While the vast majority of litigation funding continues to be devoted to financing actions by plaintiffs, there has been a noticeable increase in firms discussing and actively pursuing defense-side funding. However, as a recent case in Australia is demonstrating, this kind of third-party funding is not without its challenges, and may represent a risky proposition where there is the possibility of cost orders being leveled against the funder.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
While the vast majority of litigation funding continues to be devoted to financing actions by plaintiffs, there has been a noticeable increase in firms discussing and actively pursuing defense-side funding. However, as a recent case in Australia is demonstrating, this kind of third-party funding is not without its challenges, and may represent a risky proposition where there is the possibility of cost orders being leveled against the funder.
A piece of analysis by Corrs Chambers Westgarth examines the case of Sentinel Orange Homemaker Pty v Davis Investment Group Holdings in the Supreme Court of New South Wales. Davis went into liquidation shortly after Sentinel sued the company for invalid contract termination, due to Davis allegedly reneging on a contract to purchase land from the plaintiff. Davis’ legal defense was funded by John Davis Motors (JDM), which had been planning to conduct business operations on the aforementioned land (JDM is not a pure funder).
Sentinel’s claim was successful, and the Court issued a costs order against JDM as the funder. The analysis highlights the need for funders, even when they are not dedicated litigation funders, to be mindful of the potential financial risk should their client lose in court.
The case has put a spotlight on the wide discretion at the court’s disposal to order costs against a third-party funder, particularly where they have a separate financial interest in the outcome of the claim.
