Interested in Disbursement Funding?
Funding litigation can be an expensive business for legal firms especially in clinical negligence claims. We are seeing loans to fund disbursements are becoming a more popular way of assisting with cash flow during the life of a claim. That then begs the question of what to do about interest being charged on that funding?
The CPR confirms that “interest on costs from or until a certain date, including a date before judgment.” You can find this in the CPR at 44.2 (6) (g) entitled Court’s discretion as to costs. Once a Part 36 offer is accepted or an order granted concluding a case, we know interest starts to accrue – this doesn’t solve the issue of disbursement funding that has started clocking from when the funding was granted.
Recently we have had the decisions of Regional Costs Judges with the case of Gill v Barnsley Cannister Company Ltd & Others 15 November 2021 in Barnsley and Godfrey v Automotive Products Limited 17/12/20 heard in Liverpool.
In the Barnsley case the Costs Judge looked at the question of the claimant funding her disbursements by way of funding loan. The Claimant asserted that interest is recoverable from the paying party further to Secretary of State for the Department of Energy and Climate Change & Anor v Jones & Ors [2014] EWCA Civ 363 and noted that the interest was not contained in the bill of costs but in addition.
The Judge was referred to the case of Sharp & Ors v Blank & Ors [2020] EWHC 1870 (Ch) and to CPR 44.2 (6) (g) which we’ve looked at already. The defendant raised the cases of Hunt v RM Douglas Roofing [1987] and Motto v Trafigura [2011].
At this point District Judge Corkill referred to paragraphs 104 – 107 in Motto v Trafigura which suggested that a pre-CPR authority prohibiting inter partes recovery of interest on the costs of funding litigation (Hunt v RM Douglas Roofing) might survive post-CPR. DJ Corkill noted however that these comments were obiter dicta in Motto, the point for consideration in that case being the recoverability of costs of setting up an ATE premium.
In this Barnsley case the Judge looked at the question as to why the funding was required in the first place and led to the conclusion that it allowed the claim to be pursued. The question for DJ Corkill referred to the Liverpool case as to the commerciality of the interest rate, being 15.3% i.e. significantly above base rate.
The judge, like Judge Baldwin in Godfrey, was satisfied that an order to pay interest could be made under CPR44.2(c). However, on the evidence before him, he was not persuaded to make such an award. The Judge commented that he was being asked to make assumptions that the claimant was of modest means and that, as a consequence, it was reasonable and proportionate for the Claimant to have funded the litigation by way of taking out a loan. No evidence had been adduced by the claimant as to his reasons for taking out the loan, or of comparable rates etc. Judge Baldwin had reached a similar conclusion in Godfrey for similar reasons.
DJ Corkill gave examples of the sort of evidence which might have assisted the court, such as evidence from the claimant as to whether they had any other way of funding the litigation or the disbursements without such a loan, whether the loan he took out was the only loan available to him and whether the interest rate charges was the only interest rate available to him in the loan market (including for example whether a personal loan might have been available).
Looking at disbursement funding the way forward here is to consider the claimant’s circumstances for funding disbursements and comparable loans available (including personal loans). One thing to bear in mind is not to include the interest in disbursement funding in the bill of costs – this is confirmed in the SCCO case of Marbrow v Sharpes Garden Services Limited [2020] EWHC B26 (Costs).
At PIC we are always happy to help with all costs issues and if you’d like to find out more about how we can provide assistance with the recovery of interest on disbursement loans please get in touch.
Adrian Hawley, Head of Engagement and Strategic Development
10.03.22