Q&As

Where a claimant is funded by a third party interested in the outcome of the litigation, are the costs paid by the third party recoverable from the defendant if the claimant is successful?

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Published on LexisPSL on 01/10/2018

The following Dispute Resolution Q&A provides comprehensive and up to date legal information covering:

  • Where a claimant is funded by a third party interested in the outcome of the litigation, are the costs paid by the third party recoverable from the defendant if the claimant is successful?
  • Claimant recovers costs and reimburses the third party
  • Third party costs order in favour of the third party
  • Exceptional order
  • Fact-specific
  • Exercising its discretion
  • Process
  • If the claimant is unsuccessful

Where a claimant is funded by a third party interested in the outcome of the litigation, are the costs paid by the third party recoverable from the defendant if the claimant is successful?

In answering this Q&A, it has been assumed that the claimant is unable to pay the costs of the litigation and that the third party has paid those costs on the claimant’s behalf. It has also been assumed that the funding is not by means of a traditional funding agreement (ie a conditional fee agreement, damages-based agreement or after-the-event insurance). The issue is therefore whether those costs are recoverable from the defendant.

Claimant recovers costs and reimburses the third party

The general rule is that the successful party in litigation is entitled to recover their costs, subject to the indemnity principle. This principle provides that a party is only entitled to recover the costs they have incurred—any additional recovery would be a bonus to the winning party and a penalty to the unsuccessful party. For guidance, see Practice Note: Cost orders—the general rule and the court's discretion.

Applying this principle, a successful party, who is not liable to pay costs to their solicitor, is not entitled to recover their costs from the other side. The key consideration for costs recovery is therefore whether the claimant has a liability to pay their solicitors’ fees where the

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