Tag: interest

Pre-judgment interest allowed at 2% above the Bank of England base rate

Ellena HunterLeave a comment

Asturion Foundation v Alibrahim [2024] EWH 757 (Ch) concerned a very long-running action (9 years) during which the Defendant had incurred about £6.6 million in costs. The Claimant sought recovery of the title of an English property that had been transferred to the Defendant, by a board member of the Claimant.

Mr Justice Johnson found that the transfer of title was made within the purposes of the Foundation and the transferor had acted within the scope of internal competencies. It was agreed by the Claimant that the Defendant was the successful party and was therefore entitled to her costs.

The Defendant had failed on some points and therefore, the Claimant sought a percentage deduction to the Defendant’s recoverable costs to account for those unsuccessful issues. The Defendant conceded that a percentage deduction should be made but did not agree with the extent proposed by the Claimant. Ultimately, Mr Justice Johnson made a deduction of 15% from the Defendant’s otherwise recoverable costs.

The parties addressed Mr Justice Johnson on the issue of interest on costs. It was the Defendant’s position that interest should be paid on the costs expended by her since the dates of payments of the relevant invoices rendered by her solicitors. The Defendant emphasized that due to the litigation spanning a period of 9 years, she had been ‘out of pocket’ for a considerable period and she should therefore, be entitled to a payment reflecting the time value of money. This was calculated by the Defendant’s costs draftsman using a rate of 2% above the Bank of England base rate which was argued to represent a reasonable approximation of the Defendant’s likely costs of borrowing.

The Claimant argued that there should be suspension of payment of judgment debt interest until it had a fair opportunity to decide what sums it accepts should be payable, as a detailed bill of costs had not yet been received.

The Judge saw merits in both parties’ arguments.

In terms of pre-judgment interest, it was noted that this was within the Court’s discretion. The Judge determined that as the Defendant had been ‘out of pocket’ for a significant period of time, it would be unfair for her not to be compensated accordingly. Therefore, the Judge ordered that pre-judgment interest be paid at 2% above base rate from time to time. Interest was not, however, awarded during a 2.5-year period in which the proceedings were in a ‘state of suspense’ pending determination of the Defendant’s strike out application that was eventually unsuccessful.

The Judge did agree that the Claimant should be afforded further time to consider the bill (when received) and to determine what it accepts as reasonable and proportionate. Therefore, Mr Justice Johnson suspended the accrual of judgment debt interest for a period of 3 months but allowed pre-judgment interest to continue.

Ellena Hunter is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Can you charge interest on Deputyship costs?

Stephanie KayeLeave a comment

It is commonly questioned about whether or not interest is payable on legal fees incurred by a professional Deputy in a Court of Protection case. Interest on unpaid legal costs is governed by the Judgments Act 1838 and Section 74 of the County Courts Act 1984. It is stated that the rate applicable which a receiving party can reasonably be charging interest at is 8% on any unpaid legal costs owed by the paying party. Interest will not run on any payment of costs made on account, therefore if interim payments have been taken, interest will not accrue on those sums.

In Thomas v Bunn [1991], it was held that where a defendant is ordered to pay ‘damages to be assessed’, interest on the damages only ran from the date of the judgment or order assessing the damages payable and not from the date of the order establishing liability. As a result and applying that same logic, it’s widely accepted that interest will run in COP cases but only from the date of the Final Costs Certificate as this is the time that the amount payable is known. If the costs have not been assessed and no Final Costs Certificate has been made, interest cannot accrue.

Practically, it is an additional statutory entitlement so is in addition to the invoices already rendered, but not vatable. The party must be notified that interest is accruing.

Many firms take the view that it is not appropriate to charge interest on legal fees in COP cases where still acting as Deputy, as it would not be deemed in P’s best interests. That said, there are circumstances whereby the Deputy may expect not to receive payment for some time and therefore charging interest may be necessary, for example, pending the sale of a property to release cash assets. It is for the Deputy and the Deputy’s firm to decide whether to charge interest on the legal fees.

If you have any questions, please contact Stephanie Kaye at stephanie.kaye@clarionsolicitors.com

Pre-Judgment Interest

Andrew McAulayLeave a comment

s17 of the Judgments Act 1838 and CPR 44.2 (6) (g) allows the High Court to award pre-judgment interest on costs.

In the writer’s experience, the award of pre-judgement interest is only common in the Commercial Court. It is usually awarded on long-running cases where costs have been paid on a private fee paying basis and there has been a large outlay on costs. The interest will usually be awarded from the date that the successful party paid the law firms’ invoices.  There must be a good reason to award pre-judgment interest, but there is no requirement to establish exceptional circumstances. The comments of Lord Justice Waller in Bim Kemi AB v Blackburn Chemicals Ltd [2003] EWCA Civ 889 summarise the position well:

‘…….in principle there seems no reason why the Court should not do so [i.e. make an award of pre-judgment interest] where a party had had to put up money paying its solicitors and been out of the use of that money in the meanwhile’.

In the recent of case Puharic v Silverband [2021], the Court awarded pre-judgment interest at a rate of 2% over base rate. In the writer’s experience, awards of between 1 and 2% are common.

Pre-judgment interest is a tool that is not routinely considered by litigators. It is important that litigators have pre-judgment interest at the forefront of their minds when dealing with the issue of legal costs following a final hearing. The remedy helps to put the successful party back in the position it would have been in had the litigation not been necessary. If the successful party had not had to pay their lawyers, they would have utilised the money elsewhere or would not have had to have incurred the costs of borrowing it.

Have you had any recent experiences of pre-Judgment interest? If yes, then please feel free to share them through this blog.

This blog was written by Andrew McAulay. Andrew is a Partner at Clarion and the Head of the Costs and Litigation Funding team. He can be contacted on 07764501252 or at andrew.mcaulay@clarionsolicitors.com