High Court allows successful party to recover interest paid on
loans to fund litigation
In the recent case of F&C Alternative Investments
(Holdings) Limited v Francois Bathelemy and Anthony Culligan
Justice Sales held that in certain circumstances, where a
party has had to take out a loan to fund litigation the party can
recover the full amount of any interest paid on that loan.
The case involved a dispute between members of an LLP, two of
which were the defendants and the other the claimant. The dispute
surrounded the two defendants exercising "Put Notices" whereby the
claimant would be obliged to purchase the defendants' membership
interests for a price determined by a prescribed formula. As
Justice Sales commented, the cases was an example of "bitterly
fought litigation" and highly expensive, including a trial lasting
some 95 days and as a result the determining of costs was a key
factor for the parties.
The defendants' were eventually successful on the majority of
their points, and the judge commented that this was in fact a case
where the defendants' were de facto the claimant and vice versa for
the claimant. Due to the conduct of the claimant and its refusal to
accept numerous offers of settlement from the defendant (with such
offers being at the same level as the claimant was eventually
ordered to pay for the put notices) the judge awarded that the
claimant shall pay the costs of the defendant on an indemnity
basis.
In order to fund the litigation the defendants' (who were
individuals) had to take out numerous short-term loans at interest
rates ranging from 20%-47.4% per annum for sums ranging between
£400,000 and well over a £1 million. The court was of the view that
the costs order should reflect this and ordered that costs from the
date the defendants' had to take out these high interest loans
should include interest of 40% per annum.
The court held that this interest rate was justified and
appropriate because of:
- the very high costs which the defendants as private individuals
had to fund in order to keep their claim alive and prosecute it
effectively, under circumstances of particularly complex and
burdensome attritional litigation
- the very substantial difference between the interest the
defendants themselves have had to pay on the monies borrowed to
fund litigation and the rate which they would recover if confined
to a conventional rate of interest
- the fact that they did in fact take out loans at these high
effective rates of interest, and acted reasonably in doing so,
specifically in order to fund their on-going legal costs
- the fact that costs have been ordered to be paid by the
claimant on the indemnity basis in that period.
comment
This is an important case as it shows the court's flexibility to
try and achieve a just outcome for parties who act reasonably and
in line with the CPR and the "spirit" of the over-riding objectives
throughout litigation.
View the link for a full copy
of the judgment.
