Interest rate on damages claims?

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Persimmon Homes –v- Hall Aggregate CILL (2012) TCC Ramsey J

Facts

Hall Aggregate obtained judgment for £1,146,000 against Persimmon on a dispute arising from a sale of some land.  The parties could not agree what rates of interest should be charged (a) prior to judgment; and (b) after judgment.

HELD:

Under Section 35A Senior Courts Act 1981, the Court has a general discretion in respect of interest to the date of judgment.  It normally regards 1% over bank base as being an appropriate rate to reflect the cost of borrowing money.  In the present exceptional circumstances where the Bank of England base was only 0.5%, the Court recognised that the cost of borrowing money was greater than this and would therefore normally award 2% over the base rate.

As regards the interest rate to be applied after judgment, Section 17 of the Judgment Act, 1838 currently sets the rate of interest at 8%.  The Judge applied this rate to the judgment award to run from the date of judgment until the date of payment.

Comment

Many companies are paying 1% over their lending bank rates which may be several percentage points higher than Bank of England base.  As the Court has a complete discretion it will always be worth producing evidence from one’s bank of the actual cost of borrowing money.

For more information, help or advice please contact Rob Langley on 0191 211 7975 or email [email protected].