Interest on costs subject to provision of costs breakdown.

On the 22 September 2015, Mr Justice Leggatt ordered, in the case of Involnert Management Inc v Aprilgrange Limited & Ors [2015] EWHC 2834, that interest at the Judgment Act rate should begin to run from three months after the date of the costs order.

This is a point which has been raised many times before; more recently in the Court of Appeal case of Simcoe v Jacuzzi UK Group plc [2012] 1 WLR 2393 and the Judgment in Involnert includes a brief but interesting analysis of the previous case law.

As is apparent from the case law cited, the practice of awarding interest on costs from the date of Judgment rather than from the date of assessment (in order not to compound the financial burden of funding the claim – Hunt v RM Douglas (Roofing) Ltd [1990] 1 AC 398) has been slowly eroded.

With the introduction of the Civil Procedure Rules in 1999, Section of the 17 Judgments Act 1838 was amended to provide for interest to run “from such time as shall be prescribed by the rules of court” (previously it was “from the time of entering up Judgment”).

CPR 40.8 gives the court the power to award interest on costs from a date prior to Judgment so the reasoning for the decision in Hunt falls away.

CPR 40.8 provides:

  1. Where interest is payable on a judgment pursuant to section 17 of the Judgments Act 1838 or section 74 of the County Courts Act 1984, the interest shall begin to run from the date that judgment is given unless –
    1. a rule in another Part or a practice direction makes different provision; or
    2. the court orders otherwise.
  2. The court may order that interest shall begin to run from a date before the date that judgment is given.

Involnert concerned the extent to which the Court should ‘order otherwise’ under 40.8 (1) (b) where the Court was also prepared, in principle, to award pre-Judgment interest at a commercial rate of 2.5% (2% above the BoE base rate).

The Claimant sought an order that, interest payable under the Judgments Act, should run from 6 months after the date of Judgment. The Judge made orders for interim payments on account but as the receiving parties had provided only limited information about their costs (that were estimated to exceed £1.8m) the Judge did not think it just to order that interest (on whatever further sums the claimant is found liable to pay) should begin to run at the rate applicable to judgment debts before the Claimant has been provided with a detailed statement of the costs.

The Judge considered a reasonable and objective benchmark, for the postponement of the date from which interest should begin to run, was in accordance with the timeframe imposed for serving a bill of costs on the paying party pursuant to CPR 47.7, i.e. three months. Therefore, an order was made for interest on costs to run at 2.5% up until 3 months after Judgment, with interest to run at the Judgment Act rate thereafter.

It should be noted that the Court, when making this order, had in mind the Court’s power to disallow all or part of the claim for interest if receiving parties delayed commencement of detailed assessment in order to gain the advantage of a higher rate of interest – CPR47.8(3) Also, it should be noted that the Court had deferred the payment of interest at the Judgment Act rate in circumstances where the Court had also awarded interest to run from a date before Judgment. In circumstances where no application or order is made for pre-Judgment interest, the reasoning in Hunt may still apply.   

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