Third party litigation funders are regularly asked to fund security for costs payments as well as legal costs and disbursements, particularly in insolvency cases where security applications are commonplace. Such cases tend to be less attractive to funders because of the large capital outlay and the length of time for which funds are deployed. However, on 24th May 2018 Mr Justice Marcus Smith handed down his judgment in the case of Absolute Living Developments Ltd  EWHC 1432 (Ch) in which he dismissed the Defendant’s application on grounds that would appear to apply to most insolvency cases.
Whilst the general rule in the courts of England and Wales is that the loser pays the winner’s costs, it is important to remember that the court has a wide discretion when it comes to costs orders. Section 51 of the Senior Courts Act provides that the Court shall have “full power to determine by whom and to what extent the costs are to be paid”. It is for this reason that when considering the economics of funding applications, third party funders usually take no account of the possibility of recovering costs from the opponent.