NSW Supreme Court Rules Funder’s Commission is Not Recoverable as Damages
At the core of any litigation funding arrangement is the principle that if the funded party reaches a successful outcome, then the funder will receive a return on their investment out of whatever monetary award is given to the plaintiff. However, a recent judgement in Australia offered an interesting insight into a case where the plaintiff had attempted to argue that it was the defendant who should cover the costs of the funder’s commission. Reporting by the Australian Associated Press, and published by Yahoo News, highlights a recent judgement handed down in the Supreme Court of New South Wales, which found that a litigation funder’s commission was not ‘recoverable as damages payable to the plaintiffs.’ Justice Richard Cavanagh’s ruling in the case of Hunt Leather Pty Ltd v Transport for NSW found that there was no precedent for the court to make such a ruling, stating clearly that there has been no prior case ‘in which the funder’s commission has been allowed as a component of the damages awarded.’ The background to this latest ruling from the NSW Supreme Court is a case that saw local businesses sue Transport for NSW over its construction of the Sydney light rail project, in which they argued that they had suffered losses due to extended disruptions to the area in which the businesses are based. Last year, a court found that Transport for NSW was liable for damages, with Hunt Leather and Kensington restaurants and coffee cart being awarded $3,693,164 and $317,773 respectively. Following the award of damages, the plaintiffs argued that ‘they have suffered loss as a result of the tortious conduct of the defendant and that they are entitled to be put back into the position they would have been but for that tortious conduct.’ The plaintiffs argued that this should include the 40% funder’s commission, which the parties had agreed to when they entered into a funding agreement with International Litigation Partners (ILP). In his judgement, Justice Cavanagh reasoned that the plaintiffs had reduced the amount of profit they would see from the award, as a result of ‘the plaintiffs’ own conduct or decision to pursue the litigation on a risk free basis.’ Therefore, their claim that the defendant should cover the costs of the funder’s commission did not follow, as the plaintiffs ‘have not otherwise reduced their loss of profits flowing from the defendant’s conduct.’ Justice Cavanagh explained that if he had agreed with the plaintiffs’ reasoning, then the effect would be ‘to visit upon the defendant not just the consequences of its own conduct but the consequences of a decision taken by the plaintiffs, freely and willingly, to share the proceeds of the litigation in return for a benefit to them.’ Justice Cavanagh’s full judgement can be read here.