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Compensation Hub / Interest on Damages
When a court enters a damages award in a professional negligence claim, the figure on the judgment isn’t always the end of the story. Interest on damages compensates a claimant for the time between the loss occurring and the date judgment is actually entered — and separately, for any delay in the defendant paying up afterwards. These are known as pre-judgment interest and post-judgment interest, and both can add meaningful dollars to what you ultimately recover.
The principle
The underlying principle is straightforward, even if the mechanics aren’t. When a professional’s negligence causes you financial loss, you lose access to money that should have been yours. That loss doesn’t start the day judgment is entered — it starts the day the harm occurred, which could have been years earlier.
Courts recognise this. An award of damages is meant to restore you to the position you’d have been in had the professional done their job properly. If the court ignored the time value of money — the fact that $100,000 today is not the same as $100,000 you should have had five years ago — compensation would always fall short of that goal.
Interest fills that gap. It isn’t a punishment against the defendant. It’s a recognition that you’ve been deprived of something for longer than the judgment figure alone reflects. The High Court confirmed as much in Hungerfords v Walker (1989) 171 CLR 125, establishing that interest can form part of a damages award in its own right.
The bigger head of recovery
Pre-judgment interest covers the period from when your loss was suffered — or more precisely, when the cause of action arose — through to the date the court formally enters judgment. It is the more significant of the two heads, and the one most likely to affect your total recovery.
It is not automatic. This catches claimants and, frankly, some lawyers off guard. Pre-judgment interest is discretionary — the court has power to award it, but it won’t be granted unless the claimant specifically claims it. Your legal team needs to plead it properly from the outset, not treat it as an afterthought once the main damages figure is sorted.
The rate applied is set by the relevant Supreme Court in each state and territory, typically prescribed under court rules and linked to the Reserve Bank of Australia cash rate with a margin applied. Rates are updated periodically.
The calculation uses simple interest applied to the capital sum — no compounding. Where it gets significant is time. In professional negligence matters, proceedings may not be commenced for a year or two after the loss occurred, and litigation can run for another two or three years after that. A five-year pre-judgment interest period on a $200,000 loss at a modest court rate can comfortably add $30,000–$50,000 to a claim. That is not a rounding error.
Pre-judgment interest typically attaches to past economic loss and quantified out-of-pocket expenses. It does not apply to future economic loss — because you haven’t suffered that loss yet. The relevant legislation varies by jurisdiction: section 100 of the Civil Procedure Act 2005 (NSW), section 60 of the Supreme Court Act 1986 (VIC), section 58 of the Civil Proceedings Act 2011 (QLD), and section 32 of the Supreme Court Act 1935 (WA), among others. The principle is broadly consistent; the rates and procedural requirements differ.
After the verdict
Once judgment is entered, a different clock starts. Post-judgment interest accrues from the date of the judgment until the day the defendant actually pays.
Its purpose is different from pre-judgment interest. This isn’t about compensating you for historical deprivation — it’s about removing any incentive for a losing defendant to delay writing the cheque. If there were no financial consequence for sitting on a judgment debt, defendants would have little reason to pay quickly.
In practice, most defendants in professional negligence matters — typically insurers — settle promptly after judgment. Post-judgment interest rarely becomes a significant issue. But if payment is delayed, it applies automatically under the relevant court rules without you needing to apply for it separately. The prescribed rate is usually set higher than the pre-judgment rate, which reinforces the incentive to pay.
Knowing the limits
Not uniformly — and this is worth understanding clearly before you form a view on what your total recovery might look like.
For a full breakdown of how legal costs are treated, see our page on recovery of legal costs →
What the court weighs up
The discretionary nature of pre-judgment interest means that how your claim is run matters — not just whether you win, but how.
If a claimant unreasonably delayed commencing proceedings, a court may reduce the period for which interest runs. It won’t necessarily eliminate the award, but unexplained delay after becoming aware of the negligence is a factor courts take into account.
Settlement conduct is also relevant. If a defendant made a genuine and reasonable offer that the claimant refused, and the claimant ultimately obtained no better outcome at trial, the court may take a dim view of awarding interest in full over the period from that offer onwards.
A contributory negligence finding affects the calculation too. If your damages are reduced because you contributed to your own loss — say, by failing to take reasonable steps to mitigate after becoming aware of the negligence — interest is applied to the reduced figure, not the gross amount.
None of this is a reason to be discouraged. It is a reason to have lawyers who understand the mechanics, file promptly, and run the claim properly from day one. The claimant who acts quickly, keeps good records, and pleads interest correctly is in a materially stronger position.
The full picture
Interest on damages doesn’t sit in isolation. It’s one component of what a well-run professional negligence claim can recover — alongside past and future economic loss, non-economic loss where applicable, and potentially legal costs.
In a long-running matter — and professional negligence litigation can run three to five years or more from the date the claim is filed — interest can represent a genuinely material proportion of total recovery. On mid-sized claims, the difference between a claimant who properly pleaded interest and one who didn’t can run into the tens of thousands. That’s not a figure to leave on the table.
The Compensation Hub covers the full picture of what you may be entitled to recover. The page on economic loss explains the core damages calculation, and our guide on how claims work covers the process from start to finish.
In most Australian jurisdictions, professional negligence claims must be commenced within three years of the date you became aware — or should reasonably have become aware — of the negligence. The longer a claim is delayed, the longer the potential pre-judgment interest period. But that advantage is lost entirely if the limitation period expires before proceedings are filed.
If you’re unsure whether your claim is still within time, contact our team for a free assessment as soon as possible.
Free case evaluation
If you have a professional negligence claim and want to understand what you may be able to recover — including interest on damages — our team can walk you through it as part of a free, no-obligation evaluation. No upfront cost. No commitment. We respond within one business day.
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Common questions
Pre-judgment interest is not automatic — it’s discretionary, and the claimant must specifically claim it. If your legal team doesn’t plead it correctly, you won’t get it. Post-judgment interest is different: once a judgment debt is unpaid past the due date, it accrues automatically under the relevant court rules without a separate application.
Each state’s Supreme Court prescribes a rate, typically set by reference to the RBA cash rate plus a margin. The rate is reviewed and updated periodically. Courts may apply different rates across different periods if the circumstances warrant it, but in most standard professional negligence matters a single prescribed rate is applied across the pre-judgment period.
Yes — and you should. Interest is a legitimate component of overall compensation, and a properly advised claimant will factor it into any settlement negotiation. A defendant offering to settle should be settling the whole loss, including the time-value component. This is one of the practical reasons why specialist representation makes a real difference to what you recover.
Generally yes. If damages are reduced because of a finding that you contributed to your own loss, pre-judgment interest is calculated on the reduced figure rather than the gross amount. The reduction applies proportionally across the calculation.
Related reading: Compensation Hub · Economic loss · Recovery of legal costs · How claims work
Our goal is to help people in the best way possible. this is a basic principle in every case and cause for success. contact us today for a free consultation.
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