The English court can order liquidators to disclose the identity of third-party litigation funders in order to facilitate an application for security for costs against the funders. The decision is the latest in a recent series of English court judgments on third-party funding confirming the power of English courts to require disclosure of third-party funding arrangements. This judgment goes further than previous cases by clarifying that the court can limit disclosure of funding arrangements as appropriate, eg by limiting it to a defined “confidentiality club”: In the matter of Hellas Telecommunications (Luxembourg)  Unreported
The applicants were defendants in litigation commenced by the liquidators of a company. The applicants suspected that the liquidators’ claims were being funded by a third party. The applicants wanted to consider whether to apply for security-for-costs against the funders, and so applied for an order for disclosure of their identity.
The respondent liquidators argued that the power to order such disclosure was not expressly conferred upon the court under the security for costs provisions of the Civil Procedure Rules, and could not be implied from its power (under CPR 25.14) to order third-party funders to lodge security for costs.
Liquidators ordered to disclose identity of third-party funders and funding terms
Snowden J ordered the liquidators to disclose the identity of any third-party funders and materials regarding any financing agreement:
- As per Wall v RBS, there was a power inherent or implied in CPR 25.14 to make orders to disclose third-party funding arrangements so as to enable an effective application under CPR 25.14 to be made.
- The test was whether there were realistic grounds on which an application under CPR 25.14 might be made and whether such an application would have realistic prospects of success. The applicants had put forward sufficient evidence to meet this threshold requirement.
- The court’s power to order disclosure of funders applies even where there is no pre-existing costs order against anyone in the proceedings.
Disclosure may be limited to a “confidentiality club”
Since there was a risk that some of the third-party funders could be creditors of the insolvent company, the court found that there was a legitimate concern of material prejudice occurring to the liquidators if the identity of the funders became widely known. This risk could be mitigated by limiting the disclosure to a narrowly defined group of individuals at the applicant and requiring them to undertake only to use the information for the purposes of determining whether to make a security-for-costs application.
This judgment follows the same reasoning as in Wall v RBS: where there exists a power to grant a remedy (in this case, security for costs), there also has to be inherent in that power the power to make ancillary orders to make that remedy effective.