A recent judgment from Costs Judge Gordon-Saker covers some interesting areas of costs recovery.

Marbrow v Sharpels Garden Services Ltd [2020] EWHC B26 (Costs) raised three particular issues –

1. Are the caps on recoverable under 7.2 of Practice Direction 3E of the Civil Procedure Rules 1998, inclusive of VAT? The PD says –

‘the recoverable costs of initially completing Precedent H shall not exceed the higher of £1,000 or 1% of the total of the incurred costs (as agreed or allowed on assessment) and the budgeted costs (agreed or approved)’

The Defendant argued that the capped fee must be inclusive of VAT because it is not said to be otherwise. The judge found that the figures were exclusive of costs because of the reference to ‘1%’. This is expressed to be a percentage of a figure that does not include VAT because the figures in a costs budget exclude VAT.

He also referred to Friston on Costs (3rd Edition) –

‘While there is no authority on the point, it is likely that the percentage limits are exclusive of VAT. This is because Precedent H is designed in such a way as to discourage VAT being recorded therein, so it would seem odd if the costs were payable on a VAT-inclusive basis. Moreover, if it were not a VAT-exclusive limit, then a VAT-registered litigant would have the advantage over a non-VAT registered litigant – and that would be a curious state of affairs.’

2. Can a successful party recover interest incurred under a disbursement funding loan?

In this case the interest was 5%. The judge reviewed decisions which could be argued either way. He relied on the decision in – Hunt v RM Douglas (Roofing) Ltd [1987] 11 WLUK 221 where overdraft interest incurred in funding disbursements was disallowed because funding of costs had never been a recoverable item and this would be an ‘unwarranted extension.’

This is a significant decision in the light of the growing reliance on disbursement funding.

3. The third issue concerns that date from which interest should run.

The defendants argued that the relevant date should be 3 months after the costs order. This argument was based on comments from Leggat J. (as he then was) in Involnert Management Inc v Aprilgrange Limited & Ors [2015] EWHC 2834 (Comm) –

‘In order to commence such proceedings, the receiving party must serve on the paying party a bill of costs giving particulars of the costs claimed. It is then for the paying party to decide which items in the bill of costs it wishes to dispute. Postponing the date from which Judgments Act interest begins to run by three months will therefore generally serve to ensure that the party liable for costs has received the information needed to make a realistic assessment of the amount of its liability before it begins to incur interest at the rate applicable to judgment debts for failing to pay that amount.’

The costs judge noted that the normal rule is that interest runs from the date of judgment. This incipitur rule was therefore to be applied unless justice requires otherwise in a particular case. He found that comments in Involnert were specific to the facts in that case and did not create a general rule delaying the starting date by three months. Interest was awarded from the date of the costs order.

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