Costs Q&As
A few questions arose during our recent online costs clinic which we thought might be helpful to share.
On the issue of interest on costs one caller was concerned that the courts are taking a significant time in sealing and returning orders made by consent so when, she asked, is the trigger for interest, the point of agreement/settlement or the date of the sealed order.
JUDGMENT DEBT INTEREST
Expanding on the response given during our Zoom chat:
When reference is made to “interest on costs”, that reference is usually to judgment debt interest: judgment debt interest is by far the most common form of interest awarded on costs with four layers of discretion in relation to judgment debt interest; namely:
the court’s powers;
the date upon which interest begins to run;
the rate of interest (and the basis upon which interest is awarded); and
whether and to what extent any discount should apply.
The court’s powers
An order for payment of costs ranks as a judgment (see Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1997] 1 WLR 1627, [1998] 1 All ER 305 at 1635) – an unpaid order for costs is a judgment debt.
Judgment debts in the High Court carry interest by virtue of the Judgments Act 1838 (as amended) (JA 1838), s 17 of which contains the following provision:
(1) Every judgment debt shall carry interest at the rate of [eight per cent per annum] from such time as shall be prescribed by rules of court…until the same shall be satisfied, and such interest may be levied under a writ of execution on such judgment.
(2) Rules of court may provide for the court to disallow all or part of any interest otherwise payable under sub-s (1).
The date upon which interest begins to run
This is governed by CPR 40.8, which states:
(1) Where interest is payable on a judgment pursuant to JA 1838, s 17 or CCA 1984, s 74, the interest shall begin to run from the date that judgment is given unless:
(a) a rule in another Part or a practice direction makes different provision; or
(b) 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.
Accordingly, interest on costs will usually run from the date of the costs order, but the court may order otherwise. In particular, the court may order that interest should run from an earlier date.
CPR 44.3(6)(g) makes a similar provision (which, unlike CPR 40.8, is specifically in respect of costs):
“The orders which the court may make under this rule include an order that a party must pay…(g) interest on costs from or until a certain date, including a date before judgment.”
The default position under the CPR, i.e. that interest runs from the date of the costs order
The rate of interest and the basis on which it is calculated
Post-judgment interest is paid at the rate specified by order in JA 1838, 17(1). This has been eight per cent since 1 April 1993 (see the Judgment Debts (Rate of Interest) Order 1993 (SI 1993/ 564 (L 2)).
That said, the court may disallow interest pursuant to CPR rule 47.8(3) and 47.14(5), thereby achieving a result similar to a change of rate.
Whether a discount should apply
Interest may be disallowed as a result of a receiving party’s delay.
CPR rule 47.8(3) makes the following provisions about delay in commencing detailed assessment proceedings:
(3) If:
(a) the paying party has not made an application in accordance with paragraph (1); and
(b) the receiving party commences the proceedings later than the period specified in rule 47.7,
the court may disallow all or part of the interest otherwise payable to the receiving party under:
(i) section 17 of the Judgments Act 1838(1); or
(ii) section 74 of the County Courts Act, 1984(2),
but must not impose any other sanction except in accordance with rule 44.14 (powers in relation to misconduct).
CPR rule 47.14(5) makes almost identical provision about delay in applying for an assessment hearing. It should be noted, however, that the court may not exercise this power if the paying party has made an application for an order requiring the receiving party to commence detailed assessment proceedings.
Where delay amounts to misconduct, the sanction may extend beyond the mere disallowance of interest (CPR 44.14(2)(a) and Haji-Ioannou v Frangos [2006] EWCA Civ 1663, [2006] All ER (D) 72 (Dec).
SPECIAL SITUATIONS
Deemed costs orders
Deemed costs orders arise on acceptance of a Pt 36 Offer, on discontinuance of a claim, and where a claim is struck out for non-payment of fees (CPR 44.12 (1)).
CPR 44.12(2) provides as follows:
“Interest payable pursuant to section 17 of the Judgments Act 1838 or section 74 of the County Courts Act 1984 on the costs deemed to have been ordered under [the situations set out above] shall begin to run from the date on which the event which gave rise to the entitlement to costs occurred.”
Thus, interest will run from the date of acceptance, discontinuance or striking out.
Interest on the costs of the assessment
CPD Art 45.5(1) makes the following provisions:
“In respect of interest on the costs of detailed assessment proceedings, the interest shall begin to run from the date of the default, interim or final costs certificate as the case may be.”
Returning to the question – interest runs from the date judgment is pronounced, so when given in court interest begins to accrue with the dropping of the gavel; when by consent however the trigger must be when the order is sealed as absent the court seal the order can not be enforced. If the court is taking two, three months to provide the sealed order why should the receiving party miss out on what could be a significant sum. My answer was to put the opponent on notice that interest will be sought from the date of agreement rather than sealing of the order; if possible have the order state that interest on costs runs from the date of settlement (insert date) absent any agreement the issue may need to be resolved by the court, on detailed assessment.
Another question raised was quite timely as it dealt with the challenge to bills on assessment and the procedures in place. Timely as Chamberlain J has recently provided his judgment in a matter of Mr Jason Edinburgh and Fieldfisher LLP Neutral Citation [2020] EWHC 862 (QB). – 8 April 2020
The issue related to an assessment between a client and his former solicitors. For the purpose of this note E v F.
E terminated his retainer with F in October 2018 and continued his claim as a litigant in person. F rendered four invoices to E for services rendered – total £87,247.35.
E applied for permission to have the invoices assessed. The matter came before Master James who considered the application and adjourned the same to a directions hearing and following provision of directions, she heard the matter 16 May 2019 when Master James considered that 3 of the 4 invoices could be assessed (the earliest was time barred and payable). E was ordered to make a payment on account of costs in the sum of £44,000, with F ordered to provide E’s new solicitors, a detailed breakdown of costs on or before 12 July 2019 with a timeframe given for Points of Dispute and Replies.
The payment on account was duly provided and F served the “bill of costs”, by e mail timed at 11:23 on 12 July 2019 on E’s instructed solicitors. In accordance with Master James’ directions, Points of Dispute were required by 8 August 2019. On 7 August E’s solicitors wrote to F indicating that they considered the service of the bill of costs to be defective because the bill had been served by e mail and new Solicitors had not indicated that such service was acceptable. On behalf of E, the Solicitors served Points raising just two general points:
- The alleged defective service of the bill of costs;
- a simple reservation of E’s right to challenge each and every item in the bill and to serve supplemental points of dispute if service was deemed to be effective.
F applied for a confirmatory order and the same was granted by Master James on 5 September 2019, her decision being that service of the bill of costs by email was valid and therefore the Points of Dispute served by E should stand as the Points of Dispute in the case.
F gave E notification of their intention to apply for assessment of the outstanding costs in the event no response was received by 11 October 2019. Absent any response F applied for an assessment which was listed for 2 December 2019 with a time estimate of 1-hour. Two days before the hearing an application was made for E seeking permission to serve supplemental points. The “supplemental” points were provided just 90 minutes before the hearing.
Master James was advised that the brother of E had died in the summer at a young age and that E had been significantly affected by his brother’s death. Master James was also advised that the original claim in respect of which F had been instructed had only settled “within the last few months”.
The Master said that it was very sad that E’s brother had died but was unable to understand why the court had not been so advised in August 2019. Instead, she said, what had been put to the court was an “unmeritorious technical point”. The Master considered the issue of the litigation had been removed from E’s “plate” for “at least a while now” and the Master referred to steps that could have been taken following F’s application for an assessment.
Master James refused E permission to rely on supplemental points and on assessment the costs, assessed on the Indemnity basis, were allowed in the sum of £71,103.35 against the sum in issue – £73,999.41.
E sought to appeal the Master’s decision not to allow the “supplemental points”. The appeal was refused on papers by Freedman J and the renewed application for permission to appeal the Master’s decision was heard by Mr Justice Chamberlain.
Reference was made to the provisions of CPR 46PD, Para 6:15 (permission is not required to vary a breakdown of costs, points of dispute or a reply but the court may disallow the variation or permit it only upon conditions, including conditions as to payment of any costs caused or wasted by variation).
Master James had accepted that permission was not required therefore it was not necessary for E to apply for relief from sanction.
Had Master James been in error of approach was the question for Chamberlain J.
Submissions for F referred to the notification of intention to apply for an assessment and the absence of any response from E until shortly before the hearing.
Chamberlain J was “unable to find any arguable error in the approach of the Master to the exercise of the discretion confirmed on her by CPR 46PD para 6.15” further the Judge considered the “points of dispute” filed in August 2019 were “not really points of dispute at all”. The two general points having given “no indication of the grounds on which the amounts of the invoices were disputed”. The Judge found that the first point was accurately described by the Master as an “unmeritorious technical point” the second was merely stating “more later”.
Much was made of the delay of E’s failure to indicate any substantive points of dispute until 90 minutes before the listed assessment hearing.
A final attempt was made on E’s behalf to suggest that the appeal raised a point of wider significance. The Judge found the language of CPR 46PD para 6.15 to be clear. “The factors that may be relevant to the exercise of the discretion to disallow supplementary points of dispute depend on the circumstances of each case. This case raises no point of wider significance that justifies the grant of permission where, as I have found, the appeal has no real prospect of success.”
It is clear that all parties should act in a timely manner and raise any issues well before hearings, simply stating that further information will be provided in support of a challenge at a later stage was insufficient to afford a client protection.
We are grateful to those who took part in our recent Zoom clinic but would stress we are always happy to receive costs queries, just drop us an email; the writer has dealt with costs for some 37 years and can testify that there is no “silly question” when it comes to costs.
