The Background

The applicant, Laser Trust, had obtained three separate costs orders against CFL Finance Ltd (CFL), of which over £330,000 plus interest remained outstanding as CFL lacked the funds to pay it. Laser Trust made an application for a third party costs order against Colosseum Consulting Limited (Colosseum) as the litigation funder in the proceedings.

The Issues

The issues before Justice Smith were the extent of the control which Colosseum had over the litigation, and whether such control was so great that the “Arkin Cap” should not apply.

It was also put on record that on the same day the third party costs order was served on Colosseum, Colosseum's sole director placed the company into voluntary liquidation. As it was a voluntary liquidation, there was no stay or delay on the application, which proceeded as normal.

Held

Justice Smith said that generally speaking, the discretion to order a non-party to pay costs is exercised only in exceptional circumstances and will not be exercised against ‘pure funders’. However, this is a fact-specific jurisdiction which can, and will, be exercised against those persons who go beyond the mere funding of litigation.

The funding agreement between Laser Trust and CFL gave Colosseum a ‘massive’ degree of control over the litigation.

If the level of Colosseum’s control was to be disputed, then a ‘very high degree of frankness’ was to be given by Colosseum and/or CLF. They both failed to provide ‘full and frank’ answers, so it was not clear to what extent that power was actually exercised. Therefore, Justice Smith had no option but to infer from the content of the funding agreement that the test for imposing a third party costs order had ‘absolutely’ been met in this case.

Justice Smith held that a third party costs order ought to be made and ought to be made without reference to the Arkin Cap.

Comment

The litigation funding market is highly developed and ever increasing through various different causes of action. The introduction of funders into litigation is creating a new dynamic and with funders exercising varying levels of control over the litigation, it is becoming more and more likely that a court will use its discretion under section 51 of the Senior Courts Act 1981 to grant a non-party costs order against the funder, as in this case.

The full judgement can be found here

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