Sony / ATV Music Publishing LLC & Anor v WPMC Ltd & Anor

When making a non-party costs order, the court exercises a statutory discretion. It may determine both whether the non-party should pay costs and the amount it is just for that non-party to pay, including interest.

Where the principal defendant is already liable for interest on costs following a successful Part 36 offer, the non-party bears the onus of showing why equivalent interest would be unjust. Interest on costs under CPR rule 36.17(4)(c) remains primarily compensatory, although it may contain a penal element. The rate should reflect, albeit generously, the cost of money.

The judgment concerned the consequential costs order following an earlier decision that David Bailey, who had controlled and partly funded the defence for his own benefit, should pay the claimants’ costs from 4 January 2013.

The issue was whether he was bound by an earlier order requiring WPMC to pay interest on the claimants’ costs at 8% above base rate from 26 July 2014, or whether the court could determine afresh the appropriate interest payable by him. The court also considered whether delay justified withholding interest and whether the modern Part 36 provisions altered the principles governing interest on costs.

1. Non-party costs discretion. Mr Bailey was not barred from challenging the rate of interest by the earlier order against WPMC. A non-party costs order involves the exercise of a statutory discretion rather than the determination of legal rights and obligations. The court may therefore decide both the principle of liability and the quantum of costs, including interest, which it is just to require the non-party to pay. This analysis was supported by Systemcare v Services.
2. Burden and delay. Since WPMC was already ordered to pay interest because the claimants had obtained a judgment at least as advantageous as their Part 36 offer, the burden lay on Mr Bailey to show why it would not be just to impose interest at the same rate and for the same period. The claimants’ delay did not justify depriving them of interest: they could not have applied before 1 July 2015, and their later delay had already been found explicable and excusable.
3. Nature and rate of interest. The court remained bound by McPhilemy v Times Newspapers (No 2) Ltd and KR v Bryn Alyn Community (Holdings) Ltd to hold that interest on costs under CPR rule 36.17(4)(c) is primarily compensatory, though it may have a penal element. The rate should reflect, albeit generously, the cost of money. The appropriate rate for Mr Bailey was 3% above base rate.
4. Order. Mr Bailey was required to pay interest on the claimants’ costs at 3% above base rate.