High Court ruling passes cost of disbursement funding to defendant

Morgan: precedent for a personal injury case

Welsh firm Hugh James has struck a blow for claimants with a High Court ruling that backed its “somewhat novel” credit agreement to fund clients’ disbursements of £787,500.

The firm represented a number of successful lead claimants in the Phurnacite Workers Group Litigation (PWGL) against the Secretary of State for Energy and Climate Change and Coal Products Ltd.

The high-profile group action was brought by former employees and their families of a phurnacite plant in South Wales, successfully claiming exposure to harmful dust and fumes caused Mesothelioma.

But in order to progress the case through the courts, Hugh James agreed a credit arrangement with the claimants to fund the disbursements that Mrs Justice Swift described as “at least in the personal injury sphere… somewhat novel”.

Interest was set at 4% above base rate and payable out of damages if the claims were successful. If the individual claim was unsuccessful, the credit agreements were covered by after-the-event insurance.

The defendants sought to argue that by Hugh James paying the disbursements, it was simply an overhead of the firm – usually payable by an uplift or an additional percentage success fee – and so the burden was on the claimant to pay any interest.

However, for the claimants, Benjamin Williams argued that the terms of the conditional fee arrangement was a recoverable cost in the same way as if they had secured a bank loan or used a credit card to fund the disbursements – and that the credit agreement was at a more beneficial rate.

Mrs Justice Swift found that the claimants’ case for interest was not effectively a claim by the firm and said: “Hugh James fulfilled the role of a bank, but on terms more advantageous to the claimants than those which would have been offered by any bank”.

She set the recoverable rate of interest on the pre-judgment disbursements at 4% above base rate, saying it was not “excessive or unreasonable”.

Gareth Morgan, lead partner on the case for Hugh James, said: “This is a precedent for a personal injury case. What it means is that if a claimant enters into a funding arrangement and incurs interest on disbursements, then in appropriate circumstances, that is a cost which can be charged against the defendant in the event of a successful claim.

“This switches the burden of funding disbursements from claimant to defendant.”

He added: “It is a small movement in favour of the claimant, because up to now the tide has been going very strongly against the claimant.

“Up to now they’ve had the possibility of losing up to 25% of the damages. But at least that’s all they are going to have to fund, because the cost of disbursements – an essential part of a large case – can be transferred to the defendant.”