James Mumford &
Roderick O’Driscoll
18 February 2003
On 18 February we crowded into a basement room at the Reigate Manor Hotel to hear an exposé by James Mumford and Rod O’Driscoll on the sometimes difficult matters of interest and costs respectively.
James provided us with a very useful handout on interest; I will briefly summarise here.
Although there is no common law right to interest for late payment of debts, this has been modified by –
• Supreme Court Act 1981 s.35A which gave the courts a discretionary power to award interest.
• Arbitration Act 1996 s.49.
• Late Payment of Commercial Debts (Interest) Act 1998 (restriction on applicability by size of companies eliminated from August 2002)
• express or (sometimes) implied provisions within a contract
• special damages (for which proof of actual loss would be required) subject to normal rules of second limb of Hadley -v- Baxendale.
Under s.49 of the Arbitration Act 1996-
• parties can make their own agreement regarding interest. The award is discretionary. Simple or compound interest may be awarded, on the whole or any part of the award and/or on the whole or any part of a claim settled after the date of commencement and over such periods, including rests and at such rates as ‘meets the justice of the case’?.
• the arbitrator may also award interest on the outstanding part of any award until payment
Note that -
• any contractual provisions should be followed. Discretionary interest should only be awarded when there is no contractual provision.
• interest for the period following the award until payment is not automatic (as it was previously). Interest on costs may only be awarded for the period after the award.
• award may state the rate and period(s) and leave the parties to do calculations, but need not state reasons for award of interest.
Care must be taken to avoid double counting if some form of interest (financing charges) is included as special damages.
(Copies of handouts can be provided to those who did not attend, on application)
Costs
Rod O’Driscoll continued with a very useful discourse on costs. Referring to s.61 of the Act, Rod lead us through a flow chart which traces the process through client agreements to defining ‘the event’, issues, counterclaims, inappropriate circumstances, conduct, partial success, and offers leading to consideration of the Order, whether it is workable and just and whether a cap applies.
A copy of the flow chart can be provided on application.
reported by Peter Horne