3rd party funding

Question 1

Champerty & Maintenance
1. Maintenance –
2. Champerty –
3. C&M rules – intention –
4. Criminal Law Act 1967 –
5. 3rd Party funder =
- Genuine ‘no win, no fee’ -
- Funders usually insist that parties acquire
6. Restrictions on C&M remain. So problematic for

Answer 1

Champerty & Maintenance
1. Maintenance – an unconnected 3rd Party assisting, usually by providing funding, for litigation
2. Champerty – Form of maintenance where 3rd party pays some or all of litigation costs in return for share of proceeds
3. C&M rules – intention – to retain purity of litigation and prevent people from paying for litigation when have no interest in. Concerns about abuse of process, undue influence and fraud, if outside parties have commercial stakes in litigation outcomes.
4. Criminal Law Act 1967 – Abolished offences and Tort of C&M. But preserved that Champertous Agreements were invalid.
5. 3rd Party funder = Funder with no connection to dispute provides funds to cover legal costs and expenses, for ‘reward’ in the form of a percentage of damages awarded, or a pre-set percentage ‘uplift’ on the amount invested, usually whichever is higher.
- Genuine ‘no win, no fee’ - If Claimant loses, not required to repay funder anything.
- Funders usually insist that parties acquire After the Event (ATE) insurance to protect against potential adverse costs orders. The ATE premium is often added to the funding advance, and the ATE policy is often underwritten by the Funder, or a connected company
6. Restrictions on C&M remain. So problematic for 3rd part funding. Lack of parliamentary guidance. Courts still decide on facts of each case as to whether agreement unenforceable on grounds of public policy.

Question 2

Non-Party Costs Orders
6. s51 SCA 1981 - courts have power to

• Recent upsurge in third-party funders in litigation market has
• This of particular interest in

7. CPR 46.2 - Makes provision, where Court considers

Answer 2

Non-Party Costs Orders
6. s51 SCA 1981 - courts have power to make costs order against a non-party
- Recent upsurge in third-party funders in litigation market has led to increase in interest of exercise of this power.
- This of particular interest in PI litigation and the operation of QOCS protection (see above, esp CPR 44.16(2)(a))
7. CPR 46.2 - Makes provision, where Court considers exercising power under S.51 SCA 1981, for person affected to be joined as party (for purposes of costs only) and given reasonable opportunity to be heard

Question 3

Principles
8. Dymocks Franchise Systems v Todd (2004) – Privy Council Decision but adopted by Courts in E&W:-

9. Pro-Bono Representation - The ‘pure funders’ principle, means
10. CPR 46.7(1) and (2) - Successful pro-bono represented parties cannot obtain order for payment of legal costs (infringe ‘indemnity principle’) but can obtain
11. Deutsche Bank v Sebastian Holdings (2016) - Key consideration is,
12. Travellers Insurance v XYZ (2019) -
13. Arkin v Borchard Lines Ltd (2005) -
14. Chapelgate Credit v Money (2020) - ‘Arkin Cap’ was not a
15. Goknur v Atyacli (2021) -
16. Thimmaya v Lancashire NHS FT (2020) -
17. CF Robinson v Liverpool UHT (2023) -
18. Select Car Rentals v Esure (2017); Kindertons Ltd v Murtagh (2024) -

Answer 3

Principles
8. Dymocks Franchise Systems v Todd (2004) – Privy Council Decision but adopted by Courts in E&W:-
- ‘Pure Funders’, who are supporting access to justice not normally face costs orders
- Those who funded and controlled and/or benefitted from litigation (‘the real party’) in which they had no other interest risked NPCO (non-party costs order)
9. Pro-Bono Representation - The ‘pure funders’ principle, means lawyers can provide their services free of charge to advance access to justice without fear of a NPCO.
10. CPR 46.7(1) and (2) - Successful pro-bono represented parties cannot obtain order for payment of legal costs (infringe ‘indemnity principle’) but can obtain order to pay equivalent costs to prescribed charity. Court may assess costs for this purpose
11. Deutsche Bank v Sebastian Holdings (2016) - Key consideration is whether it is ‘just’ to make NPCO on facts
12. Travellers Insurance v XYZ (2019) - ‘Causation’ in relation to conduct and control was important to determination to make NPCO
13. Arkin v Borchard Lines Ltd (2005) - Court of Appeal appeared to limit costs exposure of commercial funders to the amount they had invested (the ‘Arkin’ cap)
14. Chapelgate Credit v Money (2020) - ‘Arkin Cap’ was not a ‘rule of law’ or a formal restriction. Non-parties’ liability to costs would be assessed on normal causation principles
15. Goknur v Atyacli (2021) - Director of insolvent company benefitting from or controlling litigation could be subject to NPCO
16. Thimmaya v Lancashire NHS FT (2020) - Expert witness who had ‘grossly breached duty to court’ was made subject of NPCO;
17. CF Robinson v Liverpool UHT (2023) - NPCO against expert witness at trial overturned on appeal
18. Select Car Rentals v Esure (2017); Kindertons Ltd v Murtagh (2024) - Credit hire companies who controlled or benefitted from litigation could be made subject of NPCO.

Question 4

Other
19. ALF – Association of Litigation Funders – formed Nov 2011
-
-
-

Answer 4

Other
19. ALF – Association of Litigation Funders – formed Nov 2011
- have a Code of conduct but its voluntary no regulation.
- Helps provide transparency
- Funders to give assurances to clients that will not take control of litigation, that have money to pay for the litigation and will not terminate funding unless material adverse developments.