March 9, 2017

Security for Costs - RBS Rights Issue Litigation (High Court)

RBS Rights Issue Litigation: Judge considers ordering disclosure third party funders' details/insurance arrangements ahead of security for costs application

The defendants' costs in this case (which is the subject of a Group Litigation Order) have so far exceeded £100 million. They sought disclosure of the names of the claimants' commercial funders and details of any ATE insurance in advance of a threatened application for security for costs, when a trial is imminent. The claimants argued that the defendants should have a settled intention to apply for security for costs and have some realistic prospect of success in such application. Hildyard J held as follows:

(1) Information about the funders should be ordered.

There was no dispute that the claimants were being financed by commercial third party funders and those funders had a measure of control over and/or prospect of benefit from the proceedings. It is clear that the court has jurisdiction to order disclosure about third party funders. The judge rejected an argument that, in order to succeed, the defendants should have unequivocally determined to bring an application for security for costs once the details are revealed: "I agree, however, that the applicant must, at least, demonstrate that its putative application for security is a real possibility on realistic grounds, and not one simply posited as a possibility for some tactical purpose without any real intention of pursuing it".

The judge went on to hold that: "In my view, the critical question for present purposes is whether, even if in other circumstances security might be ordered, were an application to be made now, it is already clear beyond sensible argument that an order (a) would not provide any fair, real choice to the respondents to it; and (b) cannot properly be accommodated within the existing trial timetable without unjust disruption to the Claimants. This is a high hurdle". On the facts of the case, it could not be said that the funders would necessarily be confronted unfairly with "an unreal choice" (as to whether to put up security and continue with their action or withdraw the claim), notwithstanding the lateness of the application. In any event, it was only information, and not security, which was being sought at this stage.

(2) However, information about the ATE insurance policy should not be ordered.

Although there is conflicting prior caselaw on the point, the judge relied on XYZ v Various Claimants (PIP Breast Implant Litigation)  to hold that the court does have power under CPR r3.1 (case management powers) to order disclosure of an ATE policy when that disclosure is necessary to enable the court proportionately and efficiently to exercise its case management function. Although there were various factors which made the ATE policy in this case potentially relevant in the context of case management (eg the claimants had previously relied on the ATE cover which they asserted was in place in order to encourage the court to make a GLO), the judge declined to exercise his discretion to order disclosure. That was because "the case management characterisation and rationale is still ancillary to enforcement; and the true or at least primary objective is demonstrated by the form of order sought, which is premised not on the documents being needed for case management purposes, but only that there are efficiencies in making the Claimants determine now their defence to an uncertain application for security which may not be pursued anyway and further or alternatively may be demonstrated (by reference, for example, to the position of the funders) to be unwarranted. I do not think it would be right to exercise case management powers to put the Claimants to an election in respect of a potential application for security for costs to which there may well be other answers, and to which the ATE policy may not be a complete answer anyway".

CPR r18 provides that the court may order a party to clarify "any matter which is in dispute in the proceedings". In XYZ, it was concluded that there was no jurisdiction under CPR r18 to order disclosure of a party's insurance arrangements ("The insurance position of the defendant is not a matter in dispute in these proceedings"). Here, Hildyard J agreed that an ATE policy is unlikely to be disclosable under CPR r18 but held the court's power to order disclosure is not excluded where that is expedient and necessary for the purposes of case management: "for example, where the ATE policy has been deployed in the course of the proceedings whereby to influence or impact on a decision (procedural or otherwise) such as it has been in the present case". However, for the reasons given above, the judge declined to exercise his discretion to grant the order.

Finally, the judge also rejected an argument that an ATE policy is privileged from disclosure because the policy is taken out for the dominant purpose of conducting litigation and/or it is likely to reflect legal advice given as to prospects and tactics: "In my view, it is unlikely that privilege attaches to an ATE policy as such on either ground (litigation or advice), except to the extent …. that parts of a policy (such as, possibly, the amount of premium..) may attract legal advice privilege and require redaction on the basis that the relevant part might allow the reader to work out what legal advice had been given".

COMMENT: The judge's comments about XYZ in relation to CPR r18 are interesting, especially given the difficulties of convincing a court to exercise its discretion under CPR r3.1. Prior to that decision, it had been held in Harcourt v Griffin, that CPR r18 was wide enough to cover the provision of information regarding the defendant's insurance cover, but the opposite view was reached in West London Pipeline v Total. The issue has not yet come before the Court of Appeal, though.