Page 18 - PIC e-newsletter Spring Issue 8

CIVIL COSTS
t the end of a claim, if the losing claimant was supported by funders who had an interest in the litigation, the successful defendant can apply under section 51 of
the Senior Courts Act 1981 for a non-party costs order against the claimant’s funders.
Normally the liability of the funders to pay such costs is as fixed by Arkin v Borchard Lines Ltd (Nos 2 and 3) [2005] 1 WLR 3055:
“We consider that a professional funder, who nances part of a claimant’s costs of litigation, should be potentially liable for the costs of the opposing party to the extent of the funding provided.”
There is now a jurisdiction in CPR 25.14 to order funders to provide security for costs. An order may be made against a person who:
“...has contributed or agreed to contribute to the claimant’s costs in return for a share of any money or property which the claimant may recover in the proceedings.”
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Cost
2017 Cases Illuminating This Jurisdiction
In the RBS Rights Issue Litigation [2017] EWHC 1217 (Ch), Hildyard J set out the principles applicable to such applications:
“Of particular relevance in assessing whether an interlocutory order against
a non-party under CPR 25.14(2)(b) to secure a contingent liability pursuant to Section 51 is appropriate and just will be:
(1) Whether it is suf ciently clear that the non-party is to be treated as having in effect become in all but name a real party motivated to participate by its commercial interest in the litigation;
(2) Whether there is a real risk of non- payment such that security against the contingent liability should be granted;
Security
(3) Whether there is a suf cient link between the funding and the costs for which recovery is sought to make it just for an order to be made;
Stephen Innes explores the matter of applications for security for costs against litigation funders in commercial claims.
(4) Whether a risk of liability for costs has suf ciently been brought home to the non-party, either by express warning,
or by reference to what a person in its position should be taken to appreciate as to the inherent risks; and
(5) Whether there are factors, including for example, delay in the making of an application for security or likely adverse effects such as to tip the overall balance against making an order.”
In an unreported decision in July 2017, in the matter of Hellas Telecommunications (Luxembourg) II SCA, Snowden J concluded that there was a power inherent or implied in CPR 25.14 to make orders so as to enable an effective application to be made under the provision, even where there was no pre-existing costs order against anyone in the proceedings. He therefore made an order requiring the claimants to disclose the identity of the funders and the details of the funding arrangements.
Litigation funders, like other claimants, may well wish to rely on an ATE policy as security. A number of cases had previously looked at whether a policy could be considered an appropriate form of security, given the risks in any given case that the insurer might not pay out on the claim, particularly if there were allegations in the proceedings of dishonesty by the insured.
INDUSTRY EXPERTS
Partners In Costs