The general purpose of the Late Payment of Commercial Debts (Interest) Act 1998 is to provide for a high rate of interest to run on commercial debts that are not paid on time. In Ruttle Plant Hire Ltd V Secretary Of State For Environment, Food & Rural Affairs  EWCA Civ 97, the court held that, properly construed, Section 4 of the Act enables a paying party to withhold payment for sums reasonably in doubt but not properly settled. Protection is provided to that party by the remission provision in s.5 of the Act, on the basis that the uncertainty has been caused by the supplier. What a paying party cannot do, however, is pay nothing at all and expect to escape the same high rates of interest on what, on any view, was due. To read the judgment click here.
Ruttle v DEFRA: Ruttle Plant Hire was asked by DEFRA to carry out emergency work after the outbreak of a pig disease and then foot and mouth disease, in 2000 and 2001. The terms of business were not precisely defined and there was a dispute about how much was to be charged for the work. Ruttle made some errors when calculating its invoices and, in the end, three sets of invoices were sent to DEFRA. DEFRA disputed the invoices and paid nothing, leaving Ruttle to claim interest for the late payment of the invoices.
The Court of Appeal overturned the lower court’s decision not to award interest in accordance with the Act, noting that it was not fair for an organisation to withhold the whole payment for goods or services just because there was confusion over some of it.