Latest judgment in the dispute between Mr Farkhad Akhmedov and Tatiana Akhmedova shows strong endorsement of funding from the English Courts
By Jeremy Marshall and Oliver Gayner, Omni Bridgeway
See judgment here.
Every good law student, and indeed litigation funder, knows that it is a maxim of English law that if there is a conflict between the common law and equity, equity will prevail. The judicial approach to litigation funding has largely been shaped by the motivations of those parties who either have funded cases or have been the beneficiaries of such funding. To date, litigation funders have come off the worse – think of the indemnity costs orders of the Excalibur litigation, or the recent doffing of the Arkin cap in the aptly named Davey v Money appeal. In neither of those cases were the equities with the claimant or the funder – both cases were adjudged to be speculative in nature - and neither were funded by members of the Association of Litigation Funders (ALF).
The recent case of Akhmedova v Akhmedov broke that mould – Burford, a member of the ALF, was funding the claimant in her attempts to enforce a £453 million judgment arising out of her acrimonious divorce. Her ex-husband had not been a model litigant, had not voluntarily paid a penny of the award and had made it clear that he would not do so. His pithy observation on the merits of the award was that it was “worth as much as toilet paper”. Whilst the latter’s price has rallied in these COVID-19 times, his remark reflected the fact that, absent litigation funding, Mrs Akhmedova’s chances of recovering her funds were remote.
Mrs Akhmedova’s well founded allegation in the instant proceedings was that her son had been enlisted by his father to assist him in spiriting away his assets. In a very much ‘like father, like son’ moment, the son sought an injunction preventing his mother from receiving funds from Burford because such funding was allegedly champertous. Champerty is an aggravated form of maintenance (the support of litigation in which a party has no legitimate concern without just cause or excuse) which occurs when a person maintaining another seeks a share of the proceeds. The doctrine is a relic of the common law which has little application in commercial contexts and does not exist at all under civil law codes. The son’s principal argument was that family proceedings need to be treated differently (the argument being that since solicitors cannot enter into CFAs in family proceedings, Parliament must also have intended to prohibit those solicitors from being third party funded).
An adverse decision in this case, where the justice of the matter clearly favoured the claimant and where the funder was undoubtedly levelling the playing field by supporting a meritorious claimant with funding provided pursuant to the industry’s Code of Conduct, would be a matter of serious concern for the funding industry.
In the event, there was nothing to worry about. The judgment by Mrs Justice Knowles has provided a much needed confirmation of what professional funders have known for some time – that a Court is not going to interfere in a freely entered into contractual arrangement unless there is evidence that the arrangement was suborning the interests of justice. So, in a strong endorsement of funding, the following are key take-aways–
- Family proceedings should not be seen as any different to other proceedings when it comes to the efficacy of litigation funding – funding can be a “necessary and invaluable service” in cases such as the present (70-71);
- A funder of litigation is not forbidden from having rights of control per se; instead, public policy would only intervene to prohibit a funder from exercising rights of control in a manner which would be likely to undermine or corrupt the process of justice (60), such as “to suppress evidence, influence witnesses, or procure an improper settlement” (36);
- It promoted the administration of justice for responsible funders to be involved in rigorous analysis and review of the litigation which they fund (44);
- Even if Mrs Akhmedova was required to obtain Burford’s consent before settling her case, that would appear to be a perfectly proper protection for Burford as funder and would not tend to corrupt justice (60);
- The significant value of the financial investment, or any profit obtained from it, has no bearing on whether a funding arrangement was champertous (61);
- Ignorance as to the precise terms of the funding arrangements does not, of itself, justify further enquiry in circumstances where a funder adheres to the ALF’s Code of Conduct (72);
- Litigation funding, including the enforcement of court judgments, practised by a funder adhering to the Code of Conduct has been endorsed by the senior Courts in robust terms (“funding is being provided post-judgment to enable the Wife to secure the recovery of sums already awarded to her in the face of the Husband's contumelious conduct (assisted by others) in evading and frustrating the enforcement of the judgment debt. Without such funding, the Wife would lose access to justice and the chance of recovering the monies awarded to her”) (73); and
- Disclosure of the terms of Mrs Akhmedova’s retainer with her solicitors was irrelevant and disclosure of any funding agreement between her lawyers and Burford was refused as not being a document in her control since neither were parties to the litigation (75).
Whilst the last point is likely to be revisited in future cases, there is nothing novel in the other observations that were made by Mrs Justice Knowles. They reinforce the point summarised at para 38 that such tactical challenges are “undesirable satellite litigation […] in circumstances where the claim is bona fide and the inquiry into funding arrangements would afford no defence to the claim.”
A funder has little to fear from the English Courts unless it unwisely follows the approach noted by Jeremy Bentham in A Defence of Usury where “a man could buy a weak claim, in hopes that power might convert it into a strong one, and that the sword of a baron, stalking into Court with a rabble of retainers at his heels, might strike terror into the eyes of a judge upon the bench.” Those days are long gone, whatever certain lobby groups may say on the subject.