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

This appeal is from some of the decisions about interest of Coulson J in his judgment of March last year, [2008] EWHC 730 (TCC). The dispute is between the claimant (“Ruttle”) and the government department now going by the acronym DEFRA, formerly MAFF. What we have to decide is principally about the construction of the Late Payment of Commercial Debts (Interest) Act 1998 (“the 1998 Act”). The general purpose of the Act is to provide for a high rate of interest to run on commercial debts which are not paid on time. Ruttle says it should receive such interest and that the Judge in some cases wrongly refused to award it and in others awarded it but at a wrongly reduced rate. As a fall-back Ruttle says it should receive interest under s.35A of the Supreme Court Act 1981 (the “1981 Act”), that the Judge wrongly held that the Act did not apply until a correct invoice was presented or that if it did apply he wrongly would have refused to exercise his discretion by not allowing interest for the period before then. So we have to consider that Act too.

Permission to appeal was refused by the Judge. I granted permission on the papers in respect of some but not all issues. Permission in respect of certain other issues was granted by Rix and Carnwath LJJ on the renewed oral application. In the event not all issues in respect of which permission was granted were pursued.

In August 2000 there was an outbreak of classical swine fever (“CSF”) in Bury St. Edmunds. DEFRA contracted with Ruttle for it to provide cleansing and decontamination work. The work continued until June 2001. The appeal is about the rates of interest to be paid on the sums due for this work.

The contract for the work was arranged in such a hurry that its terms were not settled with precision. The resulting uncertainty ultimately had to be resolved by Jackson J in a judgment of 19^th December 2006, [2006] EWHC 3426 (TCC). He dealt with a host of preliminary points. At this point it is only necessary to mention one of them.

It arose in this way. In February 2001, whilst the CSF work was ongoing although near complete, there was a near nationwide outbreak of foot and mouth disease (“FMD”). Ruttle were one of the companies engaged by DEFRA to help with that. Ruttle had so much work on for FMD that its invoicing for its CSF work was put on hold, though some invoices (“the first tranche”) had been sent by then.

The issues before Jackson J included the question of what the contractual rates for the CSF work, particularly the plant hire rates, actually were. He held (as contended by DEFRA) they were as set out in certain letters from Ruttle to DEFRA. These rates were somewhat lower than the rates agreed for the FMD work.

Ruttle sent three tranches of invoices to DEFRA before a Final Account was issued in the Spring of 2007:

The Final Account used the correct rates and was, so far as we are concerned, correct (the point about undercharges having gone).

Each tranche was supported by the underlying documentation (as to hours worked, plant used and so on). So, by applying what it considered the correct plant hire rates were (correctly, as found by Jackson J) DEFRA could not only have checked what was claimed but worked out what it thought it owed.

The first tranche was calculated at the correct plant hire rates but had a peculiarity: that the amount claimed for plant hire was discounted by 35%. It is not necessary to understand why – it was said to be for “cash flow purposes” (see the judgment of Jackson J at §287) whatever that means. DEFRA knew about the discount at the time.

The second tranche and Revision A invoices were based on the wrong, FMD, rates and so claimed rather more than Ruttle was entitled to. Again DEFRA could have worked out what it considered to be the correct amount from the underlying documentation sent with the invoices.

The Revision A invoices also included charges for some items of plant that had been missed out in previous invoices and underlying documentation.

There were also some “underclaims”. These were items where Ruttle had miscalculated what work had been done and so got the wrong and too low amount in the various invoices. An example would be where 10 hours labour was charged but the supporting timesheets showed 12 hours.

The final fact I should mention is what was called the “labour rate.” The first tranche of invoices charged labour at £14.35 per hour plus overtime. An argument blew up about overtime (the details do not matter). In May 2005 the parties resolved this by agreeing an overall rate, overtime or not, of £17.70. This was the rate applied in the Final Account.

Coulson J’s findings (I set them out with my own numbering which is more convenient for the purposes of identifying our issues) were as follows:

Ruttle no longer challenges findings (1) and (2), even though the permission to appeal originally given covered them. I am bound to say that sounds wise. To suggest that a man is liable to pay interest on a debt where the creditor has never asked for the money or, as in the case of the discounted first tranche, positively indicated that he is not asking for the money, would be pushing the boat out too far. Even if the case fell under the 1989 Act or the 1981 Act, the court would surely exercise its discretion under the relevant Act to refuse interest. Coulson J understandably said he would have so exercised his discretion if it had come to that.

Unfortunately the fact that interest was claimed on the unasked for 35% and the underclaims caused quite a lot of confusion and is evidently in part responsible for the errors which I hold were made by the learned Judge.

What Ruttle do challenge are the findings as to the dates from which interest is to run and rates of interest awarded. Specifically the points we must decide are as follows:

As I have said, the general purpose of the Act is to provide for a high rate of interest to run on commercial debts which are not paid on time. Section 1 provides:

1.

Statutory interest

(1)

It is an implied term in a contract to which this Act applies that any qualifying debt created by the contract carries simple interest subject to and in accordance with this Part.

(2)

Interest carried under that implied term (in this Act referred to as “statutory interest”) shall be treated, for the purposes of any rule of law or enactment (other than this Act) relating to interest on debts, in the same way as interest carried under an express contract term.

Section 6 provides the power to set the rate of statutory interest. It was 8% above base rate for all the periods with which this case is concerned. Section 2 defines the types of contract to which the Act applies. It is common ground that the DEFRA/Ruttle contract falls within the definition.

Section 3(1) defines “qualifying debt”:

3.

Qualifying debts.

(1)

A debt created by virtue of an obligation under a contract to which this Act applies to pay the whole or any part of the contract price is a “qualifying debt” for the purposes of this Act, unless (when created) the whole of the debt is prevented from carrying statutory interest by this section.

And s.4 defines the period for which statutory interest is to run. I set out only that which is material here

4.

Period for which statutory interest runs.

(1)

Statutory interest runs in relation to a qualifying debt in accordance with this section (unless section 5 applies).

(2)

Statutory interest starts to run on the day after the relevant day for the debt, at the rate prevailing under section 6 at the end of the relevant day.

(3)

Where the supplier and the purchaser agree a date for payment of the debt (that is, the day on which the debt is to be created by the contract), that is the relevant day unless the debt relates to an obligation to make an advance payment.

The “relevant day” where no advance payment is agreed is defined as:

(5)

… the relevant day is the last day of the period of 30 days beginning with—

(a)

the day on which the obligation of the supplier to which the debt relates is performed; or

(b)

the day on which the purchaser has notice of the amount of the debt or (where that amount is unascertained) the sum which the supplier claims is the amount of the debt,

whichever is the later.

Section 5 confers an important power to “remit” (i.e. reduce the rate of interest in whole or in part). It says:

5.

Remission of statutory interest.

5(1) This section applies where, by reason of any conduct of the supplier, the interests of justice require that statutory interest should be remitted in whole or part in respect of a period for which it would otherwise run in relation to a qualifying debt.

(2)

If the interests of justice require that the supplier should receive no statutory interest for a period, statutory interest shall not run for that period.

(3)

If the interests of justice require that the supplier should receive statutory interest at a reduced rate for a period, statutory interest shall run at such rate as meets the justice of the case for that period.

(4)

Remission of statutory interest under this section may be required—

(a)

by reason of conduct at any time (whether before or after the time at which the debt is created); and

(b)

for the whole period for which statutory interest would otherwise run or for one or more parts of that period.

(5)

In this section “conduct” includes any act or omission.

The Judge held that because the second and Revision A invoices were calculated on the wrong plant hire rates they did not give DEFRA “notice of the amount of the debt” within the meaning of s.4(5)(b). That was only done when the Final Account was supplied in the spring of 2007. Hence the Act did not apply until 30 days after DEFRA received that account.

Mr Andrew Spink QC for Ruttle advanced two separate arguments as to why the Judge was wrong so to hold. The first was based on s.4(3) and was a point not advanced before the Judge. Mr Jonathan Acton Davis QC for DEFRA fairly accepted that his client would not be prejudiced by the point being taken now and so we allowed that. The second argument advanced by Mr Spink was based on the construction of s.4(5) which he submitted the Judge had got wrong.

I turn first to the s.4(3) point. Mr Spink submitted that the parties had agreed through their solicitors that the due date for payment of an invoice was 30 days after its receipt. So 30 days after such receipt was, by s.4(3) the relevant date. And that was so even if the invoices were wrong.

I would reject that argument for two reasons. The first is that the alleged agreement was reached well after the contract had been performed. It is not suggested that the original contract between DEFRA and Ruttle contained the alleged agreement about when the debt was created. Section 4(3) I think is confined to an agreement in advance of what is agreed to be the due date. Normally it will be in the underlying contract, but it could be in a collateral contract, even a later collateral contract provided it is one which looks forward to the date or dates when the debts will be payable. The language used is “the day on which the debt is to be created by the contract”. It is not enough to have a later agreement as to the date when it was created, which is all that Mr Spink suggests happened here.

Secondly, however, I do not think there was clear and unambiguous agreement about the date for the purposes of the Act being 30 days after invoice, even if it were a wrong invoice.

The alleged agreement is set out in DEFRA’s solicitors’ letter of 10^th August 2006:

“our client’s position on ‘the relevant invoice’ is that to the extent that the sums claimed in the invoices rendered by your client in the first tranche of invoices (i.e. the invoices before they were reissued as described in paragraph 47(b) of our Defence and Counterclaim) are shown to be due and are valid, interest on those sums will run from 30 days after receipt by our client of each of those invoices. As to the reissued invoices, to the extent that the sums claimed in them are shown to be due and valid, interest on those sums will run from 30 days after receipt by our client of each of those invoices”.

I do not regard that as an agreement as to the “date for payment of the debt” for the purposes of the Act. It does not say it is and given the high rate of interest which that would involve, I think something clearer would be needed. Putting it another way it is simply not an agreement that statutory interest will run in respect of the amounts actually owing.

I turn to the s.4(5) point. What one is looking for is:

the day on which the purchaser has notice of the amount of the debt or (where that amount is unascertained) the sum which the supplier claims is the amount of the debt

Does “notice of the amount of the debt” require that the invoice be correct? Is any error, howsoever small is enough to exclude the Act? Mr Acton Davis eventually found that he had to so contend – an earlier suggestion that somehow an error in the rate for plant hire did not amount to such notice whereas an error in the periods of plant hire did fell away in the course of argument. According to Mr Acton Davis the only kind of error which would not take a case outside the 1988 Act was one where, on the face of the invoice, the reasonable reader could see the error and also understand what was really meant – something like an obviously misplaced decimal point or error of addition.

I do not so read the section. It contains two alternatives: “notice of the amount of the debt” and “notice of … the sum which the supplier claims is the amount of the debt.” The latter applies where the amount of the debt “is unascertained.” The amount of a debt will be ascertained for instance where it is the fixed sum under a fixed sum contract, or has been determined by an agreed procedure such as an architect’s certificate. But the use of the phrase in the “unascertained” alternative, “the sum which the supplier claims is the amount of the debt,” shows that a provisional view of an amount due is within the section. Mr Acton Davis suggested that the alternative was aimed only at cases where you could not do a calculation, such as where the agreement was to pay a reasonable sum – so you could not calculate the exact sum due. That it covers such cases I accept, but I see no reason why it should be so limited. Unless the sum has been determined already in a way binding on the parties, it is likely to depend on calculations which the supplier may have got right, or may have got wrong. In such a case it is not ascertained and what the supplier has to give notice of is what he claims to be due. He may or may not have got it right. In either case he is within the second half of the section.

Moreover, the section needs to be read in context and in the light of the policy of the Act. As to context it is vital to bear in mind that mistakes in the supplier’s invoice can be dealt with by way of remission pursuant to the s.5 powers. Because a wrong invoice may lead to remission of interest rather than none at all there is no need to read “amount” so strictly as “the true amount, the whole true amount and nothing but the true amount”. Nor to confine the second half of the provision to cases where for some reason one cannot calculate the sum due.

And as to policy it makes no sense to suppose that the Act requires the invoice to be perfect before interest can run. If it did, it would lead an employer looking for the smallest detail of error in an invoice. If he found one he could delay payment of the whole sum due and avoid payment of the statutory interest. The purpose of the Act would be frustrated.

Mr Acton Davis submitted that the policy of the Act was more limited: that the supplier should get the statutory rate only if he played his part properly by getting his invoice right. But I can see no factual or rational basis in such a limited purpose. There is nothing in the 2003 Law Commission Report about Pre-Judgment Interest on Debts and Damages (Law Com No.287) suggesting such a limited purpose. The report is not actually about cases within the 1998 Act, but the Commissioners considered the Act in some detail and observed no more than that “the late payment legislation has a deterrent purpose” and that it “ventures towards imposing penalties for socially damaging behaviour.” That behaviour would be more likely if errors in invoices were enough to take a case otherwise within the Act outside its ambit altogether. In the real world errors in invoices are common. That is indeed why, as in this case, they are often accompanied by the underlying documentation so that the paying party can check.

In the context of the claim for interest on the unclaimed 35% of the first tranche the Judge said that if a strict construction of s.4 were not adopted “it would have a major impact on most commercial contracts.” I confess I do not follow this. Let me take a couple of examples.

First suppose a paying party is presented with an invoice which says what the supplier claims but provides no substantiation. The paying party will probably then be in the dark as to whether the bill is right or wrong. If it is right the Act will apply. If, according to Mr Acton Davis, it is wrong, then the Act does not. So what is the paying party to do, not knowing at this stage whether the invoice is right or wrong? The answer cries out – he should pay as a minimum what he considers he ought to be paying, say why he is not paying more and ask for substantiation. If this was a reasonable line to take then he is unlikely to be at risk of having to pay the statutory rate – the uncertainty as to the balance would have been created by the supplier and the court would exercise the s.5 power of remission. What the paying party cannot do to avoid statutory interest is to keep the supplier out of any money at all until the invoice is substantiated perfectly.

Second, suppose the paying party, as in this case, is presented with both the invoice and a means of substantiation? A reasonable paying party would make a spot-check at the very least. If all seemed well he ought to pay up and check the fine detail later. If he found an error, then it would be legitimate to pay rather less, point out that there appeared to be errors and full payment would not be made until the errors were eliminated. Again what he cannot do to avoid statutory interest is to withhold all payment.

Mr Acton Davis’ suggested more limited statutory policy is inconsistent with the second part of s.4(5)(b). Even on his limited construction of an “unascertained” amount, a supplier may overclaim – even by a large amount - and yet be within the Act. That is not consistent with a “supplier must get it right” policy.

In summary as regards the construction of s.4, I would say this: that my construction does not lead to any unfairness. A paying party can withhold payment for sums reasonably in doubt or not yet properly settled. The court will protect him by the use of s.5 remission because the uncertainty to that extent was created by the supplier. What he cannot do is to pay nothing at all and expect to escape the high rates of interest imposed by the Act on what on any view is due.

Finally I should mention another point not taken below, this time one advanced by Mr Acton Davis. As advanced in his respondent’s notice it was principally directed at the now abandoned claim for interest on the 35% reduction in the invoiced price. But it relates to the “wrong invoice” point also.

He submits the 1998 Act does not apply because the very fact of the wrong invoices prevents the existence of a “qualifying debt” at all. Section 3(1) defines “qualifying debt” as one:

created by virtue of an obligation under a contract to which this Act applies to pay the whole or any part of the contract price is a “qualifying debt” for the purposes of this Act.

Mr Acton Davis submits that only a correct invoice creates an obligation under the contract to pay. I just do not accept that. Ruttle had done the work for and supplied the plant to DEFRA. To say that there was no obligation whatsoever to pay anything at all unless a correct invoice had been submitted is untenable. An invoice is a two-fold statement by the supplier “this is what I think you owe” and “pay me now.” Getting the former wrong does not mean that nothing is owing. The general principle, in the absence of any express contractual provision, is that the money is owed when the job has been done – see further §§65-66 below. Things might have been different if the contract had expressly said nothing was owing unless and until a correct invoice was supplied, but that is not this case.

I should mention a point raised by Mr Spink on which I place no weight. Shortly before trial DEFRA submitted a Scott schedule which seemed to acknowledge that statutory interest was payable. Even if it did, the Schedule could not create a binding obligation in the absence of something like conditions for an estoppel, none of which are suggested here. The question turns on the meaning of the Act, not a Scott schedule.

So I would hold that the second tranche and Revision A invoices did give notice of the amount due within the meaning of s.4(5)(b) of the 1998 Act and are within its scope.

The parties are agreed that the Judge held that, if the Act applied (which he thought not) he would have remitted all interest until 30 days after receipt of the Final Account. I will proceed on the basis of the parties’ agreement though I very much doubt they were right. Even if so, it was only a hypothetical exercise of discretion. I am not convinced generally that such an exercise is to be treated in this court with quite the same deference as an actual exercise of discretion, but for present purposes will do so.

Mr Acton Davis reminded us of those well-known principles expressing that deference, referring us to Tanfern v Cameron MacDonald [2000]1 WLR 1311; G v G [1985] 1 WLR 647 and, specifically in relation to the s.5 power of remission, Banham Marshalls Services v Lincolnshire CC [2007] EWHC 402. In brief, for present purposes, it must be shown that the Judge took something irrelevant into account or failed to take something relevant into account.

To see whether that is so the first thing to do is to look at the section conferring the power of remission to see what it says is relevant. Section 5 does not confer a general power. It is not a mere “may remit” power, one which would bring in all circumstances. It is focussed on the conduct of the supplier. It is only if his conduct warrants a remission in the interests of justice that the power can be exercised.

What then did the Judge say about his hypothetical exercise of discretion? The key passages are as follows:

[200] For the avoidance of doubt, I should also say, whether it is in respect of the interests of justice under section 5 of the 1998 Act, or the arguably wider discretion under section 35A of the 1981 Act, that I have no hesitation in concluding that it would be contrary to the interests of justice, and a wholly illegitimate exercise of the court's discretion, to award Ruttle interest from 2000/2001 on the 35% that they deliberately chose not to claim. Thus, even if I was wrong about when notice was given for the purposes of either Act, I would still exercise my discretion against awarding interest on the unpaid 35% from the date of the first tranche of invoices.

[2002] Ruttle say that, in relation to the second tranche of invoices and the Revision A invoices, they were claiming at rates that were higher than the August 2000 rates and that, therefore, those invoices must be sufficient notice under the relevant statutes. It seems to me that the fundamental problem with that assertion is that, although the rates were indeed generally higher than the August 2000 rates, they were the wrong rates: they were simply not the rates to which Ruttle were entitled to be paid. In those circumstances I consider that it would be an unjust result if it could be said that liability to pay interest was triggered by way of an invoice, in respect of which the substantive claim was (and has subsequently been found to be) erroneous.

[203] Furthermore, looking at the matter in the round, it seems to me that allowing interest on the 35% from the time that that 35% was first unequivocally claimed is an appropriate and fair result. The intervening years between the completion of the works and the provision of the final account were largely spent by Ruttle in pursuing the unsuccessful case on the FMD rates. It would therefore be wrong, I think, to ignore all of that and to award Ruttle interest as if, somehow, their claims had been correctly formulated all along. Therefore, if I was wrong about notice, on the exercise of my discretion under either Act, I would again conclude that interest on the missing 35% should run from when it was first claimed, which was May last year.

As I have said the parties are agreed that these paragraphs amount to a hypothetical exercise of discretion. As I have said, I am doubtful as to this. I have two reasons. Firstly Coulson J explicitly only mentions (twice) the now unclaimed interest on the unbilled-for 35%. Secondly Jackson J had to consider the question of interest under the 1998 Act for part of the period, namely from 30^th May 2004 to 11^th February 2005. He did so at Part 17 and concluded that there should be no remission: the interests of justice did not so require because Ruttle were not blameworthy for that period of delay. If, as the parties but not I consider, Coulson J was holding that he would have remitted all interest until 11^th May 2007, that hypothetical decision is inconsistent with that of Jackson J. Coulson J, even hypothetically, could hardly have intended to produce a conflict with Jackson J’s judgment without even mentioning it.

My own view is that the paragraphs indicate no more than that if he had addressed the hypothetical exercise of discretion he probably would have withheld interest. In view of the parties’ agreement on this pointI will, nonetheless, treat them as the Judge’s reasons for such an exercise.

His basic point is that the invoices were based on the wrong rates, so that is Ruttle’s fault, and so there should be no interest. With respect I think that is a such a disproportionate response to Ruttle’s mistaken but honestly-held view about the plant hire rates as to be outwith the ambit of a proper exercise of discretion. For it means that Ruttle is deprived of all interest even on the sums clearly owing. And the paying party gets the benefit of hanging on to the money. The interests of justice do not require such a draconian measure. If it were otherwise, the effect would be that the supplier was put to an election: either do not pursue a bona fide claim to proper resolution or forego all statutory interest. That cannot be in the interests of justice. One must not overlook here that DEFRA could have avoided any interest by paying at the plant hire rate which it considered (in the event correctly) was right.

Perhaps lurking behind the “decision,” if decision there was, was also the Judge’s view that the “penal base rate plus 8” is itself a relevant factor in the exercise of a s.5 discretion– see the point about 2% over base rate below. If he considered that a relevant factor then he would have been wrong. The rate of interest is not relevant under the section: only the conduct of the supplier and the interests of justice are.

Accordingly it is open to this court to re-consider the hypothetical exercise of discretion. It is not hypothetical for me because of my holding that notice of the amount, or at the very least notice of the amount claimed, was given.

My own exercise of the discretion would be to work on this principle: that interest should be remitted wholly or in part in respect of only any sums in respect of which the supplier had created or allowed uncertainty. There should be no remission in respect of sums which from the paying party’s point of view were clearly payable. The interests of justice do not require that the supplier be deprived of interest on sums which are clearly due from that point of view. In the present case that means there should be no remission. If Jackson J had held that the contractual rate had indeed been the higher, FMD, rate, then the position as regards the interest on the difference would itself have been different. But that is not this case.

Further, there is this important factor as regards the discretion. DEFRA had all the underlying paper work and could readily have seen Ruttle’s error which resulted in its slightly overstating the plant hire charges as a result of using the wrong plant hire rates.

Nor is any period of culpable delay by Ruttle identified. As I have said Jackson J did not identify any for the period with which he was concerned. Nor is any other period of delay by Ruttle properly identified by DEFRA. If one is going to remit statutory interest by reason of the delay of the supplier then that period ought to be clearly identified and its cause investigated.

So I would not remit wholly or in part statutory interest under the 1998 Act.

This clearly was an exercise of discretion pursuant to s.5 of the 1998 Act. The Judge said:

[206] That, I think, leaves the question of the applicable rate. I am not persuaded that the penal base rate plus 8% allowed by the 1998 Act is appropriate or in the interests of justice in the present case. If there are unpaid sums, then plainly Ruttle are entitled to be compensated by way of interest. In view of all the circumstances of this case, which I have already outlined in this Judgment, I consider that the appropriate rate of interest would be the base rate plus 2%. I make it clear that, for the same reasons, this is the appropriate rate of interest to all the claims for interest advanced by Ruttle.

Mr Spink submits that cannot have been a proper exercise of discretion under s.5 of the 1998 because the Judge’s primary reason for reducing the statutory rate is “the penal base rate”. The rate is an irrelevant consideration: all that matters is whether the conduct of the supplier merits remission.

Mr Acton Davis does not really dispute that. His point was the Judge did have regard to Ruttle’s conduct. He did so compendiously in his use of the phrase “all the circumstances of this case.” That, submitted Mr Acton Davis, was a reference to earlier parts of the judgment and in particular to section D “General Observations.” In those observations the Judge is somewhat critical of the behaviour of both sides in the conduct of the dispute. But one cannot find any specific finding as to any period of unwarranted delay caused by Ruttle. I do not regard these general observations as amounting to a sufficient finding that for such and such a period Ruttle’s behaviour should deprive it of all interest. Indeed they cannot be, for in part the Judge is critical of DEFRA.

In the circumstances I think the Judge did wrongly take into account the rate of interest, and did not with sufficient precision identify reasons as to why Ruttle should be deprived of interest.

It follows that we are free to exercise the discretion. I can see no sufficient reason flowing from Ruttle’s conduct as to why, in the interests of justice, it should not get the normal, statutory, rate intended by Parliament. In principle, under the 1998 Act, it will run from 30 days after Ruttle presented each relevant invoice for the work done and the plant hire, albeit that the amount of the invoice was somewhat overstated. Of course interest only runs on the amount actually due. I see no proper basis for exercising the court’s discretion under the Act to remit interest so that none is payable until a later date than this. So far as the underclaims are concerned, there is now no dispute that interest only runs from the time the missing charges were invoiced. The rate for these should be the full statutory amount because there is no basis in s.5 for a reduction. The same goes for the rate applied on what is called “the Labour Rate.”

I would add this: that in future a paying party which wishes to have the discretion exercised in its favour would do well to set out in advance its reasons why. Then the court can focus on the point properly in a way which Coulson J was not asked to do.

Because I have concluded that the whole question falls within the 1998 Act, the application of the 1981 Act is essentially academic. Nonetheless I will express my views not only because the point was argued but also because I do not agree with the Judge’s view of the matter so it would not be appropriate to leave matters as they stand.

Section 35A(1) of the 1981 Act says:

Power of High Court to award interest on debts and damages.

—(1)Subject to rules of court, in proceedings (whenever instituted) before the High Court for the recovery of a debt or damages there may be included in any sum for which judgment is given simple interest, at such rate as the court thinks fit or as rules of court may provide, on all or any part of the debt or damages in respect of which judgment is given, or payment is made before judgment, for all or any part of the period between the date when the cause of action arose and—

(a)

in the case of any sum paid before judgment, the date of the payment; and

(b)

in the case of the sum for which judgment is given, the date of the judgment.

The power to award interest runs from “the date when the cause of action arose.” When was that in relation to second tranche and Revision A invoices? Was there no cause of action because the invoices were wrong? Mr Acton Davis so submits because “there was no demand for payment pursuant to the Contract and therefore no cause of action could run.”

I do not agree. One starts from the position that there was no express contractual provision about delivery of invoices at all. The work was completed in June 2001. It is elementary that a term would be implied into the contract that payment for the work would be due when the work has been done. Chitty on Contracts 30^th Ed §28-053 puts it this way:

Work and services. Unless a time for payment is otherwise agreed, the right to claim payment upon an entire contract accrues when the work is completed.

Chitty cites Coburn v Colledge [1897] 1 Q.B. 702 for this proposition. In that case Lord Esher MR said (with the other members of the court saying much the same thing in other words):

In the case of a person who is not a solicitor, and who does work for another person at his request on the terms that he is to be paid for it, unless there is some special term of the agreement to the contrary, his right to payment arises as soon as the work is done; and thereupon he can at once bring his action.

Mr Acton Davis cited no case where that proposition was held wrong. I cannot see why it does not apply to this case. Of course the parties contemplated that there would be machinery of some sort for quantifying the amount due, but that is only machinery. And I can well see how the Court may withhold interest until a sum is demanded. But so far as a cause of action is concerned, it arose no later than June 2001. Were it as Mr Acton Davis contends, there would be profound implications for business – for instance time would not run for the purpose of limitation until delivery of a perfect invoice. And a paying party would be given a good reason for quibbling about an invoice in the knowledge that a successful quibble would prevent time for interest starting.

The judge said at [199]:

There could only be a cause of action for unpaid monies if the sum in question had been claimed and not paid.

He gives no authority for that proposition and it seems neither Chitty nor Coburn were drawn to his attention. I think he was in error here.

Accordingly I think the cause of action for the work done ran from when it was done and the 1981 Act applies accordingly. It does not follow that interest should run from the moment a piece of work was done. Facts like when the money was asked for come into the exercise of discretion under the Act, not (save where the contract so provides) into when the cause of action arose.

Much of what I have said about the discretion under s.5 of the 1998 Act applies equally to the discretion under the 1981 Act. First I doubt that the Judge did even hypothetically exercise his discretion. Secondly no conduct or period of delay by Ruttle is sufficiently identified to justify withholding interest under the 1981 Act. Nor for giving DEFRA the benefit of having withheld paying what on its view (or what should have been its view) was properly payable. So the discretion was not properly exercised. Exercising my own discretion I would have awarded interest at the rate usual under the 1981 Act, namely 2% above base rate (a rate not in any event challenged before us).

I would therefore allow the appeal and invite the parties to endeavour to agree a consequential order, with liberty to restore if agreement cannot be reached.

I agree.

I also agree.