Court of Appeal decides that interest can be claimed on overdue sums under NHS contracts

Provision of a vast range of NHS services is governed by NHS contracts, each of which involves payments from NHS commissions to service providers. For a vast majority of these contracts, the only means of enforcing payment is an application under the NHS Disputes Resolution procedure, which is normally handled on behalf of the Secretary of State by the NHSLA (now known as NHS Resolution). The standard terms of such contracts are set by NHS England, and all NHS contracts include an obligation on the NHS commissioner to pay promptly. However, unlike standard contracts, NHS contracts are not ‘legally binding’. When resolving disputes as to what sums, if any, are owed under NHS Contracts, an adjudicator applies standard contract law principles.  In other words, when reaching a decision under the NHS Disputes Resolution procedures, the adjudicator treats the obligations in the NHS contract as if they were a legally binding contract. However,  there are no express clauses giving a provider a right to claim interest on overdue sums under any of the standard NHS forms of contract.  Further, neither s35A of the Senior Courts Act 1981 nor section 69 of the County Courts Act 1984 directly apply as these are powers that only arise in court proceedings.

However, the Court of Appeal has decided in SSP Health Ltd v The National Health Service Litigation Authority (Primary Care Appeals Service) & Ors [2020] EWCA Civ 1574 that interest can and usually should be awarded when sums are left unpaid by NHS commissioners.  The court ruled that the wider powers of the adjudicator under s9 meant that he or she had the power to make an award of interest on the overdue sum. The Court also held that not only such interest could be awarded, but that it should usually be awarded, notwithstanding there was no express provision in the NHS contracts to award interest. In this case, the adjudicator awarded interest at 8% which amounted to £231k for the service provider.

When considering whether or not such an award is appropriate, it is open to the Adjudicator to take into account such considerations as would apply if the arrangement were a contract at law and the Adjudicator were a court. To that extent, the Late Payment of Commercial Debts (Interest) Act 1998 and general equitable principles may be relevant. Ultimately, however, the decision as to what is appropriate is a matter for the Adjudicator to decide on the facts of a given case taking all relevant matters into account.

Thus, the key points for practitioners are:

• If a party is seeking interest, it must be the subject of a specific claim.
• The rate, period and preferably amount claimed should be set out within the claim.
• If a special rate is claimed due to particular factors, those should be explained.
• The default position is probably the rate under the Late Payment of Commercial Debts (Interest) Act 1998, namely 8%.

NHS Resolution has now issued a Guidance Note explaining how it will approach claims for interest.

David Lock QC appeared on behalf of SSP Health Ltd.

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