England and Wales Court of Appeal (Civil Division) Decisions

IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION (COMMERCIAL COURT)
MR JONATHAN HIRST QC (Deputy Judge)
[2010] EWHC 416 (Comm)

		Royal Courts of Justice Strand, London, WC2A 2LL
		20/01/11

Lord Justice Aikens :

1. There are a number of issues that arise in consequence of the order of this court of 16 December 2010 which allowed the appeal of Mr Crema from the order of Mr Jonathan Hirst QC sitting as a Deputy High Court Judge. I will not repeat any of the facts or conclusions set out in the judgments handed down on 16 December 2010.
2. The first issue is whether Cenkos should pay interest on the principal sum to which this court has held that Mr Crema is entitled. Mr Crema's principal claim for interest is under the Late Payment of Commercial Debts (Interest) Act 1998 and says it should be paid as from 12 June 2008. Cenkos accepts that interest under that Act is due in principle. However, it raises two arguments. First, Cenkos submits that the start date for interest must be 30 days from the date when the sum became due ie. 12 June 2008, by virtue of the terms of section 4(5) of the Act. Secondly Cenkos submits that the court should exercise its power (under section 5 of the Act) to reduce the rate of interest (or "remit" as the Act calls it) because of the conduct of Mr Crema as "supplier", from the statutory rate of 8% above base rate (ie. 13% in all) to nil for the period until 4 April 2009 and thereafter it should be 8% above base rate: ie. 10% in total because by then the base rate was 2%. Two reasons are relied upon. First, it is said that Mr Crema did not assert a right to be paid regardless of whether Cenkos had been paid by GPV until nine months after the debt accrued on 12 June 2008. Secondly, this is not a case of a casual or feckless non-payment but of a bona fide refusal to pay because of a genuine legal dispute.
3. In my view Mr Crema is entitled to interest under the 1998 Act only from 13 July 2008. He is entitled to interest under that Act until the date of the judgment of this court. I reject the submission of Cenkos that there should be a reduction in the rate. First, it was reasonable of Mr Crema to assist Cenkos in trying to recover the sum from GPV. After that failed he brought proceedings swiftly and there was no culpable delay by him. Secondly, interest is payable under the 1998 Act even if there is a dispute on whether the debt is due. Mr Crema is therefore entitled to interest at the 1998 Act rate that prevailed as at 13 July 2008. I understand from Cenkos' submissions (para 4) that it accepts that the rate under the 1998 Act as from that date is, in total, 13%, viz. 8% above the base rate of 5% that was current at the time.
4. Thereafter, Mr Crema is entitled to interest on any unpaid judgment debt at the rate set by the Judgment Act 1838 and statutory instruments applicable to it.
5. That leaves a question of whether Mr Crema is entitled to interest under section 35A of the Senior Courts Act 1981 for the period from 12 June 2008 until 13 July 2008. The award of interest under this section is discretionary. In my view no interest should be awarded for this period. Usually parties have some time to sort things out when there is a genuine dispute, as the 1998 Act itself recognises by giving the 30 day period of grace in normal cases.
6. The next issue is costs. Mr Crema asks for an order for his costs before the Court of Appeal and below. I understand that his lawyers have a Conditional Fee Agreement with him. It is said by Mr Page QC that, with the 100% uplift, these costs will amount to approximately £1million. If that is so then it is an astonishing figure – outrageous even. It demonstrates why these types of fee arrangement need investigation.
7. Cenkos submits that, for various reasons, Mr Crema should have only a proportion of his costs here and below. In summary these are that Mr Crema lost on a lot of points that were argued on his behalf and that he and his lawyers have generally conducted the case in an unfocused and wasteful way. In particular it is pointed out that Mr Crema has lost comprehensively here and below on the "alternative case" on implied terms of duties of Cenkos and also that the FSA regulations point got nowhere. Cenkos therefore seeks an order under CPR Pt 44.3(6)(a), viz. that Mr Crema only recovers a proportion of his costs here and below. Cenkos suggests 70% of Mr Crema's costs overall (to be assessed if not agreed).
8. In response, it is said that if there is to be any reduction at all, it should be limited to 5-10%.
9. In my view there is force in Cenkos' arguments. Both sides took some bad points but the number taken by Mr Crema was considerably greater and involved more time than those taken by Cenkos. Overall, I would award Mr Crema 75% of his costs in the Court of Appeal and below.
10. However, this conclusion is subject to the third issue which arises, because Mr Crema made a Pt 36 offer in a letter dated 30 December 2009, offering to accept £882,000 in full and final settlement of his claim, inclusive of interest. By the court's judgment, including this judgment granting him interest, Mr Crema has succeeded in beating the Pt 36 offer figure. This result clearly only affects the position at first instance: CPR Pt 36.3(4). In principle, therefore, Cenkos should have to pay indemnity costs from 20 January 2010 until the end of the first instance proceedings on 16 March 2010: CPR Pt 36.14.(3)(b). It should also have to pay interest on the costs awarded: CPR Pt 36.14(3)(c). (I note that no claim is made for interest on the principal sum under Pt 36.14(3)(a), doubtless because of the claim for 1998 Act interest).
11. However, those principles are subject to CPR 36.14(4) – especially (b) and (c). Cenkos submits, for the reasons set out at paragraph 57 of its Outline Argument on these issues, that in the circumstances of this case no order under Pt 36.14(3)(b) and (c) should be made. I see some force in those reasons. Overall, I have concluded that Mr Crema should not recover full costs on an indemnity basis for the period from 20 January to 16 March 2010. Instead he should be entitled to 75% of his costs, albeit to be assessed on the indemnity basis. In addition, Mr Crema will be entitled to interest on those costs at 5% above base rate. I have taken that figure because it is probably the rate at which Mr Crema would have borrowed money at that time, although I assume he has not had to pay money to finance the action as it is all subject to a CFA.
12. The final issue that arises is what interim sum should be paid by Cenkos on account of costs, in advance of any detailed assessment in default of an agreement on the costs payable. Mr Crema submits that Cenkos should pay £500,000 on account of costs. Cenkos submits that the payment on account should be £250,000. The difference is accounted for by the 100% uplift because of the CFA: see paragraph 23 of Mr Crema's submissions.
13. Neither side has pointed to any case that helps on whether this court should take account of the effect of a claim for a large uplift when ordering an interim costs payment. The only guidance is the general one that the court should order what will almost certainly be recovered.
14. On that basis, it seems to me that Mr Crema will almost certainly get some uplift but equally certainly his total costs bill may well be reduced. In the circumstances Cenkos should make an interim payment of £300,000. This sum is to be paid within 28 days from the date of the order resulting from this judgment.

Lord Justice Hughes:

15. I agree.

The Chancellor of the High Court:

16. I also agree.