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Scottish Law Commission (Discussion Papers) |
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You are here: BAILII >> Databases >> Scottish Law Commission >> Scottish Law Commission (Discussion Papers) >> Interest on Debt & Damages [2005] SLC 127(10) (DP) (January 2005) URL: http://www.bailii.org/scot/other/SLC/DP/2005/127(10).html Cite as: [2005] SLC 127(10) (DP) |
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Part 10 Tribunals10.1 The Annual Report of the Scottish Committee of the Council on Tribunals for 2003 listed 47 types of tribunals either operating in Scotland or which could, in theory at least, sit in Scotland. This number is growing as new legislation is passed.[1] The jurisdiction of most tribunals is administrative[2] and their decisions are rarely expressed as awards of sums of money. It is unusual for their procedural rules to make any provision for interest and at common law, even tribunals whose jurisdiction includes making awards of compensation or directing other forms of payment, have no power to award interest. The commencement of tribunal proceedings does not constitute a "judicial demand" and accordingly interest does not run from the date of such commencement.
10.2 There are some tribunals which are exceptional in that they make monetary awards and have statutory powers to award interest. Tribunals which sit in Scotland[3] and make monetary awards can be divided into two categories: those which have a specific power to award or refuse interest and those which simply apply legislation which includes an element of interest.
(a) Tribunals with interest-awarding powers:
• Employment Tribunals: an award carries interest at a prescribed rate if it remains unpaid 42 days after the date of sending the decision to the parties.[4] The prescribed rate is currently set at 8%, in line with the judicial rate.[5]
• The Lands Tribunal for Scotland: the Tribunal has power to determine that an award of compensation shall carry interest from the date of the award.[6] The Lands Tribunal is also empowered to award interest on payments for the loss of a farm from the date of displacement from the farm.[7]
(b) Tribunals applying legislation where interest is specified:
• Social Security Tribunals: the Unified Appeals Tribunal[8] is a body established to hear appeals of any decision, or review of a decision, made by the Secretary of State regarding any "relevant benefit".[9] Further appeal lies to a Social Security Commissioner on the ground that the tribunal decision was erroneous on a point of law.[10] The Social Security Tribunals have no general power to award interest in situations of over or underpayment of benefits. However, interest is awarded where the legislation applicable to a particular benefit specifies that interest should be added.[11]
10.3 With one exception it is proposed that the statutory powers of tribunals to award interest should be excluded from the scope of the reforms proposed in this paper. In many cases the existing regulation has been tailored to suit the particular type of claim and the variety of claims suggests that a "one size fits all" approach is not appropriate. Some of the tribunals have a UK-wide jurisdiction and it would generally be difficult to justify the existence of different rules as between Scotland on the one hand and England and Wales or Northern Ireland on the other.• Tax Tribunals: such as the VAT and Duties Tribunals for Scotland, the General Commissioners of Income Tax and the Special Commissioners for Income Tax, have no general procedural power to award interest. Awards made by these tribunals only include interest as specified under various tax statutes, according to rates set under section 178 of the Finance Act 1989.[12]
10.4 The exception is where the existing legislation specifies a rate of interest which is related to the current judicial rate for periods prior to the date of the award. An example can be found within the jurisdiction of the Employment Tribunals. The Employment Tribunals (Interest on Awards in Discrimination Cases) Regulations 1996[13] confer power on an Employment Tribunal to award simple interest on compensation for discrimination on the grounds of sex, race, disability, sexual orientation, religion or belief,[14] from certain specified dates prior to the date of the award. The rate of interest specified (subject to an overriding discretion which may be exercised in exceptional circumstances) is the rate fixed for the time being for sheriff court decrees: in other words, the judicial rate. It seems to us that if the judicial rate is no longer to be used prior to decree in court actions or if the judicial rate is amended according to the principles in this paper, it would be anomalous to continue to use it prior to award in discrimination claims to an Employment Tribunal.
10.5 In non-discrimination cases within the jurisdiction of the Employment Tribunal, interest runs on a pecuniary award from a date 42 days after the date of the Tribunal's determination.[15] The rate of interest stipulated (for Scotland as well as for England and Wales) is the rate specified in section 17 of the Judgments Act 1838.[16] This entitlement would be superseded to some extent by our proposal that arrears of income from employment should carry statutory interest.[17] However it will remain applicable to other claims, such as claims for damages consisting of wages lost as a result of unfair dismissal. It may be regarded as anomalous that Tribunal claimants must wait until 42 days after determination of their claim for interest to begin to run whereas pursuers in court actions are, under the present law, entitled to interest from the date when the right of action arose and, under our proposals, would be entitled to interest from the date when the loss is sustained. The anomaly is perhaps less apparent in practice as a consequence of the comparative speed with which claims to the Employment Tribunal are made and disposed of. We make no proposal in this regard but invite comment as to whether Tribunal claimants should be entitled to interest on awards of damages from a date earlier than that presently specified by the 1990 Order.
10.6 We would welcome views on the following proposals and question:
46. (a) Where a tribunal presently has power to award interest at the judicial rate, this should be replaced by a power to award interest at the rate prescribed by statute.
(b) Should interest run on awards made by the Employment Tribunal from an earlier date than 42 days after the date of the Tribunal's determination?
(c) In all other respects, the powers of particular tribunals to award interest should remain unaffected by our proposals.
Note 1 For example, the Mental Health (Care and Treatment) (Scotland) Act 2003 establishes a Mental Health Tribunal for Scotland which has not yet been brought into operation. [Back] Note 2 Except the Employment Tribunals, which hear disputes between parties and do not have an administrative jurisdiction. [Back] Note 3 Some tribunals with interest-awarding powers may in theory sit in Scotland but in fact rarely or never do. The Copyright Tribunal has power when making certain orders and directions under its parent Act to award simple interest at such rate and for such periods as it thinks fit (s 151A Copyright, Designs and Patents Act 1988). The Competition Appeal Tribunal has the power to impose, confirm or vary any penalty imposed under the Competition Act 1998. It may order interest to be paid from such date as it considers appropriate although not from a date earlier than the date the application to the Tribunal was made. (The Competition Appeal Tribunal Rules 2003 (SI 2003/1372), rule 56(1)). If the Tribunal makes an award of damages it may include interest from the date when the cause of action arose (ibid, rule 56(2)). [Back] Note 4 The Employment Tribunals (Interest) Order 1990 (SI 1990/479), art 2. See para 10.4 below regarding awards for discrimination cases. [Back] Note 5 Ibid art 4. This provision applies the rate specified in s 17(1) of the Judgments Act 1838. [Back] Note 6 Law Reform (Miscellaneous Provisions) (Scotland) Act 1980, s 18. Interest is awarded at the judicial rate. [Back] Note 7 The Land Compensation Act 1973, ss 34, 36, which applies the rate specified in the Land Compensation Act 1961, s 32. [Back] Note 8 Created by Part I s 4 Social Security Act 1998, consolidating Part II Social Security Administration Act 1992; s 21 Child Support Act 1991 and s 4 Vaccine Damage Payments Act 1979. [Back] Note 9 Social Security Act 1998 s 8 defines a "relevant benefit" as those benefits named in Parts II to V of the Contributions and Benefits Act 1992; jobseeker's allowance; income support; family credit; disability working allowance; a social fund payment mentioned in s 138(1)(a) or (2) of the Contributions and Benefits Act 1992; child benefit or such other benefit as may be prescribed. See also s 12 of the Social Security Act 1998 which includes statutory sick pay or statutory maternity pay as relevant benefits. [Back] Note 10 S 14 Social Security Act 1998. See also Social Security Commissioners (Procedure) Regulations (SI 1999/1495) and the Social Security Commissioners (Procedure) (Amendment) Regulations (SI 2001/1095) for further details of the procedure. [Back] Note 11 See for example s 57(7B)(2) of the Social Security Act 1998 which amends Sch 1 of the Contributions and Benefits Act 1992 to provide for interest to be paid to the Secretary of State on employee pension contributions which have not been paid by the due date. Interest is chargeable at the rate prescribed in s 178 of the Finance Act 1989 from the "reckonable date" until payment. See also s 37 of the Tax Credit Act 2002 which provides for interest to be applied in situations where a tax credit has been overpaid to an individual, which is attributable to fraud or neglect of behalf of the claimant. The Tax Credit (Interest Rate) Regulations 2003 (SI 2003/123), regulation 2, provides that the established rate is 6.5% per annum. [Back] Note 12 The rates are specified in the Taxes (Interest Rate) Regulations 1989 (SI 1989/1297). [Back] Note 14 Ie awards made under the Equal Pay Act 1970, the Sex Discrimination Act 1975, the Race Relations Act 1976 and the Disability Discrimination Act 1995. The regulations apply to discrimination on the grounds of sexual orientation by virtue of the Employment Equality (Sexual Orientation) Regulations 2003 (SI 2003/1661) and to discrimination on the grounds of religion or belief by virtue of the Employment Equality (Religion or Belief) Regulations 2003 (SI 2003/1660). [Back] Note 15 Employment Tribunals (Interest) Order 1990 (SI 1990/479). [Back] Note 16 Ibid art 4. The rate under s 17 is presently the same as the judicial rate in Scotland. [Back]
