Are funding costs recoverable on an inter partes basis? This has been an issue which has divided the costing profession for a long time.
Prior to the CPR, there was always a presumption that legal aid only costs were not recoverable between the parties. This was confirmed in the case of Hunt v Douglas Roofing. However, the costing regime has changed dramatically following the introduction of CPR and many argue that Hunt is no longer applicable. This seems to make sense given that CFA’s and associated funding costs were not envisaged at the time of the decision in Hunt.
Some members of the profession have argued that as Hunt was briefly mentioned in the Claims Direct Test case (a post-CPR case) this should mean that funding costs still cannot be recovered on an inter partes basis. Many have argued that the costs of arranging a CFA and ATE insurance are no different in principle to arranging a bank loan to fund litigation. They reason that as the latter would clearly not be recoverable it must follow that the costs of preparing the CFA, etc should also not be recoverable.
Those who support the view that funding costs are recoverable also have many strong arguments. In support of their contention they reason that Regulation and case law both impose a heavy burden on Claimant Solicitors when dealing with the CFA formalities. Such costs are therefore necessary in order for the Claimant to obtain acces to justice. With the decision in Lownds v Home Office [2002] in mind, it is clear that such costs are unavoidable and ‘necessary’ to advance the litigation. As the costs are ‘necessary’ (as per Lownds) then they should be recoverable on an inter partes basis.
Master Rogers has now made his own view known in the case of Woolley v Haden Building Services. He found that nothing has changed the position which existed prior to the introduction of CPR and that funding costs are non-recoverable. However, Master Rogers made it clear that there is a divergence of opinion on the subject and that many District Judges hold very different views. In making his decision, Master Rogers also made it clear that clarification on the point was required and that this should come from a higher Court such as the Court of Appeal. Of course, that is unlikely to happen given that funding costs are rarely substantial and alone would not justify the cost of an appeal of the decision.
Although some Distict Judges are not going to distance themselves from the decision of Master Rogers, the decision in Woolley is clearly not a binding precedent and therefore we can expect further argument on this point for the foreseeable future. As a consequence, Forest Costing Service currently advise receiving parties to include funding costs in their Bills and vice versa advise paying parties to continue to dispute such costs! 