Court of Appeal confirms funders’ adverse costs liability not limited to amount of funding provided: Arkin “cap” not a binding rule

A decision handed down by the Court of Appeal today has dismissed the suggestion that there is a fixed limit on a commercial litigation funder's liability for the other side's costs when a claim it has funded fails: Chapelgate Master Fund Opportunity Ltd v Money [2020] EWCA Civ 246.

This is a significant decision and represents good news for financial institutions, which are commonly in the position of a defendant facing claims supported by litigation funders. The impact of the decision should be to reduce the risk which such institutions face of being unable to recover costs - where they have successfully defended a funded claim - from the funder itself.

Prior to this decision, there was conflicting authority as to whether the so-called Arkin cap was a binding rule (derived from the case of Arkin v Borchard Lines Ltd (Nos 2 and 3) [2005] EWCA Civ 655), which would limit the funder’s liability in respect of an adverse costs order to the amount of the funding it had provided to the unsuccessful claimant.

This decision demonstrates that the Arkin cap is not a binding rule and that the court retains a broad discretion as to the extent to which a funder should be liable for adverse costs, and need not limit the funder’s liability to the amount of funding provided.

For a more detailed discussion of the decision, read our litigation blog post.