Gathering interest - The issue of pre-judgment interest considered by Regional Costs Judge Baldwin

06 Jan 2021

On 17 December 2020 Regional Costs Judge Baldwin handed down judgment in Godfrey v Automotive. The judgment adds to a body of case law refusing the award of pre judgment interest to PI claimants who have incurred costs of funding disbursements. This is the third detailed consideration on the point in 2020 and one argued by leading counsel, Ben Williams QC, for the claimant. 

The facts

Peter Godfrey pursued a claim for damages for noise induced hearing loss (NIHL). The claim was settled pre-proceedings. The claimant entered into a disbursements funding loan agreement charging interest at a rate of 15.3% per annum. In the provisional assessment, the claimant sought to recoup interest charged under the agreement (£388.71) by seeking an award of pre-judgment interest pursuant to CPR 44.2(6)(g). The regional costs judge declined to make the award on paper, awarding Judgments Act interest from the date of the costs order, in the usual way (incipitur rule). The matter went to an oral review hearing on 2 November 2020, this being the only issue in dispute.

The claimant argued that as a matter of principle, an award under CPR 44.2(6)(g) should be made, highlighting the unfair position that interest is readily awarded to commercial claimants, but not to private citizens who are by their very nature, generally impecunious and are forced to incur costs funding personal injury claims.

The arguments and existing case law

The claimant relied on Jones v Secretary of State for Energy and Climate Change [201] All ER 956. The decision of Master Brown in Nosworthy v Royal Bournemouth in the Senior Courts Costs Office was criticised for imparting a test of exceptionality. The claimant conceded the rate of 15.3%, but urged the court to make a discretionary award of 4% above base rate to compensate the claimant for losses suffered funding disbursements during the currency of his claim.

The defendant, represented by Dean Holmes at BLM, argued that the award of modest interest within the region of £50 and £60 would be disproportionate and unjust set against Judgments Act interest of £211. The defendant also argued that CPR Part 36 and CPR 44.9(4) fixed the date from which interest should run. Even if that was wrong following Master Brown’s comments in Nosworthy that it was questionable whether CPR 44.2 (6)(g) was engaged at all in detailed assessment proceedings and in particular noted that that point was not argued before the court of appeal in Jones. In the alternative the defendant urged the court to apply the approach of the Senior Costs Judge in Marbrow v Sharpes Garden Services and that the comments of Lord Neuberger MR in Simcoe v Jacuzzi applied. The court should depart from the ‘incipitur rule’ only where that is what justice requires in the particular case and should avoid awarding interest from different dates on different components of costs.  On the facts in Godfrey, justice did not require any award of pre-judgment interest.

The decision

Although the court declined to find for the defendant the applicability of CPR 44.9 and the wider jurisdictional issue concerning CPR 44.2 (6) (g), it did find for the defendant on the submission that justice did not require an award of pre-judgment interest. Addressing the apparent exceptionality test imported by Master Brown in Nosworthy:

“Rather, in my judgment, he (Master Brown) was concluding that nothing out of the ordinary was present in order to persuade him to exercise any discretion to depart from the normal proportionate approach, to award Judgment Act interest on costs in personal injury claims from the date of the order for costs. The effect of such a standard approach is not simply to compensate for being out of funds generally in terms of the payment of such costs, but goes rather further by way of the regulated rate, currently of 8%, in terms of an element of noticeable over-compensation, when base rates are as they are, and therefore off-setting, to a not insignificant amount, any injustice of the type characterised by Mr Williams in terms of under-compensation, massive or otherwise."

Regarding the apparent unfairness to PI claimants raised by Mr Williams QC the judgment goes on to say:

34 “Mr Williams would no doubt be justified in responding that none of this does anything to redress the peculiar and unjustified dichotomy of approach, comparing the apparent normal or normalised practice in the Commercial Court with that of the civil courts generally in most personal injuries litigation.  Whilst it might be engaging for this Court to consider itself as being placed in the potential vanguard of a movement for change in that regard, it seems to me that there are conceivably many differences of substance at many levels between commercial cases and the funding of the same and most personal injury claims, which might be said to underlie the failure of such an equalisation to have “taken off”   up to now, but that this is not the occasion for this issue, whether of principle or policy, to be resolved.”

35 “In conclusion, therefore, whilst I am persuaded that a discretion exists to award interest from a date before the order for costs, encompassing interest of the type at issue here, I am not persuaded that it is appropriate for me actually to exercise any such discretion in favour of the Claimant in any of the alternative ways contended for by Mr Williams.  The oral review accordingly results in no adjustment on the issue raised”

A chance of appeal?
The claimant has taken the decision not to appeal this judgment, but given that arguments that remain around the operation of CPR Part 36 and discretion generally, it is likely that this issue is one which will be dealt with by an appellate court in the not too distant future.

What this means for you
In addition to Judgments Act Interest, PI claimants and their lawyers are arguing more regularly for a secondary award (discretionary pre-judgment) on the grounds that they are significantly “out of pocket” by having to fund disbursements. Given that there are now three judgments where such awards have been refused, paying parties should continue to resist these claims going forward.

We also consider that where a litigated case is settled within the CPR Part 36 standard period for acceptance that it is likely that CPR 44.9 may fixthe date from which interest should run, although this point has yet to be fully argued and considered by the courts. This may eventually turn out to be yet another advantage of making a CPR Part 36 offer to settle. The decision is to be welcomed as offering yet further clarification on the discretion and the reasons why an exercise of that discretion will be refused.

The argument in highlighting the apparent dichotomy of approach which pitches the rights of the private citizen against the rights of big business, carries with it a certain appeal. But in reality, would the reasonable person, armed with the facts genuinely believe that his rights had been curtailed because of an inability to recover just £60 interest, that same person having received £211 by way of interest already?

It can be easily argued that this type of dispute would serve only to increase satellite litigation in cases which have been the focus of significant reforms; reforms brought about to drive down costs, limit the use of court resources and actually improve access to justice for both parties. Both Jones and Simcoe discourage an in depth approach that would involve evidence gathering. The approach to be encouraged is the proportionate one. We too note with the comments of Lord Neuberger MR in Simcoe v Jacuzzi:

“Prolonged argument, let alone detailed evidence, on the issue must be avoided. There willoften be no perfect date, and the decision inevitably will, indeed should, be broad brush. Further, if interest was to run from different dates on different components of the costs, it would, in many cases, lead to arguments which would do the legal systemno credit…”

BLM Associate, Dean Holmes represented the defendant in this case -

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Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to customers of BLM. Specialist legal advice should always be sought in any particular case.

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