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CFA style third-party funding in family cases is not banned

Updated: Dec 28, 2022

The ban on conditional fee agreements (CFAs) in family cases should not be read across to third-party litigation funding, the High Court has ruled.

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Mrs Justice Knowles said the Court of Appeal’s support for litigation funding in the Excalibur case in 2016 meant a party could not maintain that funding was champertous.

The ruling in Akhmedova v Akhmedov & Ors [2020] EWHC 1526 (Fam) is the latest stage in the long-running divorce case which saw Tatiana Akhmedova awarded £453m in late 2016.

Strategy of Evasion

The husband yet to pay a penny voluntarily, and to date she has only recovered £5m. The ruling concerned her attempts to recover money from her son, Temur, who she alleges has played a key role in the husband’s “strategy of evasion”, the judge said.

Temur sought an injunction restraining his mother from instructing in the proceedings any solicitors to be paid, whether directly or indirectly, by Burford.

He argued that the funding arrangements were unlawful because they were contrary to the public policy against the champertous maintenance of litigation, and specifically raised the “important issue of public policy” of whether third-party litigation funding should be permitted in family proceedings. He drew an analogy with the exclusion of family proceedings from the rules allowing CFAs.

Knowles J disagreed, finding the analogy “misplaced because the different treatment afforded by the courts to contracts with lawyers is obvious”. Unlike with CFAs, the lawyers did not have a financial stake in the outcome.

“In this context, I am also mindful of the inappropriateness of extending the prohibition on third-party litigation funding to family proceedings as if settlement were any more difficult/desirable in those proceedings or because a portion of the monies at stake in the litigation were used to pay a funder.”

Third-party funding “has been accepted in this jurisdiction to be desirable to facilitate access to justice”, and there have been first-instance decisions in the Family Division supporting it.

The judge said that, given the Excalibur ruling, it was “difficult to envisage how litigation funding conducted by a responsible funder adhering to the code of conduct could be construed to be illegal and offensive champerty or might be held to corrupt justice”.

She rejected suggestions that rights granted to Burford “could or would be exercised to corrupt the judicial process” – having a degree of control over the litigation did not automatically do this, nor did the wife having to obtain Burford’s consent before settling her enforcement action.

“That would appear to be a perfectly proper protection for Burford Capital as funder and would not tend to corrupt justice,” the judge said.

This was not, she added, “a developing area of jurisprudence which requires detailed consideration by this court”. Without the funding, the wife would lose access to justice and the chance of recovering the monies awarded to her in December 2016.

As a result, the court struck out the counterclaim.

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