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Interested in Disbursement Funding?

Funding litigation can be expensive.  In recent times loans to fund disbursements have become 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?

CPR at 44.2 (6)(g) allows the court to order that a party must pay “interest on costs from or until a certain date, including a date before judgment.”. Therefore, following acceptance of a Part 36 offer or judgment being made, interest starts to accrue. However, what is the position regarding the interest being charged on the funding loan, in the absence of any agreement between the parties or order of the court to address the same?

In a recent case of Gill v Barnsley Cannister Company Ltd & Others 15 November 2021, District Judge Corkill looked at the question of the loan interest. The Claimant asserted that interest was recoverable from the paying party and drew the Court’s attention to the case of The Secretary of State for the Department of Energy and Climate Change & Anor v Jones & Ors [2014] EWCA Civ 363 where the interest was not contained in the bill of costs but was in addition.

The Judge was also directed to a number of other cases, Sharp & Ors v Blank & Ors [2020] EWHC 1870 (Ch), Hunt v RM Douglas Roofing [1987],  Motto v Trafigura [2011] as well as CPR 44.2 (6)(g).

DJ Corkill, during his determination, 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.

He also addressed the questions of why the funding was required in the first place and also the commerciality of the interest rate at 15.3%, which was significantly above base rate.

DJ Corkill 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 the case of 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 she took out was the only loan available to her and whether the interest rate charged was the only interest rate available to her in the loan market (including for example whether a personal loan might have been available).

When exploring disbursement funding the loan applicant’s circumstances must be investigated. Are they able to fund the litigation, are they eligible for alternative loans, have they researched any comparable loans that are available to them (including personal loans)? This exploratory work must be documented to assist with recovering the interest.

If you require any assistance with your legal costs requirements, please do get in touch with the team on 01733 350 880, or by email mail@aandmbacon.co.uk. For more information please do visit our website www.aandmbacon.co.uk.

Published 30 March 2022


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