PRE-JUDGMENT INTEREST AWARDED; INTEREST ON COSTS FROM FOUR MONTHS AFTER ORDER; THIRD PARTY FUNDER JOINTLY AND SEVERALLY LIABLE FOR COSTS
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.
Sharp in sharp contrast to Sharpes
In
Sharp and others v Blank and others [2020] EWHC 1870 (Ch)
the Chancery Division was considering various costs matters following the dismissal of the claimants’ claim against former directors of Lloyds TSB, which claim had been on behalf 5,800 claimants, subject to a Group Litigation Order, and where the defendants claimed over £30 million costs.
There were three decisions on separate key issue of principle.
Pre-judgment Interest
Here the court ordered the claimants to pay interest on the defendants’ costs at the applicable Bank of England base rate from the date of payment of each invoice until the earlier of:
(i) payment of such costs; or
(ii) the date from which interest at the rate prescribed by the Judgments Act 1838 become payable.
The significance of this decision, by a full High Court Judge, is that the court worked on the basis that pre-judgment interest was usual and standard and set:
“22. CPR44.2(6)(g) provides that the Court may order interest on costs from a date before judgment. It is common ground that this jurisdiction will generally be exercised where a party has had to put up money to pay its solicitors and has thereby either lost the beneficial use of that money or has had to borrow it. It is also common ground that the rate awarded will be determined by weighing the factors identified by Sharp LJ in Jones v SoS for Energy and Climate Change [2014] EWCA Civ 363 at [17]-[18], generally with the aim of identifying a commercial rate in the circumstances. In the instant case there is no argument about the rate. The Claimants submit (and the Defendants accept) that, if ordered for any period, the appropriate rate is base rate simpliciter. The issue is whether interest should be awarded at all.”
The court agreed that pre-judgment interest is not a costs item in its own right, and therefore should not appear in a costs budget.
To that extent, and that extent only, the court agreed with the decision of the Senior Courts Costs Office just four days earlier in the case of
Marbrow v Sharpes Garden Services Ltd [2020] EWHC B26 (Costs).
However, in terms of the general rule relating to pre-judgment interest the court here as approached could not have been more different to that in Marbrow.
The court here said:
“A claim for pre-judgment interest on costs is commonplace…”
In the Marbrow case the court referred to “the general rule that interest should only be paid from the date of the costs order…”.
Date Of Start Of Interest On Costs At 8%
Here the court said that the judgment debt rate should only apply from four months after the order for costs.
Again, this is in stark contrast to the decision in Marbrow where the court said that interest should normally run from the date of the original order, where the court held that the decision in
Involnert Management Inc v Aprilgrange Limited & Ors [2015] EWHC 2834 (Comm)
was for all intents and purposes wrong.
I agree with that statement.
However, here the court approved of Involnert saying it was “a thorough analysis” of the issues and saying this:
“Normally the interests of justice will indicate that the rate of interest applicable in the event of non-payment of a judgment debt should only run from the time when (i) the amount of that debt is known (or can at least be the subject of fair estimation for the purposes of offers of compromise) and (ii) the essential mechanics of payment can be completed.”
The complete mess that the courts are in on the issues of interest and costs can be demonstrated by my own statement in my blog on the Marbrow case – judgment given on 10 July 2020 – where I said:
“This very helpful decision should put this issue to bed. Interest on costs runs at 8% from the date of the original order for costs and Involnert was wrongly decided.”
Just four days later, the High Court has taken a diametrically opposed view.
I realise that where there is discretion, different courts will come to different conclusions.
The problem here is that both courts are assuming that the decision that they have arrived at in each case is normal and customary etc.
I will deal with the issue of the third party’s liability for costs in a separate post.
For full and detailed analysis of the Marbrow case – see my blog
Kerry Underwood 
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