Kerry Underwood

NO INTEREST ON DISBURSEMENT FUNDING LOAN

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The matters dealt with in this piece are examined in great detail in my three volume, 1,300 page book Personal Injury Small Claims, Portals and Fixed Costs – price £50 and available from Underwoods Solicitors here.

These principles, and the whole issue of Qualified One-Way Costs Shifting, is dealt with in my book – Qualified One-Way Costs Shifting, Section 57 and Set-Off – Available from me here for £15.

Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

In

Marbrow v Sharpes Garden Services Ltd [2020] EWHC B26 (Costs) 

the Senior Courts Costs Office held that the losing defendant in a personal injury case should not be liable for interest on a disbursement funding loan taken out by the claimant.

The agreed rate of interest was 5% and the total interest was £2,484.48.

Here, the claimant sought that sum as an item of costs and alternatively by way of allowing interest to run from an earlier period, that is to award pre-judgment interest.

The court disallowed both bases of the claim, but set out the different case law and considerations in relation to these two alternative methods of seeking to recover the cost of disbursement funding. 

As A Costs Item

The court held that there was no discretion to allow disbursement funding interest as a costs item, as compared with pre-judgment interest.

In

Hunt v RM Douglas (Roofing) Ltd [1987] 11 WLUK 221

the Court of Appeal held that funding costs had never been included in the categories of expense recoverable as costs and to include them would constitute an unwarranted extension.

In

F & C Alternative Investments (Holdings) Ltd & Ors v Barthelemy & Anor [2012] EWCA Civ 843 

the Court of Appeal approved the submission that “costs of funding litigation by way of bridging loans are not ordinarily recoverable in themselves as costs of litigation”.

The decision in

Secretary of State for the Department of Energy And Climate Change & Anor v Jones & Ors [2014] EWCA Civ 363

concerned the rate of interest that could be allowed in costs from a date earlier than judgment rather than claiming it as a separate capital item of costs.

Thus the fact that there the court upheld the lower court’s decision to allow interest on pre-judgment disbursements at 4% above base rate, rather than at any lower rate, did not affect the principle that interest of itself cannot be claimed as an item of costs.

Pre-judgment Interest

Nevertheless CPR 44.2(6)(g) does allow the court to order the payment of interest on costs from a date before judgment.

Here, the court held that while it clearly had that power, justice in this case did not require a departure from the general rule that interest should only be paid from the date of the costs order, and the court also pointed out that the high rate of interest under the Judgment Act 1838 – 8 % –  “should go some way to compensating the claimant for the interest that he is liable to pay for funding the disbursement.”

For further discussion on this point see my blog –

INTEREST ON COSTS IS 8% FROM DATE OF ORIGINAL ORDER

The Senior Costs Judge gave his reasons for declining to exercise his jurisdiction to order pre-judgment interest:

 

“33. Jones was a rather different case to the present: a group action in which the disbursements came to a total in excess of £787,500. The present case is a straightforward personal injury claim. No evidence of the Claimant’s means has been produced but for present purposes I am happy to accept, on my reading of the papers, that it is unlikely that the Claimant would have had the means to fund disbursements other than by a loan. That is almost certainly the case for the vast majority of claimants in personal injury actions. Yet the incipitur rule remains the default position and parliament did not choose, when enacting the Legal Aid, Sentencing and Punishment of Offenders Act 2013, to make specific provision for the funding of disbursements whether by enabling the recovery of funding costs or by creating a default entitlement to pre-judgment interest.”

 

Comment

Another short, succinct but thorough judgment from the Senior Costs Judge which has led to no fewer than three blogs by me

 – See

INTEREST ON COSTS IS 8% FROM DATE OF ORIGINAL ORDER

CAPPED RECOVERABLE COSTS FIGURES FOR COSTS BUDGETING ARE EXCLUSIVE OF VAT

 

The decision not to award pre-judgment interest follows the recent case of

Nosworthy v Royal Bournemouth & Christchurch NHS Foundation Trust [2020] EWHC B19 (Costs) 

It should be noted that Parliament has specifically given the courts power to award pre-judgment interest and a full High Court Judge in the case of

Involnert Management Inc v Aprilgrange Limited & Ors [2015] EWHC 2834 (Comm) 

said:

 

“” Since Hunt’s case was decided, the CPR have given the court power to order interest to be paid on costs from a date before judgment: see CPR 44.2(6)(g). This power is now routinely exercised when an order for costs is made following a trial to award interest at a commercial rate from the dates when the costs were incurred until the date when interest becomes payable under the Judgments Act . In the usual way, I have made such orders in this case.””

 

There is now a clear pattern of courts awarding pre-judgment interest in commercial cases, but not personal injury cases, but there is no justification whatsoever in law for adopting that different approach.

For my critique of that difference, and why the decisions are irrational, see my blog

COURT REFUSES PRE-JUDGMENT INTEREST IN PERSONAL INJURY – BUT OK IN COMMERCIAL CASES

Written by kerryunderwood

July 17, 2020 at 8:07 am

Posted in Uncategorized

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