An article published in issue 211 of Resolution's ‘Review’ magazine. Co-authored by Charles Hale QC at 4 Paper Buildings and Level CEO George Williamson.
Will the law against champerty soften in the name of access to justice?
In this article we will further explore the growing trend of third-party funding in family cases. Although upfront funding by the provision of loans, secured or not, has become much more commonplace in the last decade, what has hitherto been rare is legal funding, not by the provision of returnable loans but fee arrangements where the third-party funder takes a percentage of proceeds of (the enforced) award in family finance cases. Does the champerty rule still make such arrangements contrary to public policy, or in a time where public funding in private finance cases is practically non-existent, does the rule need to give way to ensure another avenue to access to justice?
Akhmedov and third-party funders
In December 2016 the High Court in London ordered Mr Akhmedov to pay his wife Tatiana an eye-watering £435.5m, the UK’s largest-ever divorce settlement (at that stage). When he refused to pay up, Tatiana obtained a worldwide freezing order on his assets, including Luna, the £250m ship that he had bought from Roman Abramovich, a portfolio of artwork and an enormous amount of cash and other assets.
Unfortunately for Tatiana, Akhmedov successfully put Luna beyond the reach of the English courts, moving it to Dubai. In similar “contumelious behaviour”, he placed his other assets in Liechtenstein structures, contemptuously regarding the English order as nothing more than “toilet paper”. Those structures were then ordered by Mrs Justice Knowles to become parties to the enforcement litigation.
None of these litigation stages would have been possible without the assistance given to Tatiana as the applicant wife in the enforcement process by the well-known litigation funders Burford Capital.
This fascinating case – with its superyachts and billions stashed in impenetrable trusts and corporate structures around the world – is far removed from the lives of most and so is unlike most family finance cases. But Akhmedov’s attempts to manipulate his way out of parting with his fortune illustrate a wider and fundamental problem: for those (usually wives but not always!) embroiled in a legal battle with an adversary who, with deep pockets and a disregard for court orders, is determined to frustrate their claims by putting assets beyond arms-length, what are they to do? Without liquidity or the court’s ability to secure immediate funds from the adversary, funding proper representation to secure what it rightfully theirs seems like an insurmountable task.
In civil proceedings, legal fee funding via conditional fee arrangements has been available for some time. For good and previously sound public policy reasons, conditional fee funding arrangements remain unlawful in substantive family cases, including finance cases. Funders cannot take a proportion of the award made by a court, at first instance. However, once the award effectively becomes an unpaid debt, and enforcement is required, the position can change.
We have already written on the real benefits that litigation funders (like Level) can and do bring during substantive proceedings, stepping in to cover legal expenses (and living expenses too in some cases) until the end of the proceedings when the loan and accrued interest will be deducted from the settlement before it is paid on to the client. To remind you, the benefits can be summarised as follows:
Solicitors often find themselves engaged in protracted negotiations with the side that holds the purse strings in an attempt to get their fees paid. It can even lead to a full-blown court application. Both of these can generate material costs for both parties, with no guarantees of success for the applicant.
Even if you are successful in your negotiations or court applications, you certainly are not home and dry. Difficult behaviour from the other side, for instance drip feeding insufficient cash to meet bills or endless requests for line-by-line justification of your invoice, generates further back and forth between lawyers – driving up the legal costs, not to mention the acrimony, and distracting everyone from the main objective, which is to resolve the divorce fairly and efficiently. Upfront funding stops that battle.
A “fighting fund” can remove any imbalance in the level of legal representation the parties have and provides a level playing field. This means the economically stronger party has less leverage by which to control the litigation and will often result in the parties reaching a fair resolution more quickly – potentially cutting out further litigation and saving more time and money.
But when the award is not paid and the financially weaker spouse has no more liquid funds to pay for legal representation, to enforce the court ordered debt, what options do they then have? Without some form of further funding, many have to give up, have no access to their family funds, and justice is denied.
Tatiana and Burford
Tatiana battles on and, in the latest round of litigation in the summer and autumn of 2020, Temur, the parties’ 27-yearold son, was brought into the fray when he was accused by his mother of having electronic and digital devices storing information in support of his father’s cause. The applications were extensive and expensive, and were only possible with the support of Burford who provided significant funding for Tatiana’s legal fees. In return, it has been said in The Times that Burford required an agreement with Tatiana for the payment of up to 25% of her actual award when received: very many millions of pounds. The agreement was not ordered to be disclosed.
Temur took on his mother and Burford, claiming that the arrangements fell foul of the public policy rule against champerty. If the law prevents CFAs in family cases then, by analogy, so with third-party funders seeking significant returns. Mrs Justice Knowles disagreed, and placed some endorsement on the benefits of the funding industry in family cases in securing (in this case for Tatiana), “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”.
Mrs Justice Knowles further observed that, “without such funding, the wife would lose access to justice and the chance of recovering the monies awarded to her”.
That, of course, is the central point; the public policy in access to justice and fairness is a powerful support for thirdparty funding arrangements. The judge had higher support for her settled view. As Lord Justice Neuberger MR, before his elevation to the Supreme Court, stated in Sibthorpe v Southwark LBC  EWCA Civ 2:
“… the law of champerty should be curtailed rather than expanded by the courts in a context where access to justice is difficult to achieve for the great majority of citizens, given the ever reducing availability of legal aid, and where legislative policy has shifted to permit a wider variety of more flexible funding arrangements.”
Mrs Justice Knowles ultimately determined that there was nothing in the argument of champerty in the funding arrangements between Tatiana and Burford. Burford funded – they did not control – the decisions made by lawyers in the enforcement process, an important overall distinction. The fact that Burford is fully signed up to the to the Code of Conduct endorsed by the Civil Justice Council for funders was also seen to be an important factor. Integrity in funding arrangements and of funders will and should be an important feature of the market, especially in family litigation.
Whether initial, upfront funding through litigation loans, or post-judgment funding for enforcement, third-party funders have become a regular and integral part of the family justice system, levelling the playing field and ensuring access to justice, perhaps in the way that legal aid in family finance cases once did. At least that’s what the judges think, and who are we to argue…?