Akhmedova v Akhmedov & Ors (Litigation Funding) (Rev 1)

Third-party litigation funding is not unlawful in family proceedings merely because the funder receives a share of the recovery. The modern law of champerty focuses on whether the funder’s involvement is likely to undermine or corrupt the administration of justice. Responsible funding complying with the Association of Litigation Funders’ Code of Conduct is generally regarded as facilitating access to justice.

A respondent has no legally recognisable basis to challenge an applicant’s funding arrangements without pleading facts showing improper control, prejudice, injustice or corruption of the proceedings. The prohibition on conditional fee agreements in family proceedings does not establish an analogous prohibition on third-party funding. In a bona fide claim, uncertainty about the funding agreement does not justify satellite disclosure litigation.

The Wife brought enforcement proceedings arising from a substantial financial remedies award against her former husband. She pursued claims against, among others, her son, Temur, alleging that assets had been transferred to him to frustrate enforcement. The proceedings were funded by Burford Capital.

Temur counterclaimed for an injunction preventing the Wife from instructing lawyers funded by Burford and sought disclosure of the funding arrangements. He argued that the arrangements were contrary to public policy against champerty, particularly because the proceedings were family proceedings and Burford stood to share in any recovery. The Wife applied to strike out the counterclaim and related disclosure application.

The central issues were whether Temur had standing or a legally recognisable basis to challenge the funding, whether third-party funding was impermissible in family proceedings, and whether the funding arrangements warranted further investigation.

1. The counterclaim was struck out. Temur had no entitlement to seek relief concerning the Wife’s funding arrangements and had not pleaded reasonable grounds, within FPR r 4.4(1)(a) and Practice Direction 4A, paragraph 2.1(c), for a legally recognisable application.
2. The court applied the limited strike-out test explained in Wyatt v Vince [2015] UKSC 14. The question was whether the pleaded facts disclosed a legally recognisable claim, without requiring an assessment of the prospects of success. Since the issue concerned a developing legal argument, the court also considered the caution in Barrett v Enfield London Borough Council [2001] AC 550 against striking out novel points before findings of fact.
3. The modern law of champerty was derived from Giles v Thompson [1994] 1 AC 142, Sibthorpe v Southwark LBC [2011] EWCA Civ 25, Factortame [2003] QB 381 and Davey v Money [2019] EWHC 997 (Ch). The relevant question was whether the funder’s involvement involved unjustified intermeddling or excessive control likely to undermine or corrupt public justice. Investment, profit on settlement and responsible review of litigation were insufficient by themselves.
4. There was no principled basis for treating family proceedings differently. The exclusion of family proceedings from conditional fee agreements under Courts and Legal Services Act 1990, section 58A, concerned the lawyer’s financial interest in the outcome. It did not justify extending that prohibition to independent third-party funders. The enforcement proceedings were family proceedings in form but had a substantial civil and enforcement character.
5. The authorities treated professional litigation funding as an accepted and judicially sanctioned activity which could promote access to justice. The funding was post-judgment funding intended to facilitate enforcement, and there was no pleaded or evidential basis for suggesting that Burford or the Wife’s lawyers had acted improperly or that Burford exercised corrupting control.
6. Temur’s applications for an injunction and funding disclosure therefore failed. The court observed that a bona fide action would not ordinarily be stayed merely because its funding might be champertous. The application for disclosure of the funding arrangements consequently did not require determination.