Interest on Costs

In Simcoe v Jacuzzi (16th February 2012) the Court of Appeal determined that the time for interest on costs was the date of judgment, the “incipitur” rule.

The Claimant brought a claim for personal injury in the County Court for damages for a repetitive strain injury suffered at work. He entered into a CFA with his solicitors on 5th October 2007 with a success fee of 100%. The claim settled under a consent order on 16th April 2010 for £12,750.00 together with costs to be assessed on the standard basis, if not agreed. Those costs were subsequently agreed at £74,000.00 which included a reduced success fee of 60%.

The only matter in issue was whether the Defendant was liable to pay interest on £74,000.00 from the date of the consent order containing the entitlement to costs, or from the date when costs were agreed. The District Judge gave judgment for the defendant allowing interest to run from the date of assessment of the costs following the decision in Gray v Toner in the Liverpool County Court in November 2010.

At the centre of this dispute was the provision in CPR 40.8(1) that where interest payable on a judgment pursuant to Section 17 Judgments Act 1838 or Section 74 County Courts Act 1984, the interest shall begin to run from the date the judgment is given unless another rule or practice direction, or the court orders otherwise.

The fundamental question was the meaning of the word “judgment”, which the Claimant argued that it meant the date of the consent order agreeing the entitlement to costs, so that the normal rule under CPR 40.8 is the “incipitur” rule. The Defendant argued in favour of the date of certification of the costs, the “allocatur” rule.

The Master of the Rolls went through a thorough analysis of the Judgments Act 1939, Section 74(1) of the County Courts Act 1984, County Court (Interest on Judgment Debts) Order 1991 and 40.8 Civil Procedure Rules and concluded that 40.8(1) CPR itself, which states in terms that the power which it confers derives not from the 1997 Act, but from the 1938 Act in the High Court and from the 1984 Act in the County Court.

As the Claimant was acting under a CFA the Defendant sought to argue that the Court should “otherwise order” the interest to run from the allocatur date on the basis of Lord Ackners judgment in Hunt v Douglas Roofing because “the balance of justice favours the incipitur rule” did not apply in a case such as this. The Master of the Rolls came down firmly in favour of the Claimant and also concluded that there was no justification for departing from the incipitur rule as the Claimant acted under a CFA.

What for the Future

Simcoe clearly is binding in the County Court but what is the position in the High Court? It is not clear. Parties should be prepared to proceed on the basis that Simcoe applies to High Court cases as well, but as the position is not clear, it may still be arguable in negotiations or at detailed assessment that interest runs from the allocatur date – CPR 40.8(1)(a)

The full judgment can be found by clicking the following link