Legal Cost Specialists

interest

Impact of inflation on costs

By on Jun 24, 2022 | 0 comments

A client recently asked me my view as to the impact of the current upsurge in inflation on cost matters. These are my initial thoughts: Interest on unpaid costs currently runs at 8%. When the Bank of England base rate was very low, and inflation was very low, this 8% return on unpaid costs was potentially attractive to receiving parties (although this would have to be weighed up against cash flow issues). Now that inflation is running at close to 10%, the 8% rate is no longer particularly attractive as it fails to adequately compensate receiving parties from being kept out of money that is potentially due to them. It is possible, to the extent to which receiving parties give the matter any thought, that this may encourage some to try to settle costs disputes at an earlier stage. It remains to be seen as to whether the judgment rate of 8% is increased to reflect the current high levels of inflation. However, given that no attempt was made to reduce the judgment rate during the long periods of relatively low inflation, it may be that a similar approach of inaction will be adopted now. The argument on the other side is that a judgment rate well in excess of what would be commercially available to investors, and well in excess of the rate of inflation, was not problematic as the high judgment rate positively encouraged early settlement and/or sensible payments on account. Conversely, if the judgment rate is no longer even keeping pace with inflation, then it should be revised upwards. The current high level of inflation is likely to put pressure on those that set the Guideline Hourly Rates to increase these sooner rather than later, and it was certainly anticipated within the last rate review that these should be updated on a regular...

Read More

Date from which interest on costs runs

By on Jul 17, 2020 | 0 comments

I have already written about the case of Marbrow v Sharpes Garden Services Ltd [2020] EWHC B26 (Costs) (10 July 2020) where the Senior Costs Judge Master Gordon-Saker declined the Claimant’s invitation to award pre-judgment interest on costs. He also declined my invitation, on behalf of the Defendant paying party, to only allow interest from 3 months after the date of the order for costs. This was the approach adopted by Leggatt J. (as he then was) in the High Court decision of Involnert Management Inc v Aprilgrange Limited & Ors [2015] EWHC 2834 (Comm) at paragraph 24: “it seems to me that a reasonable objective benchmark to take is the period prescribed by the rules of court for commencing detailed assessment proceedings. Pursuant to CPR 47.7, where an order is made for payment of costs which are to be the subject of a detailed assessment if not agreed, the time by which detailed assessment proceedings must be commenced (unless otherwise agreed or ordered) is three months after the date of the costs order. In order to commence such proceedings, the receiving party must serve on the paying party a bill of costs giving particulars of the costs claimed. It is then for the paying party to decide which items in the bill of costs it wishes to dispute. Postponing the date from which Judgments Act interest begins to run by three months will therefore generally serve to ensure that the party liable for costs has received the information needed to make a realistic assessment of the amount of its liability before it begins to incur interest at the rate applicable to judgment debts for failing to pay that amount.” It is clear from this passage that he was attempting to set out a general principle as to the date from which interest should run, as opposed to the decision being based on the particulars of the case.  This decision is heavily criticised in Cook on Costs 2020 (at 32.5). The Master summarised the law as being: “The entitlement to interest on costs under section 17 of the 1838 Act is automatic. Generally the court will not order it expressly. Interest is therefore payable on costs at 8 per cent from the...

Read More