I have long held the view that the authorities support the ability to recover interest on a disbursement funding agreement. Of course, this is subject to the Court’s very wide discretion at CPR 44.2.
This appears to be a view supported by Regional Costs Judges, District Judge Baldwin in Liverpool (see Godfrey v Automotive Products Limited 17/12/20) and District Judge Corkill in Barnsley (see Gill v Barnsley Canister Company Ltd & Others 15/11/21).
In both cases the Regional Costs Judges found that they had discretion to award interest accrued under a disbursement funding arrangement pursuant to CPR 44.2, however the evidential burden of reasonableness was not met. In other words, the litigant needed to demonstrate that it had limited means and that the amount of interest charged was reasonable.
It seems that anyone seeking to recover interest on a disbursement funding loan would need to provide evidence that demonstrates:
- The litigant’s means of funding the disbursements;
- Whether the litigant would have been able (or willing) to obtain a traditional personal loan at a more competitive rate; and
- Whether the disbursement funding loan was reasonably sourced.
One critical consideration may be that disbursement funding loans are often contingent, unsecured and do not require any repayment until a claim is successful. There are other compelling features such as the ability to draw-down funds when required rather than over-borrowing or having to take out multiple loans.
Disbursement funding in the form described above is clearly very attractive to any litigant as it presents a “risk-free” and “cost-free” solution. Whilst there is of course a cost, this is typically deducted from damages meaning that the litigant does not need to fund the loan as they would a traditional loan. There is also always risk, but typically a litigant would recover most of their disbursements if they win or they are paid by an ATE insurer if they lose.
This begs the question of whether a disbursement loan at 15.3% should be compared with a traditional personal loan of much less when the terms and benefits differ significantly?
Should a litigant need to show that they do not have means? A litigant may well have savings and be able to secure a personal loan, but why should they need to use that if there is a reasonable and attractive alternative?
For now, those impecunious litigants may have better prospects of recovering the interest on disbursement funding loans, but I think and hope that this will extend to all litigants in the near future.