Fosse Motor Engineers Ltd & Ors v Conde Nast & National Magazine Distributors Ltd & Ors

Factual and Procedural Background

This case concerns a fire that occurred in December 2002 at premises owned by the first claimant and occupied or used by other claimants. The claim against the first defendant was that it, through its servants or persons acting as such, negligently caused the fire. After hearing evidence and argument, the court found that liability and causation were not established and dismissed the claimants' case. The substantive judgment was handed down on 20th August 2008. The current matter concerns the question of costs following that judgment.

Legal Issues Presented

1. Whether the claimants should pay interest on the costs incurred by the first defendant's insurers from the dates invoices were paid until the date of judgment, and at what rate.
2. Whether the court has the discretion under CPR 44.3(6)(g) to award interest on costs paid by the successful defendant's insurers rather than the defendant directly.

Arguments of the Parties

Claimants' Arguments

• The claimants accept they should pay the first defendant's costs on a standard basis and agree to a payment on account of £300,000 by 28th October 2008.
• The claimants dispute the entitlement to interest on costs paid by the first defendant's insurers, arguing that the first defendant made a prior arrangement with its insurers to fund the defence and pay costs as the case proceeded.
• They contend that there is no evidence as to how the insurers funded these costs and suggest that insurers may have recouped such costs through premium adjustments, so no actual loss or cost to insurers is demonstrated.

First Defendant's Arguments

• The first defendant, through a witness statement from a representative, identified costs of approximately £680,000 incurred from January 2004 to August 2008, paid out on account as the proceedings progressed.
• It is implied that the first defendant's insurers have borne the financial burden of these costs, and interest on costs should be awarded to compensate for the loss of use of these funds.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Nova Productions Limited v Mazooma Games Limited No. 2 [2006] EWHC 189	Jurisdiction to award interest on costs before judgment under CPR 44.3(6)(g).	Adopted the approach that the court has broad discretion to award interest on costs pre-judgment, considering all circumstances including the conduct of parties and the need to deal justly.
Amoco UK Exploration Company v British American Offshore Limited [2002] BLR 135	Recognition of CPR 44.3(6)(g) as the source of jurisdiction for awarding interest on costs before judgment.	Supported the principle that substantial costs incurred prior to judgment may attract interest, especially in commercial cases.
Bim Kemi AB v Blackburn Chemicals Limited [2003] EWCA Civ 889	Power of the court to award interest on costs and appropriate rates.	Confirmed that interest on costs can be awarded at 1% above base rate for costs incurred prior to judgment and at the judgment rate thereafter.
Hunt v R M Douglas (Roofing) [1990] 1 AC 398	Authority for awarding interest on costs at judgment rate from the date of the costs order until payment.	Referenced to support awarding interest at judgment rate from the date of the order.

Court's Reasoning and Analysis

The court began by acknowledging the substantive dismissal of the claimants' case and the agreed principle that claimants should pay the first defendant's costs subject to detailed assessment. The issue focused on whether interest should be awarded on costs paid by the first defendant's insurers before judgment.

The court referred to CPR 44.3(6)(g), which expressly grants the court discretion to award interest on costs from or until a certain date, including pre-judgment dates. The court reviewed relevant case law, particularly the judgment of Mr Justice Kitchin in Nova Productions Limited v Mazooma Games Limited No. 2, which confirmed a broad discretion to award interest on costs based on principles of fairness and the overriding objective of dealing justly.

It was noted that the principle behind awarding interest on costs is compensatory: to compensate a party who has had to pay costs as the case proceeded and thus lost the use of those funds. The court recognized that in modern commercial litigation, costs are often funded by insurers rather than directly by the defendant. The court concluded that the discretion to award interest on costs extends to costs paid by a successful party's insurers, reflecting commercial reality.

Although the claimants argued there was no evidence as to how insurers funded these costs and that insurers might recoup costs through premiums, the court found this irrelevant to the principle. It presumed that insurers suffered a financial loss in paying costs as they fell due, such as loss of interest on funds paid out.

Given the substantial nature of the case, the amount of costs incurred, and the period over which costs were paid, the court found it appropriate, both in principle and discretion, to award interest on costs at the rate claimed. The calculation of interest was to be done after detailed assessment to ensure interest is only awarded on allowed costs, with any interim payments reducing the recoverable interest.

Holding and Implications

The court held that the claimants must pay interest on the first defendant's costs as incurred and paid by the first defendant's insurers, at 1% above the Bank of England base rate from the dates invoices were paid until the date of judgment, and at the Judgment Act rate thereafter until payment.

The decision confirms that under CPR 44.3(6)(g), courts have broad discretion to award interest on costs paid by insurers of a successful party, reflecting commercial realities in litigation funding. The ruling directly affects the parties by requiring the claimants to compensate not only for costs but also for the financial burden borne by the defendant's insurers. No new precedent was established beyond the application of existing principles to the facts of this case.