Factual and Procedural Background
The issue on 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 (CFA), in a personal injury claim brought in the County Court.
The claimant was employed by the defendant for assembling shower cubicles and suffered pain due to repetitive work. The claimant instructed solicitors under a CFA, entered into on 5 October 2007. The CFA defined 'basic charges' calculated by hourly rates, a 'success fee' of 100% of basic charges payable only if the claimant won, and an insurance premium to cover certain liabilities.
If successful, the claimant would pay basic charges, success fee, disbursements, and insurance premium but could recover these from the defendant. If unsuccessful, the claimant would not pay solicitors except for disbursements, which could be covered by insurance.
Proceedings were issued in the County Court and compromised by consent order on 16 April 2010, awarding damages and costs to be assessed. Costs were agreed at £74,000, including a reduced success fee, and paid to the claimant's solicitors.
The sole dispute was whether interest on the costs was payable from the date of the consent order (the "incipitur" date) or from the date the costs were agreed (the "allocatur" date). The District Judge held that interest runs from the date of assessment/agreement of costs, relying on a prior County Court decision. Permission to appeal was granted, and the appeal was transferred to the Court of Appeal due to the important point of principle raised.
Legal Issues Presented
- Does interest on costs awarded by the court run from the date of the order for costs (incipitur date) or from the date the costs are agreed or assessed (allocatur date)?
- Whether CPR 40.8(1) effectively replaced or amended the 1991 County Court (Interest on Judgments Debts) Order, and if so, whether it is valid in the County Court given the statutory requirement for Treasury concurrence.
- If CPR 40.8 applies, whether the normal rule is that interest runs from the incipitur date and whether there is justification to depart from that rule in this case.
Arguments of the Parties
Appellant's Arguments
- CPR 40.8(1) is ineffective in the County Court because it was made without the required concurrence of the Treasury, so the 1991 Order still applies mandating interest from the incipitur date.
- If CPR 40.8 does apply, the normal rule is that interest runs from the incipitur date, and there is no reason to depart from this rule in the present case.
- The 1991 Order and established case law support the incipitur rule, which is more just and practical.
Respondent's Arguments
- Interest on costs should run from the allocatur date, i.e., the date costs were agreed or assessed.
- CPR 40.8(1) validly replaced the 1991 Order in the County Court, as the 1997 Act empowered the making of such rules.
- The claimant's solicitors’ hourly rates would have accounted for delay in payment, so applying the incipitur rule results in double recovery of interest.
- The circumstances of a CFA and uplift fees justify departing from the incipitur rule.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Hunt v AM Douglas (Roofing) Ltd [1990] 1 AC 398 |
Interest on costs runs from the date the order for costs is made (incipitur date), not the date of assessment or agreement. |
Adopted as establishing the balance of justice favors the incipitur rule, providing multiple policy reasons supporting this rule. |
| Thomas v Bunn [1991] 1 AC 362 |
Confirmed that section 17 of the Judgments Act 1838 applies to orders for costs and supports the incipitur rule. |
Reinforced the principle that interest runs from the date of the order for costs rather than later assessment. |
| R v Secretary of State for Social Services ex p Association of Metropolitan Authorities [1986] 1 WLR 1 |
Regulations made without required consultation may be ultra vires but may be preserved in court discretion where acted upon. |
Distinguished on grounds that Treasury concurrence is required (not mere consultation), rendering CPR 40.8 ineffective without concurrence. |
| Fattal v Walbrook Trustees (Jersey) Ltd [2009] EWHC 1674 (Ch) |
Interest on costs generally runs from the incipitur date; departure from this rule justified only if justice requires. |
Supported the court’s view that interest should run from the incipitur date absent compelling reason otherwise. |
| Gray v Toner (11 November 2010, Liverpool County Court) |
Interest on costs runs from the date costs are assessed or agreed (allocatur date). |
Rejected by the Court of Appeal as not addressing key points; the Court reached a contrary conclusion favoring the incipitur rule. |
Court's Reasoning and Analysis
The Court began by reviewing the legislative framework governing interest on judgment debts and costs, including the Judgments Act 1838, the County Courts Act 1984, and relevant statutory instruments such as the 1991 Order and the Civil Procedure Rules (CPR) introduced in 1999.
The Court noted that before the CPR, established case law (notably Hunt and Thomas) held that interest on costs runs from the date of the order for costs (incipitur date), a rule supported by policy considerations including fairness to the paying party and the financing burden on solicitors.
The Court then examined whether CPR 40.8(1) effectively replaced the 1991 Order in the County Court. It concluded that the CPR was made without the required concurrence of the Treasury, rendering CPR 40.8(1) ineffective in the County Court for interest on costs. This conclusion was grounded in statutory interpretation and principles of administrative law regarding ultra vires regulations.
Accordingly, the 1991 Order remains applicable, mandating that interest on costs runs from the incipitur date.
Even if CPR 40.8(1) were effective, the Court held that its natural meaning and the established case law support the incipitur rule as the normal rule, with departures only justified by the court’s discretion in exceptional circumstances.
The Court rejected the defendant’s arguments that the CFA structure or the uplift fee justified departing from the incipitur rule, emphasizing that the uplift compensates solicitors for risk, not for delay in payment, and that solicitors should not be expected to finance litigation indefinitely.
The Court further dismissed the argument that hourly rates already accounted for delay, noting lack of evidence and that such considerations would affect hourly rates rather than the date interest runs.
The Court cautioned against overcomplicated factual inquiries into the precise date interest should run, advocating a broad brush approach consistent with the policy reasons underlying the incipitur rule.
Finally, the Court distinguished the prior County Court decision relied upon by the District Judge, noting significant points were not addressed in that case and explaining why it reached a different conclusion.
Holding and Implications
The Court ALLOWED the claimant's appeal and held that interest on costs runs from the incipitur date—the date of the order for costs—rather than the allocatur date when costs are agreed or assessed.
The Court ruled that CPR 40.8(1) is ineffective in the County Court due to the absence of Treasury concurrence, so the 1991 Order applies mandating the incipitur rule. Alternatively, if CPR 40.8 applies, it supports the incipitur rule as the normal rule, and no justification exists to depart from it in this case.
The direct effect is that the defendant must pay interest on the costs from the date of the costs order, not from the later date of agreement. The Court noted no new precedent beyond affirming established principles but highlighted concerns about disproportionate costs in civil litigation, hoping ongoing reforms will address such issues.