Ruttle Plant Hire Ltd v Secretary of State for Environment Food & Rural Affairs

An incorrect invoice does not, without more, prevent statutory interest arising under the Late Payment of Commercial Debts (Interest) Act 1998. Where the contractual debt is unascertained, notice of the sum which the supplier claims is due satisfies section 4(5), even if the supplier has made an honest error in calculation. The payer may seek remission for uncertainty created by the supplier, but may not withhold all sums that are clearly payable in order to avoid statutory interest.

Remission under section 5 is confined to supplier conduct and the interests of justice. The statutory rate is not itself a relevant reason to reduce interest. In the absence of an express contractual condition requiring a correct invoice, a cause of action for completed work accrues when the work is completed; invoicing is machinery for quantification.

DEFRA engaged Ruttle Plant Hire Ltd to carry out cleansing and decontamination work during an outbreak of classical swine fever. The contractual terms, including plant-hire rates, were initially uncertain. Jackson J determined relevant preliminary issues, including the applicable rates, in [2006] EWHC 3426 (TCC).

Ruttle’s later invoices included a discounted first tranche, invoices calculated using higher foot-and-mouth disease rates, and some underclaims. Coulson J held that the incorrect invoices did not give notice for statutory-interest purposes and reduced interest otherwise payable. His decision is reported at [2008] EWHC 730 (TCC).

The appeal concerned whether incorrect invoices engaged the statutory interest regime, whether statutory interest could be remitted, and, alternatively, when the cause of action arose for interest under the Supreme Court Act 1981.

1. Appeal allowed unanimously. The second-tranche and Revision A invoices gave notice within section 4(5)(b) of the Late Payment of Commercial Debts (Interest) Act 1998. A debt is unascertained unless it has already been determined in a manner binding on the parties. In that situation, notice of the sum the supplier claims is due is sufficient even though the invoice overstates the true entitlement. A construction requiring a perfect invoice would frustrate the Act by permitting a payer to withhold every sum because of a minor error.

2. A wrong invoice did not prevent a qualifying debt arising under section 3(1). Ruttle had completed the work and supplied the plant, so DEFRA was obliged to pay. An invoice both asserts the sum thought due and requests payment. An error in the assertion does not mean that no contractual sum is owing, absent an express contractual term making a correct invoice a condition of payment.

3. The judge’s assumed remission of all pre-May 2007 interest and his reduction of the statutory rate to 2% above base rate could not stand. Section 5 is not a general discretion. It requires supplier conduct which makes remission necessary in the interests of justice. The statutory rate, including its deterrent character, is not a relevant consideration. A bona fide error about rates could not justify depriving the supplier of interest on sums which DEFRA could see were payable from the supporting material. No culpable period of delay by Ruttle had been identified. The full statutory rate therefore applied to the sums due, calculated from 30 days after the relevant invoices.

4. The section 4(3) argument failed. An agreed payment date must be agreed prospectively as the date on which the debt is to be created, not merely agreed retrospectively after performance.

5. Although academic because the 1998 Act applied, section 35A(1) of the Supreme Court Act 1981 also did not depend on a correct invoice. In the absence of an express term to the contrary, payment for completed work becomes due when the work is completed. Following Coburn v Colledge [1897] 1 Q.B. 702, invoicing affected the exercise of the interest discretion, not the accrual of the cause of action.

6. The parties were invited to agree a consequential order, with liberty to restore if agreement could not be reached.

• Court of Appeal (Civil Division): allowed Ruttle’s appeal unanimously and reversed Coulson J’s interest rulings.
• High Court, Technology and Construction Court: Coulson J decided the interest issues at [2008] EWHC 730 (TCC).
• Earlier High Court, Technology and Construction Court: Jackson J determined preliminary contractual issues, including plant-hire rates, at [2006] EWHC 3426 (TCC).