Scottish Law Commission (Reports)

 


SCOTTISH LAW COMMISSION

Report on Interest on Debt and Damages

Report on a reference under section 3(1)(e) of the Law Commissions Act 1965

Laid before the Scottish Parliament by the Scottish Ministers

September 2006

SCOT LAW COM No 203

SE/2006/146

EDINBURGH: The Stationery Office

£xx.xx

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The Scottish Law Commission was set up by section 2 of the Law Commissions Act 1965^[1] for the purpose of promoting the reform of the law of Scotland. The Commissioners are:

The Honourable Lord Eassie, Chairman

Professor George L Gretton

Professor Gerard Maher, QC

Professor Joseph M Thomson

Mr Colin J Tyre, QC.

The Chief Executive of the Commission is Mr Michael Lugton. Its offices are at 140 Causewayside, Edinburgh EH9 1PR.

Tel: 0131 668 2131

Fax: 0131 662 4900

Email: info@scotlawcom.gov.uk

Or via our website at www.scotlawcom.gov.uk – select "Contact"

NOTES

1. For those wishing further copies of this paper it may be downloaded from our website or purchased from TSO Scotland Bookshop.
2. If you have any difficulty in reading this document, please contact us and we will do our best to assist. You may wish to note that an accessible electronic version of this document is available on our website.

SCOTTISH LAW COMMISSION

Report on a reference under section 3(1)(e) of the Law Commissions Act 1965

Report on Interest on Debt and Damages

To: Ms Cathy Jamieson MSP, Minister for Justice

We have the honour to submit to the Scottish Ministers our Report on Interest on Debt and Damages.

(Signed) RONALD D MACKAY, Chairman

GEORGE L GRETTON

GERARD MAHER

JOSEPH M THOMSON

COLIN TYRE

Michael Lugton, Chief Executive

1 September 2006

Contents

	Para
Part 1 Introduction	1
Terms of reference	1.1
Consultation and research	1.3
Guiding principles	1.6
Summary of our main recommendations	1.11
Legislative competence	1.19
Part 2 Summary and criticisms of the present law	2
Summary of the present law	2.1
Interest on debt	2.1
(a) Interest due by agreement	2.2
(b) Interest due by express statutory provision	2.3
(c) Interest due by implication at common law	2.4
(d) Interest due on money wrongfully withheld	2.5
Interest on damages	2.6
Statutory intervention	2.7
(a) Damages other than for personal injury	2.10
(b) Damages for personal injury	2.11
Interest on sums other than debts or damages	2.12
(a) Awards in respect of unjustified enrichment	2.12
(b) Payments relating to ship collisions and salvage	2.12
(c) Legal rights in a deceased's estate	2.12
(d) Aliment and financial provision on divorce	2.12
Criticisms of the present law	2.13
Inconsistent treatment of debt and damages	2.14
The concept of "wrongful withholding"	2.16
Interest on damages	2.18
Interest in other circumstances	2.20
Rate of interest	2.21
Part 3 A statutory entitlement to interest on debt	3
Introduction	3.1
Interest on contractual debt	3.2
Exceptions to the rule	3.5
Judicial discretion to remit interest	3.11
Starting date from which interest runs	3.12
Application of the general rule to particular contracts	3.16
Supply (including sale) of goods and services	3.17
Sale or lease of heritable property	3.20
Insurance and other claims for indemnity	3.24
Cautionary obligations: cautioner's right of relief	3.30
Loans	3.31
Contracts of employment	3.33
Obligations to account for money belonging to another	3.35
Interaction with the Late Payment of Commercial Debts (Interest) Act 1998	3.37
Contracting out of the new scheme	3.42
Interest on non-contractual debt	3.46
Introduction	3.46
Date from which interest runs	3.48
Unjustified enrichment	3.49
Repetition	3.50
Recompense	3.51
Salvage	3.55
Limitation funds	3.56
Obligations to account for money to which another person is entitled	3.57
Legal rights in a deceased's estate	3.59
Rate of interest where trustee or executor in default	3.61
Aliment and financial provision on divorce	3.63
Debts due under statute to public authorities	3.66
Part 4 Interest on damages	4
Introduction	4.1
Date for commencement of running of interest	4.3
Application of the general rule to particular types of loss	4.7
Out-of-pocket expenses	4.8
Other pecuniary losses	4.9
Solatium	4.14
Property lost or destroyed	4.15
Judicial discretion to remit interest	4.22
Part 5 Judicial discretion	5
Introduction: the current position	5.1
Interest on contractual and non-contractual debt	5.2
Interest on damages	5.4
Arguments for and against a judicial discretion to remit interest	5.7
Conclusion	5.12
Part 6 Tenders, interim payments and judicial expenses	6
Tenders	6.1
Interim payments	6.4
Judicial expenses	6.6
Part 7 Rate of interest	7
Introduction	7.1
The judicial rate of interest	7.5
Prescription of the statutory rate	7.8
Selection of base rate	7.11
Calculation of interest on a particular claim	7.14
Judicial discretion	7.15
Foreign currency awards	7.18
Post-decree interest	7.21
Rates of interest under other existing statutory provisions	7.24
Judicial rate specified	7.26
No rate specified	7.29
Rate other than the judicial rate specified	7.30
Compounding of interest	7.32
Compounding of interest at date of decree	7.40
Part 8 Tribunals	8
Part 9 Arbitration, adjudication and other forms of dispute resolution	9
Introduction	9.1
Arbitration	9.2
Adjudication	9.7
Other forms of dispute resolution	9.8
Part 10 Transition	10
Part 11 List of recommendations	11
Appendix A Interest (Scotland) Bill	A
Appendix B Current statutory provisions	B
Appendix C List of consultees who submitted written comments on Discussion Paper No 127	C

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Note 1   Amended by the Scotland Act 1998 (Consequential Modifications) (No 2) Order 1999 (SI 1999/1820).    [Back]