With late payment of debts an increasing problem for businesses, two recent Court of Appeal decisions highlight the courts' increasingly pro-supplier attitude to late payment claims.
The case of Ruttle Plant Hire Limited v Secretary of State for Environment, Food and Rural Affairs established that, for non-consumer contracts, even if an invoice is incorrect a debtor should pay the amount that it believes is due to the creditor, or risk being charged the statutory rate of interest, currently eight per cent above base, on the full amount outstanding.
In Taiwan Scot Co Ltd v Masters Golf Co Ltd the Court of Appeal upheld a contractual interest rate of 15 per cent for late payments notwithstanding that the original trial judge had held that the high rate of interest constituted a penalty, rendering the clause unenforceable. The court looked at the rate of interest at the time that the contract was entered into (which in 2001 was 5.25 per cent). Applying the current statutory rate of 8 per cent, the rate of interest payable would have been 13.25 per cent. On this basis, 15 per cent was not unreasonable and could not justify the court overriding what had been commercially agreed by two companies.