Litigation funding costs - "a skeptic, I would ask for consistency first of all"


When Sylvia Plath penned the above in her journals, she plainly didn't have the recoverability of solicitors fees at the forefront of her mind. 

Yet lawyers are all too aware that following the implementation of Rupert Jackson's reforms and in every way which matters, the ability of litigants to recover costs from their opponents has been consistently and significantly reduced. 

The most recent adjustments to the Civil Procedural Rules came into effect in April of this year. These make it clear that unless your claim is worth in excess of £10 million, made on behalf of a child, a litigant in person, those with severely impaired life expectation or is already subject to the even more limiting fixed costs regime, it will continue to be scrupulously cost managed. Automatic sanctions, limiting costs to Court fees only remain in the event of non compliance, subject to an expensive and potentially risky application for relief. 

The latest case law has set a similar, cautionary tone. 

Attempts to effectively sidestep cost budgeting exercises by providing for multiple contingencies have, as illustrated in CIP v Galliford Try & Others [2015] EWHC 481 (TCC)  been ruled uncertain, unreliable and thus ineffective.  

As for proportionality, the new approach is to assess a reasonable costs figure then stand back and consider if the figure reached is proportionate by reference to the sums in issue, complexity, conduct and importance of the case. We know that even reasonable and necessarily incurred costs can now be disproportionate and nowhere was that principle better exemplified than in BNM v MGN Limited [2016] EWHC B13 (Costs). Here a libel claim settled for £20,000, with costs claimed of almost £242,000. Master Gordon-Saker found that whilst costs of just over £167,000 were reasonable and necessary, his subsequent analysis as to proportionality resulted in a significantly reduced total, of just under £84,000. 

Nor have the provisions of the Solicitors Act offered practitioners much in the way of comfort. A solicitor who fails to expressly advise his client that the fees which he is obliged to pay may exceed those recoverable from the other party, is likely to find them irrecoverable as a result. In Rahimian and Scandia Care Ltd v Allan James LLP [2016] EWHC B18 Costs, a client who failed to seek an assessment of his solicitors own bills within the usual cut off point of 12 months, was allowed to proceed on the back of a failure by the solicitor  to provide him with accurate on-going estimates and sufficient detail as to the work undertaken. 

Set against this backdrop, the recent decision in Essar Oilfield Services Ltd v Norscot Rig Management Pvt Ltd [2016] EWHC 2361 (Comm) appears surprising. 

In short, the successful party to this dispute, pursued under the Arbitration Act 1996, included within the claim for costs those of a litigation funder, which it had been obliged to retain in order to pursue the claim. The sum in question was £647,000, repayable either at 300% of the sum advanced from the damages recovered, or 35% of the damages, whichever was the greater. This meant that in practice, the party was seeking to recover £1.94 million under this provision alone. The Court held that these costs were recoverable under section 59(1)(c) of the Act and Article 31(1) of the ICC Rules.  More particularly, the reference there to “legal and other costs” was wide enough to permit this.

There are obvious distinctions to be drawn between Arbitration and Court proceedings. However and if those determining the former are entitled to award the winning party such costs, some will find it difficult to understand why a Judge should be prevented from doing so in respect of the latter. Likewise, one is entitled to ask why either an uplift applied under a conditional fee agreement or the premium for an after the event insurance policy should as a matter of pubic policy be deemed irrecoverable, given that they perform a similar function.  Ultimately, the decision draws awkward comparisons between those engaged in very high value commercial claims and the less well heeled.    

Whilst Oscar Wilde once fairly noted that "consistency is the hallmark of the unimaginative”, I anticipate the legitimacy of this decision being called into question and whether it will be appealed, remains to be seen.  

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£2m litigation funding costs can be recovered. The High Court has ruled that a party can recover the costs of third-party funding awarded following an arbitration over the breach of an operations management agreement in the oil industry.
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