Kerry Underwood

COURT REFUSES PRE-JUDGMENT INTEREST IN PERSONAL INJURY – BUT OK IN COMMERCIAL CASES

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The matters dealt with in this piece are examined in great detail in my three volume, 1,300 page book Personal Injury Small Claims, Portals and Fixed Costs – price £50 and available from Underwoods Solicitors here.

These principles, and the whole issue of Qualified One-Way Costs Shifting, is dealt with in my book – Qualified One-Way Costs Shifting, Section 57 and Set-Off – Available from me here for £15.

Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

In

Nosworthy v Royal Bournemouth & Christchurch NHS Foundation Trust [2020] EWHC B19 (Costs)

in detailed assessment proceedings, the Master rejected the successful claimant’s claim for pre-judgment interest in relation to the funding of an expert by way of a loan at an interest rate of 15%.

The power stems from CPR 44.2(6)(g):

“(6) 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 Master rejected the claimant’s contention that there was a general rule,  or normal practice of awarding pre-judgment interest costs are referred to by the Court of Appeal in

Jones and others v Secretary of State for Energy and Climate Change and others [2014] EWCA Civ 363.

The Master also rejected the views of a full High Court Judge set out in the case of

Involnert Management Inc v Aprilgrange Limited & Ors [2015] EWHC 2834 (Comm) .

The Master also cast doubt on the validity of CPR 44.2(6)(g), as specifically approved by both the Court of Appeal and the High Court.

But apart from that, he cited authorities, including

Schumann and another v Veale Wasbrough [2013] EWHC 4070 (QB),

where the judge concluded such an award was not the general rule in “ordinary litigation”, and that such a rule would be “undesirable”.

Such an inquiry over interest was likely to be much more proportionate in large commercial, or multi-party, actions but, “self-evidently”, not here.

Nothing took this case “out of the ordinary”, and making an order for pre-judgment interest would add an “unnecessary level of sophistication” into costs assessment, and if it was necessary to consider the interest rate for experts funding, that might be necessary for other costs and disbursements, and to take account of payments on account, for example.

Paying parties might legitimately question whether they should pay interest if the receiving party paid disbursements upfront, without a loan.

Funding costs are generally not recoverable –

Hunt v RM Douglas (Roofing) Ltd [1987] 11 WLUK 221.

Payment of judgment rate interest from the date of the costs order rather than from when costs are ascertained or agreed provides substantial mitigation, and the Master was not aware of any legal principle preventing him having regard to judgment rate interest received when exercising his discretion under CPR 44.2(6)(g) or providing that such sum could not be expected to be used to defray costs of funding.

The claimant argued that he should not be expected to defray costs of funding disbursements out of judgment rate interest.

It was not unreasonable to take account of the wide availability of legal expenses insurance, which might have avoided the need for funding with the premium possibly recoverable in such a claim.

Costs recovery is not intended to provide a complete indemnity and if Parliament had intended that costs of funding should be recoverable, there would be an appropriate mechanism, which CPR 47.15 was not.

 

Comment

This decision is wrong, but difficult to challenge as it involves the exercise of a Costs Judge’s discretion:

See my write-up –

SOLICITORS ACT ASSESSMENTS: HIGH COURT CONSIDERS “PAYMENT”, PARTIAL PAYMENT AND SPECIAL CIRCUMSTANCES

 

In

Involnert Management Inc v Aprilgrange Limited & Ors [2015] EWHC 2834 (Comm) 

the High Court Judge said:

“”Since Hunt’s case was decided, the CPR have given the court power to order interest to be paid on costs from a date before judgment: see CPR 44.2(6)(g). This power is now routinely exercised when an order for costs is made following a trial to award interest at a commercial rate from the dates when the costs were incurred until the date when interest becomes payable under the Judgments Act . In the usual way, I have made such orders in this case.””

The Master here said:

“At the risk of stating the obvious, in large commercial claims or multi party actions it is much more likely to be proportionate for the Court to undertake the sort of enquiry into interest which is anticipated by this claim. In a case such as this one, self- evidently, it is not.”

That is wrong on at least two levels.

Firstly, proportionality relates to the actual case. It is not some general principle of law. If it was, then the end game is that the courts should not hear anything other than substantial commercial claims. Unfortunately, many judges seem to take that view.

Thus, although the interest claimed here was low, this was in a context of a relatively low-value claim.

Secondly, a commercial client will get tax relief on loans, as well as generally paying a lower interest rate than a private individual.

So, in fact the effect on an individual in a modest claim is, in real terms, greater than on party in a substantial commercial case.

Widow’s mite and all that.

Here, at Paragraph 20, the Master even questioned whether he had power to order such interest, in spite of the clear wording of CPR 44.2(6)(g) and the comment in

Involnert Management Inc v Aprilgrange Limited & Ors [2015] EWHC 2834 (Comm) ,

and the Court of Appeal decision in

Jones and others v Secretary of State for Energy and Climate Change and others [2014] EWCA Civ 363.

Paragraph 22 says it all:

“As Dingemans J observed, the making of an order of the sort which is requested by the Claimant would introduce an unnecessary level of sophistication into the process for assessing costs. If it were right that the court were required in general to specifically consider the interest rate applicable to experts funding, presumably also the same would apply to counsel’s fees, solicitors fees. and other disbursements (such as court fees). Further, the parties would have to take into account such matters as the payments on account and the allocation of such payments to different expenditure. The schedule of the Claimant’s costs relied on for the oral hearing put his costs at close to £4,000. Even ignoring the extent to which the Claimant’s representatives have been dealing with what, to my mind, might be regarded as a novel point the costs incurred in dealing with claims such as this are still liable to be disproportionate. The complications which would arise would, to my mind, be substantial even in a modest case; and they would exist even assuming that the rates and the principle of payment were agreed. Further, paying parties might legitimately question whether they should be paying any interest if the receiving party had, for instance, the means, by way of insurance or otherwise, to pay up front for disbursements without taking out a loan. The potential for yet further legitimate disagreement would be substantial in the context of ordinary litigation (which may involve litigants in person). In respectful agreement with the comments of Dingemans J such complications and costs would, to my mind, set significant barriers for parties litigating in the courts.”

Translation:  I can’t be bothered dealing with this sort of thing.

Note the reference to “ordinary litigation”.

The argument that post-judgment interest could be used to defray the costs of funding is illogical.

Supposing a party incurs significant interest costs during a life of a hard-fought case, but the judgment debtor pays up as soon as judgment is given.

Then there is no post-judgment interest.

Generally, this decision is all over the place and should be overturned on appeal.

See my blog –

INTEREST ON COSTS PRE-JUDGMENT. INCREASED HOURLY RATE AND SUCCESS FEE WHERE SOLICITORS FUNDING DISBURSEMENTS.

Written by kerryunderwood

May 12, 2020 at 8:18 am

Posted in Uncategorized

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