Davey v Money & Anor

A commercial litigation funder’s liability for a successful opponent’s costs under section 51 of the Senior Courts Act 1981 is governed by the statutory discretion to make the order that is just in all the circumstances. The Arkin cap is an approach that may assist that assessment, not an automatic rule. On the facts, justice required liability for the funded proceedings’ post-funding costs without applying the cap.

The court determined applications by the administrators of Angel House Developments Ltd and Dunbar Assets plc for non-party costs orders against ChapelGate, the commercial funder of Julie Anne Davey’s unsuccessful litigation. ChapelGate accepted liability under section 51 of the Senior Courts Act 1981 and accepted indemnity-costs assessment, but argued that its liability should be limited to the amount funded by applying the Arkin cap.

The court also considered whether ChapelGate was liable for costs incurred before the funding agreement dated 23 December 2015.

1. A non-party costs order under section 51 is a fact-specific discretionary decision. The ultimate question is whether it is just to make the order in all the circumstances.
2. Following Excalibur Ventures LLC v Texas Keystone Inc (No.2), [2017] 1 WLR 2221, ChapelGate was liable on the same indemnity basis as Ms Davey. A commercial funder cannot ordinarily dissociate itself from the conduct of litigation it enabled.
3. Applying Excalibur Ventures LLC v Texas Keystone Inc, [2014] EWHC 3436 (Comm), liability was confined to costs incurred after 23 December 2015, because earlier costs were not caused by ChapelGate’s involvement.
4. The approach in Arkin v Borchard Lines Ltd (Nos 2 and 3), [2005] 1 WLR 3055, was not an automatic rule. It had to be considered within the overall section 51 discretion.
5. ChapelGate funded the litigation as a commercial investment, knew the serious allegations and likely costs, retained a substantial priority profit, and removed the requirement for ATE insurance protecting against adverse costs. Applying the cap would have undermined the indemnity-costs order and left the successful defendants with an unjust shortfall.
6. The funding agreement was not champertous. ChapelGate did not exercise improper control or influence. It was ordered to pay each defendant’s post-23 December 2015 costs, assessed on the indemnity basis if not agreed.