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Is disbursement funding interest recoverable

By Matthew Best, Underwriting Manager

In this article Matthew takes a look at the latest position in relation to this hot topic. The current defendant stance is that interest incurred on loans taken out to pay for disbursements should not be recoverable inter-partes.

What case law is currently out there?

The Court of Appeal in Secretary of State for Energy & Climate Change v Jones [2014] EWCA Civ 363 [2014] backed a credit agreement that saw Welsh law firm Hugh James fund clients’ disbursements to the tune of £787,500 and then recover interest on them at 4% above base.

Swift J rejected the government’s argument that the disbursements were not recoverable, and said the interest rate was not “excessive or unreasonable”.

After this, the subject of interest recoverability appears to have gone a little too quiet. However, the question that remains is whether interest on disbursement funding loans could be recovered as interest on costs.

A court does, in principle, have the power under CPR r 44.2(6)(g) to award interest in such a way that takes into account the interest paid on a disbursement funding loan.

The Temple Legal Protection perspective

We have taken advice that supports our view that the court will uphold the decision in Jones. Further, we are encouraged by the fact that our interest rate (10%) is both reasonable and proportionate. We certainly hope to see one of Temple Funding’s cases being heard in 2019.

A trend I have noted is that many costs draftsmen are advising solicitors to include the interest within their bill of costs. There also appears to be a tendency of the losing party to be required to make contributions towards interest.

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. However, there is no doubt in my mind that, in law, the ability to recover interest on disbursement funding loans looks positive. As yet there is no decision either way, but I do feel that 2019 will see a decision made in this contentious area.

Whether the decision be recoverable or not recoverable, Temple Legal Protection and its subsidiary company, Temple Funding, will always be here to help fight the battle for access to justice that you and your clients face.

Next steps

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

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

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