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Claimant ordered to disclose identity of third party funder

 

13 December 2016

Stuart Barrie Wall v The Royal Bank of Scotland plc [2016] EWHC 2460 (Comm), 7 October 2016

The Commercial Court ordered a claimant to disclose the identity of a third party funding the litigation he had commenced against RBS where, armed with that information, RBS had a serious prospect of succeeding in an application for security for costs from the funder.  Litigation funding has been on the rise in recent years, as have the issues it presents – see for example the Essar v Norscot1 decision covered in the October 2016 Litigation Review in which the costs of third party funding was awarded by an arbitration tribunal.  The Wall v RBS judgment serves as a reminder to defendants to English court proceedings to consider whether the claimant may be in receipt of funding and if so, to consider seeking security for costs from the funder. 

RBS's intended application for security for costs

The application arose in the course of litigation commenced by Mr Stuart Wall (as alleged assignee of claims by an insolvent company he had owned and controlled) against RBS alleging mis-selling of interest rate swaps and LIBOR manipulation.  The litigation was large and complex. RBS estimated that its costs to the conclusion of trial would exceed GBP 9 million. RBS had reason to believe that the litigation was being funded by a third party and wished to make an application for security for costs against the funder under CPR 25.14, which gives the court discretion to order someone other than a claimant to provide security for costs if:

  • the court is satisfied that it is just to make such an order;
  • (in the case of a third party funder), the party against whom the application is made has contributed or agreed to contribute to the claimant's costs in return for a share of any money or property which the claimant may recover in the proceedings; and
  • a costs order may be made against that person.

The claimant refused to confirm that he was in receipt of funding.  RBS applied to the court for an order that Mr Wall: (a) provide the name and address of any third party funding the litigation; and (b) confirm whether any such funder met the second criterion above (ie has contributed or agreed to contribute to the costs of the litigation in return for a share of any proceeds).

Mr Wall submitted that the application should be dismissed on the basis of Mr Wall's right to private life under Article 8 of the ECHR or alternatively because any application for security for costs would, in any event, be defeated by Mr Wall's ATE insurance.

Claimant ordered to disclose identity of third party funder

Mr Andrew Baker QC, sitting as High Court judge, ordered Mr Wall to provide the information RBS sought on the basis that:

  • The court has power ancillary to CPR 25.14 to order a claimant to disclose the identity of a third-party funder and whether that funder would benefit from a share of any proceeds of the litigation.  Such a power must be implied in order to make CPR 25.14 effective in circumstances such as these. 
  • There was good reason to believe that Mr Wall had funding as there was no evidence to suggest he had the means to fund such complex and expensive litigation.
  • It was probable that whoever was funding the litigation was doing so in return for a share of the proceeds (as discussed above, this is a necessary criterion for an order for security for costs under CPR 25.14).
  • RBS would have a serious prospect of success in an application under CPR 25.14 for security for costs.  RBS would be materially prejudiced if deprived of the opportunity to make that application because of Mr Wall withholding the identity of the funder.  There was no argument of prejudice to Mr Wall to balance against that.
  • Mr Wall's Article 8 right to private life was not engaged.  He could not reasonably have thought that the identity of his funder could be kept private as this information would be apt to come out if RBS later obtained a costs award in its favour, if not before.  The judge concluded that it would be "no skin off Mr Wall's nose at all" if the order was made.  In any event, Article 8.2 allows the court to interfere with that right where necessary for the protection of the rights and freedoms of others.  RBS's procedural right under CPR 25.14 was sufficient to engage that exception.
  • Finally, the Judge rejected Mr Wall's argument that his ATE insurance would necessarily defeat any application for security for costs.  This was a matter on which the parties should have an opportunity to present full argument on an application for security.

Comment

The Judge stated that the power he found to exist could not be used as a "fishing expedition".  An order for disclosure will only be granted where there is good reason to believe the claimant is in receipt of funding and an application for security for costs would have a reasonable prospect of success. However, it is interesting to note the comparative ease with which the court was satisfied that RBS had met this hurdle in this case –apparently accepting the inferences drawn by RBS's counsel from the amounts at stake (including RBS's estimate of costs exceeding GBP 9 million to the end of trial) and relying on Mr Wall's failure to provide evidence to establish that he was not in receipt of funding.  It is unclear what evidence of Mr Wall's means (if any) was put before the court.  It remains to be seen whether a defendant may need to do more to secure a comparable order in a less expensive piece of litigation.

RBS would almost certainly not have succeeded in obtaining security for its (vast) costs of the litigation from Mr Wall (an individual claimant) as the grounds in CPR 25.13 would not have been met.  The decision gives RBS another avenue for seeking security for those costs, although it remains to be seen whether the claimant's ATE insurance will defeat that application.  There have been a number of decisions going both ways on this point in recent years so the precise terms of Mr Wall's ATE policy will no doubt be crucial.

RBS sensibly confined its application to the information strictly necessary to enable it to make an application for security for costs under CPR 25.14.  In the earlier case of Reeves v Sprecher et al [2007] EWHC 3226 (Ch), the court refused to order disclosure of a funding agreement itself on the basis that it was not necessary to allow the defendant to make an application for security. 

Footnote:

1http://www.allenovery.com/publications/en-gb/Pages/Costs-of-third-party-funding-awarded-in-arbitration.aspx 

Further information

This case summary is part of the Allen & Overy Litigation and Dispute Resolution Review, a monthly publication. For more information please contact Amy Edwards at amy.edwards@allenovery.com.​

 

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