purposes only. This blog does not constitute legal advice, nor is it a complete or authoritative statement of the law in England and Wales and should not be treated as such.
Whilst every effort is made to ensure that the information is correct, no warranty, either express or implied, is given as to its’ accuracy, and no liability is accepted for any errors or omissions.
Before acting on any of the information contained herein, expert advice should always be sought.