Macrae v Reed and Mallik Ltd
| Jurisdiction | Scotland |
| Judgment Date | 22 July 1960 |
| Docket Number | No. 9. |
| Date | 22 July 1960 |
| Court | Court of Session (Inner House - Second Division) |
2ND DIVISION.
Lord Wheatley.
DamagesInterestDiscretion to award interest on damages from date earlier than decreeOn what grounds exercise of discretion open to review Whether interest can only be awarded on damages for loss of money ascertainable to have been due to pursuer before date of decreeInterest on Damages (Scotland) Act, 1958 (6 and 1 Eliz. II, cap. 61), sec. 1 (1).
The Interest on Damages (Scotland) Act, 1958, sec. 1 (1), enacts:"Where the court having jurisdiction in any action for damages pronounces an interlocutor decerning for payment by any person of a sum of money as damages, the interlocutor may, if the circumstances warrant such a course, include decree for payment by that person of interest on the sum or any part thereof from such date as may be so specified (being a date not earlier than the date on which the action was commenced against that person) until the date of the interlocutor."
In an action of damages for very serious personal injuries a jury awarded the pursuer 12,000, the heads of claim being past and prospective loss of earnings, and solatium for past and prospective pain and suffering. The pursuer had concluded for interest as from the date of citation on the damages awarded, and the Lord Ordinary awarded him interest at five per centum from that date on the whole sum of 12,000 awarded by the jury, holding that the discretion conferred upon a judge by sec. 1(1) fell to be exercised on broad lines and could not be challenged except on the ground that he had erred in principle.
Held (1) (rev. judgment of Lord Wheatley) that the discretion conferred by sec. 1 (1) must be exercised on a selective and discriminating basis, and that the exercise of that discretion was open to review on the question whether the circumstances of the case warranted the course taken.
(2) (diss. the Lord Justice-Clerk) that interest from a date earlier than the date of decree could be allowed only On damages awarded for loss suffered before the date of decree where such loss could be definitely ascertained.
(3) (diss. the Lord JusticeClerk) that interest on damages in respect of solatium could never run from a date earlier than that of decree.
Opinion reserved by Lord Strachan as to the application of sec. 1 (1) to interest on damages for breach of contract.
Duncan Macrae brought an action for damages for personal injuries against his former employers, Reed and Mallik, Limited, in which he concluded "for payment 'by the defenders to the pursuer of the sum of 15,000 with interest thereon at the rate of fiveper centum per annum from the date of citation herein or as the Court may direct, until payment " The pursuer averred that, as a result of certain detonators exploding, he had suffered severe injuries, including the loss of his left hand and eye, and had been rendered permanently unemployable, and that he had suffered and would continue to suffer pain and distress.
A jury awarded the pursuer 12,000 damages, and the Lord Ordinary, after hearing counsel for the parties, decerned against the defenders for interest on this sum at the rate of five per centum per annum from the date of citation until payment.
At advising on 22nd July 1960,
LORD JUSTICE-CLERK (Thomson).It has long been our practice that where, in actions of damages, damages are awarded interest runs only from the date of the final decree. The reason is that it is then, and only then, that the illiquid claim for damages is quantified and made liquid. Once there is a final decree for a specified sum that sum is payable at the date of the final decree, and if it is not then paid, it carries interest as payment is wrongly withheld. That is in consonance with the accepted principle as laid down inCarmichael1 by Lord Westbury where he said (at p. 131): "Interest can be demanded only in virtue of a contract, express or implied, or by virtue of the principal sum of money having been wrongfully witheld, and not paid on the day when it ought to have been paid."
Under our legal system once a litigation is started, some considerable time must elapse before finality is reached, particularly if parties exercise the rights,of appeal which are available to them. There has long been a feeling that in view of this inevitable delay the rule that interest begins to run on an award of damages only after final decree may tend to give defenders an undue advantage at the expense of pursuers. I am speaking only of the normal delays inherent in normally conducted litigation; if there has been excessive delay caused by a party, the Court can deal with that situation. The feeling has been that, even in the normal case, where anything from one to two years may elapse from the raising of an action to its conclusion, the defender gets, during the currency of the litigation, the use of money which will belatedly come to the pursuer as his own. It is, in certain circumstances, possible for a defender, exercising his legitimate rights of appeal, to recoup himself for the costs of the appeal out of the interest which accrues during the period between the making and hearing of a reclaiming motion. There was also a school of thought which looked to a change in the law as a potential weapon in accelerating the speed of litigation.
It was against that sort of background that the Interest on Damages (Scotland) Act, 1958,1 was passed. Section 1 is in the following terms:"Where the court having jurisdiction in any action for damages pronounces an interlocutor decerning for payment by any person of a sum of money as damages, the interlocutor may, if the circumstances warrant such a course, include decree for payment by that person of interest on the sum or any part thereof at such rate as may be specified in the interlocutor, from such date as may be so specified (being a date not earlier than the date on which the action was commenced against that person) until the date of the interlocutor." It is clear that it was not the intention of Parliament to substitute for the old rule, a new rule that interest on an award of damages is to run from the date of citation. Had that been the intention it could easily have been put into words. What is conferred on the Court is a power "if the circumstances warrant such a course" to award interest. The date from which the award is to run is (subject to a fixed starting point) discretionary. So is the amount of the award which is to carry interest. So too is the rate. Each case, therefore, must be examined to see what sort of award of interest, if any, the circumstances warrant. It seems to me to follow that an award must be justified on particular grounds applicable to the circumstances of the particular case.
The new Act applies to actions of damages in general. Possibly, where the damages are awarded for breach of contract, the working out of the discretionary power may be comparatively easy. In practice, however, it will chiefly be operated in the more difficult sphere of reparation. This will mean operating it both after a proof and after a
jury trial. Perhaps the easiest way to see how the section may work is to take a typical action of damages for personal injuries which comes before a Lord Ordinary as a proof. Let us suppose that the Lord Ordinary assesses the damages under the familiar heads of (1) out of pocket expenses, (2) loss of future earnings, (3) solatium. It would be reasonable for the Lord Ordinary to award interest at what he regarded as the correct rate on the out of pocket expenses. That would be a figure which he would have assessed at the date of the trial and he would be well justified in thinking that it was within the general intendment of the statute that interest should run on that sum from the commencement of the action as some compensation for the fact that the pursuer has been standing out of his wages. But when one passes to what is awarded in respect of loss of future earnings the circumstances are different. Up to the date of the trial the pursuer has lost nothing under this head. It could not be said that he had been deprived of the use of the money so awarded. If he were awarded interest from the date of the commencement of the action, this would be tantamount to giving him some kind of bonus for which it is difficult to see any warrant in the circumstances of the ordinary straightforward sort of case which I am envisaging. When one passes to solatium, the question would depend on the circumstances. In so far as the award forsolatium represented past suffering, that proportion of it would be broadly on the same basis as out of pocket expenses. In so far as it looked to the future, the position would be comparable to that of the award for future lossThis illustration shows how selective the operation of the section is, and that where the circumstances are ascertainable, they must be weighed according to good sense and equity. I cannot believe that where Parliament enacts that the Judge is to award interest "if the circumstances warrant such a course," the intention could ever be to authorise an award of interest where there was no conceivable ground on which it could be said that the pursuer had been made to stand out of money. The ruling principle must be that, as interest assumes the existence of a principal sum, interest falls to be awarded only where there is a principal sum, which, but for the law's normal delays, the pursuer would have enjoyed. This is consonant with the accepted principle that ordinarily interest is payable only where there is a principal debt payment of which has been improperly or unjustifiably withheld. I recognise that where a Lord Ordinary has to deal with the section on the basis of a jury's verdict, he may be to some extent in the dark and may have to use a broad axe. But, even in that situation, he will at any rate have the evidence to go on. Thus, he will usually be in a position to know, or at any rate reasonably to...
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