Interest on damages: a cost of delay

Once a Court finds a defendant in a property damage recovery claim liable for a sum of damages awarded, it is also likely to award the Claimant interest on those damages, to compensate the Claimant for the defendant keeping it out of its money for the period in which the amounts claimed were disputed.

The Courts have a statutory power to award interest under the County Courts Act 1984 and the Senior Courts Act 1981. Interest is at the Courts discretion, and can be awarded from the date when the cause of action arose to judgment or payment. Interest can be awarded at up to the statutory rate of 8% or even beyond if appropriate. A defendant who fails to beat a claimant's part 36 offer at trial might be ordered to pay interest at a rate of up to 10% above the Bank of England's base rate.

Not only can interest be awarded under the law; as is often the case behind a law, there is also a compelling moral case for a party who has kept his opponent out of its money to pay interest to put the claimant back into the position he would otherwise have been in. Indeed, if a defendant denies a claim for, say, £50,000 for 2 years and he is able through investments to make a 4% return on his money, he has made £4,000 by keeping the claimant's money, and it would obviously be inequitable for him to keep that for himself on losing the claim rather than compensate the claimant.

Interest is discretionary and fair to the outcome so a defendant confident in its position has nothing to fear, because it can argue persuasively that, should it succeed entirely in defending the claim on the basis of its defence, it should not pay interest or at least should not pay interest on that part of the claim which has not succeeded.

A properly advised defendant will have considered on day one the interest risk and taken that into account in its decision to defend or not pay the claim.