Judicial Attitude To Funding.
1. Introduction: What is Litigation Funding?
Litigation funding (or third-party funding) refers to an arrangement where a third party (a funder) finances a party’s legal costs in return for a share of the proceeds if the case succeeds.
It is closely connected to the doctrines of:
- Maintenance: Supporting litigation in which one has no legitimate interest.
- Champerty: A form of maintenance where the funder receives a share of the proceeds.
Historically, both were prohibited, but modern courts have shifted toward controlled acceptance.
2. Evolution of Judicial Attitude
(A) Traditional Position: Strict Prohibition
Courts historically viewed funding as:
- Encouraging frivolous litigation
- Interfering with justice
- Creating conflicts of interest
(B) Modern Position: Conditional Acceptance
Courts now recognize that litigation funding:
- Promotes access to justice
- Enables claims that would otherwise not be pursued
- Is acceptable if not abusive or excessive
Thus, the judicial attitude today is permissive but regulated.
3. Key Legal Principles Governing Funding
1. Access to Justice
Courts increasingly support funding where it enables legitimate claims.
2. Control of Litigation
Funders must not exercise excessive control over proceedings.
3. Fair Return
Funding agreements must not be extortionate or unconscionable.
4. Abuse of Process Prevention
Courts intervene if funding arrangements distort justice.
5. Costs Liability
Funders may be liable for adverse costs in certain circumstances.
4. Leading Case Laws
1. Arkin v Borchard Lines Ltd [2005] EWCA Civ 655
- Principle: Introduced the “Arkin cap”.
- A third-party funder’s liability for adverse costs is generally limited to the amount of funding provided.
- Significance: Encouraged funding while limiting risk.
2. Excalibur Ventures LLC v Texas Keystone Inc [2016] EWCA Civ 1144
- Principle: Funders may be liable for indemnity costs where they fund weak or speculative claims.
- Court criticized funders for backing a meritless case.
- Significance: Strong warning against irresponsible funding.
3. ChapelGate Credit Opportunity Master Fund Ltd v Money [2020] EWCA Civ 246
- Principle: The Arkin cap is not absolute.
- Courts can impose higher costs liability where justice requires.
- Significance: Increased judicial discretion over funders’ liability.
4. Giles v Thompson [1994] 1 AC 142
- Principle: Relaxed the strict application of maintenance and champerty doctrines.
- Recognized that not all funding arrangements are abusive.
- Significance: Marked shift toward modern acceptance.
5. R (Factortame Ltd) v Secretary of State for Transport (No 8) [2002] EWCA Civ 932
- Principle: Recognized legitimacy of conditional fee arrangements and cost recovery.
- Significance: Reinforced access to justice through funding mechanisms.
6. Davey v Money [2019] EWHC 997 (Ch)
- Principle: Funders may be ordered to pay adverse costs where they substantially control or benefit from litigation.
- Significance: Reinforces accountability of funders.
7. PACCAR Inc v Competition Appeal Tribunal [2023] UKSC 28
- Principle: Litigation funding agreements may qualify as damages-based agreements (DBAs) if funder returns are linked to damages.
- Significance: Introduced regulatory uncertainty and stricter scrutiny of funding agreements.
5. Judicial Trends and Policy Considerations
(A) Increasing Acceptance
Courts recognize funding as:
- Essential in complex commercial litigation
- Important in collective actions and competition law claims
(B) Increased Scrutiny
Courts carefully assess:
- Proportionality of funder’s return
- Degree of control over litigation
- Transparency of agreements
(C) Balancing Exercise
Judicial attitude reflects a balance between:
- Encouraging access to justice
- Preventing abuse of process
6. Risks and Judicial Concerns
- Over-commercialization of litigation
- Conflicts of interest (lawyers vs funders)
- Inflated damages claims
- Control over settlement decisions
- Security for costs issues
7. Practical Implications
For Claimants:
- Easier access to justice
- Reduced financial risk
For Funders:
- Potential liability for adverse costs
- Need for careful due diligence
For Courts:
- Increased supervisory role
- Need to balance fairness and efficiency
8. Conclusion
The judicial attitude toward litigation funding has evolved from hostility to cautious acceptance. Courts now:
- Permit funding as a tool for access to justice
- Regulate it to prevent abuse
- Hold funders accountable where necessary
Case law demonstrates a clear trajectory:
- Early relaxation (Giles v Thompson)
- Structured acceptance (Arkin)
- Stronger scrutiny (Excalibur, ChapelGate, PACCAR)
Key Takeaway
Litigation funding is now an integral part of modern dispute resolution, but courts ensure that it:
- Does not undermine justice
- Remains fair and proportionate
- Preserves the integrity of the legal system
RELATED Blog
comments