Lender's reaction on 'groundbreaking' High Court Ruling

Lender's reaction on 'groundbreaking' High Court Ruling


Specialist real estate bridging lender Montello has commented on the High Court’s decision to confirm that borrowers who take out bridging finance to fund litigation expenses can be entitled to recover the full interest rate they have paid.

Christian Faes, Managing Director of Montello, which funds its transactions through alternative capital sources – including the Montello Income Fund, said of the High Court’s verdict: “As a bridging lender we always want to ensure that a borrower is borrowing from us for a viable commercial purpose – and we believe that commercial litigation is one such purpose.”

In what has been described by legal experts as a ‘groundbreaking’ decision, the High Court’s ruling last week ([2011] EWHC 2807 (Ch)) means that a winning party to a lawsuit can now be entitled to a full recovery of any interest they pay on any borrowings to fund a lawsuit.

Before this precedent was set, interest costs on a judgement accrued at a ‘standard rate’ of 8 per cent.

Christian Faes continued: “Over the course of the last year or so, we have increasingly seen borrowers coming to us to fund litigation expenses. We always require real estate security for the loan, but often mainstream lenders will not be interested in funding litigation costs. We are more than happy to lend in these circumstances. 

“The High Court’s decision in this case reflects the commercial reality of the current times. Many borrowers have very viable commercial reasons to require a loan, but struggle to get funding quickly.

“This Court decision, in some respects, recognises the increasingly mainstream role that bridging finance is playing in the marketplace.”

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