Litigation Funders Responsible For Indemnity Costs In Excalibur Ruling

Summary and implications

On 18 November the Court of Appeal upheld a first instance decision making a group of litigation funders liable to pay the costs of the action it funded on the indemnity basis. The ruling increases the exposure of funders in cases that don't succeed. It also sends a clear message to funders that their fortunes will follow those of the entity they back, irrespective of the funders' conduct.

Indemnity costs

Losing parties are generally required to pay the winning side's costs on one of two bases: the standard basis or the indemnity basis. Standard basis is the default and generally results in the unsuccessful party paying in the region of 65-70% of its opponent's costs. However in certain circumstances (usually where the losing party has behaved badly and/or lost on all aspects of its claim) a court can make the more onerous order for "indemnity" costs. This results in the loser paying a higher percentage (in the region of 80-90%) of the...