Involnert Management Inc. v Aprilgrange Ltd & Others AIS Insurance Services Ltd (First Third Party) OAMPS Special Risks Ltd (Second Third Party)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Leggatt |
| Judgment Date | 08 October 2015 |
| Neutral Citation | [2015] EWHC 2834 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2012 FOLIO 1569 |
| Date | 08 October 2015 |
and
and
[2015] EWHC 2834 (Comm)
Mr Justice Leggatt
Case No: 2012 FOLIO 1569
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Akhil Shah QC and Paul Sinclair (instructed by Jones Day) for the Claimant
Alistair Schaff QC and David Walsh (instructed by Ince & Co) for the Defendants
Daniel Shapiro (instructed by CMS Cameron McKenna) for the First Third Party
Sushma Ananda (instructed by Clyde & Co) for the Second Third Party
Hearing date: 22 September 2015
Approved Judgment
Introduction
Among the orders made at a hearing on 22 September 2015 to deal with matters consequential on my judgment handed down on 10 August 2015, I ordered the claimant to pay (i) 75% of the defendants' costs of the action and (ii) the costs of the action incurred by the second third party, OAMPS Special Risks Limited ("OAMPS") – such costs in each case to be the subject of a detailed assessment on the standard basis, if not agreed. I also ordered the claimant to make interim payments of £1,030,554 to the defendants and £600,000 to OAMPS on account of the costs payable.
There was insufficient time at the hearing to deal with one issue – being the date from which interest under section 17 of the Judgments Act 1838 should run on the remaining costs payable by the claimant. It was agreed that I should decide this issue on the basis of written submissions. I received written submissions on behalf of the claimant and on behalf of OAMPS, and the defendants adopted the submissions of OAMPS.
These are the reasons for my decision that interest should in each case run from 22 December 2015 – that is, three months after the date of the costs order.
The statutory position
Section 17(1) of the Judgments Act 1838 provides:
"Every judgment debt shall carry interest at the rate of 8 pounds per centum per annum from such time as shall be prescribed by rules of court until the same shall be satisfied, and such interest may be levied under a writ of execution on such judgment."
In Thomas v Bunn [1991] 1 AC 362, 380, Lord Ackner (with whose speech the other law lords agreed) said:
"The wording of section 17 clearly envisages a single judgment which constitutes the 'judgment debt'. This 'judgment debt' can only arise where the judgment itself quantifies the sum which the judgment debtor owes to his judgment creditor. The language of the section does not envisage an interlocutory judgment, but only a final judgment."
The House of Lords held in that case that, where a defendant is ordered to pay "damages to be assessed", interest on the damages under section 17 of the Judgments Act runs only from the date of the judgment or order assessing the damages payable and not from the date of the order establishing liability.
Only two years earlier, however, in Hunt v RM Douglas (Roofing) Ltd [1990] 1 AC 398, the House of Lords had adopted the opposite approach to an order for the payment of costs to be assessed. In Hunt's case Lord Ackner had also given the leading speech. In Thomas v Bunn [1991] 1 AC 362, 380, Lord Ackner accepted that treating such a costs order as a judgment debt for the purpose of section 17 is "an anomaly" but said that, for the reasons which he had given in Hunt's case, the balance of justice favoured continuing so to treat such an order, even though, until the costs have been assessed, there is no sum for which execution can be levied. The reasons given in Hunt's case were based on the absence (at that time) of any power to award interest on costs for any period before the date of judgment. That meant that, even if a litigant had incurred and paid costs over a period of years before another party was ordered to pay those costs, the litigant could not on any view recover interest to compensate it for being out of pocket prior to the date of the costs order. If interest did not run under the Judgments Act from the date of the costs order but only from when the amount of costs payable was subsequently assessed, the injustice would be all the greater. It would also place an incentive on a litigant to delay payment of the costs owed to its lawyers and experts until the costs were assessed and an incentive on the party ordered to pay the litigant's costs to delay the process of assessment: see [1990] 1 AC 398, 415–6.
Since Hunt's case was decided, the Civil Procedure Rules 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. Now that such orders can be made, it is hard to see that the balance of justice still favours continuing – anomalously – to treat an order for payment of costs to be assessed as a judgment for the purpose of section 17 of the Judgments Act 1838. As the House of Lords recognised in Thomas v Bunn, such an interpretation does not fit the wording of the section, which clearly envisages a quantified judgment debt for which execution can be levied. Unless and until the Supreme Court departs from it, however, the decision in Hunt's case remains binding authority.
There has been a further relevant statutory change since Hunt's case was decided. At the time of that decision section 17 of the Judgments Act provided for judgment debts to carry interest "from the time of entering up the judgment" – which was construed as meaning the date on which the judgment was pronounced. When the Civil Procedure Rules were introduced in April 1999, section 17 was amended so as to provide for interest to run "from such time as shall be prescribed by rules of court". CPR 40.8(1) provides that, where interest is payable on a judgment pursuant to section 17 of the Judgments Act 1838, "the interest shall begin to run from the date that judgment is given unless … (b) the court orders otherwise". That rule accordingly gives the court power to order interest under the Judgments Act to run from a later date than the date of the costs order.
Now that interest on costs can anyway be awarded to compensate the receiving party for the loss of use of the money before judgment, the existence of this power would be of little importance if the rate of interest payable under the Judgments Act was in line with commercial rates. Since March 2009, however, the Bank of England base rate has stood at 0.5%, while the judgment rate has remained at 8% per annum. At the present time a commercial rate of interest is generally taken in the Commercial Court to be 2% above base rate, i.e. 2.5%. When large sums have been spent on costs, it is therefore a matter of some significance whether interest at the higher rate payable under the Judgments Act starts to run when the costs order is made or not until some later date.
The rival contentions
In the present case the claimant asked the court to exercise its power under CPR 40.8 to order that the interest payable under the Judgments Act on the costs which the claimant has been ordered to pay to the defendants and to OAMPS should in each case begin to run from a date six months after the date of the costs order. OAMPS, supported by the defendants, opposed this application and argued that there is no proper justification for departing from the general rule set out in CPR 40.8 that such interest should begin to run from "the date that judgment is given" – which, in accordance with the decision in Hunt's case, means the date when the order for costs is made rather than the date when the liability is quantified.
Recent cases
Counsel in their written submissions cited a number of recent cases in which consideration has been given to the date from which interest on costs should run under the Judgments Act.
In Schlumberger Holdings Ltd v Electromagnetic Geoservices AS [2009] EWHC 773 (Pat), Mann J rejected an argument that the court should use its power under CPR 40.8(1) to postpone the date from which interest became payable under the Judgments Act until the date when the costs were quantified on a detailed assessment. Mann J did not accept that the differential between the judgment rate and a commercial rate of interest provided a good reason to order such a postponement in circumstances where fixing the judgment rate is a matter for Parliament. He also did not consider that it would be proper...
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