Pre-judgment debts

The Ministry of Justice has rejected the Law Commission’s recommendation that courts should be given the power to award compound interest on pre-judgment debts, despite the judgment of the House of Lords in Sempra Metals v Inland Revenue [2007] UKHL 34 that compound interest is available in appropriate cases as a remedy under the common law. The MoJ’s response is that the case has not been made to introduce compound interest as the norm for the generality of larger cases, which would be a major step that requires further consultation and a more detailed impact assessment than the Commission could provide. It did, however, agree with the recommendation that the Lord Chancellor should be able to set a specified rate for pre-judgment interest, based probably on the Bank of England base rate, saying ‘this will provide greater certainty and rationality for the reasons given in the report. We also agree that it should be possible to set the rate by reference to the Bank of England base rate. This would ensure that the rate remained up-to-date without the need for statutory instruments’.