BLP, Constants and DAC lose battle to recover £7m from litigation funder

Three City law firms’ court battle to recover fees of £7m from a litigation funding specialist has resulted in defeat.

Berwin Leighton Paisner, Constant & Constant and Davies Arnold Cooper, having won a longrunning competition case on behalf of their shipping line clients. The firms have until 10 December to lodge an appeal.

The losing party in the substantive action, former ship owner Yeheskel Arkin, was excused from paying the law firms’ costs because he is penniless. His case was funded by a conditional fee agreement, which controversially did not require him to take out an after-the-event insurance policy to cover the other side’s costs.

The law firms then sought to recover their costs from a company called Managers and Processors of Claims (MPC), which had funded Arkin’s accountant expert witness during the substantive litigation.

Mr Justice Colman concluded that MPC could not have afforded the inflated insurance premiums if it had been potentially liable for the other side’s costs. Colman also highlighted the importance of litigation funders such as MPC, because of their ability to make “access to the courts available to impecunious claimants with claims of sufficient substance”.

The clients of all three firms had always agreed to meet the costs of the litigation if they were not met through other channels. As a result they have had their bills settled on a regular basis throughout the duration of the matter.

Constants partner Tim Reynolds said: “With people like MPC on a 23 to 25 per cent return on the judgment, which would have been approximately $30m [£17.6m], they should not be exempt from the risk of having to pay costs if they lose.”