Interest

[7-1000] Introduction

While interest up to judgment is often the subject of agreement, particularly after some judicial encouragement, a range of issues may and do arise. In more complicated situations, particularly where statutory limitations might apply, it is often the better course to receive submissions on interest after the resolution of the principal issues.

Whilst statutory limitations must be complied with it remains the position that “the award of interest should always be approached in a broad and practical way [and] should not be allowed to assume disproportionate importance…”: Cullen v Trappell (1980) 146 CLR 1 at 22. However, for a case requiring detailed consideration of issues relating to interest up to judgment, see Gadens Lawyers Sydney Pty Ltd v Symond (2015) 89 NSWLR 60 at [167]–[186].

Interest after judgment, other than interest on costs, is not, usually at least, an issue for first instances judges and is not, itself, an amount for which judgment is given: Najdovski v Crnojlovic (No 2) (2008) 51 MVR 334.

[7-1010] Interest up to judgment

Section 100 of the CPA provides that in proceedings for the recovery of money, including any debt or damages or the value of any goods, the court may include interest in the amount for which judgment is given at such rate as the court sees fit: s 100(1). The interest may be awarded on the whole or any part of the money and for the whole or any part of the period from the time the cause of action arose until the time the judgment takes effect. As to the expression “proceedings for the recovery of money” see Lahoud v Lahoud [2011] NSWCA 405 at [37]–[45].

Section 100(2) makes similar provision for the situation where, in proceedings for the recovery of a debt or damages, payment of the whole or part of the debt or damages has been made after the proceedings commenced but before or without judgment.

Section 100(3) provides that s 100 does not authorise the giving of interest on interest (s 100(3)(a)), the giving of interest on a debt when interest is payable as a right (s 100(3)(b)) or the giving of interest on proceedings for amounts less than a prescribed amount (s 100(3)(c)). Section 100 does not affect the damages recoverable for the dishonour of a Bill of Exchange (s 100(3)(d)).

Section 100(4) provides that in any proceedings for damages, the court may not order the payment of interest under the section in respect of the period for which an appropriate settlement sum was offered (or first offered) by the defendant unless the special circumstances of the case warrant the making of such an order.

Appropriate settlement sum means a sum offered in settlement of proceedings in which the amount for which judgment is given, including interest up to and including the date of the offer, does not exceed the sum offered by more than 10 per cent: s 100(5).

[7-1020] Discretionary power

The power to award interest is a discretionary one. For applicable principles see Ritchie’s [s 100.10]–[100.95], Thomson Reuters [s 100.30]–[100.100]. For an example of the application of these principles to both before and after interest, see Maestrale v Aspite (No 2) [2014] NSWCA 302.

[7-1030] Statutory limitations

There are a number of legislative provisions, including the CPA itself, which impose limitations or restrictions on the interest which may be awarded.

Section 100(3)(c) of the CPA

The text of the provision appears sufficiently above. A Local Court may not order the payment of interest up to judgment in any proceedings in which the amount claimed is less than $1,000: UCPR r 36.7(2).

Subsection 100(4) of the CPA

The text of the provision appears sufficiently above.

In other contexts, the issue of whether an offer of settlement is an appropriate one can raise difficult questions. However, for the purpose of s 100(4) an appropriate settlement sum is defined as set out above.

There remains, however, the question whether the special circumstances of the case warrant the making of an order for interest.

As to the meaning of special circumstances and applicable principles see Ritchie’s [s 100.25].

[7-1040] Motor Accidents Compensation Act 1999

A plaintiff has only such right to interest on damages payable in relation to a motor vehicle accident as is conferred by s 137.

That section excludes any entitlement to interest on those components of an award calculated under s 128 (dealing with attendant care service) and any amount for non-economic loss: s 137(2), (3).

Other damages payable in relation to a motor accident are subject to the following provision: s 137(4):

(a) 

Interest is not payable unless:

(i) 

information that would enable a proper assessment of the plaintiff’s claim has been given to the defendant and the defendant has had reasonable opportunity to make an offer of settlement (where it would be appropriate to do so) in respect of the plaintiff’s full entitlement to all damages of any kind but has not made such an offer, or

(ii) 

the defendant has had a reasonable opportunity to make a revised offer of settlement (where it would be appropriate to do so) in the light of further information given by the plaintiff that would enable a proper assessment of the plaintiff’s full entitlement to all damages of any kind but has not made such an offer, or

(iii) 

if the defendant is insured under a third party policy or is the Nominal Defendant, the insurer has failed to comply with its duty under s 83, or

(iv) 

if the defendant has made an offer of settlement, the amount of all damages of any kind awarded by the court (without the addition of any interest) is more than 20 per cent higher than the highest amount offered by the defendant and the highest amount is unreasonable having regard to the information available to the defendant when the offer was made.

(b) 

The highest amount offered by the defendant is not unreasonable if, when the offer was made, the defendant was not able to make a reasonable assessment of the plaintiff’s full entitlement to all damages of any kind.

(c) 

For the purposes of the subsection an offer of settlement must be in writing.

The amount of interest is to be calculated for the period from when the loss to which the damages relate was first incurred until the date on which the court determines the damages: s 137(5)(a). It is to be calculated in accordance with the principles ordinarily applied by the court for that purpose subject to the section: s 137(5)(b). The rate of interest is to be three quarters of the rate prescribed for the purposes of s 101 of the CPA: s 137(6).

Nothing in s 137 affects the payment of interest on a judgment or order of the court: s 137(1).

Despite earlier views, the award of interest, once the provisions of s 137(4) are satisfied, remains discretionary in accordance with principles applicable with respect to s 100 of the CPA: Najdovski v Crnojlovic (No 2) (2008) 51 MVR 334 at [11].

For a discussion on a number of potential issues arising from the language of subsection 4 see Najdovski at [12]–[25].

On the issue of reasonableness, Basten JA at [26] said that it should be accepted that:

too great a willingness to treat an offer as “reasonable”, and therefore not unreasonable, will allow defendants to escape too readily the obligation to pay for the cost of keeping the plaintiff out of his or her damages. Ultimately reasonableness depends upon an objective assessment of the circumstances and, where the material before the court does not materially differ from that available to the defendant at the relevant time, the judgment of the Court must be treated as, subject to recognition that no precise figure is necessarily correct, a baseline for determining the reasonableness of the offer.

See [7-1060] as to the applicability of s 18(1)(c) of the Civil Liability Act 2002.

[7-1045] Motor Accident Injuries Act 2017

A claimant has only such right to interest on damages payable in relation to a motor vehicle accident as is conferred by s 4.16.

No interest is payable on damages awarded for non-economic loss: s 4.16(2).

Other damages payable in relation to a motor accident are subject to s 4.16(3):

(a) 

Interest is not payable (and the court or claims assessor cannot order the payment of interest) on such damages unless:

(i) 

information that would enable a proper assessment of the claim has been given to the defendant and the defendant has had a reasonable opportunity to make an offer of settlement (where it would be appropriate to do so) in respect of the full entitlement to all damages of any kind but has not made such an offer, or

(ii) 

the defendant has had a reasonable opportunity to make a revised offer of settlement (where it would be appropriate to do so) in the light of further information given by the claimant that would enable a proper assessment of the full entitlement to all damages of any kind but has not made such an offer, or

(iii) 

if the defendant has made an offer of settlement, the amount of all damages of any kind that is awarded (without the addition of any interest) is more than 20% higher than the highest amount offered by the defendant and the highest amount is unreasonable having regard to the information available to the defendant when the offer was made.

(b) 

The highest amount offered by the defendant is not unreasonable if, when the offer was made, the defendant was not able to make a reasonable assessment of the full entitlement to all damages of any kind.

(c) 

For the purposes of this subsection, an offer of settlement must be in writing.

The amount of interest is to be calculated for the period from when the loss to which the damages relate was first incurred until the date on which the damages are awarded: s 4.16(4)(a). It is to be calculated in accordance with the principles ordinarily applied by a court for that purpose, subject to the section: s 4.16(4)(b). The rate of interest to be three-quarters of the rate prescribed for the purposes of CPA s 101: s 4.16(5).

Nothing in s 4.16 affects the payment of interest on a judgment or order of a court: s 4.16(6).

The discussion in [7-1040] as to discretion and issues arising under s 137(4) of the Motor Accidents Compensation Act 1999 apply to the similar, although not identical, terms of s 4.16.

See [7-1060] as to the applicability of s 18(1)(c) of the Civil Liability Act 2002.

[7-1050] Workers Compensation Act 1987

A plaintiff has only such right to interest on damages as is conferred by s 151M: s 151M(1).

Subsections 151M(4)–(7) adopt the same language and scheme as s 137(4)–(7) of the Motor Accidents Compensation Act 1999, except that s 137(4)(a)(iii), referring to a third party policy and the Nominal Defendant, is omitted.

While s 151M does not exclude interest on damages payable in respect of attendant care service or for non-economic loss, the schemes should otherwise be dealt with in the same way.

[7-1060] Civil Liability Act 2002

With respect to cases to which this Act applies, a court cannot order the payment of interest on damages awarded for non-economic loss (s 18(1)(a)), gratuitous attendant care services with some exceptions (s 18(1)(b)), or the loss of capacity to provide gratuitous services to dependants (s 18(1)(c)).

The provision that interest cannot be paid on damages awarded for the loss of capacity to provide gratuitous services to dependants applies to motor accidents: s 3B(2).

If interest is to be awarded, the amount of interest is to be calculated for the period from when the loss first occurred until the date when the court determines the damages: s 18(2)(a). It is to be calculated in accordance with the principles ordinarily applied by the court for that purpose (s 18(2)(b)). The interest rate is to be as provided by s 18(3), (4).

[7-1070] Interest after judgment

Section 101 provides for interest after judgment including interest on costs. Interest on costs is payable unless the court otherwise orders: s 101(4).

For a discussion of relevant issues see, Ritchie’s [s 101.5]–[s 101.30], Thomson Reuters [s 101.20]–[s 101.50], Zepinic v Chateau Constructions (Australia) Ltd (No 2) [2013] NSWCA 227 at [83]–[88], Grills v Leighton Contractors Pty Ltd (No 2) [2015] NSWCA 348 and Grima v RFI (Aust) Pty Ltd [2015] NSWSC 332.

[7-1080] Rate of interest

Rates of interest are prescribed for interest after judgement: UCPR r 36.7 Sch 5. However, there is no such rate for interest up to judgment. The rates in Sch 5 will usually be accepted as appropriate without evidence: Hexiva Pty Ltd v Lederer (No 2) [2007] NSWSC 49. However, a party contending that the rate should be different is entitled to do so but will need, generally at least, to produce evidence in support of such a rate. “The plaintiff’s loss and its quantum are to be found as a fact and assessed on the evidence…”: Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358. In undertaking this task it will generally be appropriate for the court to have regard to prevailing market rates.

An accepted method of calculating the interest on damages accruing progressively over a period of time is to halve the rate of interest, the period or the principal amount: Cullen v Trappell, as above, Riddle v McPherson (1995) 37 NSWLR 338.

Legislation

  • CPA ss 100, 101

  • Civil Liability Act 2002 ss 3B(2), 18

  • Motor Accidents Compensation Act 1999 s 137

  • Motor Accident Injuries Act 2017 s 4.16

  • Workers Compensation Act 1987 s 151M

Rules

  • UCPR r 36.7 Sch 5 (repealed)