Laser Trust v CFL Finance Ltd

A third party costs order is exceptional but arises within a fact-specific jurisdiction. Pure litigation funders will generally not be ordered to pay costs. The jurisdiction may be exercised where the funder goes beyond funding and exercises substantial control over the litigation. The court may infer the extent of control from the funding agreement, particularly where the parties do not provide a full and frank account of how the contractual powers were used. The Arkin cap need not apply where the funder’s interest and control are sufficiently extensive. The court may order payment of costs already assessed against the funded party without requiring reassessment.

Laser Trust obtained three costs orders against CFL Finance Ltd, but more than £330,000 remained unpaid and CFL lacked the funds to satisfy the balance. CFL’s participation in the underlying litigation had been funded by Colosseum Consulting Ltd. After Laser Trust served its application, Colosseum entered voluntary liquidation.

Laser Trust applied under CPR 46.2 for a third party costs order against Colosseum. The central issues were whether Colosseum’s contractual control over CFL’s conduct of the litigation took it beyond the position of a pure funder, and whether any order should be limited by the principle identified in Arkin v Borchard Lines Ltd, [2005] 1 WLR 3055.

1. Jurisdiction. The court had power under section 51 of the Senior Courts Act to determine by whom, and to what extent, costs should be paid. Orders against non-parties are exceptional, but the jurisdiction is fact-specific and must be assessed by reference to the particular circumstances.
2. Control beyond funding. A pure funder will generally not be made liable for costs. The jurisdiction may nevertheless be exercised where the funder goes beyond merely financing the litigation. Colosseum’s funding agreement gave it control of an extraordinarily high order, described as massive and close to absolute control. The court therefore concluded that the applicable test was clearly met.
3. Inference from the agreement. The extent to which Colosseum had actually exercised its contractual powers was less clear. However, the parties had not supplied a completely full and frank answer. The court was therefore entitled to treat the funding agreement as stating the extent of Colosseum’s control.
4. Arkin cap. The so-called Arkin cap, identified at paragraph [41] of Arkin v Borchard Lines Ltd, should not apply. Colosseum’s interest in the proceedings was sufficiently extensive to justify an order for the costs already assessed against CFL, without limiting recovery to sums actually paid by Colosseum and without requiring reassessment.
5. Costs of the application. Although the application involved unusual complexity, the court applied a proportionate approach and summarily assessed the recoverable costs at £50,000.

A third party costs order was accordingly made against Colosseum for the costs already ordered against CFL, together with the separate summary assessment.