Statutory Interest is the interest rate applied pursuant to Section 35A of the Supreme Courts Act, or Section 69 of the County Courts Act 1984. That rate is 8% and has stayed at the level for several years.
Statutory interest applies on debts due. That figure is usually expressed in a Statement of Case as a total figure from the date due, until the date of issue of Proceedings, and thereafter at a daily rate of ‘x’ until Judgment or sooner payment.
Contractual rate of interest is precisely that; A figure expressly written within a Contactual document. It could be higher or lower than the statutory rate, but if expressed too highly, it may be considered penal in nature, and void, or voidable.
When bringing a case, does the Statutory or Contactual rate apply?
Interest must be expressly claimed in the Statement of Case. It seems that the Claimant, or a Part 20 Claimant can opt to choose one or the other, but usually both figures are expressed as alternatives, or indeed ‘for such rates and for such amounts as the Court deems appropriate’.
Does the Court have discretion as to what rate of Interest to apply?
The answer is categorically, yes. Courts are usually loathe to vary any contractual position, but can prevail upon the Parties a lower rate of interest.
Can one argue against the contractual rate?
Yes. See Director General of Fair Trading v First National Bank plc [2001] UKHL 52.
Does the position change if an agreement is regulated under the Consumer Credit Act 1974?
Yes. If the Courts deem an interest rate to be excessive, or that lending for example, was irresponsible, then the Courts have wide powers to set aside the interest position taking into account the realistic prospects of a sum of money being repaid, and whether advancing such funds in the first instance were deemed responsible or irresponsible lending. If the latter, arguing a low bargaining position and necessity and a rush for monies to be advanced whatever the circumstances, may be frowned upon by the Courts.
David Rosen is a Solicitor-Advocate and Partner at Darlingtons, Solicitors n London, EC4. He is a specialist litigation solicitor member of the London Solicitors’ Litigation Association, and a visiting associate Professor of Law at Brunel University.