The Supreme Court has ruled that interest on legal costs begins to run from the date of the judgment or order awarding those costs, even though the amount may not be quantified until later.
The issue arose from proceedings brought by Garda members Brendan Clarke and Fergus McCarthy. Their High Court action was settled on May 15, 1996 on terms requiring the defendants to pay their costs when taxed and ascertained.
The Taxing Master subsequently certified party-and-party costs of £130,388.27 on March 20, 1997. That amount was paid on May 8, 1997, but no interest was included.
Clarke and McCarthy claimed £10,215.01 in interest, calculated at the prevailing rate of 8% a year from the date of the settlement until payment. The defendants argued that interest should only apply to sums which the plaintiffs had themselves already paid out, including £64,000 paid to their solicitors before settlement.
The Supreme Court rejected that approach.
Mr Justice Fennelly examined the Debtors (Ireland) Act 1840 and a long line of Irish and English authorities which had produced conflicting approaches. The key distinction was between interest running from the date of judgment — known as the incipitur rule — and running only from taxation, when the amount of costs is formally fixed.
The court held that costs become a liability of the unsuccessful party when the judgment or order awarding them is made. Taxation determines the amount payable, but once quantified the debt relates back to the earlier judgment date for interest purposes.
The court also rejected the argument that interest should depend on how much of the legal bill the successful party had already discharged. Such payments concern the relationship between a client and legal advisers and are not part of the execution of the costs order.
The case-stated question was therefore answered yes: interest is payable on costs from the date of the judgment awarding them.