Singularis Holdings Ltd v Chapelgate Credit Opportunity Master Fund Ltd [2020] EWHC 1616
The case comes out of an underlying claim which had led to an award of damages of $152m in favour of Singularis. Shortly before the trial in November 2016, Singularis had entered into a litigation funding agreement with ChapelGate. Following the conclusion of the proceedings, ChapelGate was been paid $46m. The issue in this case was that ChapelGate asserted that it was entitled to be paid a further sum of c $15m.
The issue turned on a point of construction in the funding agreement. Under it, ChapelGate was entitled to a percentage share of “Proceeds”. The Proceeds were defined as being the recoveries from the proceedings. ChapelGate argued that on the correct construction the Court’s reduction of 25% to the damages on account of Singularis’ contributory negligence should be ignored and hence the share of the Proceeds should have been by reference to a higher figure, c $203m. The further sum of $15m was held by Singularis’ solicitors, pending the trial. The concept of the funding agreement was that any amount that was deducted, by reason of set-off or counterclaim, should be added back into the amount that was ultimately treated as Proceeds. It was a fact that contributory negligence was not explicitly referred to. The question turned on what was deemed to be the actual recovery. The Court found that the “adding back” provisions were designed to address the situation where a liability was found to exist to another party. However, the risk of a defence, including the partial defence of contributory negligence, succeeding and reducing the recoveries is inherent in an agreement to fund a claim in exchange for a share of the proceeds. The Court found that the fact that the parties did not include an express provision to the effect that the amount of any reduction in damages for contributory negligence would be added back in the quantification of the Proceeds reinforces the conclusion that, on the correct construction of the Funding Agreement, no such adding back was intended.
On that basis, Singularis did not have to pay the additional sum to ChapelGate. The case is an example of how a litigation funder occasionally has to take an adverse position against its own funded party. It is another demonstration of the risks that funders run and how the business of funding is exceedingly complex. ChapelGate will have considered that Singularis was in liquidation and that there was no long-term relationship to build. Otherwise, it may have been a dangerous strategy to litigate against your own client. Litigation funding is, at the end of the day, a relationship business and it is of course good for a funder to stand its ground when supporting the litigation. Perhaps it is therefore no surprise that the same determination can exist when considering claims against the funded parties. It is, though, a difficult balance to strike.