Commission takes an interest in money claims
17 Jan 05
Scottish Law Commission calls for views on running of interest
The law of interest on debt and damages is examined in a discussion paper published today by the Scottish Law Commission.
In the paper, the Commission argues that the current law on interest, which has evolved over the centuries without any general underlying principle, is lacking in consistency: interest may or may not run depending whether a claim is categorised as a debt or a claim for damages.
The paper proposes the creation of a comprehensive system of entitlement to interest which would not differ depending on the legal classification of the claim. For contractual debt, there would be a statutory entitlement to interest from the date when payment is due, whether or not the parties are in business. In the absence of agreement, interest would begin to run after 30 days.
With regard to interest on damages, it is proposed that the existing rules would be replaced by an entitlement to interest on each head of loss from the date when the loss in question was sustained. The Commission invites comment on the extent, if any, to which judicial discretion to award interest from a later date or on a lesser sum should be retained.
The Commission also invites comment on a proposal that there should be a prescribed rate of interest, such as 1% or 1.5%, above the official dealing rate of the Bank of England; and on whether compounding at specified intervals should be allowed.
The paper does not deal with contractual terms which impose exorbitant interest charges, already regulated for consumer contracts.
The Commission will consider comments on the paper submitted by 29 April 2005 before reaching conclusions to be included in a final report.