SCCO rejects claim for pre-Judgment Interest on Disbursement Funding

Catherine Moran, Costs Lawyer

The SCCO rejected a claim for pre-Judgment interest on Disbursement Funding

The case of James Nosworthy (as Representative of the Estate of Barbara Nosworthy, Deceased) v Royal Bournemouth & Christchurch Hospitals NHS Foundation Trust, SCCO Master Brown, 30 April 2020 relates to costs arising from a clinical negligence claim, which was funded by way of a Conditional Fee Agreement supported by an ATE policy. The issue for consideration by the Court related to whether the Claimant should be awarded pre-judgment interest on an element of his costs, in particular a medical report fee which had been funded by way of a disbursement funding loan at an interest rate of 15%. The claim settled pre-issue and following the issue of Part 8 proceedings the Bill of Costs was initially provisionally assessed following which an oral hearing took place to determine costs.

During the Part 8 proceedings the Claimant had served a Schedule with the Bill of Costs, which detailed separately a claim for “pre-Judgment interest” and “post-Judgment” interest. The parties agreed post-Judgment interest at a rate of 8% in the sum of over £500.00, but pre-Judgment interest remained in dispute.

The Claimant’s representative asserted that the Claimant had entered into a lending agreement as he could not fund the disbursement himself, and that he could not have pursued the claim without obtaining finance as he would not have been able to prove liability or quantum without the report.

Master Brown respectfully agreed with Dingemans J in Schumann and Anor v Veale Wasbrough [2013] EWHC 4070 QB that such an order was not the norm, and would introduce an unnecessary level of complexity into the process for assessing costs, with parties required to show not only when bills were rendered, but how and when they were paid. It was further noted that the Court was entitled to have regard to the Judgment interest received in exercising any discretion. In this matter the Claimant’s post judgement interest had been agreed at over £500. The interest on the disbursement funding amounted to £235 and could therefore reasonably be defrayed from the recovery of judgment rate interest. It was therefore not the case that the Claimant would have had to pay interest on the loan out of his damages. Furthermore, costs recovery is not intended to be a complete recovery.

PIC’s Comments

Whilst post-judgment interest on disbursement funding loans remains recoverable (in principle) and can be included within the Bill of Costs, pre-judgment interest remains controversial. Whilst this is not a binding Judgment it is likely to be persuasive. It is important that clients are given full advice at the time of entering into a disbursement loan, that they are likely to be liable for any shortfall in respect the interest on the loan.

As a growing number of firms utilise disbursement funding more and more this is an issue which is unlikely to go away anytime soon. The judgment in Nosworthy is likely to serve to embolden challenges from Paying Parties.Should you have any issues arise in relation to litigation funding then we are always happy to assess and advise upon them.

Catherine Moran  | Costs Lawyer | Partners In Costs Ltd