This case concerned the costs consequences of a claim, financed via DBA and ATE arrangements, being unsuccessful and yet being litigated in such a way as to cause the defendant to incur unnecessary legal cost. This was a case where the damages claimed appeared out of all proportion to the likely commercial outcome. Although the Court’s observations were limited to how it expected lawyers to behave in the context of having agreed a DBA, the observations have some relevance to litigation funders. The Court held that in such cases, “it seems to me incumbent on lawyers to undertake a particularly dispassionate review of whether the claim being advanced and from which they allege they should stand to benefit on a large scale is really justifiable on the authorities and on the facts. That is no more than encouraging what might be described as responsible DBA litigation.” This review was not unlike the review that the Court felt should take place when litigation funders were funding litigation. The context to this concern that Lidl’s position that DBA and ATE funding was capable of creating or increasing incentives to pursue speculative or opportunistic litigation and that pursuit of litigation using a DBA and ATE insurance may have created scenarios in which cases become harder to settle because one side was at “no risk of loss on damages while pursuing a claim with the chance of vast winnings”. The Court’s approach was to “take account of the possibilities for such to lead to abuse and unfairness and seek to address that so far as possible”. There was a public interest in the Court making litigants face up to the real costs that rejection of a reasonable offer may have imposed on others.

Although the Court did not alter the basis of the assessment of costs in this case (from standard to indemnity) it nonetheless held that the claimant – which it found to have been reasonable in rejecting a Part 36 settlement offer – was responsible for 90% of the costs and it did give Lidl permission to appeal to vary the basis. The relevance of this case to litigation funders is that, had the law firm not being operating on a DBA but was funded instead, the Court’s observations could have had equal applicability. It goes to the point that if the damages aspect of the claim makes the claim impossible to settle, and that claim is ultimately lost, there is a real risk of funders facing the possibility of an indemnity costs award.

http://www.bailii.org/ew/cases/EWHC/Ch/2021/2372.html