With spiralling court fees in particular, it is no surprise that there is more demand than ever for disbursement funding. But can you recover the interest and charges under the loan from the losing defendant? It is not always a smooth journey, but you can – as shown by a recent case that saw SpectraLegal’s COO, Steve Carter, act as an expert witness.

The case that established the recoverability of pre-judgment interest in these circumstances is Jones & Ors v Secretary of State for Energy and Climate Change & Anor [2013] EWHC 1023 (QB).

Mrs Justice Swift accepted that the credit agreement under scrutiny “provided a means by which the claimants could obtain funding for their disbursements without being required to advance any monies themselves and without financial risk since the credit agreements provided that, in the event of a claim failing, the disbursements would be paid by the ATE insurers”. The alternative was for the law firm to fund them and increase its success fee, but ultimately that would come out of the client’s damages. She accepted a rate of 4% above base as reasonable, a decision upheld by the Court of Appeal.

The question came up again recently in the case of Angela Jade Powell v Shrewsbury and Telford Hospital NHS Trust Court No OSY02236, 01.04.2016, where some £1,600 in interest was at stake. This was, unofficially, a test case for similar claims involving the NHS and a specific lender.

The defendant specifically disputed the claim for pre-judgement interest, which the claimant sought to pay the cost of the litigation loan which she had to take out to bring her claim. According to Kay Kelly, head of clinical negligence at Lanyon Bowdler, whose case it was, it is important to note that the claimant here was a person of very limited means with a poor credit history at the outset of the litigation. She was unable to finance her disbursements without a disbursement funding loan.

The firm had access to a disbursement funding product and sought payment of the interest charges under CPR 44.2(6)(G). The defendant disputed the recovery on the basis that the court did not have the jurisdiction to re-open the consent order, that the credit agreement was not compliant as the claimant had not been properly advised, and that the rate of interest charged (13.2%) was excessive.

Lanyon Bowdler was fully prepared for the trial, including Steve Carter’s evidence as an independent expert working in personal injury litigation at the relevant time who could provide specific evidence to justify the rate of interest charged. However, three days before the trial, the defendant conceded the claimant’s application. Agreement could not be reached upon the issue of costs, and Lanyon Bowdler successfully sought indemnity costs because of all the costs that had been wasted because of this late about-turn.

The NHS Litigation Authority’s counsel said during the hearing that it completely accepted that the Jones case established the principle that claimants could recover the cost of disbursement funding. Also of interest was that defendant did not seek to distinguish between the interest and administration charges incurred.

The judge agreed the preamble to the order was as follows:

“AND UPON THE DEFENDANT CONSENTING to the claimant’s application for the payment of interest on disbursements (including interest before the date of judgment) at the contractual rate of 13.2% [the contractual rate of interest] payable under her disbursement funding loan agreement with lime finance limited [the disbursement funding loan].

AND UPON THE DEFENDANT AGREEING not to challenge the contractual rate of interest in any future application by the claimant for interest in respect of disbursements subject to the disbursement funding loan which were incurred during the quantum stage of these proceedings.”

This gives Lanyon Bowdler good ammunition for all cases involving this funder, although of course there is still nothing to stop the NHSLA arguing in any particular case that it wasn’t reasonable to seek a loan or challenge it in other ways. However it risks running into an abuse of process territory if it tries to re-litigate the point.

District judge rulings do not create precedent but the decision in Powell has persuasive value. The tide is very much flowing in the direction of claimants who take out funding to fund disbursements and their solicitors should not be afraid to fight for the interest payable. At SpectraLegal we have the expertise to advise you on how best to do this, so do not hesitate to get in touch.

With thanks to Kay Kelly