Excalibur Ventures LLC v Texas Keystone Inc. and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Christopher Clarke |
| Judgment Date | 03 February 2015 |
| Neutral Citation | [2015] EWHC 566 (Comm) |
| Docket Number | Case No: 2G1G FOLIO 1517 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 03 February 2015 |
[2015] EWHC 566 (Comm)
Lord Justice Christopher Clarke
Case No: 2G1G FOLIO 1517
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
7 Rolls Building
Fetter Lane, EC4A 1NL
Mr R Eschwege (instructed by Memery Crystal LLP) for the first, second, third and fourth Costs Claimants.
Mr J Wardell QC and Mr R Carpenter (instructed by Withers LLP) for the first and second Costs Defendants
Mr I Croxford QC and Mr N Medcroft (instructed by Orrick, Herrington & Sutcliffe (Europe) LLP) for the fifth to eighth Costs Defendants
Hearing dates: 3rd February 2015
I now have to determine the order to be made following my judgment of 23 October 2014 in respect of the section 51 costs applications. I propose to do so by reference to the draft order prepared by the costs claimants.
Paragraphs 1 to 6 are agreed with the qualification, which I approve, of the addition of the word "collectively" before "liable to pay". In the case of each of these paragraphs the last sentence with its definition of different costs liabilities should be omitted.
In respect of paragraph 7, which deals with interest on the costs of the action, the rate of 1.5 per cent from the date of payment of the relevant invoices is agreed to be appropriate until the judgment rate kicks in but there is a dispute as to when that date should be. Whenever it is, the order should provide that interest should run at the rate prescribed pursuant to the Judgment Act 1838 rather than 8 per cent in case there are any changes in the prescribed rate, however unlikely that is to be.
The important question is whether the Judgment Act rate should start any earlier than 23 October 2014. Excalibur became liable for interest at that rate from 13 December 2013. It does not, however, follow that the funders should pay interest at that rate from then. I am told that there is no reported case which has considered the question of the appropriate interest rate date for interest under the Judgment Act in relation to funders.
The costs claimants submit that the funders should follow the fortunes of Excalibur in this respect as in others. Excalibur has not paid and will not be paying the 8 per cent rate due from then. It is only right, they say, that Excalibur should make up what they characterise as the shortfall in the costs claimants' recovery from Excalibur — otherwise, they submit, the funders will receive an undeserved windfall.
I do not accept this characterisation. Eight per cent is very significantly above current commercial rates. Although the rate prescribed under the Act is not prescribed by way of penalty, in circumstances where the commercial rate taken is 1. 5 per cent, its commercial character is penal. The "shortfall" in question lies in the inability of the Costs Claimants to recover the considerable excess over any commercial rate that 8 per cent represents. So far as the funders are concerned, a refusal to award interest at that rate from 13 December 2013 would only be a "windfall" in the sense that it would avoid what is in practical effect a penal charge.
The 8 per cent rate is something of an anomaly. It is prescribed by regulation but it has remained at that rate for a long time despite changes in current interest rates. In principle it is difficult to justify other than by treating it as an inducement to paying parties to agree costs or to proceed swiftly to an assessment. In that context a number of judges have regarded it as unjust that the 8 per cent rate should begin the moment that a judgment for costs has been given. In Colour Quest Limited v Total Downstream (UK) Limited [2009] EWHC 823, David Steel J regarded it as unjust for interest to accrue at that rate immediately after the costs order was made. Such an order if complied with could be said to represent a very sizeable windfall for the receiving party. He postponed the accrual of that rate for six months. In London Tara Hotel v Kensington Close Hotel [2011] EWHC 28, Roth J postponed the start of the judgment rate for four months in a case where the costs were large and there might be real issues of proportionality and reasonableness on taxation. He took account of the fact that application of a higher rate could serve as an incentive to proceed with the taxation or reach agreement on costs. In SCB v Ceylon Petroleum Corporation [2011] EWHC 2094, Hamblen J adopted a similar period. By contrast, in Schlumbereger Holdings Limited v Electromagnetic GO Services [2009] EWH 733, and Cranway Limited v Playtech Limited [2009] EWHC 823, Mann J and Lewison J, as he then was, declined to take this approach.
I was at one time attracted to the idea that I should order the 8 per cent rate to begin not at 13 December 2013 but some four to six months later in line with the authorities to which I have referred. However, all the cases to which I have referred were cases where the question was whether the accrual of the 8 per cent rate should be postponed until a date after the costs judgment, not as here whether it should be brought back to before then.
The default date for the application of the 8 per cent rate is the date of my judgment in October 2014. I have, however, a discretion to order interest to run from an earlier date if I think it just so to do. I do not think that it would be. I regard it as inappropriate to backdate the commencement date of the 8 per cent rate to a date before any order was made against the funders to pay costs or as to the scale on which they should do so.
The Costs Claimants say that the funders took a gamble on whether they would be ordered to pay costs and if so on what scale. Having lost the bet, they should make good the shortfall. If they had provided the security that I had ordered to be provided, the matter could have proceeded to assessment and by now the costs would either have been assessed or agreed. As to that, the funders were not bound to provide further funds. They were entitled to challenge their liability, or the scale of their liability, to pay costs and did so on grounds which, although I have rejected them, were not unreasonably put forward; and they have never come under any obligation to pay any costs until my order of October 2014. They could, of course, always have agreed a figure but until any assessment began they would have had difficulty in deciding what figure to offer. Further, any participation on their part in such assessment would have been, and may still be, problematic in that it is Clifford Chance that has access to most of the information and documentation from the Excalibur side relevant to costs. Given what has happened in the litigation, their willingness to assist the funders must be in doubt.
In the circumstances and despite the clarity of the additional submissions of Mr Eschwege this morning for which I am grateful, I propose to order that interest should be payable at the Judgments Act rate from the date of my judgment in October 2014.
Paragraph 8 deals with apportionment between the costs defendants and I shall address that in a moment.
Paragraph 9 deals with interim payment on account of costs and interest. I am of the view that there should be an interim payment on account of a percentage of the costs and interest. In my view, for the reasons set out below, the appropriate percentage is 80 per cent. The figures will have to be reworked to take account of the date from which I have decided that interest under the Judgments Act rate shall accrue.
CPR 44.2 (a) provides that the court, "will order" a paying party "to pay a reasonable sum on account of costs unless there is good reason not to do so". This was and is the rule in place from April 2013 replacing the former rule that the court "may order an amount to be paid on account before costs are assessed". Under the new rule there is thus a presumption that a payment will be made, subject to an exception, and a specific criterion as to amount.
There is some authority which refers to the criterion of "irreducible minimum", e.g. Beach v Smirnov [2007] EWHC, 3499 or similar expressions. Several of the cases were decided before the rule changed. In Mars UK Limited v Teknowledge Limited [2000] SFR 138, Jacob J, as he then was, said that, "a payment of some lesser amount, which he will almost certainly collect was a closer approximation to justice than saying that you need time to work out the total of the costs".
In Blakemore v Cummins [2010] 1 WLR, 983 Elias LJ, giving the judgment of the Court of Appeal, accepted that in determining whether or not to make any order it was important to consider that a party should not be kept out of money which will almost certainly be demonstrated to be due longer than was necessary. That case was, however, connected with what was described as the "first issue" whether or not any order should be made and not, "the second issue", i.e. quantum. It was also decided when the previous rule was in force. Lord Justice Elias referred in the context of the first issue to the discretion under the rule as a "wide one". He did not lay down that the ...
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