In Wall v The Royal Bank of Scotland plc [2016] 5 Costs LR 943 the issue of disclosure of the identity of third party funders in order to make an effective application under CPR 25.14(2) was considered.
Background
The main action was brought by Mr Wall against RBS. Mr Wall claimed that he was the assignee of rights against RBS arising from the property group that he owned and operated, which was now in insolvent liquidation. Mr Wall was seeking £700 Million on grounds of miss-selling, breach of contract and LIBOR manipulation.
Application
In bringing an application for security for costs, RBS was not satisfied that Mr Wall (effectively a private paying Claimant) would be able to fulfil his obligations for costs should RBS succeed in their defence. But RBS claimed that they could not practically make such an application without knowledge of any third party funders.
On that basis RBS sought to compel Mr Wall to:
a) Provide the name and address of any third party funders who were funding the litigation on his side; and
b) Confirm whether this third party funder fell within the Scope of CPR25.14(2)(b)- (contributed or agreed to contribute to [his] costs in return for a share of any money or property which [he] may recover.)
Decision
In deciding the application Mr Burke QC (sitting as a HCJ) referred to Reeves v Sprecher [2007] EWHC 3226 CH and found that:
a) The Court has the power to a grant security for costs orders against third party funders when there was good reason to believe the Claimant had funding under CPR 25.14(2)(b);
b) Any remedy granted must effective; and
c) Where the power exists for the Court to grant a security for costs order, any order requiring the Claimant provide the Defendant with the identity of a third party is ancillary to that order.
In applying this criteria Mr Burke QC considered that there was a good reason to believe Mr Wall had funding that fell within CPR 25.14(2)(b). He continued that it would prejudice RBS' position if the funder was not revealed but that it was ‘no skin off Mr Wall’s nose’ if the third party funder was revealed.
Mr Burke QC concluded that the powers granted under CPR 25.14 effectively allow the Court to order the Claimant to reveal any third party funders as it is necessary to make the primary power of the order for security for costs effective. As such he found for RBS and granted the application, forcing the Claimant to reveal the third party funders details as a pre-cursor for an application under CPR 25.14.
Conclusion
As the hearing only dealt with the first stage of the application, namely whether Mr Wall was obliged to disclosure the identity of his third party funder, it is not clear if RBS' application for security for costs will be effective. But what this Judgment does make clear is that third party funders will no longer be able to avoid these applications simply through anonymity.
Interestingly, Mr Wall had ATE insurance and the position remains unclear as to whether this form of insurance can defeat a security for costs application. Recent case law had suggested that where the ATE policy is properly drafted they provide security for costs to a sufficient degree as to not require an equivalent order (Geophysical Service Centre v Dowell Schlumberger (ME) Inc [2013] EWHC 147 (TCC) and NGM Sustainable Developments Ltd v Wallis [2015] EWHC 461 (Ch)). Although often the Courts have observed that ATE polices are not equivalent to security for costs orders (Michael Phillips Architects Ltd v Riklin [2010] EWHC 834 (TCC)).
Although Burke QC was of the view that RBS’ application for a security for costs order had strong prospects the position is far from settled.
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