Bollito v Arriva London [2009] EWHC 90136 (Costs)

[2009] EWHC 90136 (Costs)Case No 09-A-2284Case No 0804602IN THE HIGH COURT OF JUSTICESUPREME COURT COSTS OFFICEVenue Clifford’s Inn, Fetter LaneLondon, EC4A 1DQDate 27 February 2009
Before
MASTER ROGERS, COSTS JUDGE
Between
VINCENZO BOLLITOClaimantBy his wife and Litigation Friend,ClaimantFILOMENA ESPOSITOClaimantARRIVA LONDONDefendant
Ms S Towler (Solicitor) and Mr P Walton (Costs Draftsman)(instructed by Russell-Cooke) for ClaimantMr David Cooper (Legal Executive and Costs Draftsman)(instructed by Kennedy’s) for DefendantHearing Hearing date: 21 January 2009
Judgment

Master Rogers:

[1]This reserved judgment deals primarily with an application made during the course of a detailed assessment on behalf of the Defendant to disallow all interest, for reasons which will appear later in this judgment.[2]In addition I am taking the opportunity to set out concise reasons for refusing the Defendant permission to appeal on two other issues which were decided in the course of the detailed assessment.

The background

[3]The Claimant was at the relevant time (15 July 2005) a 32-year-old Italian graphic designer who was visiting London with his sister and other friends.[4]They had been out to a meal in the West End at which minimal alcohol had been consumed and at about 11.30 p.m. were anxious to return home to Streatham utilising Night Bus N159.[5]As they were approaching the bus stop for this bus towards the bottom of Haymarket an N159 pulled up at the bus stop and paused briefly before moving off but only a few yards to the next set of traffic lights which were red against the traffic.[6]The Claimant and his friend, Mr Damiano, rushed after the bus and knocked on the driver’s door to let them in. This the driver did. Mr Damiano moved into the body of the downstairs level of the bus but the Claimant remained on the threshold of the bus seeking to get the girls who were trailing behind him and Mr Demiano onto the bus before it moved off.[7]However the driver closed the doors trapping the Claimant in them and accelerated away when the traffic lights changed to green.[8]The Claimant fell from the bus, he then fell heavily, hitting his head on the road. His injuries were catastrophic. He was in a coma for several months and it was twenty months before he was discharged from hospital.[9]He is now back in Streatham under the care of his wife but as a result of the injuries sustained totally unable to work or indeed to look after himself.[10]Accordingly he instructed Messrs Russell-Cooke to represent him in a claim for damages and his wife Filomena Esposito became his litigation friend.[11]At an early stage Messrs Russell-Cooke agreed with Messrs Kennedy’s, solicitors for the Defendant [insurers] that there should be a split trial on liability and quantum.[12]There were diametrically opposed versions of what happened. The Claimant contended that due to the negligence of the driver he fell from the bus sustaining his injuries.[13]The driver however, supported by an independent witness sitting in the bus, contended that the Claimant had jumped off the bus and therefore was the author of his own misfortune.[14]There was detailed expert evidence as to the mechanics of operation of the door of the bus with reports from an expert for the Claimant (Mr Harris) and an expert on behalf of the Defendant (Mr Alford) but in the event neither of those experts actually gave live evidence.[15]The trial of liability took place over three days in October 2007 before Nelson J. In a reserved judgment delivered early in January 2008 the judge found in favour of the Claimant after a very careful analysis of the evidence given and acquitted him of any element of contributory negligence. He also ordered that the Claimant should have his costs of the preliminary issue trial to be assessed at that stage and not to await the outcome of the quantum claim.[16]I was told by the parties at the outset of this assessment that the quantum trial is fixed for October of this year, the Claimant’s schedule of loss claiming a total of over £2 million having been served in November of last year and the Defendant’s counter-schedule being due this month.

The Claimant’s bill of costs and the detailed assessment

[17]The Claimant served notice of commencement seeking payment of his solicitor’s costs totalling £198,903.05 within the primary three month period allowed under the Rules for such a step.[18]A document containing very detailed Points of Dispute running to over 60 pages was served on behalf of the Defendant in August 2008 and equally detailed Replies to those Points of Dispute were served on behalf of the Claimant on 9 December 2008. The case was listed before me with a time estimate of two-and-a-half days starting on Tuesday 20 January 2009. As a result of having the time for extensive pre-reading and a pragmatic and sensible approach to the points raised by the two costs draftsmen involved with help from the fee earner Miss Towler, who was also present, it in fact proved possible to complete the assessment in one full day.[19]The Claimant’s costs were assessed at £176,595.59, and, as this was well in excess of the Defendant’s offer, I also awarded the costs of the detailed assessment to the Claimant which were summarily assessed at £23,297.10.[20]The Points of Dispute contended that in the circumstances of this case no interest should be paid by the Defendant. At the hearing of the detailed assessment I directed that if the Defendant wished to persist in that contention his costs draftsman must issue a formal application which was duly done and was listed and heard on the second day of the two-and-a-half days allocated to this case.[21]The funding of the Claimant’s solicitors’ costs fell into three distinct retainers. In the first it was financed by a CFA with a success fee. In due course it transpired that under the policy which the Defendants had with DAS Legal Insurance, there was an extension to cover claims against the bus company, supported by BTE Insurance (though with an initial cover limit of £50,000). This sort of cover has now become general amongst bus companies, but only in the last few years, in my experience.[22]When the £50,000 insurance cover was exhausted it was asked whether DAS could provide further cover for what was clearly going to be an expensive case to run.[23]At first it seemed that further cover could readily be obtained in that way but it then became apparent that such further cover would be limited to a further £50,000.[24]Thereupon the Claimant’s solicitors entered into a second CFA with the Claimant and had to pay a very substantial premium for ATE cover against paying the Defendant’s costs, doubtless because of the late stage at which it was sought and the complete and continuing denial of liability on behalf of the Defendant.[25]I was told during the course of the hearing that bills had been rendered to the Claimant in respect of the first two retainers but it was accepted that the Claimant himself has not paid any of these costs nor is he being expected to pay any costs under the terms of the second CFA.[26]In summary the Defendant’s argument is that interest is payable to reimburse a claimant for costs paid or interest lost on money used to pay costs, and since this Claimant has paid no costs there is nothing to reimburse and therefore no interest should be paid.[27]The Claimant’s approach is that it has been the law since 1838 that interest is payable under section 17 of the Judgments Act 1838 on every “judgment debt” and that accordingly the Claimant’s solicitors are entitled to interest pursuant to the decision of the House of Lords in Huntv R.M. Douglas (Roofing) Limited [1990] AC 398.[28]Mr Cooper helpfully lodged a skeleton argument and on the morning of the hearing produced a folder containing eight authorities including Hunt v Douglas (Roofing) to all of which he referred in his cogent and helpfully concise oral submissions.

The Defendant’s Submissions

[29]Mr Cooper conceded that section 17 of the Judgments Act 1838 conferred for the first time the right to interest on a successful party. However as a result of amendments that came into force when the CPR was brought in on 26 April 1999 the section now reads:
“(1) Every judgment debt shall carry interest at the rate of 8% per annum from [such time as it 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-section (1).]”
[30]Mr Cooper also conceded that under section 18 of the 1838 Act an award of costs is to be treated as part of the judgment debt so attracting interest but he submitted that there was no other source of jurisdiction to award interest on costs and neither section 35A of the Supreme Court Act 1981 nor the court’s inherent jurisdiction authorised the court to make an award of interest.[31]CPR 44.3 is headed:
“Court’s discretion and circumstances to be taken into account when exercising its discretion as to costs.”
[32]CPR 44.3(6) reads as follows:
“The orders which the court may make under this rule include an order that a party must pay— (a) a proportion of another party’s costs; (b) a stated amount in respect of another party’s costs; (c) costs from or until a certain date only; (d) costs incurred before proceedings have begun; (e) costs relating to particular steps taken in the proceedings; (f) costs relating only to a distinct part of the proceedings; and (g) interest on costs from or until a certain date, including a date before judgment.” (a) a proportion of another party’s costs; (b) a stated amount in respect of another party’s costs; (c) costs from or until a certain date only; (d) costs incurred before proceedings have begun; (e) costs relating to particular steps taken in the proceedings; (f) costs relating only to a distinct part of the proceedings; and (g) interest on costs from or until a certain date, including a date before judgment.”
[33]Mr Cooper then submitted that the cases to which he was going to refer which were all cases where the court exercised its discretion in relation to interest pointed towards the conclusion he wished me to draw, namely that this was not an appropriate case in which to award interest.[34]The first case to which Mr Cooper referred, Powell v Herefordshire Health Authority [2003] 2 Costs LR 185, is very familiar to me because it is a case in which the Court of Appeal on a direct appeal from me reversed my decision in respect of interest.[35]The relevant passages upon which Mr Cooper relies are paragraphs 3 to 13 of the judgment of

Lord Justice Kay:

“3. The case was an action claiming damages for personal injury suffered soon after birth by the claimant, an infant. She was born on 26 June 1986 at the defendant’s hospital in Hereford. Her care following her birth was alleged to be negligent, as a result of which she suffered severe brain damage. Legal aid was obtained to pursue a claim and proceedings commenced in June 1989. 4. In April 1994 liability was admitted and judgment was entered by consent in the following terms: ‘That the plaintiff do recover against the defendants damages to be assessed and costs.’ 5. In June 2001 the issue of quantum was resolved by the parties. On 11 June His Honour Judge Nicholl, sitting as a judge of the High Court, approved a gross award of £2,175,000 inclusive of £250,000 interim payments. Clause F of the terms of settlement which formed part of the approval, and which was made an order of the court, provided: ‘The defendant pay the claimant’s costs to be subject to detailed assessment (if not agreed) on the standard basis and in accordance with Reg 107 of the Civil Legal Aid (General) Regulations 1989, the claimant’s solicitors waiving any claim to further costs’. 6. On 31 July 2002 the matter of costs came before Master Rogers. He decided to consider as a preliminary point the date from which interest on the costs should run. The contention advanced on behalf of the claimant was that the interest on the costs ran from April 1994 when the judgment for damages to be assessed was entered. On behalf of the defendant it was argued that the correct date was June 2001 when the judgment for the agreed measure of damages was entered. As Master Rogers observed, the consequence of the claimant’s contention were “fairly startling”
. He calculated that if the costs were of the order of £200,000, interest would amount to approximately £156,000 if the claimant was right. 7. The argument advanced before Master Rogers on behalf of the claimant was based upon section 17 of the Judgments Act 1838 which, following amendment by Article 3 of the Civil Procedures (Modification of Enactments) Order 1998, provides:
‘Every judgment debt shall carry interest … from such time as shall be prescribed by the rules of the court until the same shall be satisfied … ’ 8. Section 18 of the 1838 Act makes an order for costs a judgment debt within the meaning of section 17. CPR 40.8(1) provides: ‘Where interest is payable on a judgment pursuant to section 17 of the Judgments Act 1838 or section 74 of the County Courts Act 1834, the interest shall begin to run from the date that the judgment is given unless – (a) a rule in another Part or a practice direction makes different provision; or (b) the court orders otherwise.’ 9. The contention on behalf of the claimant was that the judgment of April 1994 ordered the defendant to pay the costs of the action. It was argued that the interest on the costs ran from that date. 10. On behalf of the defendant it was submitted that the date of the order giving rise to the entitlement to costs was 11 June 2001, the date of the infant settlement approval hearing when damages were assessed. If that argument was not to be accepted, it was contended that, even if interest on the costs incurred in relation to liability ran from the earlier date, interest on costs in determining quantum should run from the latter date. 11. Neither party suggested to Master Rogers that he had any power to order that the costs run from any different date. Master Rogers concluded on the arguments presented to him that the date from which the interest ran was the date when the original judgment had been entered, June 1994. He clearly recognised that this decision would seem unjust to the defendant in that interest would be carried on a substantial part of the costs for many years before those costs were actually incurred, but he felt compelled by the 1838 Act, as subsequently interpreted by the courts, to reach such a conclusion. 12. Unfortunately, neither party drew to the attention of Master Rogers the provisions of CPR 44.3(6)(g), which provides: ‘The orders which the court may make under this rule include an order that a party may pay – … (g) Interest on costs from or until a certain date, including a date before judgment.’ 13. There was thus no need in law for Master Rogers to find himself in the legal straight jacket that the parties had suggested. He had a discretion which enabled him to look at the dates when the costs had been incurred, and to come to a conclusion in relation to the payments of interest that fitted the justice of the circumstances of the particular case. He did not do so because he was not made aware of the possibility of that course. It becomes immediately apparent that the decision that he made cannot stand.” ‘That the plaintiff do recover against the defendants damages to be assessed and costs.’ ‘The defendant pay the claimant’s costs to be subject to detailed assessment (if not agreed) on the standard basis and in accordance with Reg 107 of the Civil Legal Aid (General) Regulations 1989, the claimant’s solicitors waiving any claim to further costs’. ‘Every judgment debt shall carry interest … from such time as shall be prescribed by the rules of the court until the same shall be satisfied … ’ ‘Where interest is payable on a judgment pursuant to section 17 of the Judgments Act 1838 or section 74 of the County Courts Act 1834, the interest shall begin to run from the date that the judgment is given unless – (a) a rule in another Part or a practice direction makes different provision; or (b) the court orders otherwise.’ ‘The orders which the court may make under this rule include an order that a party may pay – … (g) Interest on costs from or until a certain date, including a date before judgment.’
[36]Interestingly, the judgment does not disclose what the parties subsequently agreed as to the date from which interest should run, but presumably it was some date between April 1994 and June 2001.[37]My attention was next directed to the decision of Mr Justice Langley in Montlake v Lambert Smith Hampton Group Limited [2004] 4 Costs LR 650.[38]In that case the Claimants, who were the trustees of Wasps Rugby Football Club succeeded in a claim against the Defendants for £2,417,500 “representing the difference between [the Defendants’] valuation of [their] Sudbury ground of £832,500 and my conclusion that a proper valuation would have been in the sum of £3.25 million.”[39]Following his decision on the merits the Learned Judge delivered a supplementary judgment relating to various matters including the question of interest on costs/indemnity costs. This was a case where indemnity costs could be awarded by the judge because the Claimant did better at trial than the part 36 offer which they had made to settle proceedings without the necessity for such a trial.[40]Mr Cooper relied in particular on the last sentence of paragraph 30 of the judge’s judgment in that case which reads as follows:
“I will therefore order that costs be assessed on the indemnity basis from 13 January 2004 but I will make no order as regards interest on those costs.”
[41]The parties agree with me that that sentence is ambiguous. It could mean that the judge was awarding no interest at all on costs, or it could mean that he was not prepared to award “penal” interest. Unfortunately, the order made by the Learned Judge is not included in the report which indeed refers to the judge asking counsel to submit an order. It must therefore be a matter for speculation, but I believe that what the judge was not awarding was penal interest because in the immediately preceding paragraph to the one which I have quoted the judge said this:
“The first question is therefore whether or not Wasps should be awarded interest on the principal sum I have awarded them at a rate greater than one percent above base rate (which the court has already said would otherwise be appropriate) and if so at what rate provided 10% is not exceeded.”
[42]The next case to which Mr Cooper drew my attention was that of the Court of Appeal in Bim Kemi AB v Blackburn Chemicals Limited [2004] 2 Costs LR 201. This was a case where the trial judge had awarded costs to Bim against Blackburn and those costs had been assessed and paid.[43]As a result of the decision in the main appeal, that costs order was reversed and accordingly one of the issues that had to be decided was the interest on costs already paid by Blackburn to Bim which the Court of Appeal had ordered to be repaid.[44]The arguments appear to have been based on the rate of interest that Blackburn could have earned on the costs which they in the event wrongfully paid to Bim.[45]Waller LJ in his judgment referred to submissions made to that court based on the judgment of Rix LJ in the case of Jaura v Ahmed [2002] EWCA Civ 210.

Lord Justice Waller then went on in his judgment to say this:

“Rix LJ was dealing with interest on damages but if persons had had to borrow money in order to pay for litigation there is no reason why a similar approach should not be taken to interest on costs.”
[47]Then, two paragraphs on, the judgment continues:
“c) Interest on costs awarded in Blackburn’s favour Mr Onslow [leading counsel for Blackburn] in his written submissions suggested that there should be no order for payment of interest on costs. He suggested this would be a most unusual order and further suggested that such an order is never made. It is clear from CPR 44.3(6)(g) that the rules intended that the court should have power to award interest on costs and Mr Onslow did not press these submissions orally. In the event in principle there seems no reason why the court should not do so where a party has had to put up money paying its solicitors and has been out of the use of that money in the meanwhile. It furthermore seems to us that Mr Wilson [leading counsel for Bim] is right that there is no reason why Blackburn should not have interest at the judgment rate as from 30 January 2002, that being the date of the order of the trial judge. That must be so in our view because if the judge had made the order which we now hold he should have made in Blackburn’s favour, interest would have been payable at the judgment rate from the date of that order down to the date of payment – see Hunt v R.M. Douglas (Roofing) [1990] 1 AC 398. That leaves the question of interest on costs incurred prior to that date. It seems to us that once again, 1% over base rate is the appropriate rate of interest, that interest to run from the date of each invoice.”
[48]My attention was next drawn to Douglas v Hello! Limited [2004] 2 Costs LR 304. That was one of a number of cases arising out of the unlawful photographs taken by Hello! Limited of the wedding of Michael Douglas and Catherine Zeta Jones. This was a decision of Lindsay J handed down on 23 January 2004.[49]Part of the Learned Judge’s judgment was subsumed under the heading Issue (IV) – Interest on Costs and after referring to the provisions of CPR 44.3(6)(g)

the judge went on in paragraph 24 of his judgment to say:

“… In Bim it was ordered that the award of interest should run as from the date or dates of solicitors’ invoices but, in principle, it seems to me that the more appropriate dates, when one is seeking to measure the extent to which a party has been out of pocket, would be the dates on which invoices were actually paid. As to when such interest should stop, it seems to me that the appropriate time would be when interest on costs is replaced by judgment interest. In my judgment it is right, in the light of Bim and of the rule, to award the Claimants interest on assessed costs but that the computation will need to reflect both that of each sum found to be within assessed costs on the standard basis only 75% will be payable and that interest is not to run on any sum unless and until it had been paid. The rate is to be base rate from time to time plus 1.5%. If the parties cannot agreed a computation the issue will need to be restored to me.”
[50]Next, Mr Cooper referred me to the decision of Stanley Burnton J (as he then was) in Lloyd v Svenby [2006] EWHC 576 (QB).[51]This was a costs judgment following a decision on the merits and the relevant paragraph is 18, which reads:
“18. I see no reason why I should not follow the guidance of the Court of Appeal in Bim Kimie AB v Blackburn Chemicals [2003] EWCA Civ 889 at 18(c). Mr Lloyd must pay interest at 1% over base rate from the date of payment by Mr Svenby of each of his solicitors’ bills on 80% of the amount so paid.”
[52]The last case to which Mr Cooper drew my attention was part of a very lengthy judgment of Mr Justice Jack in relation to costs and other matters in James Carlton, 7th Earl of Malmesbury and others v Strutt & Parker (a partnership) [2009] 5 Costs LR 736; [2008] EWHC 616 (QB).[53]The paragraphs of the judgment on which Mr Cooper seeks to rely are 3 to 7 inclusive and read as follows:
“3. There are separate provisions in CPR 36.14(3) relating to costs where a claimant obtains a judgment more advantageous than a Part 36 offer made by the claimant. Unless the court considers it unjust, the claimant is entitled to indemnity costs and ‘interest on those costs at a rate not exceeding 10% above base rate’. I am not concerned with that. 4. The only authority concerning sub-rule (6)(g) to which I was referred was Powell v Herefordshire Health Authority [2002] EWCA Civ 1786. there the claimant had recovered judgment ‘for damages to be assessed and costs’ in April 1994. On 11 June 2001 judgment was entered for an agreed award of damages. The costs judge decided to consider as a preliminary point the date from which interest on the costs should run. He was faced with a choice between the two dates and an argument based on section 17 of the Judgments Act 1838. The provisions of CPR 44.3(6)(g) were not drawn to his attention. The Court of Appeal stated: 13. There was thus no need in law for Master Rogers to find himself in the legal straight jacket that the parties had suggested. He had a discretion which enabled him to look at the dates when the costs had been incurred, and to come to a conclusion in relation to the payments of interest that fitted the justice of the circumstances of the particular case. He did not do so because he was not made aware of the possibility of that course. It becomes immediately apparent that the decision that he made cannot stand. The parties were able to agree what would be a fair order in the light of the rule. Its terms are not recorded in the judgment. 5. Mr Speaight submitted that the intention in awarding interest is generally compensatory and that as Lord Malmesbury had incurred substantial interest charges in funding the action it was appropriate to compensate him. The order asked for may on a rough calculation be worth £60,000 to him. Mr Gallagher advanced no point of principle why an order should not be made but submitted that it was not the practice to make such orders. 6. Three further authorities were referred to in O’Hare and Brown on Civil Litigation, 13th Edition, Chapter 3. Interest was awarded on costs by the Court of Appeal in Bim Kemi AB v Blackburn Chemicals Ltd [2003] EWCA Civ 889. The decision was followed in Douglas v Hello! Limited [2004] EWHC 63 (Ch) where Lindsay J stated: ‘24. In Bim Kemi AB v Blackburn Chemicals Ltd [2003] EWCA Civ 889 Waller LJ said at paragraph 18(c) of an award of interest on costs:- “In any event in principle there seems no reason why the Court should not do so where a party has had to put up money paying its solicitors and been out of the use of that money in meanwhile.”
In Bim it was ordered that the award of interest should run as from the date or dates of solicitors invoices but, in principle, it seems to me that the more appropriate dates would be the dates on which invoices were actually paid. As to when such interest should stop, it seems to me that the appropriate time would be when interest on costs is replaced by judgment interest.’ Bim Kemi was also applied by Stanley Burnton J in Lloyd v Svenby [2006] EWHC 576 (QB). 7. In the light of these authorities there is no bar to my making an order as Mr Speaight asks. In my judgment it is appropriate in the circumstances that there should be such an order.” 13. There was thus no need in law for Master Rogers to find himself in the legal straight jacket that the parties had suggested. He had a discretion which enabled him to look at the dates when the costs had been incurred, and to come to a conclusion in relation to the payments of interest that fitted the justice of the circumstances of the particular case. He did not do so because he was not made aware of the possibility of that course. It becomes immediately apparent that the decision that he made cannot stand. The parties were able to agree what would be a fair order in the light of the rule. Its terms are not recorded in the judgment. ‘24. In Bim Kemi AB v Blackburn Chemicals Ltd [2003] EWCA Civ 889 Waller LJ said at paragraph 18(c) of an award of interest on costs:- “In any event in principle there seems no reason why the Court should not do so where a party has had to put up money paying its solicitors and been out of the use of that money in meanwhile.” In Bim it was ordered that the award of interest should run as from the date or dates of solicitors invoices but, in principle, it seems to me that the more appropriate dates would be the dates on which invoices were actually paid. As to when such interest should stop, it seems to me that the appropriate time would be when interest on costs is replaced by judgment interest.’ Bim Kemi was also applied by Stanley Burnton J in Lloyd v Svenby [2006] EWHC 576 (QB).[54]In summary Mr Cooper submitted that the theme underlying all the cases to which he referred was that interest was meant to compensate a Claimant for money which he had had to pay or borrow in order to pay his lawyers. Here however, as Mr Walton accepted, the Claimant has not had to pay any costs. The payment under the first retainer is the subject of the CFA and therefore the solicitor is not looking to him for payment. The second retainer is being indemnified by DAS, the BTE insurer, and the third retainer costs are “caught” by the second CFA.[55]Mr Cooper accepted that I had a discretion in the matter but on the facts of this case and bearing in mind that it was clear from the authorities that the costs are those of the Claimant, and not of his solicitors, that discretion should be exercised in favour of the Defendant, and against awarding any interest.

The Claimant’s Submissions

[56]On behalf of the Claimant Mr Walton relied on the comment which precedes the report of Hunt v R.M. Douglas (Roofing)Limited in Butterworths’ Costs Service which reads as follows:
“This judgment reversed the previous decision of the Court of Appeal and held that a litigant who had been awarded costs is entitled to interest on those costs from the date on which judgment was pronounced and not, as previously, from the date of the certificate of taxation, the two different approaches being referred to as the ‘incipitur rule’ and the ‘allocatur rule’ respectively. In Erven Warnink BV v J Townsend & Sons (Hull) Ltd (No. 2) [1982] 3 All ER 312, Fox LJ had said ‘We do not think that either rule is satisfactory as to costs in all circumstances’. The full explanation of why neither rule is satisfactory is contained within the judgment of Lord Ackner ... The main objection to the incipitur rule is that interest is payable from the date of judgment on all costs and disbursements irrespective of when they were in fact paid, including, for example, counsel’s fees and the taxing fee. Another difficulty is that although the client may not have paid any or all of the costs, it is the client who is entitled to the interest. In his judgment, Lord Ackner said this could be simply dealt with by an express agreement between the solicitor and his client that any interest recovered on costs and disbursements after judgment is pronounced but before the taxing master’s certificate is obtained, which costs and disbursements have not in fact been paid prior to taxation, shall as to the interest on the costs belong to the solicitor and as to the interest on disbursements be held by him for and on behalf of the person or persons to whom the disbursements are ultimately paid. It is of course possible to have sophisticated variations of such an agreement to ensure that interest is payable only in respect of the periods in which and for the amounts that the client was actually out of pocket.”
[57]He also maintained that on a proper analysis all the cases upon which Mr Cooper relied were cases where a receiving party was seeking interest at a penal rate and not at the standard rate prescribed under the 1838 Act, and thus can, and should be, distinguished from this case.[58]Accordingly he submitted that I should follow the normal practice and award costs to the Claimant in the usual way on the amount assessed.

My decision

[59]According to my calculations on the assessed costs of £176,595.59 for approximately one year interest at 8% totals over £14,100 which is a not insubstantial sum.[60]Mr Cooper conceded that taken to its logical conclusion his submission would mean that in a case where the successful party was entirely financed under a CFA so that he did not have to pay any costs at all, his solicitors would never recover interest.[61]In my judgment that would be a very surprising decision to have to reach and I do not think that I am forced to reach that conclusion by reference to the cases to which Mr Cooper referred me.[62]I accept Mr Walton’s submission that the basic rule should apply and that the cases referred to by Mr Cooper are either cases where penal interest was being claimed or where it was established that costs had been paid by a successful party who is therefore out of pocket or has had to borrow money to pay them. It is understandable that in such cases the judge would feel inclined to make an order for payment of exceptional rates of interest.[63]Mr Cooper’s submission would have a dramatic effect on many cases and not just this one and I do not think that such a far-reaching decision should be taken by me at Costs Judge level.[64]Accordingly my decision on the preliminary issue is that the Defendant must pay interest at the statutory rate from the date of Mr Justice Nelson’s order until the date of payment.

(I) The level of the success fee

[65]This case fell within CPR 45.15 section 3, fixed percentage increase in road traffic accident claims by virtue of paragraph 45.15(2) which reads:
“(2) This section applies where— (a) the dispute arises from a road traffic accident; and (b) the claimant has entered into a funding arrangement of a type specified in Rule 43.2(k)(1).” (a) the dispute arises from a road traffic accident; and (b) the claimant has entered into a funding arrangement of a type specified in Rule 43.2(k)(1).”
[66]The parties agreed that this was such a case, and the Claimant therefore contended that the level of the success fee throughout should be 100%, by virtue of Rule 45.16(1)(a), the “trial” being the trial on liability before Nelson J.[67]Mr Cooper however submitted that the level of success fee could not be determined until the quantum trial had been heard or the quantum claim settled.[68]As I said to the parties during the course of submissions it seems to me that the answer to this question is a pure question of construction of CPR 45.15(6)(b) which reads:
“(6) In this Section— … (b) a reference to ‘trial’ is a reference to the final contested hearing or to the contested hearing of any issue ordered to be tried separately.” … (b) a reference to ‘trial’ is a reference to the final contested hearing or to the contested hearing of any issue ordered to be tried separately.”
[69]Mr Walton’s argument was a very simple one, namely that the trial of the liability issue had been resolved in favour of the Claimant and the judge had awarded costs assessable and payable at that stage irrespective of what might happen subsequently over quantum.[70]If Mr Cooper’s contention is correct it would mean that there could be extensive and expensive further litigation over quantum which the Defendant might resolve just short of trial by making an offer under CPR 36 which the Claimant could not refuse, and, if done at the relevant time, this would restrict the Claimant’s success fee to 12.5% throughout the proceedings both on quantum and liability[71]It seems to me that the answer to Mr Cooper’s submission must be that it would be open to him to argue if the costs of the quantum trial fall to be assessed (presumably by me) it will be open to him to re-argue the point, if those proceedings conclude otherwise than with a full trial.[72]As a matter of construction however I am quite clear in my own mind that the decision I reached under CPR 45.15(5)(b) is correct and I do not think there is any reasonable prospect of success on an appeal which is why I refused permission.

Refusal of permission in relation to funding costs

[73]There has been considerable disagreement at costs judge and district judge level as to whether or not costs of funding are recoverable as between the parties in a detailed assessment.[74]This matter was fully argued before me together with a substantial number of other matters in a case of Woolley v Haden Building Services Ltd (No. 2) [2008] EWHC 90111 (Costs). The relevant paragraphs in that judgment are 123 to 134 which I set out below: “123. The Claimant seeks to recover as part of their costs of the action in this case the costs of the funding, that is to say the work necessary to put in place the CFA.124. Mr Brown contended that as a matter of principle this is simply not recoverable. He submitted that it is quite clear that the costs of obtaining and dealing with legal aid were never recoverable.125. He referred me to the decision of His Honour Judge Cockcroft given at Leeds Civil Hearing Centre on 18 March 2005 in the case of Masters v Hewden Stuart Heavy Lifting Ltd where he refers to the decision of the Senior Costs Judge in the Claims Direct case in July 2002, who said at paragraph 171: ‘171. It has long been held that the cost of funding litigation is not a recoverable cost as between the parties: “… by established practice and custom funding costs have never been included in the category of expenses, costs or disbursements envisaged by the statute or RSC Order 62. To include them would constitute an extension of the existing category of ‘legal costs’ which is not under the prevailing circumstances warranted.” (per Lord Justice Purchas, Hunt v R.M. Douglas (Roofing) Ltd, 18 November 1987, CA, unreported. This point was not taken in the subsequent House of Lords Appeal.)126. He submitted that there was nothing in the change from RSC to CPR which could bring about any change and he further pointed out that the detailed regulations in regard to CFAs which were in force until November 2005 could very easily have provided for the Claimant’s solicitors to recover costs of funding if that had been the Government’s wish, but they did not.127. Mr Brown also submitted that was a further fatal obstacle to claiming funding costs, namely that until funding was in place there could be no liability by a client to his solicitor for any costs and he equated the situation with that of a builder who is asked to give a quotation but would not of course be entitled to any payment until such time as the work is actually commissioned.128. In response, Mr Green submitted that there was a genuine divergence of opinion, even in the Supreme Court Costs Office, on this point, the majority of Costs judges certainly following the lead of the Senior Costs Judge in Claims Direct Test Cases with others who took the opposite view.129. Similarly, in the County Courts there was a divergence of view and he submitted that the time had come for a definitive decision to be taken.130. I agree with Mr Green to the extent that it would be helpful to have a definitive decision, but such a decision must, it seems to me, come from a higher court, probably the Court of Appeal.131. Presumably, although the matter has been litigated extensively, it has never been taken to that court because the sums at stake are never sufficiently high.132. In this case I asked Mr Green what this element of the bill was and he estimated these to be approximately £1,000.133. I am entirely persuaded on this point by Mr Brown’s arguments and find in his favour, but I am not persuaded that the opposite decision would be helpful to the profession, which is what Mr Green has been suggesting.134. In my judgment, the costs of funding have never been recoverable and nothing has changed as a result of the introduction of CPR or, indeed, as a result of the introduction of the CFA Regulations, and therefore that element of this bill in which the Claimant seeks to recover is funding costs, fails.” ‘171. It has long been held that the cost of funding litigation is not a recoverable cost as between the parties: “… by established practice and custom funding costs have never been included in the category of expenses, costs or disbursements envisaged by the statute or RSC Order 62. To include them would constitute an extension of the existing category of ‘legal costs’ which is not under the prevailing circumstances warranted.” (per Lord Justice Purchas, Hunt v R.M. Douglas (Roofing) Ltd, 18 November 1987, CA, unreported. This point was not taken in the subsequent House of Lords Appeal.)[75]On the basis of what I said in that case Mr Cooper submitted that the costs of funding should not be recoverable by the Claimant from the Defendant in this case. Mr Cooper however accepted that, as always, I have a discretion in these matters and there was no hard and fast rule laid down by a court which is binding on me.[76]Mr Walton submitted that this was not a usual case where a couple of letters were written to set up a CFA where the costs of funding were de minimis. On the contrary, there were three separate retainers and much work needed to be done in relation to matters not least because the Claimant was not able to deal with matters directly and of course was not English speaking anyway.[77]Equally important was the fact that when the £50,000 limit of cover was reached under the BTE insurance offered by DAS substantial efforts had to be made by the Claimant’s solicitors to find an alternative source of insurance or cover.[78]I was told that at a rough estimate the costs of funding in this case came to about £5,000.[79]It seemed to me that even in a bill of this size this was not a negligible sum and that in my discretion it would be right to award those costs to the Claimant which is what I did.[80]I refused Mr Cooper’s application for permission to appeal. I said in the quotation from Woolley mentioned above that it would be nice to have authority from a higher level as to whether the Senior Costs Judge is right as set out in Claims Direct Test Cases or whether the decision of Master Seager-Berry in Gannouchi v Houni Ltd and others is to be preferred.[81]However, I do not think this is an appropriate case for such a decision because in my discretion I decided that the costs of funding in this case were sufficiently large to justify ordering them to be paid by the Defendant to the Claimant.[82]As this was a decision taken by a specialist judge in his own field I do not think that there is any reasonable prospect of that decision being reversed on appeal and that is why I refused permission.

Conclusion

[83]When this judgment is formally handed down I will deal with the costs of the application to refuse interest which, subject to any contrary submissions made on behalf of the Defendant, must be paid by the Defendant, together with any application for permission to appeal against my decision.[84]I have already extended the Defendant’s time for lodging an appeal against the two matters upon which he sought, and I refused, permission to appeal, namely the level of the success fee and the allowance of costs of funding until 21 days after this judgment is handed down.

Cited in 1 later judgment