THIRD PARTY FUNDING – A VIABLE OPTION FOR 21ST CENTURY LITIGATION (Part 2)

This series of blog articles will address the increasing viability of third party funding as an alternative to traditional litigation funding methods. It will look at how the law has developed historically and how the Court now approaches third party funding and the potential liability of third party funders.

The second part of this series will explore the Court’s first acceptance of third party funding in the matter of Factortame Ltd v Secretary of State for Transport, Local Government and the Regions No.8 [2002].

Background

This matter related to a challenge brought by Spanish fisherman who sought to claim damages against the Secretary of State for the unlawful prohibition of fishing in UK territorial waters. A firm of accountants agreed with the Claimants to prepare and submit claims for loss or damage as a result of any losses suffered. The Accountants agreed to act in return for 8% of any damages recovered.

The Claimant’s succeeded in their challenge and were awarded damages and costs. On a preliminary issue the agreement was held to be not champertous and could be enforced against the Secretary of State.

The Defendant’s Challenge

The Defendant claimed that such an agreement was champertous and unlawful. It was argued that for an expert to act on a contingency fee basis would give the expert a significant financial interest in the case which is highly undesirable.

Decision

As stated in my previous blog, the tort of champerty had been abolished and the starting point for considering any arrangement was that it would be presumed enforceable unless there was a valid reason as a matter of public policy.

The Accountants had not acted as experts directly in this matter but had instead funded independent experts. Furthermore, by the time that they were instructed the issue of liability had already been decided.

Therefore, the Court held that such an agreement was not in the circumstances champertous or against public policy.

In the next part of the series…

The next blog will take a look at the liability of third party funders in litigation in the matter of Arkin v Borchard Lines Ltd (nos 2 and 3) [2005] 1 WLR 3055.


This blog was prepared by Kris Kilsby who is an Associate Costs Lawyer at Clarion and part of the Costs Litigation Funding Team.  Kris can be contacted at kris.kilsby@clarionsolicitors.com or on 0113 227 3628.

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THIRD PARTY FUNDING – A VIABLE OPTION FOR 21st CENTURY LITIGATION (Part 1)

This series of blog articles will address the increasing viability of third party funding as an alternative to traditional litigation funding methods. It will look at how the law has developed historically and how the Court now approaches third party funding and the potential liability of third party funders.

The first part of this series will explore how the Court’s attitude to third party funding has changed significantly from the 19th through to the 21st Century.

Champerty and Maintenance

The historic position taken by the Court in respect of third party funding was that it was illegal and tortious. Two offences had developed through the common law: champerty and maintenance.

Champerty referred to when a person who did not have a legal interest in the matter provided financial assistance to litigation in order to receive a share of the profits.

Maintenance was the procurement of direct or indirect financial assistance from another in order to carry on, or defend, proceedings without lawful justification (British Cash & Parcel Conveyors v Lamson Store Service Co [1908]).

Therefore, the default position was that such agreements, which would be considered third party funding arrangements today, would be considered illegal, tortious and unenforceable. However, even at the turn of the 20th Century, the courts were willing to find such arrangements enforceable as a matter of public policy. For instance, in insolvency proceedings, which by their very nature meant that one party would need financial assistance in order to carry on or defend proceedings (Seear v Lawson (1880)), the Court found that a third party funding agreement was enforceable.

Abolition

The default position changed with the enactment of the Criminal Law Act 1967 (CLA 1967). S.13 CLA 1967 abolished the offences and torts of champerty and maintenance. S.14 CLA 1967 changed the approach of the test, which now started from the presumption that such agreements were enforceable, unless there was a valid reason as a matter of public policy.

Comment

Statutory intervention was important to provide additional certainty and security to parties wishing to enter into third party funding arrangements. However, such an approach cannot be taken for granted outside of the jurisdiction of England and Wales.

Recently, the Supreme Court in Ireland, in the matter of Persona Digital Telephony Ltd v The Minister for Public Enterprise (2017), found a third party funding agreement to be unlawful. This is because the offences of Champerty and Maintenance have not been abolished by statute In Ireland. The Court felt that it is consequentially bound to find such agreements unlawful and that any change of approach was within the remit of the Legislator, not the Judiciary.

In the next part of the series…

The next blog will take a look at how the Court has begun to develop the law in respect of third party funding, with a look at the decision in Factortame Ltd v Secretary of State for Transport, Local Government and the Regions No.8 [2002].

This blog was prepared by Kris Kilsby who is an Associate Costs Lawyer at Clarion and part of the Costs Litigation Funding Team.  Kris can be contacted at kris.kilsby@clarionsolicitors.com or on 0113 227 3628.

Litigation costs in Court of Protection bills – are these recoverable?

It is extremely common for Deputies to be involved in ongoing litigation claims for Protected Parties. Deputies often become involved in interim payment applications and are usually asked to disclose details of the Protected Party’s affairs to the litigation solicitor to assist with the Schedule of Loss and other documentation. The main question that needs to be answered however is whether these costs can be claimed within the general management bill of costs.

Unfortunately, the answer is no…

Master Haworth considered a bill of costs where the Deputy had incurred costs through communications with the litigation solicitor to outline the Protected Party’s affairs to assist with an ongoing litigation claim. Master Haworth disallowed the costs that related to the litigation claim and he stated that “where the Deputy is being asked to provide information and/or schedules and/or documentation to support an interim payment application in an ongoing litigation these are not general management charges”.    

Master Haworth directed the Deputy to withdraw their bill of costs and to re-submit a new bill of costs which did not include the litigation costs to allow him to solely assess the general management costs that had been incurred.

It is advisable that the Deputy’s costs which relate to the Protected Party’s litigation claim are not included within general management bills. Costs which relate to the litigation claim should be recovered within the litigation bill of costs. The Deputy should therefore outline their costs to the litigation solicitor to ensure that the costs are remunerated correctly.

If you require any further advice or assistance in relation to your Court of Protection costs, please do not hesitate to contact the Clarion Costs Team on COPCosts@clarionsolicitors.com or 0113 246 0622.