Simcoe v Jacuzzi UK Group Plc 16.02.12

Court of Appeal holds that interest on costs runs from the date of the order giving rise to the entitlement to costs.  

Comment

For some time, there has been considerable uncertainty and argument as to the date from which interest runs on costs incurred under a conditional fee agreement. This judgment provides a clear answer to the question of whether interest on costs should run from the date of the costs order (known as the incipitur rule) or the date the costs are assessed (the allocator rule).

Whilst the judgment provides clarity, this is a disappointing outcome and is not good news for defendants. Interest accrued runs at eight per cent and this can add a significant amount to costs awarded. The decision emphasises the need to make voluntary early payments on account of costs in order to reduce any interest awarded.

Interestingly, as an aside, the Master of the Rolls, Lord Neuberger, raised concerns that the costs recovered of £74,000 were excessive for a relatively minor and straightforward case which settled before trial in the sum of £12,750. In his judgment he called for a more proportionate costs regime, which is clearly in line with Lord Justice Jackson’s report on civil costs.

Background

The Claimant, who was employed by the Defendant, brought a claim for injuries sustained as a result of the repetitive nature of his work.

The matter was conducted under the benefit of a conditional fee agreement (CFA) with insurance. Under the CFA, if the Claimant won he would be liable to pay his solicitors’ basic charges, success fee and disbursements, together with the insurance premium. However, the CFA stated that he would be able to recover these from the Defendant and, to the extent that any sum was reduced on an assessment or by agreement with the Defendant, he could normally rely on this reduction as against his solicitors’ costs. If he lost, he would not have to pay, save in respect of disbursements, which would in any event be covered by the insurance.

Proceedings were issued and the claim was settled by consent in the sum of £12,750, with costs to be assessed if not agreed. Costs of £74,000 were subsequently agreed and the only issue between the parties was whether the Defendant was liable to pay interest on costs from the date the matter settled or the date costs were agreed.

At first instance, District Judge Hill held, in favour of the Defendant, that interest on costs runs from the date of the assessment of those costs. He based his decision on the decision in Gray v Toner [2010], in which it was held that interest did not run until costs were assessed, and in any event, the Court had a discretion to award interest from a later date where the matter was funded by a CFA.

The baton was then taken up in Motto and others v Trafigura Ltd and another [2011]. In that case it was held by Senior Costs Judge Hurst that, whilst interest should run from the date of the order, if a CFA was silent on interest, it would be appropriate for a court to exercise its discretion and not award interest until costs were assessed.

Decision

In the Court of Appeal, Lord Neuberger ruled that, even though the Claimant’s solicitors were acting under the benefit of a CFA, this did not justify departing from the general rule of interest from the date of the order (the incipitur date).

The appeal in Motto v Trafigura was due to be heard alongside Simcoe but, by the time of the hearing, it had been compromised. The current position is therefore encompassed in Simcoe.