The High Court has dismissed a litigation funder’s claim that a law firm breached a funding agreement by failing to pass on pessimistic views about the prospects of a case. The dispute raises questions over the extent of the duties – if any – solicitors owe to companies that bankroll litigation.
1st Class Legal, now in liquidation, funded a case brought against the Egyptian government by Malicorp Limited, a company that had been due to construct and operate an airport in Egypt before the contract was purportedly cancelled. Enforcement proceedings began in the London Commercial Court in 2012. Malicorp instructed litigation specialist Saunders Law.
John Hall v Saunders Law Limited and others arose when funding allegedly ceased in 2014 and Malicorp was refused an indemnity. John Hall, suing in his own right and as an assignee of 1st Class Legal, claimed the law firm and partner Subir Kumar Karmakar did not communicate various pessimistic views expressed by barristers about the case – including that the overall prospects of success were no higher than 50%.
Hall claimed these ‘instances of non-reporting’ were a breach of the tripartite funding agreement between the law firm, the funder and Malicorp. He also alleged that the omissions were a result of a ‘conscious decision made by Mr Karmakar personally’.
The firm asserted that Malicorp had ‘every confidence in the merits of the claim’ and denied that counsel's ‘negative views were routinely ignored or withheld’. It added: ‘It is Malicorp’s position that the [ATE policy] did not contain any specific provision requiring the insured or its lawyers to notify the insurer about any discovery of any fact or advice which materially or adversely affected the insured prospects of success in the proceedings’.
Mr Richard Salter QC, sitting as deputy judge of the High Court, dismissed the claim summarily, stating: ‘The determinative issues in this case are short points of contractual interpretation.’ He found the funding agreement did not ‘expressly impose any obligations on the law firm’, adding: ‘It might perhaps have been a better bargain for the funder if it had also imposed such obligations on Saunders: but “necessity is not established by showing that contract would be improved by the addition” of the suggested implied term.’
Salter also struck out the pleading against Karmakar personally.