Well, that’s interesting!
In court terms, the amount of interest you may claim as part of any proceedings may seem like a side issue – the main issue is the amount of the claim and any interest you get on top might just be an added bonus, assuming that you win.
However, even as interest rates rise, knowing that you could claim 8% pa in court proceedings can become quite attractive. If your claim is for outstanding invoices, and you are not strapped for cash, then knowing that you might get a judgment for the full amount, plus interest at considerably more than you would have received if you’d just put the money in the bank, can suddenly make litigation much more rewarding than it might otherwise have been.
But before you put the champagne on ice, here are a few things to remember.
Whilst the court has the power to award interest to the successful party, and it has become normal to claim interest at 8%, it is not automatically awarded for the period from when the sum fell due to when Judgement is entered. It is at the court’s discretion.
If you are going to claim interest at 8%, be ready to explain why you think that amount is reasonable. We are still a long way (but perhaps not many months away) from that being Bank of England base rate, so make sure you have your arguments ready in advance. If a court thinks, for example, that you’ve claimed it out of habit, or as a mechanism to unfairly put pressure on the other side to settle, it could backfire on you.
Don’t forget to look at what is in any relevant contracts, such as your terms of business. If those say 4% (which is fairly standard) and you claim more without a really really good reason, your opponent could use that to discredit you.
If you want some interesting answers to the question “why is this rate justified”, I’ll be happy to fill in the blanks and reminisce with you about the days when court judgment debt rate was a glorious 15%!
Kleyman & Co solicitors. The full service law firm. More interesting than a clowder of cats and certainly much cuter!