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Scottish Law Commission (Discussion Papers)
You are here: BAILII >> Databases >> Scottish Law Commission >> Scottish Law Commission (Discussion Papers) >> Interest on Debt & Damages [2005] SLC 127(appendix c) (DP) (January 2005)
URL: http://www.bailii.org/scot/other/SLC/DP/2005/127(appendix_c).html
Cite as: [2005] SLC 127(appendix c) (DP)

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    APPENDIX C

    Research Project

    C.1 The research project involved a study of summons and writs lodged in court in order to find out what kind of interest is normally claimed in practice. Research at the Court of Session was conducted in April, May and September 2004, in three exercises the details of which are set out below. All the cases indexed[1] in March 2004 were checked[2] to find out what kind of interest had been claimed and, where possible, to find out what interest had been awarded. In addition, all the ordinary actions and commercial actions which were lodged at the Court of Session in March 2004 were checked, mainly in order to see if any reference was made to the Late Payment of Commercial Debts (Interest) Act 1998. Further research was carried out at Aberdeen Sheriff Court in June 2004 where it was anticipated that there would be a representative sample of cases in which both parties were involved in a commercial transaction.

    C.2 The Project Team are grateful to staff at the Court of Session and Aberdeen Sheriff Court for their assistance during the collection of data for this project.

    Exercise 1: Court of Session cases indexed in March 2004

    C.3 The sample for exercise 1 was drawn from processes which had been indexed in March 2004. It was thought that if an earlier month were chosen there would be fewer cases to which the Late Payment of Commercial Debts (Interest) Act 1998 could apply.[3] February was a shorter month, and April and January had fewer business days due to the effect of holiday periods. The index numbers in the sample ranged from 830/2004 to 1302/2004 (473 numbers). Of these, seven numbers were unallocated to a process.[4] One number had been accidentally allocated to two processes. There was, therefore, a total of 467 cases which had been indexed that month. The processes were examined by members of the project team on 21 and 22 April, 13 and 14 May and 27 September 2004. Of the 467, 13 had been borrowed and were unavailable during each of the research visits. This left 454, of which 121 were petitions and six were family actions. Interest is not awarded in petitions and family actions, so these cases were excluded from our sample. Of the remaining 327 processes, 19 were incomplete and did not contain all the data required for our survey. The resulting sample consisted of 308 cases.

    •    245 of the 308 cases (79.54%) were damages cases in which the pursuer was an individual (ie mostly personal injury cases).
    •    43 of the 308 cases (13.96%) in exercise 1 involved parties who were both in a commercial undertaking.

    Exercise 2: Court of Session cases lodged in March 2004

    C.4 Many of the actions in exercise 1 were initiated before the Late Payment of Commercial Debts (Scotland) Act 1998 came into force[6] or related to debts which were probably incurred before the Act came fully into force. In order to find out if reference was made to the 1998 Act in more recent cases we checked all the summons lodged in the Court of Session in March 2004 and examined those cases in which both parties were involved in a commercial undertaking. It was anticipated that by March 2004 the 1998 Act would be available to all litigants if the case involved a debt to which that Act would apply. Petitions and Personal Damages[7] actions were not included in the sample.

    C.5 The project team collected data at the Court of Session on 14, 26 and 27 May and 27 September 2004. For each summons, the team recorded the type of case, the interest which was asked for (if any) and the authority cited for interest (if any). 87 ordinary actions were examined. Of these, 61 were cases in which both parties were involved in business. In addition, 14 commercial action summons were examined. After excluding non-business cases, the total sample was 75 cases.

    •    Interest was claimed in 56 (74.66%) of the 75 cases.
    •    In 1 (1.33%) of the 75 cases (or 1 out of 56: 1.79%) interest was claimed under the Late Payment of Commercial Debts (Interest) Act 1998.
    •    In 19 (25.33%) of the 76 cases no interest was claimed because no monetary award was sought.[8]
    •    In 27 (36%) out of 75 cases (or 27 out of the 56 claiming interest: 48.21%) a rate under tax legislation was claimed.[9]
    •    In 3 (4%) out of 75 cases (or 3 out of 56: 5.35%) a rate specified in a contract was claimed.
    •    In 2 (2.66%) out of 75 cases (or 2 out of 56: 3.57%) interest was claimed but no rate or period specified.
    •    In 12 (16%) out of 75 cases (or 12 out of 56: 21.43%) interest was claimed at 8% from the date of service.
    •    In 9 (12%) out of 75 cases (or 9 out of 56: 16.07%) interest was claimed at 8% from the date when the right of action arose.
    •    In 1 (1.33%) of the 75 cases (or 1 out of 56: 1.79%) interest was claimed at 8% from the date of decree.

    Exercise 3: Summary cause and small claims in Aberdeen Sheriff Court

    C.6 The sample for exercise 3 was taken from all summary cause actions and small claims which were due to call in Aberdeen Sheriff Court on 24 June 2004. 140 cases were examined by a member of the project team at Aberdeen Sheriff Court on 16 and 17 June 2004. It was anticipated that this sample would include a large number of debt actions between businesses to which the Late Payment of Commercial Debts (Interest) Act 1998 would apply.

    •    126 (90%) of the 140 cases were actions for recovery of a debt.
    •    9 (6.43%) of the 140 cases were actions for damages. Interest was claimed in all 9 cases.

    •    In 35 (25%) of the 140 cases both parties were involved in a commercial undertaking. 7 of those 35 cases were actions in which the Registrar of Companies sought a penalty under the Companies Acts. This left 28 commercial undertakings cases, excluding tax cases, in which interest was sought as well as the principal sum:

    •    3 (2.14%) of the 140 cases were for recovery of unpaid tax and interest was sought in terms of tax legislation.
    •    14 (10%) of the 140 cases were actions by SAAS[11] for recovery of student awards and no interest was sought in these cases.

    Conclusions

    C.7 In exercise 3, interest under the Late Payment of Commercial Debts (Interest) Act 1998 was not claimed in most of the cases where it appeared that a claim would be valid. However, it is not known, in cases where such interest is not claimed, if this is due to ignorance of the creditor's rights or forbearance on the part of the creditor. In other cases, a variety of interest rates are claimed which seem to bear little relation to the nature of the claim. In exercise 1 there were 245 cases out of a sample of 308 in which it appeared that interest could have been claimed from the date when the right of action arose. In fact, interest was claimed from the date of decree or the date of citation even in some long running personal injury claims. This is borne out by the damages actions examined in exercise 3, albeit from a very small sample of nine damages cases. It may be that the rate of interest and the date from when it should run are not always considered carefully by court practitioners at the point of drafting the court writs and it is not known whether a more precise calculation of interest is achieved at the point of settlement.

Note 1    In the Court of Session a case is "indexed" when it is concluded, "fallen asleep" or otherwise becomes inactive. It is given an index number and put into storage.     [Back]

Note 2   Family actions and petitions were not examined because interest was unlikely to be claimed in these cases.     [Back]

Note 3   The Late Payment of Commercial Debts (Interest) Act 1998 came fully into force in August 2002. Only 9.74% of the cases in our March 2004 sample were signeted after the Act came into force.     [Back]

Note 4    A number becomes unallocated where a case becomes live again and the process is returned to the General or Petition office. After the case has concluded and is returned to storage it is given a new index number, and the original index number is not re-allocated.     [Back]

Note 5    There were no cases in the sample in which it was clear that the 1998 Act was applicable but was not used.    [Back]

Note 6    9.94% of the total sample and 69.77% of the cases in which the parties were commercial undertakings.     [Back]

Note 7    Ie actions to which Chapter 43 of the Rules of the Court of Session apply ("Actions of Damages For, or Arising From Personal Injuries"), as substituted by the Act of Sederunt (Rules of the Court of Session Amendment No 2) (Personal Injuries Actions) 2002 (SSI 2002/570).     [Back]

Note 8    Eg actions seeking interdict or declarator.     [Back]

Note 9    Ie the actions were for recovery of unpaid tax.    [Back]

Note 10   In all 16 out of the 25 cases where interest under the 1998 Act could have been claimed but was not, the pursuers were legally represented.    [Back]

Note 11   Student Awards Agency for Scotland.     [Back]

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URL: http://www.bailii.org/scot/other/SLC/DP/2005/127(appendix_c).html