England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE No QBENI 96/0404/B

(Sitting as a High Court Judge)

Royal Courts of Justice

Strand

London WC2

Monday, 3rd February 1997

B e f o r e:

LORD JUSTICE KENNEDY

LORD JUSTICE PETER GIBSON

MR JUSTICE BUCKLEY

ELECTRICITY SUPPLY NOMINEES Ltd

Plaintiff/Appellant

- v -

TERENCE FARRELL

First Defendant/Respondent

NICHOLAS T GRIMSHAW

Second Defendant/Respondent

NICHOLAS GRIMSHAW & PARTNERS

Third Defendant/Respondent

BRIAN P TAGGART

Fourth Defendant/Respondent

(Handed down judgment prepared by

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 831 3183

Official Shorthand Writers to the Court)

MR J MORGAN (Instructed by Eversheds of London) appeared on behalf of the Appellant

The First Respondent was not represented and did not attend

MR R STEWART (Instructed by Warner Cranston of London and Reynolds Porter Chamberlain of London) appeared on behalf of the Second, Third and Fourth Respondents

J U D G M E N T

(As Approved by the Court )

(Crown Copyright)

LORD JUSTICE KENNEDY :

1. This is a plaintiff's appeal from a decision of Judge Bowsher, Q.C., sitting as an Official Referee, who on 2nd February 1996 ordered that the plaintiff's application for liberty to enter judgment for interest on taxed costs be refused, and that the plaintiff should pay the costs of the application.

2. Background

The substantive action was one in which the plaintiff claimed damages from the defendants, who were all architects, alleging defects in premises owned by the plaintiff at Nottingham. That action was settled, and on 25th February 1993, at the behest of the parties, the court made a consent order which included a stay of the proceedings. By then the defendants had made two payments into court, totalling £225,000, the most recent payment being made on 20th January 1993. The effect of the consent order was to enable the plaintiff to withdraw that sum, with any interest which it had earned whilst in court being paid to the defendants. Paragraph 4 of the Order reads :-

"The plaintiff's costs of this action as against the second, third and fourth defendants up to and including 22nd January 1993 and the further costs of preparing and obtaining this order shall be taxed upon the standard basis if not agreed and such costs when taxed or agreed shall be paid by those defendants, save as provided otherwise by preceding orders. ”

The emphasis is mine, and is to identify the words which are said to be of particular significance in relation to the submissions which have been made to us.

After the consent order was made the solicitors acting for the plaintiff seemed to have been dilatory. The Bill of Costs should have been lodged by 25th May 1993, but it was not in fact lodged until 25th January 1994. The costs were taxed in January 1995, in the total sum of £349,324-65 - £11,859-08 of which related to a judgment of this court. The balance was attributed to the order of 25th February 1993. Both before and after taxation the defendants indicated that they were not prepared to pay interest on the plaintiff's costs for the whole period from the date of the consent order. Basically their contention seems to have been that if the matter had proceeded with reasonable expedition the plaintiff could not have claimed nearly so much in respect of interest. Some sums were paid, but not the totality as set out in the taxing master's certificates. So, on 10th November 1995, the plaintiff took out a summons seeking an order :-

(1) That the stay of proceedings imposed by Judge Wilcox on 25th February 1993 be removed for the purposes of the commencement of enforcement proceedings by the plaintiff on the grounds that the defendants had in breach of the order failed to pay in full the plaintiff's costs in the action as set out in the taxing officer's certificate.

(2) That the plaintiff be at liberty to enter judgment against the defendants in the sum of £99,324-65 being the outstanding costs owed by the defendants to the plaintiff pursuant to the order....... "together with interest thereon at such rate and for such period as the court thinks fit pursuant to section 35A Supreme Court Act 1981".

As Mr Stewart for the respondent defendants has pointed out, the reference to the 1981 Act was inappropriate. It should have been a reference to sections 17 and 18 of the Judgments Act 1838. The matter came before Judge Esyr Lewis, Q.C., on 16th November 1995 when it was ordered that the sum of £99,324-65 be paid and" the application for judgment for interest on the costs order ... be adjourned to a date to be fixed."

3. Before Judge Bowsher

Thus the matter came before Judge Bowsher, who pointed out that when the consent order was made the proceedings were stayed pursuant to RSC Order 22(4) which provides :-

"On the plaintiff accepting any money paid into court all further proceedings in the action or in respect of the specified cause or causes of action, as the case may be, to which the acceptance relates, both against the defendant making the payment and against any other defendant sued jointly with or in the alternative to him shall be stayed.”

As the judge pointed out, that stay could not possibly extend to proceedings before the taxing master, but, according to the judge :-

"Once money paid into court has been accepted, or there has been leave to take the money out, the court ceases to have jurisdiction in the action and all matters concerning costs are handed over to the taxing master. There is no question of the court having any involvement with the costs, or any interest thereon.”

The judge accordingly declined to rule on the substantive arguments addressed to him in relation to interest on costs. He said that the right place for those matters to be dealt with was before the taxing master.

4. Issues

Before us neither side has argued in favour of Judge Bowsher's assertion that the right place to deal with the issue which the plaintiff wanted him to resolve is or was before the taxing master. The defendants contend that once the consent order was made the High Court had discharged its function save for those limited functions expressly delegated to the taxing master by Order 62 and Order 106 of Rules of the Supreme Court. Those limited functions are not, it is agreed, wide enough to enable a taxing master to resolve this sort of dispute as to the right to recover interest on costs, therefore, Mr Stewart contends, if the plaintiff has a remedy it can only seek to enforce it by commencing fresh proceedings. Mr Morgan, for the appellant plaintiff, submits that Judge Bowsher was wrong, not only as to the extent of the taxing master's jurisdiction, but also as the extent of his own. A fresh action would be unnecessary and inappropriate. Mr Morgan submits that Judge Bowsher had jurisdiction to rule, and should have exercised that jurisdiction. Had he done so he should have ruled in favour of the plaintiff on the substantive issue. There are therefore two issues for us to decide, namely :-

(1) Whether after the consent order was made the High Court retained a jurisdiction to make the orders sought in the summons of 10th November 1995, or whether relief could only be obtained, if at all, by means of a fresh action, and -

(2) whether, on a true construction of the consent order made in this case, interest under the Judgments Act 1838 runs from the date of the consent order or from the date of the taxing master's certificate.

5. Jurisdiction

As to jurisdiction Mr Morgan began by pointing out that the whole policy of the courts is now, more than ever, to discourage rather than encourage the bringing of more that one action between the same parties to resolve related disputes. The arguments in favour of one set of proceedings are obvious - it is bound to be simpler, cheaper and probably quicker. Furthermore, if interest is made the subject matter of a second action there may be problems as to the recovery of interest in that second action. The general policy of the courts can be seen to be demonstrated in relation to a Tomlin Order in Phillips v Clarke (1970) 1 Ch 322, and in relation to a garnishee order by what was said by Sir Nathaniel Lindley, MR, in Pritchett v English & Colonial Syndicate (1899) 2 QB 428.

Mr Morgan went on to submit that the combination of the consent order in the present case and the provisions of the Judgments Act 1838 gave the successful plaintiff an entrenched right to interest, and it would be surprising if the plaintiff then had to start separate proceedings to discover the extent of that right. Obviously, he submitted, the law should provide one means of resolving all disputes. Indeed if a successful plaintiff were to be faced with the restricted choice of starting fresh proceedings or attempting to levy execution he might be tempted to choose the latter course even when aware of the existence of a genuine dispute, thus leaving it to the defendants to try to obtain relief by resort to provisions of the Rules of the Supreme Court which seem ill-suited to this purpose (See Order 45 Rule 11 and Order 47 Rule 1).

In practice, as Mr Stewart concedes, ever since 1838 courts at all levels have on many occasions exercised the jurisdiction which Mr Morgan submits should have been recognised and utilised in this case. Sometimes the court's power to act has been attributed to the liberty to apply which "all orders of the court carry with them in gremio" (per Fry J. in Fritz v Hobson (1880) 14 Ch D 542 at 561) but that, as Chitty J. pointed out in Penrice v Williams (1883) 23 Ch D 353 at 356, involves a preliminary consideration of whether or no the order is one which can or cannot be worked out without any further order.

In re London Wharfing Company (1885) 54 L.J.Ch 1137 Chitty J. noted at 1138 that "the settled practice in the office is that where judgment is given for costs there should be inserted in the order judgment for interest on the costs from the date of the order" (as opposed to from the date of the taxing master's certificate). That practice was then quite new, and after North J. had given judgment in favour of the appellant for costs against a company in liquidation the liquidators took out a summons raising the point whether the costs should be paid out of the assets or the applicants left to prove for their judgment debt. The applicants appeared at the hearing of the summons but neglected to claim interest on the costs. About 6 weeks later, realising their oversight, they took out a summons in which they sought an order for interest. The Chief Clerk refused the order on the basis that Chitty J. had determined the question by the order that he made on the liquidator's summons, but that same judge discharged the Chief Clerk's order saying at page 1139 -

"Their omission was a mere mistake or slip; and, acting in analogy to the practice in cases of writs of execution, I see no difficulty in making an order for payment of interest as if such payment had been mentioned in the original order.”

That seems to me to be a clear example of the court 112 years ago exercising a jurisdiction which Mr Stewart contends does not exist. The unsuccessful argument of counsel for the liquidator even then was that it was too late to apply for any payment of interest as the whole matter should be treated as res judicata .

In Boswell v Coaks (1887) 57 L.J.Ch 101 the action was dismissed with costs but the costs were not taxed before the 1883 Rules came into force, which rules provided for interest on costs to run not from the date of the taxing master's certificate (which was the position under the preceding rules) but from the date of judgment. After taxation North J was asked to rule as to the date from which interest on costs should run. He had no doubt that it was for the court, not for its officials, to decide that issue. In the Court of Appeal it was argued that when the action was dismissed it came to an end and the taxation could not be treated as proceeding in a cause or matter still pending, to which Cotton L.J's response at page 104 was -

"Although it is true that for some purposes an action is at an end when it is dismissed, or when judgment is given in favour of the plaintiff, so far as deciding the rights of the parties is concerned; the action is not at an end so far as regards the enforcement of the judgment.”

Similarly at page 106 Lindley L.J. said - "It is impossible to accede to (counsel's) argument that the action was so far at an end at the date of judgment as not to be pending for any purpose. It is still pending for all purposes necessary to give effect to the judgment. The action, although the rights of the parties are ascertained by final judgment, is still pending for all purposes of working out that judgment, and amongst other matters for the enforcing payment of costs."

Mr Stewart contends that those words should be narrowly construed as relating only to the practice which then prevailed to work out what was owed in respect of a judgment, but I see no reason to give the words such a limited construction.

In R v Taxing Officer ex parte Bee-Line Roadways International Limited (1982) Times 11th February (cited extensively at 1996 1 All E R 821) Woolf J., as he then was, considered an application for judicial review of a taxing master's decision. He held that although the appeal procedure set out in the Rules did not assist the applicants there was no need for them to proceed by way of judicial review because the court had "an inherent power ..... to control its own proceedings conducted by officials of the court, such as taxing masters, as delegates of the judges". Thus, Mr Morgan contends, if the court's power to act be not attributable to the implied liberty to apply it can be attributed to the inherent power identified by Woolf J.

Mr Stewart strove valiantly to meet that weight of authority, but in my judgment he failed to do so. After some reference to the position before 1838 he invited our attention to an election petition case, R v Cripps ex parte Muldoon (1984) 1 QB 686. There the Commissioner had found largely in favour of the respondent, but had ordered that he pay ¾ of the petitioners' costs. Six months later, when the respondent received the petitioners' Bill of Costs, the Commissioner was asked to clarify his order, and said that he intended to confine it to the two issues on which the petitioners were successful. The Divisional Court quashed that further direction of the Commissioner on the basis that after the original direction the Commissioner became functus officio , and the Court of Appeal upheld the decision of the Divisional Court. As Sir John Donaldson, MR, pointed out at page 696E the Commissioner's original decision as expressed in the formal order was "quite unambiguous". What the Commissioner was doing 6 months later in reality was not clarifying or correcting a slip, but drastically altering his original order, and that was something he had no power to do. But that decision seems to me to be a long way from the situation which faces us in this case.

Mr Morgan did not contend, as he might have done, that on the jurisdictional issue Boswell v Coaks is a decision of this court by which we are bound. His argument was of such strength that he had no need to do so. In my judgment that issue must be resolved in his favour.

6. The Construction Point

As can be seen from the authorities to which I have already referred there have been times when the practice has been for interest on costs to run from the date of judgment, and other times when the practice has been for it to follow the old equity practice and run from the date of the taxing master's certificate. In K v K (1977) Fam 39 this court held that the 1965 revision of the Rules of the Supreme Court had the effect of enabling the court to revert to the old equity practice, which Lord Denning MR, plainly preferred. But in Hunt v Douglas (1990) 1 AC 398 the House of Lords overruled the decision in K v K and made it clear that :

(1) a litigant who has been awarded costs in an action is entitled to interest on subsequently taxed costs from the date of judgment, and -

(2) the same principle applies where there is a consent order, the relevant date being the date of the stay.

In Thomas v Bunn (1991) 1 AC 362 it was held by the House of Lords that where the order of the court is an interlocutory order for damages to be assessed there is no monetary judgment to trigger the right to interest on costs. That right only accrues from the date of the judgment assessing or recording damages payable to the plaintiff.

It is not suggested by anyone that in February 1993, when the relevant consent order in this action was made, either side was unaware of the law in relation to interest on costs, as explained by the House of Lords in the two decisions to which I have just referred. It therefore follows that the parties expected that law to apply to this case. Mr Morgan concedes that in this court we must proceed upon the basis that by agreement the parties could have modified the practice in relation to interest on costs, but, he submits and I accept, they could only do so if they used clear words to achieve that effect. The words which Mr Stewart submits do have that effect are those which I emphasised when setting out paragraph 4 of the consent order. In my judgment they lack the necessary degree of clarity. As Mr Morgan has sought to demonstrate, they are probably no more than verbiage derived from a precedent, but whatever their origin what matters is their effect, and in my judgment there is none. Mr Stewart's contention is that the words in question constituted a special order directing money to be paid on a future date when, as he put it, liability would arise with the result that interest would run from that date and not before. If that was what the defendants wanted to achieve against the background of law which I have set out they needed to ensure that the order was much more explicit. In Hunt v Douglas Lord Ackner said at page 415G, when setting out why the balance of justice favours the incipitur rule, that the first reason is -

"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?"

The submission now is that despite arguments such as that in favour of the incipitur rule which were relevant to the facts of the instant case, the operation of the rule itself was avoided by the insertion in the order of the words "and such costs when taxed or agreed shall be paid". That I cannot accept. I regard those words as no more than a recitation of what in fact was to occur. I would therefore allow this appeal and in doing so make it clear first, that Judge Bowsher did have jurisdiction to resolve the issues he was asked to resolve, and secondly, that on a true construction of the relevant consent order interest on costs under the 1838 Act runs from the date of the consent order and not from the date of the taxing master's certificates.

LORD JUSTICE PETER GIBSON : I agree.

MR JUSTICE BUCKLEY :

Section 18 of the Judgments Act 1838 provides that all orders that costs shall be payable to any person, shall have the effect of judgments and the persons to whom such costs shall be payable, shall be deemed judgment creditors. I have omitted words irrelevant for present purposes.

Section 17 provides that every judgment debt shall carry interest from the time of entering up the judgment.

In both Hunt -v- Douglas (Roofing) 1990 1.A.C. 398 and Thomas -v- Bunn 1991 1.A.C. 362 it was conceded by Counsel and accepted by their Lordships that an order for costs to be taxed was a judgment debt within the true construction of Sections 17 & 18. The question which Hunt's case resolved was the date from which interest was to run. The issue was the construction of the words "entering up the judgment". We now know they mean the date of judgment as opposed to the date of the Taxing Master's certificate.

Since I agree with Kennedy L.J. that the costs order in this case is, for all practicable purposes indistinguishable from that in Hunt's case which was:

the result must be that interest runs from the date of the consent order.

Mr. Stewart's submissions to the effect that there cannot sensibly be a judgment debt within the meaning of Section 17 in respect of an unascertained amount and that the costs order here is analogous to an order for payment of a sum certain at a future date, cannot avail the Respondents in the light of the deeming provisions in Section 18 and the decision in Hunt's case.

It is open to the parties to a consent order to make a side agreement as to interest or to take account of the effect of the Court's order on interest and adjust the other terms of the consent order accordingly, for example by reducing the money judgment. Altering the wording of costs orders, as Mr. Stewart submitted had happened here is unlikely to achieve the desired result. Further, I doubt whether, even in a consent order, the Court could directly alter the incidence of interest on the Judgment because that is governed by the Act and rules of court. The position is different in respect of costs orders to or against the Crown, where the Court is expressly given power to do so. (See s.24(2) Crown Proceedings Act 1947).

I also agree with Kennedy L.J.'s judgment on the jurisdiction issue and thus that this appeal should be allowed.

Order: Appeal allowed with costs