Non-party litigation funding carries high risk

Posted: 18th July 2019

Money down the drainGiving financial assistance to a cause close to your heart or a loved one embroiled in litigation may be viewed as a selfless act.

However, as a High Court case showed, such generosity can have unforeseen consequences and that is why such a step should never be taken without first taking professional advice.

The wife of a foreign businessman provided him with about £13.8 million to fund his unsuccessful defence to a fraud claim, brought by an overseas company of which he had formerly been CEO.

Following a long and enormously costly trial, judgment was entered against him for almost $300 million.

Although his wife was not a party to that litigation, the company later took action against her under Section 51 of the Senior Courts Act 1981 with a view to recovering its own legal costs of the case, which came to around £13.2 million. That provision confers a broad power on English courts to determine by whom, and to what extent, legal costs are to be paid and enables them to make costs orders against non-parties who have supported litigation.

After the company obtained a worldwide asset freezing order against her, she was required to give full disclosure of her assets. Dissatisfied with the information she provided, it sought a further order requiring her to attend the High Court in London to undergo cross-examination as to the extent of her wealth.

In granting the order sought, the Court acknowledged that requiring her to undergo public questioning under oath was a strong step. However, she had not challenged the freezing order, which had been in force for some time, and the company had a strong case that the disclosure she had thus far provided was inadequate. In the circumstances, it could not be said that the company had been overly aggressive in its pursuit of her, or that the order would be oppressive.