Funders liable for costs up to the amount of their potential gain amount of their potential gain

Arkin v Borchard Lines Ltd, Zim Israel Navigation Company Ltd and others and Managers and Processors of Claims (Part 20 defendants) and others [2005] EWCA Civ 655

MPC, a professional funding company, entered into a funding agreement with the impecunious claimant, Yeheshkel Arkin, whereby it funded the employment of expert witnesses, the preparation of their evidence and the organisation of the enormous quantities of documents which became necessary to investigate before the trial. In return MPC was to receive a very substantial proportion of any recoverable damages or settlement payments (25% of the first £5m and 23% of any excess). There was no undertaking by MPC to pay the defendants’ recoverable costs nor was any after-the-event insurance cover taken out in respect of such costs. The defendants contended that in principle, professional funders, who are maintaining litigation for their own profit, as distinct from pure funders, should be liable for the costs of the defendants if their claim fails, which in this case it did.