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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Arkin v Borchard Lines Ltd [2003] EWHC 2844 (Comm) (27 November 2003) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2003/2844.html Cite as: [2003] EWHC 2844 (Comm), [2004] 1 LLR 88, [2004] 2 Costs LR 231, [2004] 1 Lloyd's Rep 88 |
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QUEENS BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
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Yeshekel  Arkin- and -Borchard Lines Limited and Zim Israel Navigation Company Ltd & Ors |
Claimant 1st, 2nd to 4th Defendants and 3rd and 5th Part 20 Defendants |
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| - and - |
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| Managers and Processors of Claims |
11th Part 20 Defendants |
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Steven Gee QC and Hugh Mercer (instructed by Messrs Davies Arnold Cooper) for the 2nd, 3rd and 4th Defendants and the 3rd, 5th, 8th and 10th Part 20 Defendants
Vasanti Selvaratnam QC and Fergus Randolph (instructed by Messrs Berwin Leighton Paisner)
For the 1st and 6th Part 20 Defendant
Mr Guy Mansfield QC and Ms Sarah Lambert (instructed by Messrs Gordon Dadds) for the 11th Part 20 Defendants
Hearing dates: 16 May 2003, 25 July 2003, 1-2 October 2003
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Crown Copyright ©
Mr Justice Colman:
Introduction
Arkin, whereby it funded the employment of expert witnesses, the preparation of their evidence and the organisation of the enormous quantities of documents which became necessary to investigate before the trial.
The Relevance of R (Factortame Ltd and others) v. Secretary of State for Transport
"Ultimately, it is necessary to consider the questions posed in this case in the light of contemporary public policy. The correct approach is not to ask whether, in accordance with contemporary public policy, the agreement has in fact caused the corruption of public justice. The court must consider the tendency of the agreement. The question is whether the agreement has the tendency to corrupt public justice. And this question requires the closest attention to the nature and surrounding circumstances of a particular agreement."
"Returning to the company, is it wantonly or officiously interfering in the litigation; is it doing so in order to share in the profits? I think not. The company makes its profits from the hiring, not from the litigation. It does not divide the spoils, but relies upon the fruits of the litigation as a source from which the motorist can satisfy his or her liability for the provision of a genuine service, external to the litigation. I can see no convincing reason for saying that, as between the parties to the hiring agreement, the whole transaction is so unbalanced, or so fraught with risk, that it ought to be stamped out. The agreement is one which in my opinion the law should recognise and enforce."
"This decision abundantly supports the proposition that, in any individual case, it is necessary to look at the agreement under attack in order to see whether it tends to conflict with existing public policy that is directed to protecting the due administration of justice with particular regard to the interests of the defendant. This is a question that we have to address."
"These then, are the reasons that have led us to conclude that section 58 of the 1990 Act, both as originally enacted and as amended by the 1999 Act, applies only to agreements concluded by those conducting litigation or providing advocacy services. The effect of the section extends more widely, however, for it reflects Parliament's assessment of the present state of public policy in this area. Thus, in Awwad v. Geraghty & Co [2001] QB 570, 600, the Court of Appeal held that there was no scope for the court to hold that the common law permitted conditional fee agreements that did not conform to the requirements imposed by section 58 and in Bevan Ashford v. Geoff Yeandle (Contractors) Ltd [1999] Ch 239 Sir Richard Scott VC held that the provisions of section 58, which applied only to litigation, should be applied by analogy to solicitors who were conducting arbitration.
More generally, however, section 58 evidences a radical shift in the attitude of public policy to the practice of conducting litigation on terms that the obligation to pay fees will be contingent upon success. Whereas before this practice was outlawed, it is now permissible subject to the requirements imposed by the section. These requirements do not appear designed to mitigate the mischief that had led to the banning of contingency fees the undesirability of the interests of officers of the court conflicting with their duties to the court. Rather the requirements appear designed to protect the litigants concluding conditional fee agreements who, when the section was first enacted, were required to pay any "uplift" out of their recoveries. Conditional fees are now permitted in order to give effect to another facet of public policy the desirability of access to justice. Conditional fees are designed to ensure that those who do not have the resources to fund advocacy or litigation services should none the less be able to obtain these in support of claims which appear to have merit."
"That test is appropriate when considering those who, in one way or another, support litigation in which they are not concerned. It is not, however, really in point when considering agreements under which those who are playing a legitimate part in the process of litigation provide their services on a contingency fee basis. A solicitor who charges a contingency fee which does not satisfy the requirements of section 58 can hardly be said to be guilty of "wanton and officious intermeddling with the disputes of others .. where the assistance he renders to the one or other party is without justification or excuse". The public policy in play in the present case is that which weighs against a person who is in a position to influence the outcome of litigation having an interest in that outcome."
"In Hamilton v. Fayed (No.2) [2003] 2 WLR 128 both Chadwick and Hale LLJ emphasised the importance that public policy attached to access to justice. This had overbourne the previous absolute prohibition on lawyers agreeing to act for contingency fees. The same public policy considerations mitigate the criticism that there might otherwise have been of the agreements under which Grant Thornton provided their own services, and funded the services of the expert witnesses, on a contingency basis.
There is another matter which greatly reduces the significance of the fact that Grant Thornton were acting on a contingency fee basis. By the time that the 1998 agreements were concluded, the claims had succeeded on the issue of liability. While it is possible that their victory might be reversed by the House of Lords, this was no more than a possibility. Mr Davies, with the benefit of legal advice, believed that, after the final decision of the European Court, recovery of damages by the claimants was inevitable. The advice which he had received proved sound. Thus the contingency that the claims might fail was not great. Furthermore, and this is also highly material, Grant Thornton had no role at all to play in the final battle before the House of Lords on the issue of liability. The fact that they had an interest in its outcome posed no threat of any kind to the manner which the battle was conducted." (emphasis added)
(i) The greater the share of the spoils that the provider of legal services will receive, the greater the temptation to stray from the path of rectitude. The 8 per cent was not extravagant and was agreed to at the request of the claimants.
(ii) The 8 per cent was likely to have been attractive to the defendant Department because it represented an effective cap on the claimant's costs for which it would be liable if it lost.
(iii) Although the prospect of receiving 8 per cent of recoveries would have provided a motive for GT to inflate the damages "though not to the extent that a larger proportion would have done", the likelihood of GT yielding to that temptation should be discounted: they were reputable members of a respectable profession who were subject to regulation.
(iv) Even if they could be tempted there would have been little opportunity to influence the outcome of the assessment of damages. That firm's input into the preparation of the computer model was in conjunction with the Ministry of Agriculture's experts as a joint exercise in a manner that was transparent so that lack of objectivity on the part of GT was unlikely to have any impact on the assessment of damages.
(v) Although GT liaised with counsel and advised on the settlement, since there were nine counsel and a well known and highly experienced firm of commercial solicitors involved, it was unrealistic to suggest that GT might have attempted to procure a settlement on terms which were at odds with their appreciation of the merits.
(i) A key underlying public policy factor relevant to deciding whether fees payable under a funding agreement providing for conditional fees for the benefit of a funder of a successful party should be reflected in a costs order in favour of that party is whether the agreement may lead or does lead to interference by the funder adverse to the proper administration of justice.
(ii) Whether the conditional funding agreement is thus objectionable is to be tested both at the time when it is entered into and in the course of its performance.
(iii) Whether such an agreement is materially objectionable at the time when it is entered into is to be tested by reference to the magnitude of the risk suggested by its terms that the funder may interfere adversely to the proper administration of justice.
(iv) For the purposes of (iii) it is relevant to consider (a) whether the size of the fee contingent upon the outcome of the litigation is such that there is a real risk that it will tempt the funder to influence the conduct of the litigation otherwise than in accordance with prudent legal or other professional advice and (b) whether the terms of the funding agreement are such as to give the funder some measure of control over decision-taking as to how the litigation should be conducted.
(v) Whether such agreement has been operated by the parties to it in a manner adverse to the proper administration of justice may depend, amongst other considerations, on whether the funder has caused the claim to be exaggerated or has procured unreliable or fabricated evidence or has influenced settlement negotiations adversely to an objective analysis of the funded party's prospects of success.
(vii) Another public policy objective very relevant to the exercise of the court's powers to award such costs against a funder is the facilitation of access to justice, as exemplified by Hamilton v. Al Fayed. (No.2), supra, a judgment of the Court of Appeal delivered six weeks earlier. I shall have to consider later in this judgment the relationship between this factor and that whose purpose is to protect the due administration of justice. Before doing so, however, it is necessary to investigate the effect of that decision.
Access to Justice: Hamilton v. Al Fayed (No. 2)
(i) Legislation in respect of conditional fee agreements up to the Access to Justice Act 1999 demonstrated a trend in public policy towards funding access to the courts, even to the extent of entitling a successful party to pass on his lawyer's conditional fee uplift. Chadwick L.J observed:
"It may be said that a defendant does not choose to be sued. It may be said that, if he is obliged to incur costs in the successful defence of a claim brought against him he should not suffer financially because he is unable to recover those costs from an impecunious claimant. It may be said that it is unjust that a defendant should have to face a claim brought by a claimant who, if unsuccessful, will not be in a position to meet an order for costs made against him. But the courts have had to balance the risk of injustice to the defendant in those circumstances against the risk of injustice to a claimant who is denied access to the courts to pursue a genuine claim; and the scales have come down in favour of the latter."
(ii) The purpose of permitting CFAs was not only to provide impecunious parties with access to the courts but to enable them to have the benefit of equality of arms (see Chadwick L.J. at p. 664.)
(iii) As regards third party costs orders against funders, the underlying public policy of the provision of access to the courts by outside funders for those who could not otherwise afford it ought not to be imperilled by such orders, which would tend to discourage the availability of such outside funding: see Simon Brown L.J.at p.660, Chadwick L.J. at pages 664, 665, Hale L.J. at p.669.
(iv) At paragraph 70 Chadwick L.J. observed at p.666:
"For my part I can see no difference in principle, in the context of facilitating access to justice, between the lawyer who provides his services pro bono or under a conditional fee arrangement, the expert (say an accountant, a valuer or a medical practitioner) who provides his services on a no-win/no-fee basis, and the supporter who-having no skill which he can offer in kind-provides support in the form of funding to meet the fees of those who have. In each case the provision of support-whether in kind or cash-facilitates access to justice by enabling the impecunious claimant to meet the defendant on an equal footing.
It follows that I would hold that- in the interests of justice generally- fairness to the successful defendant does not, as a general rule, require that where a pure funder provides financial support towards the litigation costs of an impecunious claimant, he should contribute to the costs which that defendant will (by reason of the claimant's impecuniosity) be unable to recover under an order for costs against the claimant alone. In that context I use the expression 'pure funder' to denote a person who provides funds to meet the litigation costs of a claimant in circumstances in which he, himself, has no collateral interest in the outcome of the claim- other than as a source of reimbursement of the funds which he has provided."
(v) All the members of the court addressed the position of the "pure funder", that is to say the funder who was not entitled to a fee over and above repayment of his loan, as well as the position of those remunerated under a conditional fee agreement. Only Chadwick L.J., in the passage cited above at p.666, considered the position of an expert witness so remunerated. To that extent his remarks were obiter.
The Underlying Principles
(i) The purpose of discouraging ill-founded claims or defences and of compensating those who have been obliged successfully to protect their rights in the course of litigation underlies the rule that in general a successful party is entitled to recover his costs.
(ii) The purpose of facilitating access to justice, including the achievement of equality of arms, for impecunious claimants in the absence of public funding or insurance or trade union membership needs to be supported. Costs orders against funders of unsuccessful claimants will tend to discourage the availability of such funding.
(iii) The purpose of protecting the due administration of justice requires that the courts should discourage the interference by funders in the proper and responsible management and conduct of litigation in any manner adverse to that purpose. In order to achieve this purpose the courts will take into account in the exercise of their discretion as to the making of costs orders against funders who are parties to conditional fee agreements whether the terms of such an agreement give rise to a material risk of conduct adverse to that purpose and whether the actual conduct of the funder in the course of the litigation has been consistent with that purpose.
"The respondents to Mr Al Fayed's application are pure funders. Their donations towards Mr Hamilton's costs were not made as the result of any obligation owed to him but as an act of charity through sympathy with his predicament and in some instances affinity to the Conservative Party. They have no control over how their donation is spent. They have no part in the management of the litigation up to and including the trial. Their only hope was that Mr Hamilton would achieve sufficient success in trial to enable their donations to be repaid to them. Why would a pure donor be in any more vulnerable position than a solicitor or counsel acting on a contingency fee? (See the observations of Rose L.J. in Count Tolstoy-Miloslavsky v. Lord Aldington [1996] 2 All ER 556 at p.565-566, [1996] 1 WLR 736 at p.746)
The position of the professional funder is very different. Almost always the funding arises out of a contractual obligation, for example where the funder is a trade union, an insurer or a professional or trade association. Normally such a funder exercises considerable control, management and supervision of the litigation.
It would be very exceptional that a situation would arise where it would not be just and reasonable to make a section 51 order against a professional funder.
The reverse is the position in the case of a pure funder. It will be rare or very rare that it will be just and reasonable to make an order against him."
The Relevant Facts: the Background to the Agreement between Mr. Arkin and MPC
Arkin has at all material times since the collapse of Multifleet lived on his state pension and was originally granted legal aid which covered the commencement of these proceedings and the service of points of claim. The issue of that certificate was strongly opposed by the 1st and 2nd to 4th defendants. However, legal aid was subsequently withdrawn on 29 August 1997. Mr Arkin's solicitor, Susan Singleton, is a sole specialist practitioner who had insufficient resources to take on litigation of this size on a pro bono basis. Attempts were made by Susan Singleton and counsel to find a large City firm prepared to take on Mr Arkin's case on a pro bono basis, but without success. As from 30 July 1998 conditional fee agreements in civil litigation, in addition to personal injuries cases, became lawful. In consequence, Miss Singleton and counsel entered into such agreements in the course of 1998, in the case of Susan Singleton with effect from 30 July 1998.
Arkin's financial position was bleak. Although he continued to live in his family home in London, that had been charged to his bank. He has been in default on repayments of capital and interest due to the bank for many years and it is estimated that his equity in the house has long been negative. The bank has been persuaded to hold its hand until the outcome of this litigation is known. The evidence is absolutely clear that at all material times from the commencement of these proceedings in 1997 until today Mr Arkin has had no available funds for paying for any aspect of this litigation. Nor has he had the means of borrowing any.
Arkin has been to deploy the prospect of the ultimate recovery of substantial damages as a means of payment to his solicitor and counsel and to any expert witnesses who might be required. Although insurance against liability to pay the defendants' cost would have been available for it is normally taken out where conditional fee agreements are used to fund personal injuries litigation, this has at no time been an available option for Mr Arkin personally, who would have had no means of paying the premium.
Arkin was pursuing these proceedings with the assistance of conditional fee agreements to which his solicitor and his counsel were parties. Although I do not know with exactly what degree of confidence Mr Arkin was advised as to his prospects of success at this stage, I infer that leading counsel advised that on the evidence and the materials then available he had a much better than 50 per cent chance of success.
Arkin's legal team to decide what to do about expert evidence. On the face of it, the main area of expertise was going to be proof of causation and extent of loss. For this purpose, it was going to be necessary either to procure the evidence of an accountant or to dispense with calling any expert evidence and to rely, instead on cross-examination of the defendants' expert. The latter was, not surprisingly, seen as a high risk strategy and extremely dangerous, given that Mr Arkin had the burden of proof. Another possibility was to attempt to find an expert prepared to give evidence on the basis of a conditional fee. Alternatively, it might be possible to insure against inability to recover as legal costs the amount of the expert's fees. Miss Singleton approached a well-known firm of accountants, but they declined to act on a conditional fee agreement. I would interpose that it is well-established that although a contingent fee does not render an expert's evidence inadmissible, the existence of his interest in the outcome of the proceedings is relevant to the weight which the court gives to his objectivity as an expert. That is why, at least in the Commercial Court, expert witnesses are expected to indicate, when called to give evidence, whether they are acting under a conditional fee arrangement or one which gives them some financial interest in the result of the proceedings. In consequence of that approach the Academy of Experts had amended its Code of Practice to prohibit conditional fee agreements. Susan Singleton investigated the cost of taking out insurance to cover experts' fees and was informed by insurers of whom she enquired that the normal premium was 15% of the sum assured. On the assumption then made that those fees were likely to be in the order of £30,000, the probable premium was beyond Mr Arkins' means.
Arkin that he should approach MPC. Mr Arkin's Counsel and solicitor were hopeful that Ernst & Young ("E&Y") could be retained as experts. Mr Dyson, a partner in that firm declined to act as expert on a conditional fee basis. He suggested that MPC might be able to help. Although Mr Arkin appears first to have approached MPC on 21 December 1999, the first serious contacts with MPC seem to have been made in February 2000 by Mr Dyson who discussed the case with Mr Gerard Walsh, Managing Director of MPC. The latter had been involved in providing case preparation and funding services in the Factortame Case, to which I have already referred. It was explained in the course of the negotiations between MPC and Mr Arkin and his advisers that Mr Arkin was not eligible for legal aid and that the claim could not proceed without the provision of disbursement funding. It was also said that Mr Arkin would not be able to obtain ATE insurance because of the complex nature of the case and the fact that he had no funds to pay the premium.
Arkin MPC carried out such due diligence on the claim as was possible. It had to rely heavily on leading counsel's advice as to both liability and quantum. On that basis, although it received advice that Mr Arkin had a very strong claim, it had great difficulty in arriving at any reasonably confident assessment of the quantum of recoverable loss or therefore the amount for which a settlement might be achieved. The evidence suggests that MPC representatives had by August 2000 formed the view that the probable settlement range was likely to be of the order of US$5 million (£3.42 million) to US$10 million (£6.85 million). They were also of the view that, if E&Y were to be employed to provide expert forensic accountancy services, their fee was likely to be about £250,000. In addition MPC considered that it would be necessary for it to employ a Mr. Merrill as an additional assistant in order to provide litigation support services to inspect and sort out documentation relevant to the expert's work and to act in a liaison capacity between the experts and the solicitors. The intention was that it would be more cost effective to employ him in this work than to pay E&Y at their usual rate. It was estimated that he would have to be paid £54,000 to £75,000 over an eighteen month period up to and including trial. MPC budgeted for a further £100,000 for additional expenses. In addition to these estimates, MPC would have had to take into account the cost of being out of their money for many months if not years between incurring disbursements and recovery of damages. They would also have to take into account two significant areas of risk, namely that the claim would fail or that, if it succeeded, they might not be able to recover under the agreement with Mr. Arkin if he took the point that it was unlawful on the grounds of maintenance.
Arkin's legal costs were £1 million, which was not an excessive projection as at August 2000, were the case to be settled at US$5 million (£3.54 million) at the lower end of the range considered by MPC, the latter would derive a very modest profit from a 25 per cent share in the settlement figure: £30,000 against an outlay of £600,000, that is to say just 5 per cent.
Arkin.
Arkin and the Liquidator that, in consideration of the assignment of BCL's claim to Mr. Arkin the creditors of BCL would be entitled to 50 per cent of any damages recovered in the proceedings. Mr. Arkin was therefore left with 50 per cent of any recovery and the negotiations with MPC were conducted on the basis that MPC's percentage would have to be calculated on the total recovery but would have to be paid out of Mr. Arkin's share. The Liquidator took the position that the creditors would not fund the proceedings.
Arkin entered into the MPC Agreement Susan Singleton entered into a conditional fee agreement with the solicitors, Edwin Coe. Their function was to provide assistance with solicitors' administrative work and trial preparation to Susan Singleton who, as a sole practitioner, did not have the resources to deal with the very substantial amount of documentation which Mr. Arkin provided in 2000 and subsequently as well as disclosure by the defendants. Counsel had also entered into a conditional fee agreement.
Arkin agreed to provide the services described in the Agreement. By clause 1.2 these comprised the provision of:
"(a) the senior research team of MPC, including the services of Mr Mark Merrill (as head of research) and in particular, but without limitation, the instruction of an expert as provided below:
(b) (i) the instruction, engagement and payment of:
(i) an expert forensic accountant(s), Mr Richard Dyson, or equivalent partner in Ernst & Young's Manchester office to write an expert accountant's report, on the quantum of the claim in the proceedings for the loss of income/profits suffered by BCL as a result of the actions of the Defendants;
(ii) a joint shipping expert;
and in relation to the instruction and engagement of the expert, and to the extent only that they are able to contract to do so, MPC will:
(ii) assist with any queries the experts may have in producing their draft report(s);
(iii) assist with analyse the draft report (sic);
(iv) ensure appropriate amendments are made;
(v) consider and analyse the Defendant's similar such report(s); and
(vi) assist in the preparation of a response thereto.
(c) the engagement and instruction and payment of any other experts deemed by Mr
(d) secretarial, photocopying and documentation services in connection with the Services;
(e) further services in relation to the conduct of the Proceedings, including without limitation:
(i) Mediation; attendance (including, where reasonably practicable, attendance by the Ernst & Young forensic accounting experts and/or Mr Merrill) at any mediation hearing where reasonably so requested by Mr
(ii) Hearings: attendance (including, where reasonably practicable, attendance by the Ernst & Young forensic accounting experts and/or Mr Merrill) where reasonably so requested by Mr
(iii) cross examination: all reasonably necessary assistance with cross examination issues arising from the defendants' witnesses;
(iv) trial: ensuring and arranging, in so far as is reasonably practicable to do so, the Ernst & Young forensic accounting experts' and Mr Merrill's attendance at the trial where so requested by Mr
Arkin with the briefing and engagement of the expert forensic accountant and of a joint shipping expert with the preparation of the report and with the conduct of the proceedings. In the event the shipping expert, Ms Jean Richards, was not a joint expert. There was an expert economist, Mr Bishop, and there was also instructed at a very late stage a tax expert, Mr Robert Brown, specifically to deal with the issue of the exposure to tax of the Multifleet Group in respect of the proceeds of ship disposals which was unexpectedly raised by the 2-4 Defendants in the course of the trial. These other experts were found not by MPC but by Edwin Coe (Mrs Richards), Ernst & Young (Mr Brown) and counsel (Mr Bishop).
"2.1 On behalf of Mr
2.2 Notwithstanding MPC's obligation to pay such accountant, Mr
2.3 MPC shall through Mr Merrill, report to Mr
2.4 Mr
Arkin's counsel who was to specify the scope of the work to be carried out by the forensic accountancy expert. Under clause 2.2 it was agreed that Mr Arkin should be entitled to give direct instructions as to the work reasonably required to be done to both that expert and the MPC staff, including Mr Merrill. There is no specific similar provision dealing with the relationship between Mr Arkin, his counsel, MPC and other experts, but I find as a fact that all concerned proceeded to engage, instruct and assist the other experts consistently with the specific provisions of clause 2.
3.1 In consideration for the provision of the Services by MPC Mr
3.2 Where Mr
3.3 MPC shall charge VAT at the applicable rate (currently 17.5%) on its percentage entitlement (25%/23%) set out above and shall render such VAT invoices as shall be reasonably required.
3.4 MPC shall record its internal time spent in performance and arrangement of the Services hereunder and bill Mr
3.5 For the avoidance of doubt nothing in this agreement shall impose any liability on Mr
"4.1 Subject to clause 4.2, Mr
4.2 In the event that MPC and Mr
Arkin is not to make any settlement without MPC's consent. However, the effect of that provision has to be read in the light of two considerations.
(i) It applied only to settlement of the case and not otherwise to the conduct of the proceedings.
(ii) Mr
(iii) In the event of any disagreement between Mr
Arkin as the claimant but also of MPC as the funder at risk as to its liability to pay expert fees. I am unable to accept this submission. The duty of leading counsel was to give proper professional advice to Mr Arkin in all the circumstances, including the circumstance that he had the benefit of the MPC Agreement. In the event that Mr Arkin wished to take one course but MPC another, leading counsel's professional duty was to his client (Mr Arkin alone) to tender such advice as he considered to be in his client's best interests in the context of the litigation as a whole and whether that advice was consistent or inconsistent with what Mr Arkin thought ought to be done or with what MPC thought ought to be done. In other words, not only was the last word to be that of leading counsel, but the exclusive interests of MPC as funder, as distinct from the interests of Mr Arkin as claimant, could properly be superseded. Had it been the intention of the parties that leading counsel should give advice founded on the objective of achieving some kind of equitable balance between Mr Arkin's interests as one who stood to lose little or nothing if the claim were defeated or a settlement were not entered into and the interests of MPC who stood to lose their entire expenditure if the claim were defeated or part of that expenditure and/or their anticipated profit if it were settled at a certain level, much clearer language would have to be used. In such a case leading counsel would be placed in an invidious position if, by reason of such a purpose he was placed in a position of conflict with his overriding duty to the court and to give his client advice having regard to his clients' best interests in preparing and conducting his case and if it came to settlement negotiations to his reasonable prospects of success.
"This Agreement shall not be terminated by either party except with the written consent of the parties or where either party is in material breach hereof, where if such breach is capable of remedy, it has not remedied such breach within 30 days of written notice thereof, provided that MPC may terminate this Agreement on 21 day's notice where the initial report of the forensic accountancy expert clearly shows that MPC's agreed percentage of the likely damages to be recovered is not sufficient to cover MPC's anticipated costs hereunder ("MPC Right to Withdraw"). Where MPC exercises the MPC Right to Withdraw it shall solely be responsible for payment of any MPC External Fees and shall lose its entitlement to share in any proceeds of the Proceedings which may thereafter be continued. MPC shall be entitled to recover from Mr
Arkin which remained unremedied after written notice, MPC was locked into the agreement to fund the proceedings unless the forensic accountancy expert's initial report clearly showed that the likely recovery of damages was at a level in relation to which MPC's percentage would be insufficient to cover its costs. Once that stage had passed, MPC could not withdraw even if the expert advice or counsel's advice was such that the relevant percentage of the amount likely to be recovered would be such as to be insufficient to cover MPC's costs. This represented what was at least potentially a serious risk of loss to MPC. It was additional to the overriding risk that, notwithstanding the proceedings having been conducted on the assumption that the experts' evidence would be accepted and in accordance with leading counsel's advice, in the event the claim would fail completely. In that case MPC would stand to lose its entire expenditure, would recover no contribution to its overheads and, on the state of the law at the time when the agreement was entered into, might be exposed to a massive claim for the defendants' costs.
MPC's Conduct after entering into the MPC Agreement
Arkin in 2000 as well as a further large quantity of documents which Mr. Arkin had recovered from Israel. Documents were stored in MPC's premises because they were so voluminous that there was nowhere else to keep them. However, all decisions as to which documents ought to be disclosed were taken by Edwin Coe and Singletons.
Arkin's control which was needed to give the legal team and MPC "an overall appreciation of the financial position" of those companies. To enable him to do so he held some discussions with Mr. Arkin. He also had discussions with E&Y about the nature of the claim and prepared some draft documents about the nature and likely size of the claim for the purposes of discussions between counsel, solicitors and experts during the late summer and autumn of 2000.
"(a) Liaising between the various advisers and experts involved to ensure that they all had up to date information about the claim and its progress.
(b) Preparing a monthly report for the MPC board about the progress of the claim, although this did not include any financial information as (he) was generally unaware of the costs being incurred other than the broad estimates of the accountancy experts costs.
(c) Liaising with Mr.
(d) Attending meetings which Edwin Coe had with some of these former members of staff and business associates, particularly where financial matters might need to be discussed.
(e) Commenting on draft papers and reports by both Ernst and Young and Jean Richards (who had been appointed as the shipping expert). At the early stage of the process (he) probably had a wider knowledge of the factual material available and its whereabouts than the Ernst and Young personnel had."
Arkin's Multifleet Group. Again he took no decisions on whether documents should be disclosed: that was left to the legal advisers.
"I was asked to read the early draft experts' reports by way of proof reading more than anything else. I had a longer involvement in the factual material available than the experts and was likely to be able to identify factual inaccuracies in the narrative of supporting commentaries. MPC were not involved in suggesting whether the reports of any of the experts might be revised. I believe that any such suggestions if at all were made solely by Mr
Arkin's advisers conducted the litigation.
"Having prepared draft reports, the experts circulated them for comments. I received draft copies of both Mr Dyson's report and Mr Bishop's report. I read the drafts in the same role as somebody who had not been immersed in the detail of the claim and as a result made suggestions for amendments to the phraseology where I felt the discussion and arguments were difficult to follow. At all times it was left to the expert to decide whether or not the suggestions were incorporated or not."
Arkin's legal team.
Arkin's expert case had grown so considerably beyond what had originally been anticipated that MPC took legal advice as to whether, under the terms of the MPC Agreement, they could withdraw and so cut their losses before trial. They were advised that there were no sufficient grounds for doing so. Nor could MPC withdraw when in May 2002 the court gave the parties a provisional indication of its views on the dominance and causation issues which was unfavourable to Mr Arkin.
"I can confirm that if Mr
If we had been considering ATE insurance we would have insisted on Expert costs cover as well to protect our downside in the event the case was lost. The scenario of only insuring defendants' costs is purely academic. We would not have wanted to have been left with the liability of both a premium and the costs of the experts especially where the upside profit on a win was already so marginal. The control exercised by insurers on things like Pt 36 offers could still make a 'win' a financial loss to us. It should also be borne in mind, that at the time the agreement with
Arkin's favour.
"Decisions about points to be taken were taken by counsel. Counsel were very heavily involved in this case, more than would normally be the case (a) because they were aware as a sole practitioner competition lawyer I did not have the resources and (b) because it was the first action for damages for breach of the EU competition rules ever and we needed their expert help in this. There was no way MPC could know about or take any decisions on these kinds of issues. They relied on the legal team to decide what case was brought. Where a major decision was to be made such as dropping the second trial/stage we would have a conference at Brick Court Chambers with counsel, me, probably someone from Edwin Coe, the liquidator, Peter Levy and a representative of MPC and always Mr and Mrs
Discussion
Arkin had not entered into the MPC Agreement or an agreement with another professional funder on substantially similar terms, he could either not have pursued the claim to trial or at best would have been obliged to fight the case in the hope of proving causation and loss by means of inviting inferences from such primary facts as could be gleaned by the legal team from the huge volume of documents that eventually emerged and, if the defendants called any expert witnesses on those issues on which Arkin took this course, by cross-examining such witnesses. A trial fought in this manner would not have been fought with equality of arms: Mr Arkin would have been seen to be virtually certain to lose. It is improbable in the extreme that Counsel could ever have conscientiously advised him to continue with his claim by that means.
Arkin had a very strong claim. As matters have emerged at the trial, Mr Arkin had a claim that had real substance in respect of Article 82, some substance in respect of Article 81 and little substance in relation to causation and proof of loss. I have no doubt, whatever, that Mr Arkin received advice from counsel given in good faith with a genuine belief in the strength of his claim. It is not difficult to appreciate that in a case of this size and complexity counsel concentrated on the liability issues. I do not speculate on the extent, if any, to which, in forming his pre-trial optimistic view of Mr Arkin's position, leading counsel appreciated the evidential problems presented by causation of loss in this case. It may well be that it was not until long after the entering into of the MPC Agreement that, with the emergence of the experts' reports on loss, the attention of Mr Arkin's legal team came to be adequately focused on the problems presented by the need to establish a causal link between the allegedly unlawful conduct of the conferences and the collapse of Mr Arkin's Group. It may well be that the claim was allowed to come to trial in the hope that Mr Dyson would be able to identify sufficient financial information to provide proof of causation of loss. However, those problems, as the judgment shows, were never solved.
Arkin's legal team that, however, strong his case might be on liability, it was necessarily doomed on causation of loss. Moreover, there is no evidence that the decisions to embark on the trial and to press on with the trial once the court had highlighted the obstacles to success were in any way influenced by MPC or any conduct on the part of its representatives or Mr Merrill. Nor is there any evidence that MPC influenced or attempted to influence Mr Dyson or any of the other experts whose fees it was paying. Indeed, I find as a fact that Mr Dyson, with the assistance of the E&Y team, formed his own views on all the salient points. In so doing he acted to the best of his ability entirely independently of MPC. The fact that E&Y's outstanding fees substantially exceeded the amount of the guarantee with which MPC had provided them, in my judgment, played absolutely no part in the content of Mr Dyson's evidence.
Arkin's legal advisers who could be expected to act with proper professional objectivity and who would be entitled to override any attempt by MPC to persuade them to act otherwise.
Arkin which MPC was to receive under clause 3.1 of the MPC Agreement. It was submitted that so great was this stake in the success of the claim that MPC was in substance a party to the proceedings and ought therefore to be liable for the defendants' costs. This submission, in my judgment, entirely ignores the conceptual considerations involved in the exercise of the court's powers to make a costs order against a non-party funder which I have described earlier in this judgment. The fact that the funder is to share in the proceeds of the claim and may thereby derive a large profit from its investment will normally justify an order for costs because the very fact of the funder's stake in recovery represents a risk of interference in the due administration of justice. Although in such a case access to the court may have been provided to the funded party the countervailing consideration of avoiding the risk of interference in the due administration of justice displaces the public policy objective of such access. Generally, as the authorities demonstrate, the greater the stake, the larger is that risk. Where, however, the funder is ring-fenced out of the area of control over the conduct of the proceedings, that risk is removed. True enough, the funder's stake may be considerable, but the objective of safeguarding the due administration of justice is achieved. The characteristic of the funder's relationship to the proceedings which offends public policy has been removed. In those circumstances access to the courts re-emerges as an objective of greater weight.
"It may well be that it is not necessary to every case of lawful maintenance that the maintainer should accept a liability for a successful adverse party's costs; for example, a member of a family or a religious fraternity may well have sufficient interest in maintaining an action to save such maintenance from contractual illegality, even without any acceptance of liability for such costs. But in what one may call a business context (e.g. insurance, trade union activity or commercial litigation support for remuneration) the acceptance of such liability will always, in my view, be a highly relevant consideration."
"I do not consider that the analysis of whether the facts of a given case amount to unlawful maintenance is essential for the exercise of the s.51 jurisdiction against supporting parties. As Mr Justice Lindsay observed, following the passage which I have cited:
Nowhere is it said that if a supporter's position is such that he would, when maintenance was a tort, have been "guilty" of it that that in itself necessarily suffices to make him liable under s. 51 as a non-party. Conversely, his "innocence" of maintenance, had it still been a tort, is nowhere said of itself necessarily to lead to his escape from liability."
Conclusion
Arkin to enable him to prosecute this claim and in the hope that its agreed share of those damages would provide it with a profit, its relationship to Mr. Arkin and to the proceedings generally was not adverse to considerations of public policy which would otherwise have called for a costs order. It could not and did not attempt to control or influence the conduct of the proceedings otherwise than in accordance with the advice of Mr. Arkin's leading counsel. Had it not entered into the funding agreement, Mr. Arkin would have had to abandon the claim or fight it without calling expert evidence, a virtually futile exercise. MPC could not commercially undertake responsibility for the defendants' potentially huge costs as part of their funding agreement. ATE cover would have been so expensive as to render it impossible for MPC to bear the premium. The claim was very complex and the documentary evidence very difficult to analyse in such a way as to demonstrate before the trial started that the claim could have no real substance. MPC was entitled to rely on leading counsel's advice.