Scottish Law Commission (Discussion Papers)

 


Part 13       List of Proposals and Questions

13.1     (a) So far as practicable, interest should run on pecuniary claims during the same period and at the same rate regardless of whether the claim takes the form of a claim for payment of a contractual debt, a non-contractual debt or damages.

(b) The primary goal of an award of interest should be the realistic compensation, in commercial terms, of the creditor for loss of the use of money or property. Interest should not as a general rule be payable at a punitive rate.

(c) An award of interest should compensate the creditor for loss of the use of money or property throughout the period during which that loss has subsisted.

(Paragraph 3.6)

13.2     There should be created a general statutory entitlement to interest on contractual debts except where an entitlement to interest is conferred or expressly excluded either (a) by the terms of the contract itself or (b) by any other statutory provision.

(Paragraph 4.8)

13.3     As a general rule, interest on a debt arising under a contract should run from the date when payment is due by the debtor.

(Paragraph 4.14)

13.4     Statutory interest should run on a debt due for the supply of goods or services from the following date:

Where the parties agree a date for payment of the debt (whether fixed or dependent upon the happening or non-happening of an event), that date;

In any other case, 30 days after the later of:

the day on which the supplier's obligation is performed; and

the day on which the purchaser has notice of the amount of the debt or of the amount claimed by the supplier.

(Paragraph 4.17)

13.5     Should the entitlement to statutory interest extend to all circumstances in which the purchaser of property (whether heritable or moveable) has been granted possession without payment of the price to the seller, except during any period when the price has been consigned at an appropriate rate of interest?

(Paragraph 4.20)

13.6     Interest should run on arrears of rent and other sums payable by a tenant to a landlord as it runs on other sums which have fallen due for payment.

(Paragraph 4.22)

13.7     Statutory interest should run on a contractual debt even where the amount of the debt, if found to be due, remains unascertained pending determination by a third party.

(Paragraph 4.23)

13.8     (a) Statutory interest should run on sums due under a contract of employment or apprenticeship.

(b) Unless the contract contains a contrary provision, interest should run from the last day of the month following the month in which the service under the contract was performed.

(c) Entitlement to interest should not be deferred by virtue of there having been no agreement as to the amount due under the contract.

(Paragraph 4.25)

13.9     Statutory interest should run on a sum paid by a cautioner in satisfaction of a debt due by the principal debtor from the date when payment by the cautioner was made.

(Paragraph 4.26)

13.10     Where a contract of insurance or indemnity contains no express provision with regard to the running of interest, it should begin to run from whichever is the later of:

(a) the date 30 days after the date when a claim in respect of the occurrence of the event insured against is intimated to the insurer; and

(b) where the insured has sustained a loss as a consequence of the occurrence of the event insured against, the date when the loss was sustained.

(Paragraph 4.29)

13.11     A debt shall not carry interest under the proposed new scheme if or to the extent that it consists of a sum in respect of which a creditor has elected to claim interest under the Late Payment of Commercial Debts (Interest) Act 1998.

(Paragraph 4.31)

13.12     There is no need for statutory provision to prohibit parties from contracting out of the creditor's entitlement to interest under the proposed new legislation.

(Paragraph 4.37)

13.13     (a) There should be no judicial discretion to remit interest;

(b) There should be a judicial discretion to remit interest where the interests of justice so require, but only by reason of any conduct of the creditor (as in the 1998 Act); or

(c) There should be a wide judicial discretion to remit interest in any circumstances where the interests of justice so require.

(Paragraph 4.46)

13.14     Where a loan carries interest as a matter of common law presumption, should there be a rebuttable presumption that interest runs at the rate prescribed for statutory interest?

(Paragraph 4.51)

13.15     In the absence of agreement to the contrary, statutory interest should run on a loan of money from the date agreed by the parties for repayment of the loan or, failing such agreement, from the date 30 days after the day when the creditor demands repayment of the loan.

(Paragraph 4.52)

13.16     Statutory interest should run on funds held by one person on behalf of another from the date when the holder is in default in failing to make them over to the person entitled to them.

(Paragraph 4.54)

13.17     Is it desirable for the law relating to interest on damages to be re-formulated by statute?

(Paragraph 5.2)

13.18     In an action for damages, interest should run on each head of loss from the date on which the loss in question was sustained.

(Paragraph 5.7)

13.19     (a) Interest on pecuniary losses consisting of out-of-pocket expenses should run from the date when the expense in question was incurred.

(b) No special provision is required in relation to losses accruing periodically during the time since the date of the event giving rise to the claim.

(Paragraph 5.11)

13.20     If the principle which we have proposed were to be adopted, is there a need to specify by statute that the loss which is compensated by an award of solatium is sustained throughout the period during which the effect of the event giving rise to the claim endures, and is not sustained wholly on the date when the event occurs?

If so, how might this best be done?

(Paragraph 5.12)

13.21     (a) Where loss is sustained as a consequence of the loss or destruction of an item of property which is replaced, the loss should be taken to occur on the date when expense is incurred on replacement.

(b) Where loss is sustained as a consequence of the loss or destruction of an item of property which is not replaced and which consists of a loss of proceeds of realisation of the item, the loss should be taken to occur at the time of loss or destruction but any lost profit on realisation should not be taken to have occurred until the date when the proceeds would have been received.

(c) Where loss is sustained as a consequence of the loss or destruction of an item of property which is not replaced and which was not intended for realisation, the loss should be taken to occur at the time of loss or destruction.

(d) If these proposals are adopted, is there a need for express statutory provision setting them out, or could they be regarded as following naturally from the principle that interest runs from the time when loss is sustained?

(Paragraph 5.18)

13.22     Where a defender makes a payment to the pursuer in part satisfaction of his liability, the amount on which interest is calculated after the date of such payment should be reduced by the amount of the payment.

(Paragraph 5.20)

13.23     (a) There should be no judicial discretion to remit interest on damages;

(b) There should be a judicial discretion to remit interest on damages where the interests of justice so require, but only by reason of any conduct of the pursuer;

(c) There should be a judicial discretion to remit interest in any other particular circumstances (which would be specified in the legislation); or

(d) There should be a wide judicial discretion to award or disallow interest as the interests of justice require.

(Paragraph 5.27)

13.24     (a) Should the new statutory scheme extend to claims for payment based upon the law of unjustified enrichment?

(b) If so, should the date when interest begins to run be the date when payment fell due by the debtor to the creditor, or should some other criterion be used instead?

(c) Is there a need for a judicial discretion which would operate either

(i) instead of the general rule proposed in Question 24(a);

(ii) alongside the general rule proposed in Question 24(a), but without restriction on the scope of the discretion;

(iii) alongside the general rule proposed in Question 24(a), and restricted to taking account of the conduct of the pursuer; or

(iv) in some other way?

(Paragraph 6.11)

13.25     (a) Should the new statutory scheme extend to claims for payment for salvage services?

(b) If so, should the date when interest begins to run be the date when the salvage services are completed or some other date?

(Paragraph 6.13)

13.26     There should be an express exclusion from the new statutory scheme in respect of interest on claims on limitation funds established under the Merchant Shipping Acts or similar legislation.

(Paragraph 6.14)

13.27     (a) Should the new statutory scheme extend to claims for payment based upon an obligation to account for funds in circumstances where the obligation is non-contractual?

(b) If so, should interest run only from the date when the holder is in default in failing to make over the funds to the person entitled to them?

(c) Should the new scheme extend to beneficiaries' claims arising out of late payment by trustees or executors, imposing personal liability on the trustee or executor for the difference between statutory interest and the interest actually earned?

(d) Is there a need for a judicial discretion and, if so, at what rate and during which period?

(Paragraph 6.22)

13.28     (a) Should the new statutory scheme extend to claims for sums due by way of legal rights in a deceased person's estate, from the date when the executor is in default in failing to make payment to the person claiming legal rights?

(b) Is there a need for a judicial discretion as to whether to award interest and, if so, at what rate and during which period?

(Paragraph 6.24)

13.29     (a) Should an award of aliment which has been backdated carry interest from the date or dates when the instalments ought to have been paid?

(b) If so, is there a need for a judicial discretion as to whether to award interest and, if so, during which period?

(Paragraph 6.25)

13.30     (a) Should arrears of aliment carry interest from the date or dates when they ought to have been paid?

(b) If so, is there a need for a judicial discretion as to whether to award interest and, if so, during which period?

(Paragraph 6.26)

13.31     There should be a prescribed rate of interest which would fluctuate according to the Bank of England base rate. We propose that the rate of interest prescribed by statute should be a specified percentage, such as 1% or 1.5%, above the official dealing rate of the Bank of England.

(Paragraph 7.21)

13.32     Is there another rate which would be better than the Bank of England base rate as the basis of the prescribed rate?

(Paragraph 7.21)

13.33     (a) A fixed interest rate would be prescribed by statutory instrument at pre-set periods. The rate prescribed would be calculated according to a formula set out in primary legislation but the statutory instrument would specify only the rate produced by this calculation on a given date.

(b) Views are also sought on whether the rate should be fixed annually, every six months, every month, or such other periods as consultees may wish to suggest.

(Paragraph 7.22)

13.34     (a) If a rate of interest is prescribed by legislation, should there be judicial discretion to apply a rate other than the prescribed rate?

(b) If there is to be judicial discretion to apply a rate other than the prescribed rate, comments are sought on whether discretion should be limited to applying a lower rate than the one prescribed and should not extend to applying a higher rate.

(Paragraph 7.32)

13.35     (a) Where a party seeks an award in a currency other than sterling, and the award includes an element of interest, should the party be entitled to interest at a rate referable to the currency of the principal sum?

(b) Where an award is made in a currency other than sterling, should the court have a broad discretion to award interest at a rate other than the prescribed rate?

(Paragraph 7.35)

13.36     (a) There should be a preferred method for dealing with changes to the rate of interest. The most accurate method would be to apply the fluctuating prescribed rate to the appropriate period of the debt or sum due in damages.

(b) Should there continue to be judicial discretion to apply different methods to different circumstances?

(Paragraph 7.38)

13.37     Interest:

(a) on sums due post-decree should continue to run at a rate to be prescribed in rules of court independently of the rate applicable to pre-decree interest.

(b) on sums due post-decree should run on the same basis as sums due pre-decree and the applicable rate post- and pre- decree should be standardised and calculated by the same method. The amount of pre-decree interest would be fixed at the date of the award and post-decree interest would then run on that sum until payment.

(c) should run from the appropriate date until payment regardless of whether it is pre- or post- decree and the same rate and method of calculation should apply throughout this period.

(Paragraph 7.51)

13.38     (a) Should post-decree interest run at a higher rate than pre-decree interest in order to penalise late payment?

(b) If post-decree interest should run at a higher rate, should the higher rate be linked to the formula for determining pre-decree interest (ie if pre-decree interest is 1% above base, post-decree interest could be 2% above base)?

(c) If post-decree interest is to run at a higher rate, should there be a period allowed before the higher rate is applied (for example, 14 days after decree)?

(d) If pre-decree interest is compounded, should post-decree interest also be compounded?

(Paragraph 7.52)

13.39     (a) Where a statute currently provides for interest to run at the post-decree rate, should interest run at the statutory rate which we have proposed or (if different) should it continue to run at the rate applicable after decree?

(b) Where a statute currently provides for interest to run without specifying the rate, should interest run at the statutory rate which we have proposed or (if different) should it run at the rate applicable after decree?

(c) Are there any statutes which currently provide for interest to run at a rate other than the post-decree rate which should be amended to provide for interest to run at the statutory rate which we have proposed or alternatively (if different) at the rate applicable after decree?

(Paragraph 7.61)

13.40     Are there any other rates of interest specified in statutory provisions which ought to be brought into line with the statutory rate which we are proposing in this Discussion Paper for contractual and non-contractual debts and damages?

(Paragraph 7.62)

13.41     If legislation is enacted specifying a rate of interest, it should allow for that interest to be compounded at specified intervals.

(Paragraph 8.38)

13.42     (a) Whether there should remain a judicial discretion to refuse compound interest where it would be just to do so.

(b) If judicial discretion is retained, should it be restricted to allowing simple rather than compound interest or should there be judicial discretion to allow compounding at a different frequency from the recommended period?

(c) Whether the pursuer should retain a right to claim simple interest provided that the sum claimed is less than would be claimed if compound interest were applied.

(Paragraph 8.39)

13.43     (a) Should interest be compounded at monthly or annual intervals or any other period suggested by consultees?

(b) A computer program for calculating interest according to the prescribed formula should be made available free of charge on a website which can be accessed by the general public. Printed tables for the calculation of interest should be made available in appropriate places such as court buildings and public libraries.

(Paragraph 8.43)

13.44     The principle to which section 1(1B) of the Interest on Damages (Scotland) Act 1958 gives effect should be retained and extended to awards of interest on sums other than damages.

(Paragraph 9.2)

13.45     Should section 1(1B) be re-enacted with amended wording in order to make clear that the statutory intention is in accordance with the interpretation given to the existing section by the Inner House in Manson v Skinner?

(Paragraph 9.4)

13.46     (a) Where a tribunal presently has power to award interest at the judicial rate, this should be replaced by a power to award interest at the rate prescribed by statute.

(b) Should interest run on awards made by the Employment Tribunal from an earlier date than 42 days after the date of the Tribunal's determination?

(c) In all other respects, the powers of particular tribunals to award interest should remain unaffected by our proposals.

(Paragraph 10.6)

13.47     Should the proposed legislative reform of the law on interest on debt and damages include a provision conferring, in the absence of contrary agreement, a power on the arbiter or adjudicator to award interest for a period prior to the date of the award or should this be left to await the enactment of a comprehensive statutory arbitration code?

(Paragraph 11.7)

13.48     If arbitration is included in the proposed legislative reform,

(a) should the arbiter's power to award interest be co-extensive with the powers which the court would have in relation to interest (on the various categories of pecuniary claims) under the proposed new legislation; or, alternatively,

(b) should the arbiter's power be exercisable on the basis of a wide discretion such as that contained in Clause 22 of the Scottish Advisory Committee's draft Bill?

(Paragraph 11.7)

13.49     An arbiter appointed under a statutory provision requiring a dispute to be referred to arbitration should have the same "default" power in relation to the award of interest as an arbiter appointed under an arbitration agreement.

(Paragraph 11.9)

13.50     Is any amendment required to the existing statutory provisions regarding the power of an adjudicator to award interest?

(Paragraph 11.10)

13.51     In addition to litigation, arbitration and adjudication, is there any form of dispute resolution in respect of which statutory provision would be desirable with regard to entitlement to interest on a sum found to be payable by one party to another?

(Paragraph 11.12)

13.52     Should the new provisions apply:

(a) to all debts falling due and all rights of action arising on or after the commencement date; or

(b) to all pecuniary claims except those in respect of which an action has been raised prior to the commencement date; or

(c) on some other basis?

(Paragraph 12.10)

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