The Court of Appeal has overturned a previous landmark decision that denied defendants in commercial disputes the right to claw back their costs from professional claims funders.

Ruling in Arkin v Borchard Lines [2005] EWCA Civ 655, the Master of the Rolls, Lord Phillips, said professional funders that are prepared to take a slice of the damages should also be prepared to share the costs.


In Arkin, funders Managers and Processors of Claims (MCP) paid for experts in return for 25% of damages in the £80 million claim.


The claimant lost and the defendants asked MCP to pay £6 million in costs, but the High Court ruled in 2003 that it was contrary to access to justice and would deter funders from supporting cases where the claimant could not afford the experts' services.


However, Lord Phillips said the funder should be liable for the costs to the extent of the funding provided but entitled to a greater share of the damages if the case succeeded.


Lord Phillips added: 'Overall, justice will be better served than leaving defendants in a position where they have no right to recover any costs from a professional funder whose intervention has permitted the continuation of a claim which has ultimately proved to be without merit.'


London firm Gordon Dadds acted for MCP. Partner Cormac Cawley welcomed the clarification. 'This should help more claims taken on by lawyers on a conditional basis to proceed where the clients have limited resources,' he added.


'The decision should in theory create a more level playing field.'


Tim Reynolds, partner at London firm Constant & Constant, which acted for Borchard, said: 'What is sauce for the goose should be sauce for the gander.


'This [issue] dates back to the Hamilton v Al Fayed case, where the court looked at people who fund for either love or money. The distinction got blurred, but Arkin shows that people who fund for money should bear the consequences.