Recovering the costs of third party funding
March 5, 2018
Litigation Tactics: myths, legends and fairy tales series by Partner, Tom Blackburn
Imagine we live in a post-apocalyptic world. Access to justice is being denied to those that can’t afford to pay ‘normal’ hourly rates, creating a two-tier civil justice system. Trump is the leader of the free world. The UK government is propped up by a small party that extorted a specific sum solely for their support… oh hang on, wait.
Now also imagine that you could recover the cost of purchasing litigation funding, ATE and the success fee you are charging your client. What would you do with these new-found superpowers? Would you use them for good and seek to right wrongs, or turn into an evil genius?
At the end of 2016, HHJ Waksman QC sitting in the Queen’s Bench Division of the High Court, awarded inter parties the cost of litigation funding (approx.£1.94m).
At the time the Essar Judgement came out, many legal commentators said that it didn’t change the litigation landscape. They said it was an exceptional case that had to be interpreted in isolation. Now I agree that Essar is similar to the story of ‘Goldilocks and the Three Bears’. The circumstances (porridge, stay with the fairy tale / myth theme here) must be right. One party has to have conducted the litigation very poorly, so poorly that the Court / Arbitrators must want to impose a sanction on them. However, most observers were wrong for two reasons:
- As a litigator who uses third party funding, ATE or success fees (or all of them). If you don’t try the tactics used in Essar to recover the costs incurred by your own client, you may be negligent in not doing so;
- Many said that Essar only applied to ICC arbitration’s, not Court litigation in England and Wales (or any other Arbitration forum).
Let’s take a look at the second point first. The relevant section that HHJ Waksman (on appeal) replied upon to award post-Jackson additional liabilities was s.59(1). This provides that “the costs of the arbitration” compromises, in addition to the fees and expenses of the arbitrator and arbitral institution, “the legal or other costs of the parties”.
ICC Rule and CPR Definition
How does the ICC rule differ from the definition of costs contained within CPR 44.1(1)? Which defines costs as “includes fees, charges, disbursements, expenses, remuneration, reimbursement allowed to a litigant in person under rule 46.5 and any fee or reward charged by a lay representative for acting on behalf of a party in proceedings allocated to the small claims track”?
It isn’t different. I’d go so far as to say that the CPR definition is wider than the ICC’s. Take a look at para 69 of the Judgement which states “As a matter of justice, it would seem very odd and certainly unfortunate if the arbitrator was not entitled under s.59(1) (c) to include the costs of obtaining third party funding as part of “other costs” where they were so directly and immediately caused by the losing party.”
Now imagine you are a High Court Judge (as I often do) giving Judgement in litigation. Litigation, where a party had requested the inter parties recoverability of third party funding. In addition, you feel inclined to oblige them “as a matter of justice, it would seem very odd and certainly unfortunate if the Court was not entitled under CPR 44.1 to include the costs of obtaining third party funding as part of “fees, charges, disbursements, expenses, remuneration, reimbursement” where they were so directly and immediately caused by the losing party.”
A ‘no brainer’ as the unseasonably tanned U.S. President may say.
Turning back to point one above. If you are involved in arbitration that have similar wording to the ICC rules. If you aren’t pleading recovery of these fees, you will be in desperate need of a paddle, sharpish.
If you are involved in litigation in England & Wales and want to try and recover the cost of funding, ATE and success fees. You will need to instruct an exceptional costs litigator.
If you have any further questions with regards to this article, please contact Tom Blackburn who will provide more guidance where necessary.