‘Interest’ grows for New Year’s Judgements

In the New Year, the court is set to hear the appeal from Motto v Trafigura as to whether interest should be allowed  on costs from the date of judgement or from a later date in cases funded by way of CFAs.

In quick summary of the cases to date, the issue was raised in Gray v Toner where it was adjudged that interest was not recoverable on costs until a final costs certificate has been issued.

In Motto v Trafigura, it was adjudged that the court should use its discretion and apply interest from the date of the costs certificate rather than from the date of the judgement. This is the subject of appeal in January 2012.

However, Master Leonard has now thrown his hat into the legal ring with the case of Kurian v Falzon and ordered that interest should be payable on costs from the date of Judgement.

Which way will the Law Lords go in January? There is significant public policy arguments in favour of both possible outcomes. Probably the worst outcome will be a case specific outcome whereby further satellite litigation will be generated.

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Motto v Trafigura Appeal Judgement

Following the mammoth judgement that was Motto v Trafigura by Senior Costs Master Hurst, permission to appeal certain issues was given. These were:

i) Proportionality;

ii) Vetting costs;

iii) Pre-Action Protocol;

iv) Medical reports;

v) Abandoned claims;

vi) Settlement and distribution;

vii) Cost of funding;

viii) Success fee;

ix) ATE premium.

The interesting and useful findings that have general application are as follows:

ii) Vetting Costs – subject to a valid retainer being in place to cover the work, and any arguments over proportionality, reasonableness and necessity, the work done in vetting the clients is recoverable.

With regards vii) costs of funding, the Court of Appeal have ruled:

The time, expertise and effort devoted by solicitors to identifying a potential claimant, and negotiating the terms on which they are to be engaged by the claimant, in connection with litigation, cannot, in my view, be properly described as an item incurred by the client for the purposes of the litigation. Until the CFA is signed, the potential claimant is not merely not a claimant: he is not a client. When advising a potential claimant on the terms and effect of the CFA, the solicitors are acting for themselves, not for the potential claimant: the solicitors are negotiating with him as a prospective client, not for him as an actual client.

It seems to me that the expenses of getting business, whether advertising to the public as potential clients, making a presentation to a potential client, or discussing a possible instruction with a potential client, should not normally be treated as attributable to, and payable by, the ultimate client or clients. Rather, such expenses should generally be treated as part of a solicitor’s general overheads or expenses, which can be taken into account when assessing appropriate levels of charging, such as hourly rates.

the cost incurred in having such discussions and taking such instructions was not so much a cost of the litigation as a cost which was collateral to the litigation, being a cost incurred to ensure that the claimants were not at risk on costs.

The remainder of the judgement is largely case sensitive and we await the Court of Appeal’s findings on interest