BL-2017-000665 - [2025] EWHC 2909 (Ch)

The Bank also seeks a determination in principle on the payment by the Defendants of interest on costs. It submitted that whether to award interest on costs is a matter for English law as the lex fori, a submission with which I agree.

The power to award pre-judgment interest is contained in CPR 44.2(6)(g), which provides that “[t]he orders which the court may make under this rule include an order that a party must pay … (g) interest on costs from or until a certain date, including a date before judgment”. As Leggatt J said in Involnert Management Inc v Aprilgrange Ltd & Ors [2015] EWHC 2834 (Comm) (“Involnert”) at [7], this power to award interest at a commercial rate from the dates when the costs were incurred until the date when interest becomes payable under the Judgments Act is now routinely exercised when an order for costs is made following a trial. Although Leggatt J used the word “incurred”, the Bank, consistently with Douglas v Hello Ltd [2004] EWHC 63 (Ch) at [24], accepted that the right starting point was the time at which the costs were actually paid. The Individual Defendants did not oppose an award of interest in principle, but in the absence of the Corporate Defendants, I should make clear that I think that their position was the correct one to adopt. Having regard to the fact that these proceedings were commenced in 2017, at which point the Bank began to incur liability for paying the costs of its own lawyers, I can see every reason to exercise the power in this case.

The Bank seeks interest at the Bank of England base rate plus 3%, as to which it submitted in its skeleton argument that it relied on the evidence of the Bank’s US$ borrowing and lending rate and the Bank’s general characteristics as a nationalised Ukrainian bank. This appeared to involve not just looking at the rates at which the Bank actually lent and borrowed, but also the objective question of where the Bank stands in the market as a result of its own characteristics. As Mr Hunter pointed out, the rate sought is one percentage point higher than the award made in Involnert. Although they did not deal with this in their skeleton arguments for the Second Consequentials hearing, the Individual Defendants did not accept that the rate sought by the Bank was an appropriate starting point.

The appropriate rate is a matter for the court’s discretion to be exercised in light of the purpose of such an award, which is to compensate a party who has been deprived of the use of his money, or who has had to borrow money to pay for his legal costs (Jones v Secretary of State for Energy and Climate Change [2014] EWCA Civ 363 at [17]). As Sharp LJ went on to explain, the relevant principles do not materially differ from those applicable to the award of interest on damages under section 35A, which Mr Hunter submitted meant that the court had to take a relatively broad brush approach, a submission which is supported by cases such as Kazakhstan Kagazy at [70] and with which I agree.

Mr Hunter submitted that the Bank of England base rate plus 3% was equivalent in commercial terms to US prime plus 2%, which was the rate that he submitted (and I have accepted) should be applied for the purposes of quantifying pre-judgment interest on the principal judgment sum, although I did not understand it to be suggested that it should receive interest on costs on a compound basis. He said that this equivalence between Base rate plus 1% and US Prime followed from the analysis of Aikens J in Mamidoil-Jetoil Greek Petroleum Company SA v Okta Crude Oil Refinery AD [2003] 1 Lloyd’s Rep. 42 at [16], as cited and relied on by Picken J in Kazakhstan Kagazy at [78]:

“When damages are assessed in pounds sterling the conventional rate of interest that is awarded in commercial cases is ‘base rate plus 1 per cent’. That is the rate that a commercial borrower of good credit will have to pay to borrow sterling in London. But when the currency of the loss and the currency of damages is U.S. dollars, then the Commercial Court will consider the cost of borrowing U.S. dollars. That is the position in this case. The cost of borrowing U.S. dollars is usually expressed by reference to the U.S. Prime Rate. That is the rate that commercial banks charge their most creditworthy customers if they are borrowing U.S. dollars. It is a short-term borrowing rate. Prime Rate includes an element of profit for a bank, so that the most creditworthy borrows can obtain loans at Prime Rate itself. Less creditworthy borrowers will have to pay Prime Rate plus one or more percentage points.”

Mr Morrison, who argued this point for Mr Bogolyubov, made a deceptively simple submission in response to the argument advanced by the Bank. He said that the evidence on which the Bank relied for the appropriate rate was what it said was “its US$ borrowing and lending rates, as set out above”, which he said was a reference back to the table in Mr Thompson’s evidence which recorded the Bank’s US$ denominated borrowing rates dropping from 3.7% in 2017 to 0% in 2021 and thereafter (see paragraph 24 above). He then demonstrated that the Bank of England base rate plus 3% figures were significantly higher than the weighted average interest rates on the Bank’s figures from 2018 onwards and even the base rate without any uplift was higher from 2022 onwards.

I do not accept this submission. What the Bank was referring back to included its lending rates as well as its borrowing rates, but in any event and taking a broad approach to the award, the rate should be a commercial rate reflecting the appropriate category into which the judgment creditor (in this case the Bank) falls as a borrower of the relevant currency. This was one of the bases on which the Bank advanced its claim to pre-judgment interest on costs in its skeleton argument (although it also referred to its own borrowing and lending rate encapsulating as it did the 0% reflecting the consequence of the de-dollarisation of the Ukrainian economy).

I agree with the Bank’s submission based on Kazakhstan Kagazy that it is appropriate to equate US prime with the Bank of England’s base rate plus one per cent for the purpose of assessing the starting point for a commercial rate. To that can then be added an appropriate uplift reflecting the creditworthiness of the Bank, which is an additional 2%. It follows that, in the case of a costs award in sterling, being the currency in which the Bank’s costs have been incurred and paid, the starting point is that the appropriate rate of interest is 3% over the Bank of England base rate from time to time. Such an award would be consistent with the award I have already made in relation to the judgment sum, but having proper regard to the currency in which the relevant obligation to its lawyers has been incurred. In my judgment this rate best meets the justice of the case.

As to post-judgment interest on costs, the default position is set out in CPR 40.8(1), which is that interest at that rate (8%) is payable from the date of the judgment awarding costs, sometimes referred to as the incipitur date (Simcoe v Jacuzzi UK Group plc (CA) [2012] 1 WLR 239 (“Simcoe”) at [47] and [48]). This is the starting point, although it can be departed from “if that is what justice requires”. The Bank submitted that, as costs had been incurred and paid in sterling (and therefore section 44A did not apply), there was no justification for departing from the normal time from which interest should run, viz., the date of the award.

Mr Haydon submitted that what Mr Hunter had to say on timing was wrong, because it failed to take into account Leggatt J's discussion in Involnert at [18] to [26] of how and why it might be appropriate to defer the running of post-judgment interest on costs until a date three months after the orders for costs were made. The issue arises because of the oddity that an award of costs is still to be treated as a judgment debt for the purposes of section 17 of the Judgments Act 1838 (Hunt v RM Douglas (Roofing) Ltd [1990] 1 AC 398), even though, until the costs have been assessed, there is no sum for which execution can be levied (Involnert at [6]). It was then said to be just for such a deferral to be granted in respect of that element of the costs award which exceeded the amount of the interim payment largely on the basis that it was only after three months that the paying party would be provided (pursuant to CPR 47.7) with a detailed statement of the costs claimed so that it could take an informed view of the amount of its liability. This was an important refinement to Simcoe where the rival arguments were whether judgment interest should normally run from the incipitur date or the date of agreement / assessment (i.e., the allocatur). It does not seem to have been suggested that the solution later adopted by Leggatt J in Involnert was the right starting point.

I see force in Mr Haydon’s submission, because it reflects the underlying principle that it may not be just to make an order under which interest begins to run at the rate appropriate for unpaid judgment debts before the paying party could reasonably be expected to pay the debt. This will be the time at which (as Leggatt J put it in Involnert at [23]) “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”.

Leggatt J’s approach is regularly cited with approval and in my judgment is often the right one to adopt. However, it seems to me to be important that, although an interim payment had been sought and ordered in Involnert, the information supplied to the paying party was not sufficient to make it reasonable for it to make any payment over and above the amount for which the interim payment had been ordered (see the description at [27]). This seems to have been the real reason why it was unjust to make an order which had the effect of judgment interest running before much greater detail was provided. Although I suspect that the schedules supplied by the Bank in support of their interim payment application contained more detail than the information provided in Involnert, I still consider that the same principle applies in the present case.

The result is that the Bank is entitled to interest on its costs from the time of payment to the time at which the costs are payable at the Bank of England base rate plus 3% and thereafter at the post judgment statutory rate. To the extent of the interim payment, the time at which the rate converts from base rate plus 3% to the judgment rate is the time at which the interim payment falls due. For the balance of any ultimate costs liability, the time at which the rate converts from base rate plus 3% to the judgment rate is three months after the date of this judgment.