The Supreme Court Costs Office

No.17 of 2005

 Arkin v Borchard Lines Ltd & Ors

 26 May 2005

 Court of Appeal (Master of the Rolls, Brooke and Dyson LJJ)

The Court of Appeal has reversed Mr Justice Colman in respect of his two decisions in Arkin v Borchard Lines Ltd & Ors (No.2) [2005] 2 Costs LR 231, and Arkin v Borchard Lines Ltd & Ors (No.3) [2004] 2 Costs LR 267.

Arkin v Borchard Lines Ltd & Ors (No.2) concerned the liability for the costs of the successful defendants of a funder of the unsuccessful claimant, the arrangement with the funder being that they should receive a percentage of any potential recovery of damages. The Judge below held that, on his review of the authorities, it would not be right to make any such order.

The Court of Appeal reversed that finding, largely on the basis of the judgments in Dymocks Franchise Systems (NSW) Pty Ltd v Todd & Ors [2005] 1 Costs LR 52, a Privy Council decision which reviewed all the authorities, and which had not been available to the trial Judge.

The gist of the Court of Appeal decision on this part of the appeal is to be found in paragraph 41 of their judgment, which reads as follows:

"41. We consider that a professional funder, who finances part of a claimant's costs of litigation, should be potentially liable for the costs of the opposing party the extent of the funding provided the effect of this will, of course, be that if the funding is provided on a contingency basis of recovery, the funder will require, as the price of funding, a greater share of the recovery should the claim succeed. In the individual case, the net recovery of a successful claimant will be diminished. While this is unfortunate, it seems to us that it is a case that the impecunious claimant can reasonably be expected to bear. Overall justice will be better served than leaving defendants in a position where they have no right to recover any costs from a professional funder whose intervention has permitted the continuation of a claim which is ultimately proved to be without merit."

Arkin v Borchard Lines Ltd & Ors (No.3) concerned the position where, as here, the successful defendants had brought in Part 20 defendants. After a careful analysis of the appropriate authorities the Judge had decided that there were no grounds for disturbing the normal rule that a defendant, who although successful against the claimant, has necessarily failed against the Part 20 defendant, should nevertheless be ordered to pay the Part 20 defendant's costs.

The Court of Appeal, whilst acknowledging that that rule was still applicable, nevertheless decided to vary the costs order below to reflect their perception of the merits, and also the fact that there would now be £1.3 million available from the funders towards the defendants/ Part 20 defendants costs.