Buckinghamshire Council v FCC Buckinghamshire Limited

Contractual interest depends on the payment obligations created by the agreement, not on the date when liability is established by judgment. Where the contract permits disputed or subsequently corrected amounts to be adjusted, interest may run from the contractual due date or, under a freestanding balancing-payment provision, from the date of actual payment. A party cannot avoid contractual interest merely because the amount was disputed or had not yet been judicially determined.

Compound interest is recoverable only where the contract provides for it. A court should not infer compound interest from a general interest clause where the agreement delimits the circumstances in which it may be claimed.

This was a consequential judgment following the trial of a dispute concerning payments under a waste management project agreement between Buckinghamshire Council and FCC Buckinghamshire Limited. The principal sum awarded at trial had been paid, and the remaining issue was the Council’s entitlement to contractual interest on sums which should have been included in the calculation of the monthly and annual unitary charges.

The Council claimed interest at 2 per cent above Bank of England base rate from dates linked to the relevant contract years and claimed compound interest. FCC accepted entitlement to interest at the prescribed rate but argued that interest should run only from the date of judgment and should not be compounded. The court considered the construction and interaction of the agreement’s payment, disputed-amounts, adjustment and late-payment provisions.

1. Due date. The agreement’s payment provisions had been drafted inconsistently. Applying a logical and purposive construction, the due date was the final business day of the month following the relevant payment-period month. That construction allowed the report and invoice to be submitted, disputes to be identified and payment to be made. The court rejected the conclusion that the agreement contained no due date.
2. Compound interest. The disputed-amounts provision did not apply because the contractual dispute procedure had not been used. The Council therefore had no right to compound interest under that provision. The parties had deliberately delimited the circumstances in which compound interest could be recovered, and those circumstances did not arise. Earlier payment of interest on a compound basis did not establish a legal entitlement to the same treatment.
3. Adjustment provision. The balancing-payment clause created a separate and freestanding right to interest at the prescribed rate where an amount had subsequently been adjusted or corrected. It applied whether or not the disputed-amounts procedure had been followed. Since it did not require identification of a due date, interest under that clause could run from the date of actual payment, but the clause did not authorise compound interest.
4. Pre-judgment contractual obligation. The defendant’s contractual obligation was to calculate and pay the charges required by the agreement, including the relevant third-party income share. The fact that liability had not been admitted or determined by the court did not postpone the contractual obligation until judgment. That conclusion was necessary to give effect to the adjustment and late-payment provisions.
5. The alternative claim under the Senior Courts Act 1981, section 35A, was pleaded. If the contractual analysis had been wrong, the court would have exercised its discretion to award interest at the prescribed rate from the last business day of the month following the relevant month. The claim under the Late Payment of Commercial Debts (Interest) Act 1998 was not available because it had not been pleaded.
6. The Council was entitled to interest on the stated basis, recalculated in accordance with the judgment.

The judgment followed a trial judgment in the same proceedings, reported at [2024] EWHC 1552 (TCC). The present judgment determined consequential issues concerning interest.