Claimant not entitled to recover interest on loan to fund medical report

A claimant was not entitled to recover interest on a loan taken out to fund a medical report prior to the part 8 order, the Senior Courts Costs Office has ruled.

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”.

He was ruling in Nosworthy v Royal Bournemouth & Christchurch Hospitals NHS Foundation Trust [2020] EWHC B19 (Costs), the oral hearing of a provisional assessment after a claim over the defendant’s mismanagement of a patient’s pressure sores settled for £37,500.

Costs could not be agreed and so part 8 proceedings were commenced in respect of the costs only. The claimant, the representative of the patient’s estate, sought costs of £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, which was funded by a loan from Lime Finance at a rate of 15%. The interest on the loan was paid out of the damages.

“Although the head of interest in respect of ‘pre-judgment interest’ is disputed, interest has, as I understand it, been agreed and paid at the judgment rate of 8% from the date of [usual order in part 8 proceedings] the 16 October 2018.”

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

It was different in 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. In a case such as this one, self-evidently, it is not”.

Master Brown continued: “I would add, in effect in passing, that there may well be a legitimate issue as to whether CPR 44.2(6)(g) provides a self-standing jurisdiction to award interest on costs in detailed assessment proceedings.

“At least historically, as I understand it, the only jurisdiction exercised as a matter of general practice in detailed assessment has been to alter the period over which judgment interest applies (a jurisdiction which would seem to be adequately provided for under CPR 40.8). But putting aside any issue as to the precise technical nature of the jurisdiction under CPR 44.2(6)(g) and accepting that I had a jurisdiction to award interest as claimed, I am not satisfied that it is, or would be, appropriate for me to exercise any such discretion in the claimant’s favour.”

There was nothing to take this case out of the ordinary, the judge said. “As Dingemans J observed [in Schumann and Anor v Veale Wasbrough [2013] EWHC 4070 (QB)], 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.

“If it were right that the court were required in general to specifically consider the interest rate applicable to experts funding, presumably also the same would apply to counsel’s fees, solicitors fees. and other disbursements (such as court fees). Further, the parties would have to take into account such matters as the payments on account and the allocation of such payments to different expenditure.”

Master Brown said the claimant’s costs were nearly £4,000 and, even ignoring the extent to which his lawyers were dealing with what might be a novel point, “the costs incurred in dealing with claims such as this are still liable to be disproportionate”.

He added: “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). In respectful agreement with the comments of Dingemans J such complications and costs would, to my mind, set significant barriers for parties litigating in the courts.”

Master Brown said that, in any event, he was not satisfied that any expense in relation to the disbursement could not reasonably be defrayed from the recovery of judgment rate interest. “I am not therefore satisfied that after reckoning for all the interest received on costs the claimant would have had to pay interest on the loan paid out of damages.”

Parliament had not provided for the recovery of the costs of funding or borrowing in litigation of this sort, he noted.

The master concluded: “I rejected the claim (provisionally) on the grounds that I was not satisfied that I had the jurisdiction to award interest or to deal with any other matter concerning interest other than to determine the period over which judgment rate interest applies.

“Further, I said that even it were appropriate to award interest for the period claimed before the costs order my understanding was that the allowance of judgment rate interest should, to an extent, be on a ‘swings and roundabouts’ basis and not such as to permit the degree of specificity which is implicit in the claim.

“For these rather more extended reasons I am not persuaded that I should now come to any different conclusion.”

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Costs News
Published date
06 May 2020

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