Simcoe v Jacuzzi UK Group Plc
| Jurisdiction | England & Wales |
| Judge | The Master of the Rolls,Lord Justice Hooper,Lord Justice McFarlane |
| Judgment Date | 16 February 2012 |
| Neutral Citation | [2012] EWCA Civ 137 |
| Docket Number | Case No: A2/2011/2192 |
| Court | Court of Appeal (Civil Division) |
| Date | 16 February 2012 |
[2012] EWCA Civ 137
The Master of the Rolls
Lord Justice Hooper
and
Lord Justice Mcfarlane
Sitting with Master Gordon-Saker as Assessor
Case No: A2/2011/2192
Claim No 7LS57337
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LEEDS COUNTY COURT
District Judge Hill
Royal Courts of Justice
Strand, London, WC2A 2LL
John Foy QC and Roger Mallalieu (instructed by Irwin Mitchell LLP) for the Appellant
Mark Friston and Paul Hughes (instructed by Berrymans Lace Mawer) for the Respondent
Hearing dates: 30 January 2012
The issue on this appeal concerns the date from which interest should run on an award of costs in favour of a successful claimant, whose legal representatives were retained under a conditional fee agreement (a 'CFA'), in a personal injury claim brought in the County Court.
The factual history
The facts are as follows. 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.
The CFA contained a number of definitions. 'Basic charges' were charges assessed by reference to the work done on the case by solicitors at Irwin Mitchell calculated by reference to an hourly rate, which varied between £135 and £250, depending on the experience and qualification of the solicitor concerned. The 'success fee' was 100% of the basic charges, and was payable only if the claimant won the case. The 'insurance' was a policy, whose premium increased as the case progressed, and would indemnify the claimant against liability for Irwin Mitchell's disbursements and the defendant's costs.
The effect of the CFA, in summary terms, was as follows. If the claimant won, he would be liable to pay Irwin Mitchell's 'basic charges', 'success fee', and disbursements, and 'the insurance premium'. However, the CFA informed him that he would be able to recover these from the defendant, and, to the extent that any sum was reduced on assessment or by agreement with the defendant, he could normally rely on the reduction as against Irwin Mitchell. If he lost, the claimant would not have to pay Irwin Mitchell, save in respect of disbursements, which, he was told, could be covered by the insurance, which could also protect him against liability for the defendant's costs.
Thereafter, Irwin Mitchell issued proceedings for damages on behalf of the claimant against the defendant in the Leeds County Court. On 16 April 2010, the proceedings were compromised by way of a consent order, under which the defendant agreed to pay, and the claimant agreed to accept, £12,750 by way of damages, together with costs to be assessed on the standard basis if they were not agreed. Although detailed assessment proceedings were initiated, the claimant's costs were subsequently agreed in the sum of £74,000 (which included a reduction in the success fee to just over 60%), which was then paid to the claimant's solicitors.
The only issue between the parties is whether the defendant is liable to pay interest on the sum of £74,000 from 16 April 2010, as the claimant contends, or whether interest is only payable from the date on which the sum was formally agreed, as the defendant contends. The issue was determined by District Judge Hill in a very brief judgment (perhaps unsurprisingly as neither party appeared before him) on 9 June 2011. He held, in favour of the defendant, that 'interest on costs runs from the date of assessment of those costs', basing his decision on the decision of His Honour Judge Stewart QC in a case in the Liverpool County Court, Gray v Toner (11 November 2010). His Honour Judge Gosnell gave the claimant permission to appeal, and ordered, pursuant to CPR 52.14, that the appeal should be transferred to the Court of Appeal as it 'raise[d] an important point of principle'.
The issue of principle can be expressed in general terms as follows: where the court orders one party to pay the other party's costs in a sum to be agreed or determined, does interest run (i) from the date of the order for costs as agreed or assessed, or (ii) from the date on which the sum is agreed between the parties or assessed (or, to use the pre-CPR language, taxed) by the court? Or, in the arcane language of the costs world, does interest run from the incipitur date or the allocatur date?
In determining that issue, we have received helpful written and oral submissions on behalf of each party. We have also had the invaluable benefit of the expertise and advice at the hearing of the appeal and during our deliberations of Master Gordon-Saker.
To resolve this issue, it is appropriate to look first at the position in the High Court and the County Court, prior to the introduction of the Civil Procedure Rules ('CPR'), and then turn to the changes effected in April 1999, when the CPR came into force.
The law in the High Court before the CPR
Sections 17 and 18 of the Judgments Act 1838 ('the 1838 Act') provided as follows:
'17. … every judgment debt shall carry interest at the rate of 4 pounds per centum per annum from the time of entering up the judgment … until the same shall be satisfied ….
18. … all decrees and orders of Courts of Equity and all rules of Courts of common law … whereby any sum of money, or any costs, charges, or expenses, shall be payable to any person, shall have the effect of judgments … And the persons to whom such monies, or costs, charges, or expenses, shall be payable, shall be deemed judgment creditors within the meaning of this Act ….'
In Hunt v AM Douglas (Roofing) Ltd [1990] 1 AC 398, Lord Ackner, with whom the other Law Lords agreed, concluded that, as had been held in a number of nineteenth century cases (including Boswell v Coaks (1887) 57 LJ Ch 101 and Pyman v Burt, Boulton [1884] WN 100), the effect of these two sections was that interest on costs ran from the date the order for costs was made, and not the date on which the costs were subsequently assessed or agreed. Lord Ackner also said at [1990] 1 AC 398, 415F-416B that, while 'a satisfactory result cannot be achieved in every case', he considered that 'the balance of justice favours the incipitur rule' for reasons which he then explained.
Those reasons (renumbered and abbreviated) were as follows:
i) '[T]he unsuccessful party … has caused the costs … to be incurred, [and, as] interest is not awarded on costs incurred and paid by the successful party, why should he suffer the added loss of interest on costs incurred and paid after judgment'?
ii) 'Since … payments of costs are likely nowadays to be made to lawyers prior to taxation, … the allocatur rule would generally … do greater injustice than … the incipitur rule,.
iii) [T]he incipitur rule provides a … stimulus for payments to be made on account … prior to taxation, for costs to be more readily agreed, and for taxation to be expedited';
iv) Barristers, solicitors and expert witnesses should not be expected to finance their clients' litigation until … the [taxation is completed]'.
v) Where the interest is payable on disbursements and costs in respect of a period during which they have not been paid, there can be 'an express agreement between the solicitor and his client that any [such] interest … on the costs [shall] belong to the solicitor, and … on disbursements [shall] be held by him for … the … persons to whom they are ultimately paid.'
Two years later, in Thomas v Bunn [1991] 1 AC 362, the House of Lords had to consider whether interest on damages in a personal injury claim, following a split trial, ran from the date of judgment on liability, or the later judgment (or agreement) on quantum. In deciding on the latter date, Lord Ackner (with whom the other Law Lords agreed) accepted that 'it is an anomaly that an order for payment of costs is construed for the purposes of section 17 as a judgment debt', but he then said that 'the courts have accepted since its enactment that section 17 does apply to such an order, and for the reasons set out in Hunt [1990] 1 AC 398, the balance of justice favours continuing so to treat such an order' – [1991] 1 AC 362, 380E.
The law in the County Court before the CPR
The position in the County Court was governed by section 74(1) of the County Courts Act 1984 ('the 1984 Act'), which, so far as relevant, provided:
'The Lord Chancellor may by order made with the concurrence of the Treasury provide that any sums to which this subsection applies shall carry interest at such rate and between such times as may be prescribed by the order.'
And it is clear from subsection (2) that 'the sums' to which this provision refers include sums payable by way of costs pursuant to a court order. Section 74(6) provides that the power is to be exercised by a statutory instrument.
In 1991, the Lord Chancellor made the County Court (Interest on Judgments Debts) Order 1991 ( SI 1991/1184, 'the 1991 Order'). The 1991 Order was promulgated with the concurrence of the Treasury, as is stated at the beginning of the Order, and as is evidenced by the signatures of two of the Lords Commissioners of the Treasury at the end of the Order, after the signature of the Lord Chancellor.
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