England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE QBADI 96/0330/B

(MR JUSTICE CLARKE )

Royal Courts of Justice

Strand

London WC2

Wednesday, 26 March 1997

B e f o r e:

LORD JUSTICE LEGGATT

LORD JUSTICE SAVILLE

LORD JUSTICE PILL

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DEBORAH JANE ROSS

PLAINTIFF/APPELLANT

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OWNERS OF THE SHIP "BOWBELLE" & ANR

DEFENDANTS/RESPONDENTS

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(Transcript of the handed down judgment of

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 831 3183

Official Shorthand Writers to the Court)

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MR C HADDON-CAVE (Instructed by Messrs Hodge Jones & Allen, London NW1 0NE) appeared on behalf of the Appellant

MR G ALDOUS (Instructed by Messrs Hill Taylor Dickinson, London EC3A 7LP [First Defendant] and Messrs Shaw & Croft, London EC3A 7BU [Second Defendant]) appeared on behalf of the Respondents

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J U D G M E N T

(As approved by the Court )

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©Crown Copyright

Wednesday, 26 March 1997

J U D G M E N T

LORD JUSTICE LEGGATT: In the early hours of 20th August l989 the plaintiff Deborah Jane Ross was a passenger aboard the Marchioness when she was in collision with the Bowbelle. Miss Ross survived the accident and brought a claim for damages for post-traumatic stress disorder caused by the disaster. In the limitation action begun by the owners of the Bowbelle a scheme was set up with the joint consent of the shipowners by order of Sheen J. on 8th May l990. The scheme provided for claims arising out of the collision to be brought in the Admiralty Court, and assessed and paid without awaiting the outcome of any limitation proceedings. Miss Ross' claim was brought under that scheme and was the first to be heard. On 18th June l991 Master Topley, sitting as Admiralty Registrar, assessed her damages by an order in the following terms:

"It is hereby ordered that the Defendants do pay the Plaintiff damages assessed at £9226 plus interest on general damages of £195.25 and interest on special damages of £63 making a total of £9484.25 together with the Plaintiff's costs to be taxed".

Miss Ross commenced the taxation of her costs on 12th August l99l. A bill of costs included her solicitors' ordinary costs of proving her claim. On 15th January l993 she applied to amend her bill of costs to include an unspecified amount of steering committee costs, which had been incurred by the Marchioness Solicitors Group Steering Committee. Since no specific figure for steering committee costs was included in Miss Ross' bill, Chief Taxing Master Hurst ordered the solicitors' firms concerned to lodge bills of their costs. The four firms concerned presented bills which totalled £548,000. After a lengthy examination of the bills for reasonableness, the Chief Taxing Master reduced them to £186,309.03 (inclusive of VAT). During this process the Chief Taxing Master made one order for costs in favour of the defendants on 25th April l994 and five in favour of the plaintiff on 1st December l993, 15th March l994, and 11th January, 15th June, and 21st September l995. On 2nd November l995 the Chief Taxing Master issued a Final Taxation Certificate which recited that -

"IN PURSUANCE OF THE Order dated 18th June l991 .... [Miss Ross' inter partes costs were £195,728.11]"

On 10th November l995 Master Topley, sitting as Admiralty Registrar, held that interest ran from the date of the Chief Taxing Master's orders. On 14th February l996 Clarke J. dismissed an appeal against the Master's Order. Against the judgment of Clarke J. Miss Ross now appeals. She claims interest on the costs of taxation from the date of the order for costs to be taxed, namely 18th June l991 (the incipitur rule). The judgment debt rate then in force was 15%. The defendants, on the other hand, maintain that interest only runs from the various dates upon which orders for costs were made. On each of those dates the rate was 8%. The question is, therefore, pursuant to which order or orders of the Court Miss Ross is entitled to the costs of taxation.

Before considering the narrow grounds upon which the judge decided the case it is necessary to understand the way in which the practice of the Court has developed since the passing of the Judgment Act 1838. By s.17 -

".... every judgment debt shall carry interest at the rate of £4 per centum per annum from the time of entering up the judgment .... until the same shall be satisfied, and such interest may be levied under a writ of execution on such judgment."

So far as material, s.18 provides that -

".... all decrees and orders of courts of equity, and all rules of courts of common law .... whereby any sum of money, or any costs, charges, or expenses, shall be payable to any person, shall have the effect of judgments in the superior courts of common law. ...."

For Miss Ross Mr Haddon-Cave reinforced his illuminating skeleton argument by submitting that the nine cases from the last century cited by Lord Ackner in Hunt v Douglas Roofing [1990] 1 A.C.398 illustrate that historically interest has always been awarded on costs generally from the date of judgment, and no distinction has ever been made between different types of costs, for example, costs of the action or of taxation. In each of these cases it is reasonable to assume that the interest awarded on the total certified taxed costs must have included the costs of taxation.

In Fisher v Dudding (1841) 3 Scott N.R.516 it was held that interest on costs runs under s.17 of the 1838 Act from the date of signing the judgment. Maule J.said at p.520 -

"The moment that entry is made [of the incipitur in the Master’s book] the plaintiff is entitled to receive the debt or damages and an unascertained amount of costs. The legislature have considered that he is also entitled to receive interest at £4 per cent. upon the judgment debt: and that is quite independent of the day upon which the right to the costs arises."

In Pyman & Co v Burt, Bolton & anor (1884) W.N.100 Field J.held that interest ran from the date of the judgment on both the judgment debt and the taxed costs.

"[T]he form of a judgment is that the plaintiff recovers so much for the debt, and so much for the costs. There is, therefore, a judgment for the costs .... In the absence of any special order, no distinction is made between interest on the debt and interest on the costs. Both begin to run from the day of the judgment."

This case was approved by the House of Lords in Hunt’s case, as was Boswell v Coaks (1888) 57 L.J.Ch.101. In that case Fry J. dismissed the action with costs. He was reversed by this Court, but restored by the House of Lords. A taxation certificate was finally issued after that. North J. held that interest ran from the date of judgment, and this Court agreed.

The cases cited by Lord Ackner show the operation of two propositions upon which Mr Haddon-Cave relied. First, the reference to ‘costs, charges and expenses’ in s.18 of the 1838 Act means costs, charges and expenses to be ascertained in the usual way by the taxing officer without the need for any further order to pay after they have been taxed by the officer. In Jones v Williams (1841) 8 M & W 349 Parke B. said at p.358:

"I am of the opinion, that with respect to costs, it is enough if they are ascertained by the officer of the Court, and that it is not necessary that there should be any order to pay after they are taxed by the officer."

Alderson B. added at p.359 -

"All that is required is, that if the Court shall order a sum of money to be paid, and if it also order costs, that means the costs ascertained by the officer of the Court."

Secondly, the cases show that where a Court orders ‘costs of the action’ in favour of one party, such costs are not confined to costs up to the hearing, but include the costs of all steps requisite or necessary for carrying out or working out the order, including the costs of ascertaining the amount of such costs by taxation. So in Krehl v Park (1875) 10 Ch.App. 334 James L.J.said at p.337:

"....[A]ccording to the well-established practice of this Court, the costs of suit when given to a party are not confined to costs of suit up to the hearing but include the costs of all accounts and inquiries requisite for carrying out the decree; nor are these latter costs costs for subsequent consideration. That is the general rule, and it is very important that the general rule should not be interfered with."

Similarly, Mellish L.J. said at p.337 -

"I am of the same opinion. The rule which appears to be established is, that where costs of suit are given generally by the decree at the hearing, the subsequent costs of working out the directions of the decree will be included."

Without having considered the derivation of the modern rules the judge held at page 14G of the transcript of his judgment -

"The plaintiff .... lodges his bill of costs in accordance with the Rules of the Supreme Court. The taxing officer has the powers and duties conferred on him by Order 62. If the plaintiff asks for an order that the defendant pay his costs of taxation (as he will invariably do) he is entitled to such an order and the taxing officer is bound to make it in accordance with rule 27(1), unless he concludes that some other order ought to be made under rule 27(2). Those costs will then be taxed in the ordinary way and a certificate granted covering all the costs under rule 22."

By Order 62, rule 27 -

"(1) Subject to the provisions of any Act and the Order, the party whose bill is being taxed shall be entitled to his costs of the taxation proceedings.

(2) Where it appears to the taxing officer that in the circumstances of the case some other order should be made as to the whole or any part of the costs, the taxing officer shall have the same powers as the Court has in relation to the costs of proceedings."

For the Owners Mr Aldous submitted that r.27 means that the party whose bill is being taxed is entitled to an order for costs of the taxation proceedings, except where it appears that ‘some other order’ should be made. ‘Other order’ means an order other than such as is contemplated will be made under rule (1) in favour of the person whose bill is taxed.

By virtue of r.27(1), when he comes to tax his bill, an order for ‘costs to be taxed’ entitles the person in whose favour it is made to his costs of the taxation proceedings. It is only where the Taxing Master thinks it appropriate to avoid that result that he has power to make ‘some other order’. R.27(1) expressly entitles the person whose bill is being taxed, not to an order for costs, but to his costs: he already has the order. O.62, r.5 dispensed with the need for an order in such circumstances, because a person taxing his bill will always have had an order for the costs of the action or other proceedings.

Order 62, rule 3(2) provides that -

"If the Court in the exercise of its discretion sees fit to make any order as to the costs of any proceedings from any other party to those proceedings except under an order of the Court."

And by rule 1(4) -

"References to costs shall be construed as including references to fees, charges, disbursements, expenses and remuneration and, in relation to proceedings (including taxation proceedings), also include references to costs of and incidental to those proceedings."

Mr Aldous submitted that r.1(4) means that an order for costs of taxation proceedings includes costs of and incidental to those proceedings, not that an order for costs of assessment proceedings includes costs of and incidental to taxation proceedings.

In my judgment references to costs in relation to taxation proceedings include references to costs of or incidental to those proceedings. The words ‘together with the plaintiff’s costs to be taxed’ constitute a reference to costs in relation to taxation proceedings. By force of r.1(4) that reference includes a reference to costs of (or incidental to) those proceedings. It would be tautologous as well as inept if it meant no more than that an order for costs of taxation proceedings includes the costs of (or incidental to) those proceedings. An order ‘for’ certain costs refers exclusively to those costs and does not merely ‘include’ them. The rule more aptly and directly means that where reference is made to costs of an action in the context of taxation proceedings those costs ‘include’ costs of (or incidental to) those proceedings.

In Hunt v Douglas Roofing (supra) interest was claimed on taxed costs, and the question for the House of Lords was whether they were payable from the date of judgment or from the date of taxation. At p.400 counsel for the appellant argued that:

"It is consistent with justice and fairness between the parties that interest should be paid on costs from the date of pronouncement of the judgment. By that date the successful party has incurred the costs of litigation (save for the costs of taxation itself): he may have paid his solicitors in advance in which case he will have incurred interest or lost interest which the monies paid would have earned."

In reply the respondent’s counsel submitted at p.403D that:

"Were the incipitur rule to be brought back, there would be many cases in which the successful litigant would make an adventitious profit by receiving interest on costs which he had not yet paid: ...."

It is common ground that the costs awarded in that case included costs of taxation, as the judge recorded at p.18D of the transcript. Lord Ackner analysed K v K (Divorce Costs: Interest) [1976] Fam. 279, in which this Court had held that costs should run from the date of the allocatur. But he concluded at p.413D by reference to the form of fi.fa. that there is only one date from which interest is to run "and this has therefore to be calculated on the aggregate of the damages or debt together with the costs allowed on taxation."

Lord Ackner reached his conclusion at p.415E -

"The Court of Appeal in K v K (Divorce Costs: Interest) [1977] Fam.39 misapprehended the nature of the amendment made to the new form by the Rules of the Supreme Court (Revision) 1965, for the reasons already stated. The decision in Pyman’s case [1884] W.N. 100 as to the effect of the Rules of 1883, as approved by the Court of Appeal in Boswell’s case, 57 L.J.Ch. 101 was correct. Accordingly the incipitur rule prevails. I respectfully agree with the observations of the Court of Appeal that a satisfactory result cannot be achieved in every case, but in my judgment the balance of justice favours the incipitur rule for the following reasons. 1. It is the unsuccessful party to the litigation who, ex hypothesi, has caused the costs unnecessarily to be incurred. Hence the order made against him. Since interest is not awarded on costs incurred and paid by the successful party before judgment, why should he suffer the added loss of interest on costs incurred and paid after judgment but before the taxing master gives his certificate ? 2. Since, as the Court of Appeal rightly said in the Erven Warnink case [1982] 3 All E.R. 312 payments of costs are likely nowadays to be made to lawyers prior taxation, then the application of the allocatur rule would generally speaking do greater injustice than the operation of the incipitur rule. Moreover, the incipitur rule provides a further necessary stimulus for payments to be made on account of costs and disbursements prior to taxation, for costs to be more readily agreed, and for taxation, when necessary, to be expedited, all of which are desirable developments. Barristers, solicitors and expert witnesses should not be expected to finance their clients’ litigation until it is completed and the taxing master’s certificate obtained. If interest is not payable on costs between judgment and the completion of taxation, then there is an incentive to delay payment, delay disbursements and taxation."

At page 21A the judge said ".... nowhere in the speech of Lord Ackner is there any suggestion that he was considering the relevant incipitur in the case of the costs of taxation."

I can see why, because the judge did not want Hunt’s case to stand in his way, he felt able to say that the House of Lords did not specifically advert to the costs of taxation. But the point had been specifically raised by both counsel, and it is inconceivable that Lord Ackner was not alert to it when drafting his speech. In any event I am not prepared to say that the decision of the House of Lords was made per incuriam in so far as it applied to the costs of taxation. On the contrary, the decision is consonant with the conclusion to which an historical analysis and consideration of the rules independently lead.

The judge also said at p. 10D -

"It would be remarkable indeed if the effect of the statute was to require the judgment debtor to pay interest on what might be substantial costs, all, or almost all, of which could not yet have been incurred."

At p.15F he acknowledged that -

".... it appears that in practice taxation certificates include the costs of taxation without any separate order being made further to the order of the judge or master."

But he sought to justify the practice by remarking that normally the costs of taxation are a formality. The judge also asserted at p.17B that his approach "holds the balance more fairly."

In my judgment Master Topley’s order for costs of 18th June 1991 entitled Miss Ross to interest on her costs from that date, and the order included the costs of taxation. No subsequent orders in her favour affected that original order. This accords with Hunt’s case in which a similar order was made by the Master, and the House of Lords justified payment of interest on costs not incurred and paid until later on the ground that it does no more than offset costs incurred before the order, on which no interest would be paid for the antecedent period, and on the ground that it would give the party paying the costs an incentive to pay on account or in any event to pay promptly. This seems to have represented the practice in Queen’s Bench courts for 150 years and there is no reason why it should change now.

In the light of Lord Ackner’s speech there is nothing remarkable about interest being payable on particular costs not yet incurred at the date of the incipitur. Nothing in rule 27(1) requires or authorises a Taxing Master to make an order in favour of the person whose costs he is taxing. The fact that normally the costs of taxation are a formality is not the reason why no separate order is drawn up for the costs of taxation: it is because no further order is required. In Hunt’s case the costs which the House of Lords were considering included the costs of taxation. In my judgment the practice that has lasted for 150 years is justifiable on the ground that it achieves the rough justice envisioned by Lord Ackner at page 415G-H. It is too late to change the practice now, and there is no warrant for doing so.

This is an unusual case on account of the combination of (a) the amount of the costs, (b) the length of time between the order in the action and the dates when the costs of taxation were incurred, and (c) the disparity in interest rates between the competing dates. The answer to the question I earlier posed is that, aside from the ‘other order’ in favour of the defendants of 25th April 1994, the date of the judgment awarding Miss Ross the costs of taxation was 18th June 1991. Those costs are treated as subsumed in the costs which have themselves been taxed. So I would allow the appeal.

LORD JUSTICE SAVILLE: I agree.

LORD JUSTICE PILL: I agree.

ORDER: Appeal allowed with costs here and below; leave to appeal to the House of Lords refused.