Arkin cap still alive and kicking

Following the court’s refusal to apply it in the Davey case, the court was asked to consider applying the “Arkin cap” to a case where a liquidator’s firm had part funded an unsuccessful action.

A company in liquidation and its liquidator unsuccessfully pursued a case against the defendants. A certain way into the proceedings, litigation funding was obtained from a third party, but before that, the liquidator obtained interim funding from his firm.

The defendants sought a third party costs order against the firm. The court recognised two potential limiting principles to any third party costs order, being that it should only be for the period of funding and, pursuant to the Arkin cap, that it should be limited to the amount funded. Earlier last year, the court had refused to follow the Arkin cap principle in the Davey case.

The court found that the liquidator’s firm was not in the business of litigation funding and had only funded this claim for a limited period whilst the liquidator, due to the state of the litigation at that time, was unable to source funding elsewhere. Once that situation changed, third party funding was secured and the firm’s funding stopped, albeit that recovery was obviously dependent on the ultimate success of the claim. 

On those facts, the court held that the firm was well within the ambit of a party against whom a third party costs should be made and that order was granted. However, the Judge declined to make that order for a period beyond that of the funding provided by the firm.

On the facts, the Judge also followed the Arkin cap and limited the third party costs order to the amount funded by the liquidator’s firm.

Litigation funders can therefore take some comfort from this decision, but its facts will be a challenge where funding is provided from start to finish of an unsuccessful action.

Burden Holdings (UK) Limited and others v the Fieldings and Project Appledene PC [2019] EWHC 2995 (Ch)

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