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Disbursement Funding Interest Recoverability – Shades Of Grey Or As Clear As Mud?

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By Matthew Best, Senior Underwriting Manager

(Estimated reading time: 4 minutes, 17 seconds)

A previous article I wrote in June 2019 ‘Is disbursement funding interest recoverable’ attracted, forgive the pun, a lot of interest – but the subject itself has remained a very grey area with clarity in short supply. The SCCO has, unhelpfully, recently ruled that a claimant is not entitled to recover interest on a loan taken out to fund a medical report prior to a part 8 order.

In the judgment of  Nosworthy v Royal Bournemouth & Christchurch Hospitals NHS Foundation Trust [2020] EWHC B19 (Costs) Master Brown said that costs recovery “is not intended to be a complete indemnity” – Parliament would have allowed for the recovery of such costs had it wanted to, “but I do not read the scheme for provisional assessments under CPR 47.15 (or indeed generally in respect of the assessment of costs) as providing any such mechanism”.

In this case, costs could not be agreed and so part 8 proceedings were commenced in respect of the costs only (sought for £25,328, including both pre- and post-judgment interest) and settled for £20,000. At the hearing, the claimant sought interest for the period prior to the part 8 order, specifically £235 in interest for the cost of the medical report (the loan was provided at a 15% rate).

Master Brown said that, contrary to the claimant’s contention, he did not understand an order for interest on costs before judgment to be considered normal, or that the general rule was that pre-judgment interest on costs should be awarded.

There was perhaps a crumb of comfort from his comments in relation to large commercial claims or multi-party actions, where “it is much more likely to be proportionate for the court to undertake the sort of enquiry into interest which is anticipated by this claim…”

Continuing on this theme, Master Brown also said – “the making of an order of the sort which is requested by the claimant would introduce an unnecessary level of sophistication into the process for assessing costs… The complications which would arise would, to my mind, be substantial even in a modest case; and they would exist even assuming that the rates and the principle of payment were agreed.

Further, paying parties might legitimately question whether they should be paying any interest if the receiving party had, for instance, the means, by way of insurance or otherwise, to pay up front for disbursements without taking out a loan. The potential for yet further legitimate disagreement would be substantial in the context of ordinary litigation (which may involve litigants in person).”

Cutting to the chase

In very basic terms, the Costs Judge thought it too complicated to decide whether or not to award interest and if so, how much, in respect of disbursement funding and other pre-judgment costs – save where the amount involved was likely to be significant.

Master Brown accepted there was a discretion to award interest on costs before the date of the judgment but that it wasn’t a sensible exercise of that discretion to allow such interest in modest cases for disbursement funding. He did observe that, as interest is awarded on costs as a whole from the date of judgment, claimants could look to that interest to repay the interest owed on disbursement funding without having to draw on their damages.

In light of the decision in Nosworthy, it certainly appears that the fight to recover interest goes on; the pendulum is certainly swinging in favour of the opponent – interest is not currently going to be recoverable from the opponent – certainly prejudgment.

The Temple perspective

Returning to the original case of Jones in my first article, the Court of Appeal did not have to consider if the interest due under a funding agreement was recoverable in principle because that point had been conceded by counsel in the court below.

So, in this case the Costs Judge did not feel bound to follow Jones. We think he was right. Jones was only concerned with the rate of interest because that was the only issue before the Court.

Unfortunately, we cannot expect to see interest due under a disbursement funding CCA being awarded in future detailed assessments. Ultimately, the advice to our customers has to be clear. We still await a decision on the recoverability of interest. Whilst we believe it ought to be recoverable, it is only fair and proper that the client knows they are ultimately responsible for the payment of such.

We would be very interested to hear your views on this. Do you agree, disagree – or is there something we are missing to consider?

Temple offers straightforward, affordable disbursement funding that enables your client to make a claim without having to pay expenses along the way. It provides your law firm with a solution to the significant cash flow burden that comes with clinical negligence litigation. It is available at no extra cost to your law firm and there are no set-up fees for the client. The interest rate is competitive – at just 10% per annum.

If you would like to discuss this with me, or feel that your clients and your law firm would benefit from this, please contact me on 01483 514804 or via email to matthew.best@temple-legal.co.uk

Matthew Best

Senior Underwriting Manager
Read articles by Matthew Best

Matthew Best

Matt has an insurance background and joined Temple in July 2011 having worked for 4 years in a leading insurance company where he was dealing with personal injury work.

Matt’s experience allows him to undertake a key role in Temple’s ATE insurance personal injury and clinical negligence teams. He also participates in the assessments of delegated schemes that Temple provide with the objective of helping our customers make the most beneficial and appropriate use of ATE insurance.

He has started studying for this CII exams which he will sit in the near future, which he will then use to develop himself, further into the company in order to provide Temple’s customers with the excellent service they expect.

 

Read articles by Matthew Best