Interest & Awards

Interest in law and equity

The law in relation to interest has developed in a fragmentary manner. Historically, the common law did not favour interest.

At common law, where a person had an entitlement to receive payment of funds or has lost a specific measurable sum at a particular time, he may have lost interest by reason of the breach and non-receipt by reason of not having the use of the money earlier. In this case, recovery was readily allowed.

Ultimately from the start of the 18th century,  interest could be awarded at common law in limited cases. The courts were granted the power to award interest on damages in the nineteenth century.

Compound Interest/ Damages

Compound interest may, in effect,  be available on special damages.  It may be a head or type of special damage or loss,  which is specifically foreseeable in the circumstances.

The principle applies primarily in the context of a breach of contract.  In some kinds of civil wrongs, an economic loss which includes compound interest may also be foreseeable.

The courts of equity were always willing to grant compound interest.  They are particularly willing to ensure that a person does not make a profit from his wrongdoing. Where an account is allowed and ordered, compound interest may be allowed within the account in order to reflect the true position in the matter.

Interest & Damages

Damages may be awarded for the period between the date when the claim/cause of action arose and the date of judgment.   Interest should not generally run from prior to the date of the claim.

In some circumstances,  interest will run only from a later date.  The actual loss may not arise until a future date, in which case interest should run from that later point in time.

Interest may be reduced or denied if there is an unjustifiable delay in bringing legal proceedings. Equally, the level of lump sum damages may be reduced on account of delay.

Personal Injuries Losses

In principle, a person who claims for personal injuries and loss of earnings should be entitled to interest on the loss from the date it occurred both on the general and special damages incurred.  However, courts more readily award interest on special damages, loss in respect of money that he would otherwise have been paid to the claimant.  This has been criticised.

In practice, the courts do not generally make precise calculations in respect of each heading of loss, from the date on which the damage occurred to the date of judgment.  Averaging and rules of thumb are applied where convenient. The effect may be to compensate for the fall in the value of money.

Discretionary Common Law Power

In the case of discretionary interest, no fixed rate is applicable.  The court may regard the amount set by statute in respect to awards of damages. The modern approach to common law damages looks at the commercial rate of interest and return.

In the 19th and early 20th centuries, a practice of granting 5% interest had developed.  The latter part of the 20th century saw significant inflation, which required a variation of this approach.

In England, the base rate plus 1%.  is commonly applied.  Exceptionally, a rate of 2% plus the base rate is awarded.

The base rate is generally the interbank lending rate prevailing at the relevant time. The approach, generally, is to use the approximate rate which the claimant e company would have been charged if it had borrowed. In cases with a foreign element, a foreign interest benchmark may be appropriate.

Interest on Debts

Interest is generally recoverable on an unpaid price either by statute or under discretionary power. Interest will also commonly be payable by the express terms of a contract.

There is a statutory right to interest on late payments of debts.  There is similar legislation in relation to late payment by public bodies.

The rate is set by the Minister from time to time. The Minister for Justice may if he is satisfied that the rate of interest per annum for the time being standing specified ought having regard to the level of rates of interest generally in the State, to be varied, make an order varying the rate of interest so standing specified.

Statute allows for discretion in the award of interest in some contexts.  The discretion applies to whether interest should be awarded, the rate, and for what period. The power to award interest should be used appropriately to meet the full loss and damage sustained, where required.

Statutory interest applies in relation to failure to pay money or special damages which are specifically foreseeable. Outside of this, there is a general discretionary power to award interest.

Judgment Debts

Interest is awarded on judgments for damages at a statutory rate. This rate is varied from time to time.  It is simple interest and it applies to the amount for which judgment is given.

The Debtors Ireland Act 1840 allows a court to award interest on judgment debts.  This is the equivalent of the English 1833 legislation.  Every judgment debt due upon any judgment not confessed or recovered for any penal sum for securing principal and interest shall carry interest at the rate specified from time to time by order from the time of entering up the judgment, or from the time of the commencement of this Act in cases of judgments then entered up and not carrying interest until the same shall be satisfied; and such interest may be levied under a writ of execution on such judgment.

Statutory Power to order Interest

Where in any proceedings a court orders the payment by any person of a sum of money (which expression includes in this context damages), the judge concerned may, if he thinks fit, also order the payment by the person of interest at the rate per annum standing specified for the time being, on the whole, or any part of the sum in respect of the whole or any part of the period between the date when the cause of action accrued and the date of the judgment.

This does not

•  authorise the giving of interest on interest, or
• apply in relation to any debt upon which interest is payable as of right, whether by virtue of any agreement or otherwise, or
• affect any damages recoverable for the dishonour of a bill of exchange, or
•  shall authorise the giving of interest on damages for personal injuries, or in respect of a person’s death, in so far as the damages are in respect of—any loss occurring after the date of the judgment for the damages, or iN any loss (not being pecuniary loss) occurring between the date when the cause of action to which the damages relate accrued and the date of the said judgment.