"Where, however, the non-party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party's costs. The non-party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes. He himself is "the real party" to the litigation, a concept repeatedly invoked throughout the jurisprudence . . ."
"8. The claim was essentially speculative and opportunistic. It has been advanced at great length and by the assertion of a plethora of causes of action, all of which have been maintained to the last possible moment, no doubt upon instructions. Gulf, and to a lesser degree Texas, have been put to enormous expense in terms of legal costs and Mr Kozel has borne a heavy personal burden in dealing with it. 9. The litigation has been gargantuan in scope, involving a five month trial and 373 trial bundles. But it was based on no sound foundation in fact or law and it has met with a resounding, indeed catastrophic, defeat. The fact that it has done so arises in large measure as a result of facts and matters which were known to the Wempens before the case started. As Gloster J put it in JP Morgan Chase v Springwell[2008] EWHC 2848 (Comm) : "
"The funders 6. The funders divide into four groups. The initial funder was Mr Andonis Lemos ("
"If, then, the funder's witnesses turn out to be liars or the litigation is conducted unreasonably, so that the court awards costs on an indemnity scale, it is just and equitable that the funder should pay on that scale."
"97. . . . The pursuit of objectively hopeless claims which required much time, labour and expense to refute is itself a ground for indemnity costs both against the litigant and his funder. . . . 110. In short, in a case of this kind justice requires that, when the case fails so comprehensively, not merely on the facts but because it was wholly bad in law, the funder should, subject to the Arkin cap, bear the costs ordered to be paid by the person whom or which he has unsuccessfully supported, assessed on the scale which the court thinks it just for that person to pay in the light of all the circumstances, including but not limited to that person's behaviour and that of those whom that person engaged. In short, he should, absent special circumstances, follow the fortunes of those from whom he himself hoped to derive a small fortune. To do otherwise would, in my judgment, be unfair to the Defendants and their personnel, who were on the receiving end of claims and actions of the character that I described in the costs judgment. . . . 125. The supposed principle looks at the question from only one point of view – that of the funder. It ignores the effect and character of the action which he has funded on the Defendants; whereas the derivative nature of his involvement should, as it seems to me, ordinarily lead to his being required to contribute to the costs on the basis upon which they have been assessed against those whom he chose to fund."
"Personally, I am quite happy that if the case attracts indemnity costs, then the funder's liability should also be assessed on that basis. The part that concerns me is the security for costs."
"I entertain some doubt that my decision will send an unacceptable chill through the litigation funding industry, whose aim is not to finance hopeless cases but those with strong merits. If it serves to cause funders and their advisors to take rigorous steps short of champerty, i.e. behaviour likely to interfere with the due administration of justice, - particularly in the form of rigorous analysis of law, facts and witnesses, consideration of proportionality and review at appropriate intervals - to reduce the occurrence of the sort of circumstances that caused me to order indemnity costs in this case, that is an advantage and in the public interest."
". . . Somehow or other a just solution must be devised whereby on the one hand a successful opponent is not denied all his costs while on the other hand commercial funders who provide help to those seeking access to justice which they could not otherwise afford are not deterred by the fear of disproportionate costs consequences if the litigation they are supporting does not succeed."
". . . it must be borne in mind that this court has said on more than one occasion that proceedings in respect of orders such as these [which included an application for a non-party costs order under section 51(3) of the SCA] should be dealt with in a summary way, to be measured in hours not days, and not allowed to give rise to substantial satellite litigation: Ridehalgh v Horsefield[1994] Ch 205 , 238."
"19. The guiding principle here is that costs orders against third parties are exceptional but that they are warranted in cases where there would otherwise be a situation in which a person could fund litigation in order to pursue his or her own interests and without risk to himself or herself should the proceedings fail or be discontinued."
"135. The provision of money to Excalibur in order that it may provide security for costs is not the equivalent of a payment of costs ordered at the end of the case. It was a form of funding of the claim in exchange for a return attributable to the monies provided for that purpose – in effect an investment. If the action was to continue it was, of course, beneficial for the Defendants to have security rather than not. But continuance of the action was the last thing they desired. The provision of money for security was the only means by which that could happen and it resulted in the Defendants continuing to incur the costs and suffer the detriment which the action cast upon them. . . . 137. If the position were otherwise a funder whose sole contribution was to provide money for security for costs, without which the action would not have continued, would be in the happy position of facing no possible exposure under section 51; whereas those who funded the costs would bear that burden (alone). This would be the position even though, had the claim succeeded, the security for costs provider would have a right to share in the proceeds increased by a percentage reflecting what he had contributed in respect of security. In effect such a provider would have, so far as exposure to an order under section 51 was concerned, a "free ride", on the back of those financing the costs. This could not be just and cannot be right."
"Funding in the form of putting up security for costs will ordinarily not materially increase a funder's exposure to adverse costs, as the funding itself will generally cover those costs. It is only in cases involving indemnity costs that there is likely to be a meaningful shortfall. If proper due diligence is carried out, the risk of indemnity costs can be virtually eliminated and, if necessary any residual risk insured. The additional cost charged by a funder for this remote exposure is therefore likely to be negligible. The ALF refer to the "cost of funding to the client": the client does not incur any up-front cost. Any increase in cost to the client would take the form of an increased share of any recoveries for the funder at the end of a case. This will not deter access to justice, at most it will mean that the litigant's recovery may be marginally lower. In a competitive marketplace, even this is highly questionable. Indeed, the reaction of the ALF's members to the judgment does not suggest that there has been any restriction in access to justice following the judgment."