Davey v Money & Anor 
The High Court has held in the case of Davey v Money & Anor that the Arkin Cap should not be applied automatically, meaning that the adverse costs liability of a commercial litigation funder will not always be limited to the amount of its investment.
The Arkin cap, derived from the case of Arkin v Borchard Lines Limited & Others, has allowed defendants, having successfully defended a claim, to claim their costs from a third party litigation funder, but with recovery being capped up to the amount of the funder’s investment.
This has afforded litigation funders significant protection against having to pay the full amount of the successful party’s legal costs safe in the knowledge that any liability would be capped at the level of their investment.
There have been several decisions made by the Court since that time and in Davey, Mr Justice Snowden concluded that the Court of Appeal had not intended the Arkin cap to apply in every situation.
In Davey, the unsuccessful claimant was ordered to pay each of the defendants’ costs claimed at 7.5m on the indemnity basis. The Defendant sought a non-party costs order against the funder, ChapelGate and although they accepted this should be made they argued that its total liability should be capped at the total funding that it provided.
Snowden J having considered the facts of the case concluded that ChapelGate “plainly was the party with the primary interest in the claim”. They had negotiated to receive a substantial commercial profit which would have taken priority over any compensation payable to Mrs Davey.
Whilst it has been said that this decision is likely to have significant repercussions for the commercial litigation industry with the increased risk of bearing adverse costs, there are of course, ways that funders can seek to protect themselves from adverse costs liability by requiring a funded party to obtain ATE Insurance cover.
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