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Interest on Party Party Costs

Interest on Party Party Costs - Legal Costs Consulting Australia

From Allocatur to Incipitur

We are now seeing the effect of the (not quite so) recent changes to the Civil Procedure Act 2005 being applied in cost assessments in relation to interest.

S101(4) of the CPA now reads:

(4) Unless the court orders otherwise, interest is payable on an amount payable under an order for the payment of costs.

Previously, the legislation provided:

(4) The court may order that interest is to be paid on any amount payable under an order for the payment of costs

What effect does this change have?

Previously, unless a specific order for interest on party party costs was made, interest could generally only be claimed on a party party award after the issuing of a certificate of determination by the cost assessor or review panel – The allocator basis.

The cost assessor was precluded under s363(A)(4) Legal Profession Act 2004 from determining interest payable.

Post amendment, we now find ourselves in a position that unless otherwise ordered interest is payable under the order of the court for the payment of costs.  This means that interest commences running from the making of the order – The incipitur basis.

Now the cost assessor must make an assessment in accordance with any order made for interest on costs under section 101 of the Civil Procedure Act 2005 –   s75(1)(d) Legal Profession Uniform Law Application Act

What is the operative date for this to take effect?

For this, we need to examine the following

  • The Courts and Other Justice Portfolio Legislation Amendment Act 2015 (NSW), came into operation on 24 November 2015.
  • The savings provisions, now incorporated into Schedule 6 of the Civil Procedure Act 2005, at s 21 provide:

Part 8 – Provisions consequent on enactment of Courts and Other Justice Portfolio Legislation Amendment Act 2015

21 Pending proceedings

The amendments made to this Act by Schedule 1.2 to the Courts and Other Justice Portfolio Legislation Amendment Act 2015 do not extend to proceedings commenced before the commencement of that Subschedule and those proceedings may continue as if those amendments had not been enacted.

Therefore, proceedings issued on or after 24 November 2015 fall under the amended CPA and attract the benefit of the interest provisions contained therein.

See Rothe v Scott (No. 5) [2016] NSWDC 225 for a simple analysis.

How is the interest claim made?

Paragraph 4(g) of Form A3 Application for Court Ordered Costs states:

(g) If interest is claimed, identify any relevant order for interest on costs and ATTACH a copy. State the amount claimed under the order to a convenient date of calculation, how it is calculated, and the rate(s) at which continuing interest is claimed.

We recommend a schedule is attached to the application and listed in the Index detailing the claim along the lines of:

Start DateEnd DateDaysRateAmount per dayTotal
Sub Total 365  $7,748.95
Projected Interest 907.50%$20.54$1,848.60
Grand Total 455  $9,597.55

In the schedule the:

  • Start date is the date of the order of the Court
  • End date is the date the matter is filed in the Supreme Court for assessment
  • Projected interest takes into account the time for the issuing of a certificate of determination.

We are currently working on an interest calculator tool to be launched on our website to assist practitioners and cost assessors with these calculations.

The summary

With interest rates at a historic low, the ability to recover 6% plus cash rate on party party costs is one not to be overlooked.

Likewise, the exposure to same as a cost respondent is likely to encourage part payment of the undisputed portion of costs where matters appear to be running to assessment in order to mitigate this loss.

Having mind to the express provisions under s75(1)(d) Legal Profession Uniform Law Application Act it is unclear what effect the cost applicants delay in bringing an assessment will have in the assessor determining the interest under s101(4).

We will publish an update in the near future detailing the launch of the Interest Calculator.