The Secretary of State for the Department of Energy and Climate Change and Another v Jeffrey Jones (and Others)
| Jurisdiction | England & Wales |
| Judge | Lady Justice Sharp,Lady Justice Gloster,Lord Justice Patten |
| Judgment Date | 27 March 2014 |
| Neutral Citation | [2014] EWCA Civ 363 |
| Docket Number | Case No: A2/2013/1380 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 March 2014 |
[2014] EWCA Civ 363
Lord Justice Patten
Lady Justice Gloster
and
Lady Justice Sharp
Case No: A2/2013/1380
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
Queen's Bench Division
Swift J
Royal Courts of Justice
Strand, London, WC2A 2LL
Ronald Walker QC and Ms Judith Ayling (instructed by Nabarros) for the Appellants
Benjamin Williams (instructed by Hugh James) for the Respondents
Hearing date : 21 January 2014
Introduction
On 21 December 2012, following an earlier judgment on liability in respect of the eight lead claims of the Phurnacite Workers Group Litigation (PWGL) brought by these claimants, Swift J ordered that the defendants should pay 80 per cent of the claimants' costs of the action as agreed or assessed. Although there was then agreement that costs and disbursements would be subject to interest from the date of judgment in the usual way, there was not agreement on a further claim by the claimants for pre-judgment interest on disbursements. The litigation had been substantial. The trial on liability took more than six weeks, and the claimants' disbursements exceeded £787,500. The pre-judgment interest on disbursements issue was dealt with at a hearing on 24 March 2013, and on 3 May 2013, Swift J made a costs order which is the subject of this appeal. She ordered that the defendants pay pre-judgment interest on disbursements at the rate of 4 per cent above base rate.
It is not disputed that the claimants are entitled to interest on their paid disbursements. The narrow issue which arises for determination on this appeal relates to the rate of interest. The defendants contend the judge was wrong to have regard to the circumstances of the claimants when determining the rate of interest. They assert that given the way the claimants financed the litigation disbursements, interest should have been calculated by reference to the circumstances of their solicitors, Hugh James, rather than that of the claimants; and absent evidence to the contrary, Hugh James should be equated to a first class borrower so as to attract the conventional measure for such a borrower of 1 per cent above base rate.
For the reasons that follow I would hold that the judge was entitled to make the order she did, and I would dismiss the appeal.
Relevant background
The claimants in this case are former industrial workers of modest means who had worked at the defendants' works in South Wales and who brought personal injury claims against the defendants. Their solicitors in the litigation were (and are) Hugh James, a medium-sized firm based in Cardiff.
The claimants entered Conditional Fee Agreements (CFAs) with Hugh James drafted on the Law Society's model, which provided that payment of the solicitors' charges was conditional on success, but disbursements were payable, win or lose (albeit the expectation in such cases would be that if the claimants lost, the disbursements would be claimed against ATE insurance, not from the claimants).
There are a number of ways by which disbursements can be funded. A claimant with adequate means may pay the disbursements as the case progresses, or obtain a loan, from a bank for example, to do so. There are (or at least were before the Jackson reforms) commercial organisations which funded disbursements at a commercial rate of interest: the Law Society ran one such scheme referred to in Tankard v John Fredericks Plastics [2009] 1WLR 1731. The solicitors might fund the disbursements themselves by absorbing the cost as part of their overheads or by providing funding in return for payment of increased hourly rates of remuneration or an additional uplift in their success fee under a CFA.
In this case however, Hugh James agreed to fund those disbursements but only if their clients entered a disbursement funding agreement (the agreement/s) with the firm. We were told, as was the judge, that this form of agreement was novel, at least in relation to personal injury actions.
The agreements were in identical form for each of the lead claimants. Each was expressed to be a Credit Agreement exempted from the Consumer Credit Act 1974 and it was noted that payment of disbursements was subject to the CFA.
Under the agreements Hugh James agreed to provide the claimants with credit (i.e. the principal) in such sums as were required from time to time to pay disbursements up to a maximum of £5,000, though it could increase that amount should it prove necessary for the progression of the claim. If the case was successful, the credit would be repaid by the defendants or if it was unsuccessful, by the claimants' insurers. The charge for credit (i.e. the interest) was 4 per cent above base rate. Clause 5 of the agreement provided that the client would be responsible for payment of the charge for credit if the case was successful and would pay it to Hugh James after the damages had been received by Hugh James on the client's behalf.
Before the hearing, the defendants wished to satisfy themselves that the agreements were genuine and valid agreements for the payment of interest. They accordingly asked for, and the judge ordered, the disclosure of the agreements themselves and of the provisions in the CFAs relating to the obligation to pay disbursements, and interest or credit charges on those disbursements. The defendants also wrote to Hugh James asking why it was said that the agreements were exempt agreements for the purposes of the Consumer Credit Act 1974. In a letter dated 20 March 2013, Hugh James replied. They said the claimants' case was that the agreements were exempt because they did not provide regulated credit. They went on to say: " The claimants' repayment obligations are expressly contingent on recovery of interest from your client and principal either from your client or their ATE insurer. A debt which is contingent on the occurrence of a future event – such as the availability of a third party indemnity – does not qualify as credit within the meaning of the relevant legislation."
The hearing and the judgment below
By the time of the hearing, a number of matters were not in contention or were common ground. First, it was not suggested that these were anything other than genuine and valid agreements. Secondly, the defendants conceded that the claimants were in principle entitled to pre-judgment interest on disbursements. Thirdly, the parties agreed that though these were personal injury claims it was appropriate to adopt the approach taken in the Commercial Court to assessing the appropriate rate of interest on costs. Fourthly, the defendants accepted 4 per cent above base rate was not an excessive or unreasonable rate of interest to charge for borrowing by claimants who were private individuals of modest means. Their argument was however that in reality the claim for interest was not one made by the claimants, who were never at risk of having to pay any interest, but was a claim made by Hugh James. The agreements therefore were no more than a device to enable Hugh James to recover interest on disbursements they were funding at a rate of their choosing. There was no evidence before the court as to Hugh James' financial position or the rate at which they were able to borrow money or indeed that they had borrowed any money. Thus it was argued, there was no evidence to displace the usual presumption applied in the Commercial Court that the appropriate rate of interest was 1 per cent above base rate; and this was the rate which the judge should award.
At paragraphs 9 to 16 of her judgment, the judge set out the relevant law in relation to the issues she had to decide. It is not suggested before us that there was any error in her analysis though it is helpful to refer to the position in...
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