Skip to main content

News story

November 21, 2017

Litigation funders beware

Litigation is an expensive and risk-laden enterprise. It is not to be embarked upon lightly, especially having regard to the ever-increasing cost of access to justice.

Litigants who are unable to afford funding often turn to third parties who, if they agree, might unwittingly put themselves at risk to meet all or part of the opponents’ costs.

Potential private funders should therefore approach any request for financial assistance in funding litigation with extreme caution, especially if they are offered a share in any “winnings”.

An obvious example of third party funding is where a non-party funder meets the legal costs of a Defendant who loses his case to the Claimant. The Claimant is then unable to recover its costs against the Defendant and looks for other targets.

An obvious target is the funder, who is termed a “non-party”. The Court has wide powers to make non-party costs orders (NPCO) under Section 51 of the Senior Courts Act 1981.

If the non-party is a “pure funder” and has no interest in the outcome of the litigation, then an NPCO is very unlikely to be made. A Court will usually consider that an NPCO is inappropriate where, for example, a disinterested relative has, out of natural affection, funded costs of a claim or a Defence that is reasonably advanced.

The position however changes if the funder has a personal stake in the outcome of the litigation. Examples of such circumstances include:

  • A director funding the costs of his company which is either unable to afford the litigation or is insolvent.
  • Circumstances where a non-party not only funds the proceedings, but substantially controls or stands to benefit from them. He or it will be considered the “real party” to the litigation.

The fact that a non-party acted without any impropriety or upon legal advice does not prevent the making of an NPCO.

Yet further, a funder can be held liable for the opponents’ costs on an indemnity basis if he did not pay sufficient attention to ongoing litigation, thereby allowing it to continue unchecked. Therefore, an absence of oversight and scrutiny of the prospects of success could prove extremely costly.

A prudent lawyer for an opposing party should consider seeking costs against a non-party where an unsuccessful opponent does not look good for the money. He should consider:

  • Putting the non-party on notice of a potential NPCO application as soon as practicable.
  • Whether, if litigating against a company, its financial profile is uncertain.
  • Whether the Directors of a litigant company have a record of being involved with insolvent companies.

It is therefore important to ensure that:

  • If you are asked to provide funds to progress a claim or aid a Defence that you are appraised of all facts and take independent legal advice. Not to do so could lead to a very nasty shock.
  • If you are a litigant and suspect that your opponent has the benefit of third party funding that your lawyers make immediate enquiries with a view to putting the funder on notice of your right to seek an NPCO.

Speak to M. Qaiser Khanzada today for more information on Litigation funders.

Note: This article is not legal advice; it provides information of general interest about current legal issues.

Stay in touch

Subscribe to our newsletter

Stay in touch

By completing your details and submitting this form you confirm you are happy for us to send you marketing communications and that you agree to our Website Privacy Policy and Legal Notice and to us using Mailchimp to process your data.


Sending

News/Insight

  • Neuroinclusion in the workplace
    With a varied workforce, businesses in the UK need to provide inclusive policies and practices. One key area that employers must address is neuroinclusion.


    Read more
  • RIAA Barker Gillette (UK) appoints Brinda Granthrai as Partner and Head of Commercial Real Estate
    London, May 2025


    Read more
  • Strategic lifetime gifting
    How to minimise your IHT liability during your lifetime.


    Read more
  • Navigating directors’ duties
    Legal responsibilities and risks for UK company directors


    Read more
  • Preparing a business-lasting power of attorney
    In this article, private client solicitor Herman Cheung of West End law firm RIAA Barker Gillette (UK) considers the advantages, needs and practical examples of creating a bu


    Read more

What they say...

  • Michael, May 2025
    “Very pleased with the services provided by Charlotte Barbaroussis. Particularly found her quick and effective to reply to any queries.”

  • Malcolm & Sheila Blackmore, May 2025
    “My wife and I engaged RIAA Barker Gillette to prepare our wills and LPOA’s. James McMullan and Charlotte Barbaroussis were the epitome of professionalism – responding quickly, talking us through the legalese, clearly answering any

  • Ian, April 2025
    “Martin and his team at Barker Gillette acted for us in our purchase and sale of property. The chain was lengthy and elements of the work became complex. Martin was tenacious and resolved to answer our queries as they arose. He handled all aspe

  • Henry, April 2025
    “We have purchased flats before with 2 different solicitors who were unable to help us this time. Martin came highly recommended and are we glad. He was very professional in every way: knowledgeable, approachable, he has a friendly manner, very

  • Megan Purcell-Jones, April 2025
    “Charlotte was extremely diligent and thorough. She talked us through the process of making our wills and listened to and understood our needs and the complexities involved. Extremely patient and very clear.”

Read more
Send this to a friend