Disbursements: What’s so interesting about interest
Interest is omnipresent in our daily lives. Whether it be interest on a loan, a Credit Card, a contract phone, or a mortgage, interest is everywhere. Despite this, when it comes to the issue of legal costs, interest is often forgotten about, or conveniently glossed over by paying parties. Seamus Kelly, Costs Consultant, PIC, reports.
When the costs element of a legal claim is resolved, the receiving party is entitled to recover interest on those costs, including profit costs, assessment costs and disbursements. Up until that point; however, experts need to be paid, expenses are incurred, and (ever increasing) Court fees are discharged.
One way for a Claimant to pay these fees is to enter into a funding loan with their solicitor or a third- party funding provider. The reasonableness and legality of this option was dealt with in the 2014 case of The Secretary of State for Energy and Climate Change v Jeffrey Jones & Others  EWCA Civ 363. By way of recap, in this case the Claimant’s solicitor agreed to fund the disbursements (in essence acting as a creditor to the Client) at a rate of 4% above the base rate. In the original High Court hearing Swift J ordered the Defendant to pay the Claimant’s pre-judgement interest on these disbursements at the agreed rate. The Defendant appealed against the decision, arguing that the claim for interest was being made by the Solicitor rather than the Claimant themselves, who they contended were not exposed to any risk of actually having to pay the interest themselves. Further the Defendant argued that the interest rate should have been calculated by reference to the Solicitor’s circumstances. Interestingly the Defendant did not question the validity of the credit agreement.
The Court of Appeal rejected the Defendant’s appeal. The Court found that the Claimant’s liability for interest under the agreement had actually materialised. This was because under the agreement the Claimant would have to pay interest on the disbursements if they were successful in the claim.
The impact of this claim was that it helped establish that such credit agreements to fund disbursements, can be enforceable. These credit agreements can help Claimants progress claims where funds may otherwise have precluded them to do so. Despite this, many individual claimants, and solicitors, continue to struggle to pay disbursements (especially the latest Court Issue fees).
Disbursement funding has become a competitive market and there are now a wealth of options and products available from numerous providers – from straight forward financing to innovative ATE products. When deciding how to fund disbursements, it is important not to become blindly locked into a single provider without considering the available options. Much like getting a loan, credit card, contract phone or mortgage, it is important to consider each option on their merits to find the best solution for each situation.
PIC can help Claimants consider their breadth of options and provide introductions to most of the major players in the market place, so that litigants can decide upon the method most suitable for their specific needs. For more information, please contact Seamus Kelly, Costs Consultant, PIC.