This case raised the issue of interest on costs where a CFA was in place, and from which date the interest should be calculated from. The Claimant argued that interest should run from the date of the costs order, known as the incipitur rule, whereas the Defendant held that interest should run from the date that the costs were assessed, known as the allocator rule.

The Court ruled that where a successful Claimant is represented under a CFA interest should run from the date of the costs order and not the date costs are assessed.
Recent case law had brought the position into doubt with a number of decisions in cases such as Gray v Toner, Bridle v Ikhlas and Motto v. Trafigura, holding that interest should only run on costs from the later date when costs are assessed, potentially saving Defendants considerable sums.

Background

In October 2007, the Claimant’s solicitors agreed to act for Mr Simcoe under a CFA, in a personal injury claim against his former employer, Jacuzzi UK Group plc. Damages of £12,750 were agreed with costs. Detailed assessment proceedings were initiated and the Claimant’s costs were subsequently agreed at £74,000.
Issue

Costs and damages had been agreed and the only outstanding issue was whether interest on the costs of £74,000 was payable from the date of the costs order, as the Claimant contended, or from the date upon which the sum for costs was formally agreed as the Defendant contended. The Court held in favour of the Defendant but as this was an important point of principle, permission was given to appeal.

Appeal Decision

At the Court of Appeal Lord Neuberger concluded the general rule was that interest should run from the incipitur date, i.e. the date of the order giving rise to costs.

The Court of Appeal reviewed case law and legislation including: Sections 17 and 18 of the Judgments Act 1838, the County Courts Act 1984, the County Court (Interest on Judgments Debts) Order 1991 and Rule 40.8 of the Civil Procedure Rules 1998.

The fact that the matter was funded by way of a CFA did not justify departure from the incipitur rule, as even though the Claimant has not paid anything to the Solicitor until after the costs have been agreed, effectively those solicitors have been financing the Claimant’s litigation and they should not be expected do so until the costs are assessed.

Comment

Now there is a considered judgment from the Court of Appeal we expect that challenges to a receiving party’s entitlement to interest on costs will be few and far between, if any are made at all.