Ipsofactoj.com: International Cases [2005] Part 7 Case 10 [SCIre]


SUPREME COURT OF IRELAND

Coram

Horan

- vs -

Quilter

DENHAM J

HARDIMAN J

MURRAY J

1 MARCH 2004


Judgment

Mr. Justice Denham

APPEAL

  1. This is an appeal by Tadgh Horan, the plaintiff/appellant, hereinafter referred to as the plaintiff, from an order of the High Court (O'Higgins J.) delivered on the 2nd July, 2001 and perfected on the 11th July, 2001. Thomas Quilter, the defendant/respondent, is hereinafter referred to as the defendant.

    ONE ISSUE

  2. There is a single issue on this appeal and it is as to the date from which interest is payable on the taxed costs of the arbitration.

    FACTS

  3. The plaintiff and the defendant commenced a partnership to practise veterinary surgery in or about 1989. Difficulties arose in the partnership in or about 1990 and by agreement Mr. Joseph Dundon was appointed as arbitrator to determine the disputes. The arbitration progressed in the years from 1992 to 1996. An interim award was made in 1992 and in 1993, and the final award was made in 1996. Clause 5 of the final award stated:

    I award the applicant his costs of the reference, together with witnesses's expenses.

  4. The applicant referred to is the plaintiff. On behalf of the plaintiff a bill of costs was furnished in 1998 to the defendant. The bill of costs amounts to £30,331.65. No demand was made that the bill of costs be referred to the Taxing Master or elsewhere. The plaintiff sought that the bill of costs be discharged. The plaintiff then brought proceedings by way of special summons for an order pursuant to O. 56 r. 4 (f) of the Rules of the Superior Courts and s. 41 of the Arbitration Act, 1954 to enforce the provisions of clause 5 of the final award of the arbitrator. He sought, if necessary, judgment in the sum of £30,331.65 (being the bill of costs) together with interest on the sum until judgment.

    HIGH COURT ORDER

  5. The High Court ordered, pursuant to s. 41 of the Arbitration Act, 1954, that the plaintiff be at liberty to enforce the arbitration award in the same manner as a judgment or order to the same effect. It was ordered that the plaintiff do recover against the defendant the sum of £30,331.65 and costs of the proceedings when taxed and ascertained.

    HIGH COURT JUDGMENT

  6. The learned High Court judge adopted counsel's note of his ex tempore judgment given on the 2nd July, 2001. Counsel's note states:

    This is an application for a section 41 order to enforce the provision of clause 5 of an arbitrator's award. There were two interim awards and a final award which is dated the 26th November, 1996 which is exhibited and which was made four and a half years ago. Pursuant to the arbitrator's order a bill of costs was submitted.

    This bill of costs was not taxed and was not paid. Two reasons have been advanced by the defendant as to why this was so.

    1.

    There is an allegation by the defendant that a witness who gave evidence was not qualified. He was not a Chartered Accountant and he was not a Certified Accountant. This was irrelevant said the plaintiff as he was acting within the practice of the profession. I am satisfied that there is no substance to this argument.

    2.

    Another matter arises in relation to the evidence giving by Mr. Neville. Mr. Quilter says that his was part of the partnership expenses. But it seems it is clear that this was not given about the accounts of the partnership. He gave evidence on behalf of one of the parties. This is not denied by the defendant in the pleadings. The defendant is not entitled to challenge the final award. The arbitrator has made his final award.

    A further argument made is that these proceedings are premature. That argument is more impressive. But the position is set out accurately in the letter of Mr. McMahon exhibited. (Judge reads)

    This relates to Mr. Neville's costs for preparing accounts for the arbitration on the instructions and on behalf of Mr. Quilter. David Fitzmaurice & Co., were accountants to the partnership and other accountancy services provided to either party by other firms did not relate to the partnership accounts. Unless Mr. Neville's fees are excluded then agreement cannot be reached. I confirm Mr. O'Donnell's fees will not be submitted by Mr. Horan as against the partnership accounts.

    [Letter November 17, 1999]

    I think that that is the reality. The fact is that these were not partnership accounts and this was a lever being exerted by Mr. Quilter. The final award was the final award and these proceedings are not premature.

    The Court then made an Order: in terms of paragraph 1 of the Special Indorsement of Claim, under section 41 of the Arbitration Act, 1954 and in terms of paragraph 3 of the Special Indorsement of Claim giving the plaintiff judgment for £30,331.65.

    Counsel for the plaintiff then applied for interest on the Bill of Costs and witnesses expenses as and from the date of the arbitrator's award and relied on:

    (i)

    section 22 Courts Act, 1981 and

    (ii)

    Best v Wellcome Foundation Ltd.

    The Judge refused to grant interest on the arbitrator's award. But allowed that interest to accrue from the date of his judgment/order.

  7. Consequently, it is the latter part of the judgment which is in issue on this appeal, although the context is explained in the body of the judgment. It is the refusal of interest, from the date of the award of the arbitrator, which is in issue.

    NOTICE OF APPEAL

  8. Against the said order and judgment the plaintiff has appealed. He set out the following grounds of appeal in his notice of appeal:

    1.

    That the learned Trial Judge erred in law and in fact in determining that the Plaintiff/Appellant was not entitled to interest, pursuant to the provisions of the Courts Act, 1981, on foot of the said Arbitrator's Award and in particular on foot of the circumstances award of costs and witnesses as and from the date of the said award, namely the 26th day of November, 1996.

    2.

    That the learned Trial Judge erred in law and in fact in determining that the Arbitrator's said award did not have the status, nature and effect of a court order.

    SUBMISSIONS

  9. Counsel on behalf of the plaintiff in written submissions submitted that an arbitrator's award of costs should carry statutory (Courts Act) interest as and from the date of the award in the same way as an award of costs in either High Court or Supreme Court proceedings carries statutory interest as and from the date of judgment and not from the date of the ascertaining of the amount of such costs. Counsel referred the Court to O'Sullivan v Dwyer (No. 2) [1973] I.R. 81, Walsh J. at p. 85; Best v Wellcome Foundation Ltd (No. 2) [1995] 1 I.L.R.M. 554; and s. 34 Arbitration Act, 1954. He submitted that an arbitrator's award is of the same nature, effect and consequence as a court order. He submitted that the Court should grant interest on the costs of the arbitrator's award as and from the date of the final award and not from the date of the High Court order giving power to enforce the award either

    1. on the basis of the Debtors (Ireland) Act, 1840, or

    2. on the basis of s. 34, Arbitration Act, 1954.

  10. In written submissions counsel on behalf of the defendant submitted that there was no statutory definition of the term "award", that on its own the arbitrator's award does not have the standing of a judgment or order, that only the courts can make judgments or orders and that leave of the court is required to enforce the award as a judgment or order. Counsel also submitted that pursuant to s. 41 of the Arbitration Act, 1954 the High Court had ordered that the plaintiff be at liberty to enforce the arbitration award in the same manner as a judgment or order to the same effect. Thus, counsel submitted, as and from the 2nd July, 2001, when the High Court order was made, s. 26 of the Debtors (Ireland) Act, 1840, post judgment statutory interest attached but it did not attach before that date. Further, it was submitted that interest provided for by s. 34 of the Arbitration Act, 1954 does not apply as it refers to "a sum directed to be paid by an award." Clause 5 of the arbitrator's final award does not refer to a sum, it refers simply to the costs of the reference. In addition it was submitted that s. 34 does not refer to interest on costs, a lacuna, which has since been corrected by the legislature. Section 34 of the Arbitration Act, 1954 has been amended in relation to interest on awards by the Arbitration (International Commercial) Act, 1998, which Act does not apply to this case as it applies only to arbitrations commenced after the date on which the Act of 1998 came into operation.

  11. When this matter was heard before the court the oral submissions crystallised the matter as requiring an interpretation of s. 34 of the Arbitration Act, 1954. In construing s. 34 Arbitration Act, 1954 reference was made to other sections of the Arbitration Act, 1954 and to the rationale of the law on interest on judgments of the courts.

    LAW

  12. The relevant statutory and case law referred to is as follows: The Arbitration Act, 1954:

    29.

    (1)

    Unless a contrary intention is expressed therein, every arbitration agreement shall be deemed to include a provision that the costs of the reference and award shall be in the discretion of the arbitrator or umpire who may direct to and by whom and in what manner those costs or any part thereof shall be paid, and may, with the consent of the parties, tax or settle the amount of costs to be so paid or any part thereof, and may award costs to be paid as between solicitor and client.

    (2)

    Where an award directs any costs to be paid, then, unless the arbitrator or umpire, with the consent of the parties, taxes or settles the amount thereof-

    (a)

    the costs shall be taxed and ascertained by a Taxing Master,

    (b)

    the procedure to obtain taxation and the rules, regulations and scales of costs of the Court relative to taxation and to the review thereof shall apply to the costs to be so taxed and ascertained as if the award were a judgment or order of the Court.

    34.

    A sum directed to be paid by an award shall, unless the award otherwise directs, carry interest as from the date of the award and at the same rate as a judgment debt.

    41.

    An award on an arbitration agreement may, by leave of the Court, be enforced in the same manner as a judgment or order to the same effect and, where leave is so given, judgment may be entered in terms of the award.

  13. The Arbitration (International Commercial) Act, 1998, s. 17 amends the Arbitration Act, 1954 by substituting the following for s. 34:

    34.

    (1)

    The parties to an arbitration agreement may agree on the powers of the arbitrator or umpire as regards the award of interest.

    (2)

    Unless otherwise agreed by the parties, the arbitrator or umpire may award simple or compound interest from the dates, at the rates and with the rests that he or she considers meet the justice of the case -

    (a)

    on all or part of any amount awarded by the arbitrator or umpire, in respect of any period up to the date of the award;

    (b)

    on all or part of any amount claimed in the arbitration and outstanding at the commencement of the arbitration but paid before the award was made, in respect of any period up to the date of payment.

    (3)

    Unless otherwise agreed by the parties, the arbitrator or umpire may award simple or compound interest from the date of the award (or any later date) until payment, at the rates and with the rests that he or she considers meet the justice of the case, on the outstanding amount of any award (including an award of interest under subsection (2) and an award of costs).

    (4)

    References in this section to an amount awarded by an arbitrator or umpire include an amount payable in consequence of a declaratory award by the arbitrator or umpire.

    (5)

    This section shall not apply to an arbitration commenced before the day on which the Arbitration (International Commercial) Act, 1998, comes into operation unless –

    (a)

    the arbitration is concluded after that day, and

    (b)

    the parties agree that this section shall apply.

    (6)

    This section shall apply to an arbitration commenced on or after the day on which the Arbitration (International Commercial) Act, 1998, comes into operation –

    (a)

    under an arbitration agreement entered into on or after that day, or

    (b)

    if the parties so agree, under an arbitration agreement entered into before that day.

    ....

  14. In O'Sullivan v Dwyer (No. 2) [1973] I.R. 81 Walsh J. at p. 85 said:

    A judgment debt of the High Court or the Supreme Court carries interest at 4% from the date of judgment's pronouncement. This is the result of ss. 26 and 27 of the Debtors (Ireland) Act, 1840, and the Rules of the Superior Courts, 1962. Section 26 of the Act of 1840 provides that every judgment debt due upon any judgment not confessed or recovered for any penal sum for securing principal and interest shall carry interest at the rate of 4 per cent per annum from the time of entering up the judgment, or from the time of the commencement of the Act in cases of judgments then entered upon and not carrying interest, until the same shall be satisfied. Section 27 of the Act provides that any persons to whom any sum of money, costs, charges or expenses are payable under any order are deemed to be judgment creditors within the meaning of the Act. Thus interest on a judgment of the High Court or the Supreme Court may be claimed from the date of the pronouncement of the judgment and the costs awarded.

  15. In Best v Wellcome Foundation Ltd (No. 2) [1995] 2 I.R. 393, the High Court (Murphy J.) held in allowing the plaintiff's claim,

    1.

    That where an order for costs is made and the order is merely expressed as an order 'for costs' interest accrues thereon from the date of the order and not from the date of the taxation notwithstanding the fact that the costs are of necessity unascertained until taxation. Cooke v Walsh (1989) I.L.R.M. 322, Hickey v Norwich Union Fire Insurance Ltd. (unreported, High Court, Murphy J., 23rd October, 1987, ex tempore) applied ....

    ....

    5.

     

    That while the approach of the High Court in Hickey v Norwich Union Fire Insurance Ltd. in determining that the accrual of interest was not conditional upon the taxation of costs was not expressly endorsed by the Supreme Court in Cooke v Walsh there was no reason, in the circumstances of the instant case why such an approach should not be followed. Hickey v Norwich Union Fire Insurance Ltd. (unreported, High Court, Murphy J., 23rd October, 1987, ex tempore) applied.

  16. In Best v Wellcome Foundation Murphy J. at p. 397 said:

    Issues with regard to the payment of interest on costs awarded in legal proceedings have been debated in this country and in England over many years and there are conflicting decisions within both jurisdictions. As it happens, the matter came before me in Hickey v Norwich Union Fire Insurance Ltd. in which an ex tempore judgment was delivered on the 23rd October, 1987. My judgment is of assistance in that it reviews the law in England and Ireland and the conflict on the matter in issue between (and within) the two jurisdictions. The judgment is of importance in that the views expressed therein were endorsed in part by the late McCarthy J. when delivering the judgment of the full Supreme Court in Cooke v Walsh [1989] I.L.R.M. 322. In Hickey v Norwich Union (unreported, High Court, Murphy J., 23rd October, 1987, ex tempore) I expressed my conclusion in the following terms:

    I take the view that the law in this country is that where an order for costs is made and the order is merely expressed as an order 'for costs' that interest accrues thereon from the date of the order and not from the date of the taxation notwithstanding the fact that the costs are of necessity unascertained until taxation.

  17. In Clarke v Commissioner of An Garda Siochana [2002] I.R. 207 the plaintiffs were plaintiffs in a High Court action which was settled on 15th May, 1996 on terms, one of which was that the defendants pay to the plaintiffs their costs of the action when taxed and ascertained. Fennelly J. at p. 209 stated:

    Although the case stated is silent on the point, it can be assumed that the settlement was made a rule of court and that an order for taxation of costs was made.

  18. The essential legal issue on the case stated was whether interest should run from the date of judgment and thus prior to the amount being determined in taxation. The case related to a judgment of a court. On the issue Fennelly J. held at p. 218:

    On the issue of principle, I am of the view that costs constitute a liability of the unsuccessful party from the moment of the decree or judgment, that they are not payable until quantified but that, from that point the debt relates back to the date of the judgment, with interest running from that earlier date.

    DECISION

    Arbitration Act 1954

  19. At the heart of this case is s. 34 of the Arbitration Act, 1954 which provides that:

    A sum directed to be paid by an award shall, unless the award otherwise directs, carry interest as from the date of the award and at the same rate as a judgment debt.

  20. The award in this case did not otherwise direct. Thus the case turns on the construction of s. 34. The critical words are "a sum directed to be paid by an award."

  21. The question is whether these words include costs, so that they shall, pursuant to the further words of s. 34, "carry interest as and from the date of the award and at the same rate as a judgment debt."

    "Sum"

  22. At first glance the word "sum" might appear to mean a definite amount of money, an amount of money calculated by the arbitrator. This meaning would require that the amount be ascertained at the time of the award. As costs are not ascertained at the time of the award, but at a later date, it might be inferred that the word "sum" does not include costs.

  23. Although the exact amount of money involved in an order for costs is not defined at the time of the award it is a definite award of the costs. While the amount of the costs may have been agreed it is more probable that they have not. If it were necessary in the construction of the section that an exact amount of money be awarded by the arbitrator to attract interest then if the amount of costs had been agreed it would attract interest but if it had not then no interest would lie. This construction would appear to create an injustice.

  24. In Stroud's Judicial Dictionary, 6th Ed., there are many entries relating to the word "sum." Included in the entries are:

    A 'sum' does not necessarily mean an amount expressible in some coin of the realm ....; 'Provided the sum or damages sought to be recovered shall not exceed £50'; 'sum' in such a connection, means 'debt' (Joule v Taylor 7 Ex. 58) ....; 'Sum of money', in regard to ad valorem stamp duty, will generally mean the principal sum, not a sum compounded of principal and interest (Pruessing v Ing 4 B. & Ald. 204).

  25. On occasion the word "sum" is defined further. Included in the entries for "sum adjudged" are:

    The 'sum adjudged to be paid on a conviction, 'refers to the sum in which the party is convicted, and does not include the costs' ....; 'Sum adjudged' (Public Health Acts) meant the sum in respect of which the adjudication was made ....

  26. These meanings are to be contrasted with a "sum certain", which connotes further certainty. In London, Chatham and Dover Railway v South Eastern Railway [1893] A.C. 429 Herschell C. held that the phrase "sum certain" did not cover a sum which was liable to subsequent adjustment. He stated at p. 436:

    I think that the certain sum payable must be a certain sum which is due absolutely and in all events from the one party to the other, though it may not come, strictly speaking, within the term 'debt'.

  27. Section 34 contains the term "sum" simpliciter. On its face it is describing money. It does not expressly refer to a specified sum or a certain sum. It is the sum adjudged to be paid by the arbitrator. I am satisfied that its plain and simple meaning is that it refers to money. I would construe the section as referring to money directed to be paid by an award. I am satisfied that the precise amount of the money does not have to be specified in the award, as the circumstances may require an arbitrator to make an order linked to the circumstances of a case. Taking this approach it is money which would carry interest from the date of the award at the same rate as a judgment debt.

    "Award"

  28. The word "award" is not defined in the Arbitration Act, 1954. It is defined in the Concise Oxford Dictionary, 8th Ed. as:

    A noun:

    1.

    A payment, penalty or prize awarded.

    2.

    A judicial decision.

  29. In s. 34 of the Arbitration Act, 1954 the term "award" has a clear meaning. Taking its plain meaning it refers to the conclusion reached by the arbitrator. This is the decision of the arbitrator. Having reached this view I was pleased to note a contemporary author on the topic. In considering the award of an arbitrator Ercus Stewart in "Arbitration, Commentary and Sources" (Dublin, 2003), states at p. 92:

    The decision of the arbitrator is called the award.

  30. I am satisfied that the term "the award" of the arbitrator refers to the decision of the arbitrator.

  31. Thus, in light of this construction of the Act of 1954 the words of s. 34 have a plain meaning. It means that money directed to be paid by a decision of an arbitrator shall, unless the decision otherwise directs, carry interest as from the date of the decision and at the same rate as a judgment debt. This construction of s. 34 of the Arbitration Act, 1954 would also be consistent with the principle in the case law on interest payable on costs in court decisions.

  32. The underlying principle of the common law as to court orders for costs is that interest will run from the date of the court order. This is so even though the sum is as yet unascertained at the date of the court order. The taxation of the costs and the determination of the amount would be post the court order. Yet interest runs from the court order. The rationale behind this is one of justice, the party is out of his money all this time and should be compensated by the payment of interest. It is also a measure which encourages early payment of costs to defeat a high interest bill. This is consistent with a policy opposed to delay in litigation. I can conceive of no reason why the same approach is not taken in the legislation on arbitrations. There appears to be no reason why the principle underlying both schemes for decision making would be different and every good reason why they should be consistent.

  33. To avoid doubt it would appear to be good practice for the written decision of an arbitrator, the award, to deal expressly with interest. It may well be that this has been common practice and that that is why this issue has not been the subject of any recorded court decisions which counsel could bring to the attention of the Court. The absence of reference to interest in the Arbitration Act, 1954 has been rectified in the Arbitration (International Commercial) Act, 1998, in relation both to international commercial arbitration and to domestic arbitration.

  34. The usual order in arbitration is that costs follow the event. Thus it is similar to the position in courts of law. If there is a departure from the usual order then it should be clear and reasons should be given.

  35. In this case the decision of the arbitrator was that money be paid and it shall, unless the decision otherwise directs, carry interest as and from the date of the decision at the same rate as a judgment debt. Thus the decision in this case of the arbitrator carried interest as the decision did not otherwise direct. The High Court made an order under s. 41 of the Arbitration Act, 1954 enforcing the award. It may well have been that there was a different emphasis by counsel when arguing the matter in the High Court. It was conceded in this Court that s. 22 Courts Act, 1981 was not relevant, that the relevant law is s. 34 Arbitration Act, 1954. Further, no reason was recorded in the note of the ex tempore judgment of the learned High Court judge as to why interest was refused on the arbitrator's award but interest was allowed from the date of the judgment.

  36. I am satisfied that the High Court erred in not including interest from the date of the award and in offering no reasons for departing from the usual rule. Therefore, I would allow the appeal and vary the order of the High Court to enable interest to run from the date of the award of the arbitrator, as well as from the date of the judgment.

    CONCLUSION

  37. I would allow the appeal for the reasons given in the judgment. I would order that the money directed to be paid by the award, the costs, carry interest from the date of the award.

    Mr. Justice Hardiman

  38. This case raises a net point of some complexity.

  39. The plaintiff and the defendant are both veterinary surgeons. In the year 1989 they entered into a partnership. Unfortunately disagreements soon arose between them as to the affairs of the partnership. They agreed to refer their differences to the arbitration of Mr. Joseph Dundon, Solicitor. The arbitrator held a number of hearings between 1992 and 1996. He made an interim award in September, 1992, a second interim award in June, 1993 and a final award on the 26th November, 1996. Both the interim awards expressly reserved for a future award the question of costs. In the final award, paragraph 5 provided:-

    I award the applicant his costs of the reference together with witnesses expenses.

  40. The "applicant" referred to is the plaintiff in the present proceedings.

  41. He applied to the High Court for an order pursuant to s.41 of the Arbitration Act, 1954 which provides as follows:-

    An award on an arbitration agreement may, by leave of the Court, be enforced in the same manner as a judgment or order to the same effect, and where leave is so given judgment may be entered in terms of the award.

  42. The High Court, by order dated the 2nd July, 2001 provided that:-

    It is ordered pursuant to s.1 of the Arbitration Act, 1954 that the plaintiff be at liberty to enforce the said arbitration award in the same manner as a judgment or order to the same effect.

  43. It was further ordered "that the plaintiff to recover against the defendant the sum of £30,331.65 and costs of these proceedings when taxed and ascertained".

  44. The learned High Court judge (O'Higgins J.) is recorded in the order as refusing to grant interest pursuant to s.22 of the Courts Act, 1981. This provision appears to relate to pre-judgment interest. In any event on the hearing of this appeal no claim was advanced by virtue of that Section.

  45. The sole question on the hearing of this appeal was to whether interest on the sum of £30,331.65 (being the amount of the plaintiff's Bill of Costs submitted on foot of paragraph 5 of the Arbitrator's award) should run from the date of that award, the 26th November, 1996 or from the date of the High Court judgment enforcing the award, the 2nd July, 2001.

    STATUTORY PROVISIONS

  46. Section 34 of the Arbitration Act, 1954 provides:-

    A sum directed to be paid by an award shall, unless the award otherwise directs, carry interest as from the date of the award and at the same rate as a judgment debt.

  47. The plaintiff says that the term "sum" includes a sum which is unquantified at the time of the award, but quantified later. The defendant says that the award in this case does not refer to any "sum" because that terms refers exclusively to a quantified sum, a specific sum of money. He says that s.34 simply does not refer to interest on costs. In so far as this may be considered a lacuna, the defendant points out, it has been filled by the Arbitration (International Commercial) Act of 1998. But this provision does not apply to an arbitration commencing before the date of its coming into operation.

  48. Despite this difference, the parties are agreed that the order of a court for the payment of costs by one party to another, where such costs are not quantified, has the effect of triggering interest from the date of the order. But the defendant says this does not apply to an award of costs by an arbitrator,

    • firstly because an arbitrator has no power to order interest on costs and

    • secondly because his award is not an order proper.

    "SUM"

  49. Both sides contend that the word "sum" should be given its ordinary and natural meaning. But they are not agreed as to what this meaning is. The Oxford English Dictionary defines the word broadly enough, it seems to me, to include each side's preferred connotation, referring to both "some quantity or amount of money "and" a quantity of money of a specified amount". The examples from usage given in the OED reflect this distinction precisely: in one set of examples the information communicated is merely that something was done or exchanged in consideration of some sum of money; in the other examples the actual amount is specified. It does not appear, therefore, that the present problem can be resolved wholly on the basis of the ordinary and natural meaning of the word "sum". But it is important to note that the ordinary and natural meaning extends to each sense in which the parties contend the word should be interpreted here.

    ANALOGY WITH COURT AWARDS

  50. The question of whether an award of costs made by a court, which requires to be quantified later by an official, carries interest from the date of judgment or the date of qualification, has been vigorously debated for upwards of 150 years. The history of this debate is meticulously traced in the judgment of Fennelly J. in Clarke & McCarthy v The Commissioner of An Garda Síochána [2002] 1 I.R. 207. This judgment, in turn, draws on the scholarly judgment of Murphy J. in Hickey v Norwich Union Fire Insurance Ltd (unreported High Court 23rd October, 1987).

  51. The historical position revealed by those redoubtable researches is one which is complex, obscure and changeable. It is also remarkable for the emphatic manner in which judicial luminaries since about 1844 have pronounced quite contrary views as to whether it is (apart from technicality) more just that interest on costs should run from the date of the decree awarding them, or from the later date when they are ascertained.

  52. At common law no interest was payable on a judgment, whether for costs or otherwise. A separate action had to be started to recover it. This position was altered by the passing of the Debtors Ireland Act, 1840 which mirrored a legislative provision of 1838 having effect in the rest of the former United Kingdom. This Act had the following provisions of relevance to the question of interest on judicially awarded costs:-

    26.

    Every judgment debt due upon any judgment not confessed or recovered for any penal sum for securing principal and interest shall carry interest at the rate of £4.00 per centum per annum from the time of entering up the judgment .... and such interest may be levied under a writ of execution on such judgment. 

    27.

    All decrees and orders of the Court of Chancery .... and all rules of any of the Superior Courts of Common Law whereby any sum of money or any costs, charges, or expenses, shall be payable to any person, shall have the effect of judgments in the Superior Courts of Common Law.

  53. The Sections cited, actually described by Fennelly J. in the case cited above as "these venerable provisions", are still central to the ascertainment of the date for which interest runs on judicially awarded costs. The same judgment traces the long period in the 19th Century (and into the 20th Century in Ireland) during which the Courts of Common Law and those of Equity differed on the dates from which they awarded interest. This was because of a difference, entirely technical in nature, in the view which the respective court took of the phrase "the time of entering up the judgment". This phrase occurs in s.26 of the Debtors Ireland Act, 1840 and was also used in the exemplar of that Act, the Judgments Act, 1838.

  54. The approach of the Courts of Common Law was based on the proposition that, in construing the statutory phrase, they were entitled to look to the practice of the Courts at the time the Act was passed. Thus, in Fisher v Dudding (1841) 9 Dowl. 872, Erskine J. said:-

    In putting an interpretation upon this clause of the Statute, we must look at the practice of the Court to see what is the 'entering up' of the judgment, and it appears to me that the entry of the incipitur in the Master's Book must be taken to be that entering up which is contemplated, and although the judgment may afterwards be more formally recorded in the role, yet that is not the entering of the judgment from which the interest must be calculated.

  55. The view of the Courts of Chancery was expressed by Lindley L.J. in Boswell v Coaks (1887) 57 L.J.Ch. 101:-

    The right to interest on costs depends upon the [1838 Act] and by Section 20 of that Act the Court is empowered to make orders framing new rules, and under that Section the Court of Chancery by consolidating orders issued a form of writ of fi. fa. according to which interest on costs was to run from the date of the Taxing Master's certificate. There was no similar practice at common law, where the interest always ran from the date of the judgment.

  56. It will thus be seen that the difference between the Common Law and the Chancery practice turned on matters of bare technicality. Just how bare, and how oddly based on historical happenstance, these differences were is fully explored in the judgment of Maule J. in Fisher v Dudding: but I forbear to burden this judgment with too detailed an explanation of historical developments already obscure when chronicled by Maule J. 163 years ago.

  57. Since "entering up the judgment" is a term of art, it was no doubt proper for the Judges who had to construe that phrase, shortly after the passages of the respective Acts of 1838 and 1840, to consider the meaning of that term in the actual practice of the Courts at the time the Act was passed. But there appears to me to be less justification for construing the Act, at a great remove from the time of its passing, in accordance with the changing practices. Certainly it is deplorable that, as Fennelly J. says at page 211 of the judgment already cited "Some of the decisions turn, not on the terms of the Sections but on versions of the footnotes to the forms attached to the Rules of Court".

  58. Whatever the position may have been in the past, the process of "entering up" is now governed by Order 41 Rule 6 of the Rules of the Superior Courts of 1986. This provides:-

    Particulars of every judgment or order of the High Court .... shall be entered in proper books to be kept for that purpose and the judgment or order shall be filed in the Central Office .... every judgment or order pronounced or made by the High Court .... when so filed shall be deemed to be duly entered.

  59. Apart from the unfortunate technicality arising from a construction of the 1838 and 1840 Acts based on the obscure practices of the Victorian Courts, there emerged at an early date a more principled approach. This is exemplified in the following passage from Newton v Grand Junction Railway Company (1846) 16 M.W. 139. Alderton B., arguendo, said:-

    Then, as to the interest, there is an uncertain amount which is in the wrong pocket, and is there bearing interest; I see no injustice in saying, that as soon at is reduced to certainty, that interest should be paid. Whatever be the sum, it is fructifying in the wrong pocket.

  60. I would also say that the statutory phrase ".... Any sum of money or any costs, charges, or expenses", (emphasis added) appearing in s.27 of the Act of 1840 appears to me to extend to those costs charges or expenses before, as well as after, ascertainment.

  61. In Hunt v Douglas (Roofing) Ltd [1990] 1 AC 398, the House of Lords revisited the topic of when interest on costs should run from. Lord Ackner delivered the unanimous judgment of the Lords which overruled two previous leading cases K v K (Divorce costs: interest) [1977] Fam. 39 and Erven Warnink BV v J. Townsend and Son Ltd [1982] 3 AER 312.

  62. Lord Ackner's judgment contains an historical survey very similar to that contained in the Irish cases mentioned above, with emphasis on the English position.

  63. One of the English cases cited by Lord Ackner, Borthwick v Elderslie Steamship Co Ltd [1905] 2 K.B. 516, is suggestive both in the understanding of the historical cases and some of the terminology used in them, and in terms of the proper principle to be applied. In that case, Romer L.J. mentioned that, at the end of the trial, the plaintiff was held entitled to recover damages in an amount to be ascertained. He continued:-

    The amount has since been ascertained, and must be treated as if it had been mentioned in the judgment of the Court; and the result is that the plaintiff had a judgment for an ascertained sum, dated on the day on which it is pronounced.

  64. In the first place, this deeming of the ascertainment of quantum, which in fact may have taken place months or years later, to have occurred on the date of judgment is the origin of the Latin name of the Common Law Rule, the incipitur rule. This Latin word has a connotation of reference back to the beginning or origin of the entitlement. The alternative Chancery Rule was known as the allocatur rule, which has connotations of the date on which a precise quantification or allocation of money to the previously unquantified sum occurs.

  65. More fundamentally, the passage cited from Romer L.J. draws attention to the fact that it is merely incidental that time elapses between the award of a sum for damages or costs and the quantification of that sum. The entitlement of the successful party has been ascertained as of the date of judgment. Indeed, the postponement of the declaration of the party's entitlement has occurred, in the case of a plaintiff, due to the resistance of his just claim by the other party or, in the case of a defendant, by the making of unjust claim against him. It is therefore difficult to see why interest – awarded to reflect the period during which the sum in dispute was fructifying in the pocket of the wrong party, to use the phrase of Alderson B. – should not in principle be awarded from the date of the declaration of the successful party's entitlement.

  66. In Hunt v Douglas Lord Ackner said:-

    .... In my judgment the balance of justice favours the incipitur rule for the following reasons. (1) It is the unsuccessful party to the litigation who, ex hypothesi, has caused the costs unnecessarily to be incurred. Hence the order made against him. Since interest is not awarded on costs incurred and paid by the successful party before judgment, why should he suffer the added loss of interest on costs incurred and paid after a judgment but before the Taxing Master gives his certificate. (2) Since, as the Court of Appeal rightly said in [Warnink], payments of costs are likely nowadays to be made to lawyers prior to taxation, then the application of the allocatur rule would generally speaking do greater injustice than the operation of the incipitur rule. Moreover, the incipitur rule provides a further necessary stimulus for payments to be made on account of costs and disbursements when necessary, to be expedited, all of which are desirable developments. Barristers, solicitors and expert witnesses should not be expected to finance their client's litigation until it is completed and the Taxing Master Certificate obtained. If interest is not payable on costs between judgment and completion of taxation, then there is an incentive to delay payment, delay disbursements and taxation.

  67. Lord Ackner went on to make a further point relating to a problem identified in the speeches in the House of Lords in K. v K., which is not relevant for present purposes.

  68. Some two years before Lord Ackner's speech in Hunt, this Court had addressed a similar problem in Cooke v Walsh and the Attorney General [1989] ILRM 322. Dealing with the particular case where the party entitled to the costs has not paid his lawyers or expert witnesses at the time of judgment he had this to say:-

    If a litigant has discharged legal costs he is, on being awarded his costs, entitled to interest on the amount from the date of judgment; this may be qualified in vacuo by pointing to the fact if it be the fact, that he did not pay those sums until a date after the judgment. If he did not pay it, then it was owing to those to whom he should have paid it, his lawyers. If they have not been paid, they would appear to have an equitable right to interest on the undischarged amount or amounts; I see nothing wrong in principle in securing that such interest is paid from the earliest date the law permits, to the successful litigant, either by way of direct indemnity for the loss of interest on monies paid out to him, or by way of indirect indemnity to those who have had to await such payment.

  69. This concept of interest on costs as "direct indemnity for the loss of interest" monies paid out by the party entitled to costs, or by way of indirect indemnity to those who have to await payment, is to me suggestive of the proper principle of construction of s.34 of 1954.

    ARBITRATION COSTS

  70. This judgment has devoted much space to an analysis of the position obtaining in relation to judicially ordered costs because the law on that topic seems most apt, by analogy, to cast light on the present one. Of course, if there were a complete absence of power to award interest on arbitration costs, or on such costs prior to quantification, no reasoning by analogy would cure that. But I have already held that, in its ordinary and natural meaning, the word "sum" where it occurs in s.34 is not confined to a specified sum but is capable of referring to a sum (as yet) unspecified.

  71. In Clarke v Commissioner of An Garda Síochána, Fennelly J. said at the conclusion of his judgment:-

    .... I am of the view that costs constitute a liability of the unsuccessful party from the moment of the decree or judgment, that they are not payable until quantified but that, from that point, the debt relates back to the date of the judgment, with interest running from that earlier date. These views are, I believe, consistent with the wording of ss26 and 27 of the Debtors Ireland Act, 1840. Section 26 gives the right to interest from the date of entering up of judgments.

  72. These words were described as the resolution of "the issue of principle".

  73. If, in principle, court costs are a liability of the unsuccessful party from the moment of the judgment, and that debt relates back to the date of the judgment, so that interest runs from that date, there is manifestly no reason for disapplying that principle to the costs of an arbitration. The fact that the arbitration award requires to be enforced by order of the Court cannot prevent interest thereon running from the date of the award to be enforced. To hold otherwise would be unwarranted by anything in the Arbitration Acts, would artificially limit the meaning of the word "sum" and would amount to a positive discouragement to claimants from referring a dispute to arbitration. Both an arbitration award and a court award are to be collected by operation of the machinery of execution of judgments and interest is to run at the same rate. This too is a factor suggesting a close analogy between arbitration costs and court costs. But it is subordinate to the dominating consideration in this area; the sheer injustice which would be worked if a party successful at arbitration were forced himself to bear the expense of a period after his entitlement to costs had been established but before their quantification.

    CONCLUSION

  74. I believe that s.34 of the Arbitration Act, 1954 extends to costs as well as to any other sum ordered to be paid in an arbitration award. This, I believe is the true meaning of the Section and is commendable alike to justice and to commonsense. I would therefore allow the appeal to the extent of ordering that interest on the sum ordered to be paid run from the date of the Arbitrator's final award, rather than from the date of the High Court order.

    Mr. Justice Murray

  75. Agreed with both judgment.


Cases

O'Sullivan v Dwyer (No. 2) [1973] I.R. 81; Best v Wellcome Foundation Ltd (No. 2) [1995] 1 I.L.R.M. 554; Clarke v Commissioner of An Garda Siochana [2002] I.R. 207; London, Chatham and Dover Railway v South Eastern Railway [1893] A.C. 429; Hickey v Norwich Union Fire Insurance Ltd unreported High Court 23rd October, 1987; Fisher v Dudding (1841) 9 Dowl. 872; Boswell v Coaks (1887) 57 L.J.Ch. 101; Newton v Grand Junction Railway Company (1846) 16 M.W. 139; Hunt v Douglas (Roofing) Ltd [1990] 1 AC 398; K v K (Divorce costs: interest) [1977] Fam. 39; Erven Warnink BV v J. Townsend and Son Ltd [1982] 3 AER 312; Borthwick v Elderslie Steamship Co Ltd [1905] 2 K.B. 516; Cooke v Walsh and the Attorney General [1989] ILRM 322

Legislations

Rules of the Superior Courts: Ord. 56 r. 4 (f)

Arbitration Act 1954: s.29, s.34, s. 41

Arbitration (International Commercial) Act 1998: s. 17

Courts Act 1981: s.22

Debtors (Ireland) Act 1840: s.26, s.27

Authors and other references

Stroud's Judicial Dictionary, 6th Ed

Oxford English Dictionary

Ercus Stewart, "Arbitration, Commentary and Sources" (Dublin, 2003)


all rights reserved