Interest on Legal Costs

CarlisleLegalCosting
March 22, 2012

Instructing a lawyer is expensive. Losing a legal case is even more expensive. Not only do you have to pay your own solicitor, but normally you have to pay your opponents costs. In addition, interest is payable on those costs at a base rate of 8%.

The law has been in a state of flux with regards to interest on costs and whether it was payable in cases pursued under a Conditional Fee Agreement (CFA) following a number of minor court rulings followed by Gray v Toner in which HHJ Stewart found that the allocatur rule should be applied and interest on costs should not run from the date of judgement but from the later date of agreement or assessment of costs. The logic for this was that in matters pursued under a CFA, the client had not paid anything for the services so was not out of pocket and so it was unreasonable for interest to be payable. Practitioners waited with baited breath for the Court of Appeal decision in Simcoe v Jacuzzi UK Group PLC [2012] EWCA Civ 137.

The issue on the appeal concerned the date from which interest should run on an award of costs, whose legal representatives were retained under a conditional fee agreement (a ‘CFA’), in a personal injury claim brought in the County Court. The background was that the claimant, Mr Simcoe, was employed by the defendant, Bradford Jacuzzi UK, for the purpose of assembling shower cubicles. By 2005, he was suffering pain as a result of the repetitive nature of the work involved. In that connection, he instructed Irwin Mitchell Solicitors LLP to act for him in proceedings for damages against the defendant. Irwin Mitchell agreed to act under a conditional fee (often known as ‘no win no fee’) basis, and in due course the claimant entered into a conditional fee agreement (a ‘CFA’) on 5 October 2007.

Following an agreement being reached between the parties regarding costs, District Judge Hill was requested to rule whether interest should run on those costs from the date of the settlement of the damages claim or the date of settlement of the claim for costs. District Judge Hill summarily found that the case of Gray v Toner should apply, and he ruled that the interest should run from the latter date based on the Allocatur Rule.

An appeal was taken and due to its importance, was transferred to the Court of Appeal. On Appeal various points were taken and upheld to include the fact that CPR 40.8 did not apply in the county court such that Article 2 of County Court (Interest on Judgments Debts) Order 1991 still applied and that demanded that the incipitur rule must be applied. The Master of The Rolls found in favour of the Claimant and ruled that the interest runs on costs from the date of judgement – the incipitur rule applies and issued a note of warning to all with regards to continued satellite litigation over costs “which would do the legal system no credit”.

The author, Mr Graham Whittaker of Carlisle Legal Costing, has been involved in costs law for over 10 years, and regularly advises solicitors involved in litigation on costs law, funding, retainers and law firm profitability as well as acting as a law costs draftsmen preparing bills of costs and appearing as a costs advocate in detailed assessment hearings.