Interest on costs: when it runs and how much you can claim

Section 17 of the Judgments Act 1838 provides for interest on High Court judgment debts, and the rate has been 8% a year since 1993. CPR 40.8 provides that interest on a judgment runs from the date the judgment is given unless a rule or the court orders otherwise. For costs, the House of Lords in Hunt v R M Douglas (Roofing) Ltd [1990] 1 AC 398 confirmed that interest runs from the date of the order for costs, not the later date the amount is assessed.

That rule surprises many paying parties. Interest is accruing throughout the detailed assessment process, so a delayed settlement can add a meaningful sum to the eventual liability.

CPR 44.2(6)(g) allows the court to award interest on costs from or until a certain date, including a date before judgment. Receiving parties sometimes ask for interest on costs paid during the case, because the client or funder has been out of pocket. The rate in that situation is discretionary and is often set by reference to a commercial rate rather than 8%.

Courts can also reduce or postpone the start date of Judgments Act interest, for example to reflect delay by the receiving party in starting detailed assessment proceedings. Under CPR 47.8 and 44.11, unjustified delay can lead to disallowed interest.

In the county court, interest on judgment debts is governed by the County Courts (Interest on Judgment Debts) Order 1991, which generally applies to judgments of £5,000 or more and contains its own exceptions. Where costs are payable alongside a smaller judgment, it is worth checking the position rather than assuming interest applies.

Where a claimant beats its own Part 36 offer at trial, the court may award enhanced interest on costs under CPR 36.17(4), at a rate not exceeding 10% above base rate. Our article on Part 36 offers explains how those consequences work.

Interest is usually claimed in the bill of costs or when a final costs certificate is sought. Many settlements are expressed as an all-inclusive sum covering costs and interest, so each side should calculate interest before making or responding to offers.

For a receiving party, the threat of interest is a useful lever in negotiation. For a paying party, an early, realistic offer and a payment on account can reduce exposure. Our legal costs negotiation service includes interest calculations as standard.

A payment on account reduces the sum on which interest accrues from the date it is paid. That is one reason payment on account applications are worthwhile for receiving parties and why paying parties sometimes volunteer payments to limit interest.

Our detailed assessment team keeps a running interest figure during negotiations so that offers can be compared fairly.