Third party funding – “Arkin” cap disapplied – Funder held liable for Defendants’ costs

Davey v Money and others [2019] EWHC 997 (Ch)

The Court considered the application of the “Arkin” cap to limit the extent of a non-party costs order.

The “Arkin” cap, from the Court of Appeal decision in Arkin v Borchard Lines Ltd [2005], limits the amount payable by a litigation funder to the other side to an amount equal to the sum funded. The basis of the “Arkin” cap is access to justice (i.e. by not deterring commercial funders) balanced against the competing principle that ‘costs follow the event’.

The Court disapplied the “Arkin” cap stating that, on the facts of the case, the balance between the principle that the successful party should have its costs, and enabling commercial funders to continue to provide finance to facilitate access to justice, should be struck differently than it was in Arkin.

The Court ordered the Funder to pay all of the Defendants’ costs on the indemnity basis from the date of the funding agreement.

While the “Arkin” cap has often been criticised as being too far in the favour of the funder it has, to date, been readily adopted by the commercial funding industry. This may now change.

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Issues-based costs order: only where an issue on which the successful claimant lost “so starkly stands out as being separate”

Canary Wharf (BP4) T1 Limited and others v European Medicines Agency [2019] EWHC 921 (Ch)

The Court considered whether it could make an issues-based costs order, i.e. an order in favour of the winning party in respect of issues won and countervailing in respect of issues lost.
The Court noted that in any litigation, but especially in complex commercial litigation, any winning party is likely to fail on one or more (often intertwined) issues. The Court found that “unless there is an issue which so starkly stands out as being separate and on which [the Claimant] lost, [it] should not make an issues-based costs order”.
The Court found only one issue which stood out so as to justify an issues-based order and, as a result, reduced the recoverable costs by 15%.

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Budgeting and Proportionality

Red & White Services Limited v Phil Anslow Limited [2018] EWHC 1699 (Ch)

Costs may be disproportionate where it will cost significantly more to fight than a party stands to recover. One test is whether the trial is likely to be an end in itself or merely part of the process of arguing who should pay (all or most of) the costs. Where costs exceed quantum it will often be the latter, and costs may be disproportionate.

While the dispute was not simply as to money, the claim having a higher value and greater significance than that shown only by the quantum of damages, the issues in the case did not justify disproportionate costs nor the very substantial differences between the parties’ budgets (a party’s disproportionately low budget is not an appropriate yardstick to assess another party’s higher budget).

The Judge considered the matters in issue and used his own experience to arrive at a reasonable and proportionate figure.

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