Recovery of interest paid on disbursement funding loan
Last week in Marbrow v Sharpes Garden Services Ltd  EWHC B26 (Costs) (10 July 2020) the Senior Costs Judge Master Gordon-Saker handed down a reserved judgment in relation to three discreet issues where I acted for the Defendant paying party.
None of the issues were novel, but they are ones that have continued to trouble the lower courts, which was no doubt part of the reason for the reserved judgment.
The issue I will deal with today is the decision relating to whether the interest paid on a disbursement funding loan was recoverable as an item of cost or, alternatively, by way of allowing interest to run from an earlier period.
The Claimant claimed, as an item of costs, the interest payable under a loan agreement with his solicitors in relation to the funding of disbursements. The agreed interest rate was 5%.
The Claimant relied on the decision of the Court of Appeal in Secretary of State for Energy v Jones  EWCA Civ 363 as authority that such an item was recoverable as an item of costs. The Master rejected that on the basis the Court in that case was concerned with the rate of interest that could be allowed on costs from a date earlier than judgment where, as here, the claimants had incurred a liability to pay interest to their solicitors in respect of the funding of disbursements.
In Hunt v RM Douglas (Roofing) Ltd  11 WLUK 221 the claimant sought to recover on the taxation of his costs the interest that he had incurred under an overdraft to fund the disbursements required for his claim. 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.
The Master held that it was clear following Hunt that interest incurred under a disbursement funding loan cannot be recoverable as costs and so disallowed the item within the bill.
However, the Master then considered CPR 44.2(6)(g), which does allow the court to order the payment of interest on costs from a date before judgment. He distinguished Jones on the basis it was a different case to the present: a group action in which the disbursements came to a total in excess of £787,500. The present case was a straightforward personal injury claim. Although there was no evidence of the Claimant’s means, for present purposes he accepted that it was unlikely that the Claimant would have had the means to fund disbursements other than by a loan, as is almost certainly the case for the vast majority of claimants in personal injury actions. Nevertheless 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.
He concluded that justice did not require a departure from the general rule in this case such as to aware interest from an earlier date.
This was the same conclusion that was recently reached by Master Brown in Nosworthy v Royal Bournemouth & Christchurch Hospitals NHS Foundation Trust  EWHC B19 (Costs) (30 April 2020).