Carleton & Ors v Strutt & Parker (A Partnership)

Under CPR 44.3(6)(g), the court has a discretion to award interest on costs from a date before judgment. The discretion should be exercised to achieve justice in the particular circumstances, including where a party has funded litigation costs and has been deprived of the use of that money. Interest may run from an appropriate date connected with payment of the costs, rather than necessarily from judgment or assessment. Where only part of a party’s costs is recoverable, the calculation should be based on the net sum ultimately found due, taking account of reciprocal costs orders.

The claimants had succeeded in the underlying action and complex costs orders had been made, leaving a balance payable by the defendant. The court was asked to determine whether interest should be awarded on the costs payable after agreement or detailed assessment, and, if so, the appropriate commencement date and rate. The agreed rate was 2.5 per cent above base rate. The principal issue was whether the court had power and discretion under CPR 44.3(6)(g) to award such interest and whether 4 April 2007 was the proper starting date.

1. Power and discretion. CPR 44.3(6)(g) empowered the court to order interest on costs from a specified date, including a date before judgment. Powell v Herefordshire Health Authority [2002] EWCA Civ 1786 established that the court was not confined to the dates proposed by the parties and could select a date producing justice in the circumstances.
2. Purpose and circumstances. The claimant submitted that the purpose of interest was generally compensatory because Lord Malmesbury had incurred substantial interest charges in funding the action. The authorities, including Bim Kemi AB v Blackburn Chemicals Ltd [2003] EWCA Civ 889 and Douglas v Hello! Limited [2004] EWHC 63 (Ch), supported awarding interest where a party had paid solicitors and been deprived of the use of the money. There was no bar to making the order.
3. Commencement and amount. Interest was ordered on the net sum found due to the claimants after taking account of the partial costs orders in their favour and the costs payable by them to the defendant. The appropriate starting date was 4 April 2007, the midway date proposed by the claimants. Interest was therefore payable at 2.5 per cent above base rate.