Crema v Cenkos Securities Plc

Interest under the Late Payment of Commercial Debts (Interest) Act 1998 may be payable even while liability for the debt is genuinely disputed. The statutory 30-day period governs when interest begins where the Act applies, and discretionary interest under section 35A of the Senior Courts Act 1981 need not be awarded for the overlapping period. A party’s reasonable assistance in recovering the debt and prompt commencement of proceedings may justify retaining the statutory rate. Costs may be reduced where the successful party advanced numerous unsuccessful or wasteful points. A Part 36 offer can justify indemnity assessment and interest on costs, but the court may temper those consequences under the applicable discretion. An interim payment on account should reflect the sum almost certainly recoverable, including the risk that a conditional-fee uplift will not be recovered in full.

This was a costs and interest judgment following the Court of Appeal’s decision on 16 December 2010 allowing Thomas Crema’s appeal from the order of Mr Jonathan Hirst QC, sitting as a Deputy High Court Judge in the Commercial Court. The first-instance judgment was [2010] EWHC 416 (Comm).

The court had to determine the date and rate of statutory interest, whether further discretionary interest was appropriate, the proportion of costs recoverable after a partly unsuccessful and unfocused case, the consequences of a successful Part 36 offer, and the interim payment to be made on account of costs.

The Court of Appeal determined the consequential issues following its allowance of the appeal.

1. Interest on the principal sum. Under the Late Payment of Commercial Debts (Interest) Act 1998, interest ran only from 13 July 2008, being 30 days after the sum became due on 12 June 2008. The court rejected a reduction of the statutory rate. It was reasonable for Crema to assist Cenkos in recovering the money from GPV, and, after that failed, he brought proceedings promptly. Interest under the 1998 Act remained payable despite a genuine dispute about whether the debt was due. The applicable rate was 13% in total.
2. Discretionary interest. No interest was awarded under section 35A of the Senior Courts Act 1981 for 12 June to 13 July 2008. The existence of a genuine dispute and the 30-day period of grace recognised by the 1998 Act made an additional award inappropriate. Thereafter, interest on any unpaid judgment debt was payable at the rate set by the Judgment Act 1838 and applicable statutory instruments.
3. Costs. Although Crema succeeded overall, both parties had taken bad points. Crema had taken considerably more, consuming more time, and had failed on the alternative implied-terms case and the FSA regulations point. He was therefore awarded 75% of his costs in the Court of Appeal and below.
4. Part 36 offer. Crema beat his offer of £882,000. The result affected the first-instance proceedings only. The court accepted that indemnity costs and interest on costs would in principle follow for 20 January to 16 March 2010, but, under the relevant discretion, limited recovery to 75% of costs assessed on the indemnity basis. Interest on those costs was awarded at 5% above base rate.
5. Interim payment. The court ordered Cenkos to pay £300,000 on account within 28 days. The proper approach was to order a sum that would almost certainly be recovered, recognising both that some conditional-fee uplift was likely and that the overall bill might be reduced.

Lord Justice Hughes and the Chancellor of the High Court agreed with Lord Justice Aikens.

• Court of Appeal (Civil Division): On 16 December 2010, allowed Crema’s appeal from the Commercial Court order.
• High Court of Justice, Queen’s Bench Division (Commercial Court): Judgment of Mr Jonathan Hirst QC, sitting as Deputy High Court Judge, reported at [2010] EWHC 416 (Comm).
• Court of Appeal (Civil Division): On 20 January 2011, determined interest, costs and the interim payment following the successful appeal.