Judge wholly rejects application to boost value of costs awarded on back of pound to euro fluctuations
The High Court has upheld the essential difference between the nature of costs and compensation by rejecting a defendant’s attempt for the recovery of extra costs to reflect changes in the exchange rate between sterling and the euro.
Mr Justice Coulson who made the decision in the context of there being no other authority on the topic, said: “On the contrary, unless the payee has an order in his favour for indemnity costs, he will never recover the actual costs that he has incurred” and the court’s starting point “will almost always be the payee’s approved costs budget”.
In his opinion there is no correlation between ordering interest on costs, which he said was commonplace, and ordering exchange rate losses.
In MacInnes v Gross  EWHC 127 (QB), the defendant sought extra costs to reflect changes in the exchange rate between sterling and euros since the Brexit referendum. The defendant was referring to the decision in Elkamet Kunststofftechnik GmbH v Saint-Gobain Glass France S.A.  EWHC 3421 (Pat) where the claimant was awarded an extra £20,000 in costs to compensate for the impact of the falling value of the pound, which was dramatically devalued on conversion from euros into pounds in order to pay its solicitors.
Coulson went on to point out that a buffer already exists in the “already generous rate of interest on costs at 4% over base” for such circumstances “designed to provide at least some protection to the payee against such events”.
‘The paying party can work out in advance the additional risk created by the potential liability to pay interest on costs, but any potential liability to pay currency fluctuations is uncertain and wholly outside his control.
Similar costs/compensation challenges will no doubt surface with more regularity given the significant fall in the pound following the EU referendum and the subsequent currency fluctuations and uncertainty following the soon-to-be triggering of Article 50. The question remains which way judges will continue to apply the principle in light of the fact that the first two judgements were directly opposed to each other?