There is often a delay, sometimes quite significant, between the point at which a judgment is awarded and the date of actual payment.
To compensate for this, in certain circumstances judgment creditors are permitted to recover statutory interest from the judgment debtor.
The statutory rate for judgment interest is currently 8% per annum, as set out in the Judgment Debts (Rate of Interest) Order 1993, which reduced the rate from 15% as set in 1985.
A contract between the creditor and debtor may have stipulated an interest rate, in which case the Court will rule whether the contract rate or the statutory rate of interest will apply.
Which judgments qualify
Interest can be applied to all High Court Judgments (HCJ) and to County Court Judgments (CCJ) of £5,000 and above.
CCJs of £600 and above may be transferred up to the High Court for enforcement by a High Court Enforcement Officer (HCEO). Once the CCJ has been transferred, it is treated in the same way as an HCJ in terms of interest, i.e. judgment interest can be claimed.
CCJs below £5,000 that are not transferred up will not normally be eligible for judgment interest, unless provision has been made for this in the contract between the debtor and creditor.
When interest is applied from and to
With an HCJ and a CCJ for £5,000 and above, interest starts to accrue from the date the judgment or order is handed down - not the later date when it is drawn up and sealed.
With a CCJ transferred up to the High Court for enforcement, interest starts to accrue from the date of the certificate of transfer issued by the County Court.
In either case, interest will continue to accrue until the debt is completely paid.
Payment by instalments
If an order to pay by instalments is made by the court, there is no interest payable unless an instalment is overdue (County Courts Order 1991).
However, most arrangements to pay by instalments are agreed outside court between the debtor and creditor. In these circumstances, statutory interest continues to accrue until the debt is paid in full.
Late payment charges prior to judgment
Even if your debt does not reach the stage of judgment, you are entitled to claim interest and a set amount of compensation, according to the value of the debt.at his interest will stop accruing once a judgment is awarded. You can read more about Late Payment Compensation here.
David is an authorised High Court Enforcement Officer and our Director of Corporate Governance