Costs News

15 October 2015
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Judgments Act interest should not run until three months after decision, says High Court

A High Court judge has said there should be a three-month post-judgment moratorium before Judgments Act (JA) interest begins to run on costs.

Mr Justice Leggatt said it was “desirable” to set a date from which JA interest should run on “some objective benchmark”, which he identified as the three-month period prescribed for commencing detailed assessment proceedings.

He was ruling in Involnert Management Inc v Aprilgrange Limited & Ors [2015] EWHC 2834 (Comm) solely on the issue of when JA interest should run on the remaining costs payable by the unsuccessful claimant.

Having looked at the issue on the basis of principle and in the light of the relevant case law, Leggatt J drew several conclusions:

• The date when an order for costs is made is ‘the date that judgment is given’ for the purpose of CPR 40.8(1), even though the amount of the costs payable has still to be assessed;
• There is nothing in the JA or CPR which expressly or impliedly restricts the power of the court under CPR 40.8(1) to order the interest payable under section 17 of the JA to run from a different date, or which requires exceptional circumstances to be shown before that power is exercised. The power to ‘order otherwise’ is to be exercised in accordance with the overriding objective of dealing with cases justly;
• The date from which JA interest runs should not be deferred simply because it is at a considerably higher rate than commercial rates;
• There is nothing to prevent the court from ordering that JA interest should run from the date when the amount of costs payable is assessed, if that is what in current circumstances justice requires;
• It is not just to make an order under which interest begins to run at the rate appropriate for unpaid judgment debts before the paying party could reasonably be expected to pay the debt; this goes for the balance of the debt where an interim payment on account of costs is ordered;
• Translating this principle into practice, it is desirable to set a date from which Judgments Act interest will run which is based, if possible, on some objective benchmark and does not depend simply on the judge's general feeling of what length of postponement is fair. He said: “With this in mind, it seems to me that a reasonable objective benchmark to take is the period prescribed by the rules of court for commencing detailed assessment proceedings.” By then the paying party will have received the bill of costs and ensure it has “received the information needed to make a realistic assessment of the amount of its liability before it begins to incur interest at the rate applicable to judgment debts for failing to pay that amount”.
• If the receiving party commences detailed assessment proceedings after the expiry of the specified period, CPR 47.8(3) provides that the court may disallow all or part of the interest otherwise payable to the receiving party under section 17. There is thus a power to remedy any injustice which may arise in the event that the paying party is not provided with details of the costs claimed within three months of the date of judgment.

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