Jones & Ors v Secretary of State for Energy and Climate Change & Anor

Under Civil Procedure Rules 1998 CPR 44.3(6)(g), the court has discretion to award pre-judgment interest on costs and disbursements. The appropriate rate is determined by all the circumstances and by what is just between the parties. An agreed contractual rate is prima facie evidence of the claimant’s funding cost, but is not conclusive and may be displaced if excessive or unreasonable. The court may consider the rate at which claimants with the relevant financial characteristics could obtain alternative funding. Where solicitors fund disbursements on terms more favourable than commercial borrowing, the arrangement may be treated as equivalent to bank financing. On the evidence, 4% above base rate was appropriate.

The claimants succeeded in lead claims forming part of the Phurnacite Workers Group Litigation. The defendants were ordered to pay 80% of the claimants’ costs. The parties agreed that costs and disbursements would bear interest from judgment, but disputed whether interest should also run on disbursements from the dates they were paid and, if so, at what rate.

The claimants’ solicitors had funded disbursements under credit agreements charging 4% above base rate. The defendants conceded entitlement in principle to pre-judgment interest but argued that the contractual rate was a device benefiting the solicitors and that the usual rate of 1% above base rate should apply. The central issue was the appropriate rate under CPR 44.3(6)(g).

1. The court had discretion under CPR 44.3(1) and CPR 44.3(6)(g) to award interest on costs and disbursements from a date before judgment. The rate was not fixed and had to be determined in all the circumstances, bearing in mind the requirement to do justice between the parties.

2. The starting point was the practical cost of funding the litigation. The claimants could not fund the substantial disbursements themselves. The credit agreements enabled them to obtain necessary funding without advancing money or bearing financial risk if their claims failed, because the after-the-event insurers would meet the disbursements in that event.

3. The agreed rate could not be determinative. It provided prima facie evidence of the claimants’ cost of obtaining credit, subject to being displaced by evidence that the charge was excessive or unreasonable. The relevant comparison was not necessarily the conventional rate available to large commercial borrowers, but the rate at which claimants with the relevant characteristics could obtain funding.

4. The court rejected the submission that the claim was in substance one by the solicitors. Hugh James fulfilled the role of a bank. The position was analogous to claimants borrowing from a bank and claiming the interest paid as part of their litigation costs.

5. There was no evidence that the 4% rate was excessive or unreasonable. The defendants did not contend that the claimants could have obtained equivalent unsecured or contingent funding more cheaply. The appropriate rate was therefore 4% above base rate. No interest was payable before execution of the relevant credit agreement.

First-instance decision. The judgment records no appeal or earlier decision on the application.