Addleshaw Goddard

UK 200 2014 position: 22

Quick updates for those dealing with disputes

Do solicitors who help their clients out by providing finance during litigation expose themselves to non-party costs orders (NCPOs)? Two recent Court of Appeal decisions provide guidance (and some reassurance to solicitors).

In Flatman v Germany, a firm of solicitors (GMS) advised impecunious claimants under conditional fee arrangements (CFAs), but without after-the-event (ATE) insurance. The claims were unsuccessful. The defendants’ insurer argued that GMS had funded the claimants’ disbursements on the implicit understanding that they would not be repaid if their claims failed – and GMS was therefore the claimants’ ‘commercial funders’. On this basis, they argued that GMS should be liable for the defendants’ costs. The insurer initially sought orders against GMS for disclosure of (i) information about the claimants’ funding arrangements and (ii) the extent to which GMS had funded the disbursements.

On appeal, Eady J made the disclosure orders. GMS appealed. Although the appeal strictly concerned disclosure, the Court of Appeal considered the circumstances in which solicitors might be subject to an NCPO (since they had no reason to order disclosure unless in support of an NCPO application). They held that, by funding disbursements, solicitors do not step outside their role as solicitors or become their clients’ commercial funders, so cannot for that reason alone be subject to an NCPO…

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