Scottish Law Commission (Reports)

 


Part 10: Transition

10.1           Transition to the proposed new regime requires the balancing of competing policies. On the one hand, legitimate expectations acquired under the existing regime should not readily be disturbed. On the other hand, it would be inconvenient to maintain two parallel regimes of entitlement to interest in existence during an extended period of time. It might also be argued that if, as we believe, the proposed new system would represent a significant improvement upon the existing law, that benefit should be generally available as soon as possible.
10.2           In the Discussion Paper we identified four options for commencement of application of the new legislation in relation to interest on contractual debts and three options in relation to interest on damages. The options for contractual debts^[1] were:

(i) all obligations to pay which are created or come into existence on or after the commencement date;

(ii) all debts which become due on or after the commencement date;

(iii) all actions for payment (including claims to tribunals and claims in arbitration) raised on or after the commencement date;

(iv) all decrees for payment granted on or after the commencement date.

The options for damages which we identified were:

(i) all rights of action arising on or after the commencement day;

(ii) all actions raised on or after the commencement day;

(iii) all decrees granted on or after the commencement day.

10.3           We suggested that there would be advantages of consistency in having the same commencement date in relation to all types of pecuniary claim, whether for debt or for damages. The two options which could achieve such consistency are (a) to provide for the Act to apply to all debts falling due or, as the case may be, rights of action arising, on or after the commencement date; or (b) to provide for the Act to apply immediately to all claims except those in respect of which an action has been raised prior to the commencement date. We considered that option (iv) above in relation to debt would give rise to an unacceptable degree of retrospectivity, although one consultee supported its counterpart, option (iii), in relation to damages because this would avoid having two parallel regimes in existence. The other consultees who responded to this question supported the application of the new legislation to all pecuniary claims except those in respect of which an action has been raised prior to the commencement date. We also favour this approach. There would then be a period during which actions not subject to the new regime will work their way through the court system. It may be that there will be an incentive for claimants for damages to raise actions prior to the commencement date if, at the time when the act comes into force, the judicial rate of interest continues to be a little higher than the statutory rate which we are proposing. On the other hand, creditors suing for payment of a debt in respect of which there is no contractual entitlement to interest may have an incentive to await commencement before raising an action. The fact that these (relatively minor) distortive transitional effects could occur suggests that a reasonably brief period should be allowed between Royal Assent and entry into force of the legislation.
10.4           We recommend that:

The new legislation should apply to all pecuniary claims except those in respect of which an action has been raised prior to the commencement date.

(Draft Bill, section 13)

Note 1   Options for non-contractual debts were the same except that option (i) has no counterpart.     [Back]