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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