Interest on Disbursements
Catherine Walmsley, Costs Lawyer,
comments on Secretary of State for the Department of Energy and Climate Change and another v Jones and Others v  EWCA Civ 363 where the Defendant was ordered to pay interest on disbursements…..
In this matter the Claimants had financed personal injury claims under a CFA, with their Solicitors agreeing to fund the cost of disbursements by means of a ‘credit’ agreement. The Claimants’ Solicitors had funded disbursements of over £787,500.00. The agreement provided that payment of interest was contingent on the claim being successful and damages actually being received.
Following an earlier judgment on liability in respect of eight lead claims, where the Defendants had been ordered to pay 80% of the Claimant’s costs, the pre-judgment interest on disbursements issue was dealt with at a further hearing, where Swift J ordered the Defendant to pay pre-judgment interest on disbursements at the rate of 4% above base rate (i.e. the interest rate agreed as between Solicitor and own client as part of the disbursement funding arrangement).
On Appeal the Defendant contended that the judge was wrong to have regard to the circumstances of the Claimant when determining the rate of interest, and that the interest rate should instead have been calculated by reference to the circumstances of the Claimants’ Solicitors who were actually funding the disbursements, and who should be ‘equated to a first class borrower so as to attract the conventional measure for such a borrower of 1 per cent above base rate’.
Appeal dismissed. The rate of 4% above base rate was a reasonable interest rate for private individuals in the Claimants’ circumstances. The Claimants had borrowed money from their Solicitor, the Claimants had won their claims and recovered damages, and the Claimants’ liability to pay interest had therefore materialised. The interest liability was no longer contingent.
This is excellent news for Claimant Solicitors who want to offer their clients this type of funding arrangement. Care should be taken to ensure that any agreements do give rise to a ‘real’ liability to pay interest, not simply a notional liability.
You can view the Full Judgement here.