​Litigation funders welcome Court of Appeal ruling in Excalibur

The Court of Appeal held last week that third parties who funded unsuccessful litigation brought by a shell company, Excalibur, are jointly and severally liable to pay the defendants’ costs on an indemnity basis, in Excalibur Ventures v Psari Holdings [2016] EWCA Civ 144.

However, litigation funders welcomed Lord Justice Tomlinson’s statements that litigation funding is “an accepted and judicially sanctioned activity perceived to be in the public interest”. Tomlinson LJ recognised the Association of Litigation Funders (ALF) role as the voluntary regulator of “professional funders” and drew a distinction between professional funders and “the funders [in Excalibur who] were inexperienced and did not adopt what the ALF membership would regard as a professional approach to the task of assessing the merits of the case”.

Tomlinson LJ said: “By funding, the funder takes a risk, a risk as to the nature of which he has the opportunity to inform himself both before offering funding and during the course of the litigation which he funds…When conducted responsibly, as by the members of the ALF I am sure it would be, there is no danger of such review being characterised as champertous [behaviour likely to interfere with the due administration of justice that may render the funding agreement unenforceable].”

Susan Dunn, head of litigation funding at Harbour Litigation Funding, said: “Although the judge upholds the decision of the High Court, he reiterates that awarding costs on an indemnity scale is a departure from the norm.

“In this particular case, he agreed that the character of the claim, the size and effect justified this specific outcome.”

ALF Chairman, Leslie Perrin said: “No sensible, experienced funder has any interest in funding speculative claims that don’t have good chances of success.

“Excalibur is a graphic illustration of the risks of litigation funding, particularly for the sources of capital that may be attracted to funding on an ad hoc basis. Excalibur’s various inexperienced funders were found to be jointly and severally liable for indemnity costs of nearly £32m.”