The Arkin cap re-visited: How much should a litigation funder of unsuccessful litigation pay towards costs?
In a decision relevant to the fledgling litigation funding industry in the Cayman Islands, in Chapelgate Credit Opportunity Master Fund Limited v Money [2020] EWCA Civ 246, the English Court of Appeal confirmed that there is no fetter on the court’s broad discretion to make cost orders against non-party litigation funders.
You can read about the facts of this case and the first instance decision, in which the High Court made a costs order against the non-party litigation funder and refused to apply the so called ‘Arkin cap’ (by which a funder’s liability is capped at the amount of the funding it advanced).
The Court of Appeal affirmed that first instance decision and held that the Arkin cap is not a binding rule, and that “the only immutable principle is that the discretion must be exercised justly”. However, the Court of Appeal also left open the door to the application of the cap in appropriate circumstances. The Court noted that the cap is more likely to be an appropriate solution where the funder has funded only a discrete part of the litigation, but that the potential return to the funder if the case is successful is also likely to be a relevant consideration.
