Civil Procedure Act, 2005.
Local Court: Interest
Statutory Rates of Interest ..... Interest Prior to Judgment ..... Interest After Judgment ..... Mode of Calculation
Statutory Interest Calculator The claiming of interest in the Local Court is governed by S.100 and S.101 of the Act and by Rule 36.7 of the Rules.
S.100 deals with interest before judgment. S.101 deals with interest after judgment. Part 13 prescribes statutory rates of interest and limitations on claims for interest. Interest prior to judgment can be calculated at a rate previously agreed to by the parties as part of the cause of action instead of the statutory rate.Statutory Rates of Interest
The statutory rates of interest as laid out in Part 13 of the rules are rather messy and confusing. LAWconnect has therefore created the following simplified table:- (dates are inclusive)9.00% p.a. from 1st March, 2002 until the present time........
10.00% p.a. from 1st September, 2001 until 28th February, 2002
11.00% p.a. from 1st September, 2000 until 31st August, 2001
10.00% p.a. from 1st March 2000 until 31st August, 2000
..9.50% p.a. from 1st September 1998 until 29th February 2000
10.00% p.a. from 1st September 1997 until 31st August 1998
10.50% p.a. from 1st March 1997 until 31st August 1997
12.00% p.a. from 1st March 1995 until 28th February 1997
10.50% p.a. from 1st September 1993 until 28th February 1995
11.25% p.a. from 17th February 1992 until 31st August 1993
15.00% p.a. from 2nd March 1988 until 16th February 1992
18.00% p.a. from 2nd November 1987 until 1st March 1988
19.50% p.a. from 1st August 1986 until 1st November 1987
Interest Prior to Judgment
Interest can be claimed as of right in relation to any cause of action in which the payment of interest was an inherent part of the action. For example, if the parties entered into a loan agreement and the payment of interest on the loan at an agreed rate was an express part of the agreement, then Part 13 rule 2(5) allows interest to be claimed at the agreed rate.If interest was not an inherent part of the cause of action, Rule 36.7(2) allows that interest may be claimed at the prescribed rate on any amount of $1000 or more from the date the cause of action arose until the date of judgment. Ascertaining when the cause of action arose in some circumstances can be difficult. In contractual matters, it is generally accepted that interest should be calculated from the date on which the amount due under the contract was supposed to have been paid. Thus, if a workman does some work under an agreement and sends an invoice with the agree terms "to be paid in 14 days from date of invoice", then interest should be calculated from the fifteenth day after the date of the invoice. In relation to torts (e.g. damages for breach of contract or accidents) then, ideally, interest should be calculated from the date that the loss is "realised" by the plaintiff in financial terms. This is because interest is a form of compensation for the plaintiff to be compensated for the opportunity cost of not having been paid on time. Thus, the workman should have been able to bank the payment of the invoice 14 days after the date of the invoice. He has not been paid, therefore the money is not in his bank account earning interest and he suffers a cost of not having the opportunity to use that money. Interest compensates him for that "opportunity cost" from the day he suffered it - the fifteenth day. In relation to a claim for damages, the opportunity cost may not be "realised" in a financial sense until some time after the cause of action takes place. For example, with a motor vehicle collision in which the paint on the plaintiff's car is scratched, the plaintiff does not "realise" the opportunity cost until he actually pays the motor vehicle repairer. This might be quite some time after the date of the collision.
Any claim for interest prior to judgment must be pleaded and particularised in the statement of claim.
Interest After Judgment
Part 13 rule 3 says that interest is to be calculated on the total amount of the judgment (including the amount of the verdict, costs, disbursements and interest allowed under S.100) at the prescribed rate. Section 39(3) says that interest on a judgment shall not be payable if the amount of the judgment debt is paid in full within 21 days of the date of the judgment. If costs are part of that judgment but have not been ascertained, interest shall not be payable on the amount of those costs if they are paid in full within 21 days of the date on which their amount was ascertained.
Mode of Calculation
Section 39(2) says that the interest after judgment will be calculated from the date of the judgment unless the court orders otherwise. Thus, if the judgment debt is not paid within 21 days of the date of the judgment, interest will then normally be calculated from the date of the judgment and not from the 22nd day.Section 39(1) says that interest shall be calculated on the amount of the judgment debt "as is from time to time unpaid". This means that interest is "reducible" in that it will be calculated on the reducing amount as the debt is paid by instalments. However, where enforcement fees and legal costs are incurred to issue a writ of execution, Part 31A rule 22 says that interest will be calculated on the balance of the judgment debt as increased by the payment of the fees and allowable professional costs for the issue of that writ of execution. This does not automatically follow in relation to other enforcement process unless the Registrar or Court makes a specific order for those costs.
Section 39(2)(c) says that interest on the judgment shall "form part of the judgment debt but not so as to require the payment of interest upon interest.". This means that statutory interest does not compound as normal bank interest does. The creditor does not get interest on interest. It also means that, because the interest shall "form part of the judgment debt" the judgment creditor is entitled to apply any instalment payment to interest which has accrued since the last payment was made on the debt before applying any balance of such instalment to the amount of the principal still outstanding.
Most freely available "interest calculation" programs for personal computers presume that interest will be compounding. Statutory interest does not compound and so such programs are unsuitable for calculating statutory interest. For that reason LAWconnect has provided a specialised interest calculator for calculating Court interest in debt recovery matters.
A manual interest calculation sheet can be launched and printed here: Interest Calculation sheet. It allows a manual record to be calculated and kept by hand where a judgment debt is being paid by instalments. It also keeps a record of what portion of each instalment payment was consumed by interest and how much was applied to the principal outstanding on the judgment debtor. It also allows for adding costs such as the costs of a writ of execution to the amount of the judgment debt.
TIP: Most plaintiff's will calculate interest in a claim for damages from the date on which the events took place and leave it up to the defendant to contest the calculation of interest in a defence. Few do.
TIP: Many judgment creditors never collect the interest which accrues on a judgment paid by instalments, either because they don't realise they are entitled to it, or because they just couldn't be bothered working it out.
Last updated: 1 November. 2005
Copyright, 22/8/99: LAWconnect