Carrasco v Johnson

Statutory interest compensates a claimant for being kept out of money which should have been paid. It is not an award of damages, punishment, or an account of the defendant’s gain. The assessment is broad and practical. It turns on the general attributes of the class of claimant, not the claimant’s particular borrowing, investments, financial circumstances, or alleged lost opportunities.

A claimant who does not clearly fall within either the borrowing or deposit-investment category may properly receive a blended rate between those rates. Delay in prosecuting the claim may justify a reduction in the rate. An appellate court will not interfere with a rate within the generous ambit of the trial judge’s discretion.

The appellant lent the respondent two unsecured sums of £20,000 in late 2008. The County Court at Central London found that £28,500 principal and £6,000 contractual interest remained due. It awarded statutory interest at 3% per annum.

The appellant challenged only that rate. She relied on her actual borrowing costs, expert evidence about unsecured borrowing in 2008, alleged lost investment opportunities, the respondent’s conduct, and an earlier unfulfilled interim-payment order. The central issue was whether the district judge had erred in exercising the discretion to award statutory interest at 3%.

1. Appeal dismissed. The award of statutory interest at 3% per annum disclosed no error of law and fell well within the generous ambit of the district judge’s discretion.
2. Interest serves to compensate a claimant for being kept out of money due to them. It does not compensate for consequential loss, punish the defendant, require an account of the defendant’s use of the money, or determine the merits of the underlying dispute.
3. The assessment must be broad. The court looks to the general or class attributes of the claimant rather than their individual financial history, actual borrowing, investment plans, particular need for funds, or matters known to the defendant. A detailed inquiry into those matters would be disproportionate and might require a substantial further trial without producing reliable answers.
4. The loans were private rather than commercial. The judge was entitled to place the appellant between the ordinary borrowing and deposit-investment categories. A blended rate above base rate, though lower than the appellant’s asserted borrowing cost and higher than a deposit rate, was permissible. The rate was broadly comparable with awards to other mid-category claimants.
5. The expert evidence concerned the cost of borrowing when the loans were made in 2008. It did not determine the proper rate for the period from 2009 to 2016, for which base rate was the relevant starting point. Alleged lost investment opportunities and general unfairness were likewise immaterial to the compensatory interest assessment.
6. The judge was also entitled to take account of the appellant’s delay in prosecuting the proceedings between 2011 and 2014. The interim-payment order did not attract the judgment rate of interest and did not assist the challenge to the award.

• Court of Appeal (Civil Division) — Carrasco v Johnson, [2018] EWCA Civ 87 : appeal dismissed; the 3% statutory-interest award was upheld.
• County Court at Central London — District Judge Langley, judgment dated 20 April 2016: judgment for £39,970.84, including £28,500 principal, £6,000 contractual interest and £5,470.84 statutory interest at 3% per annum. No citation was stated.