RBS Rights Issue Litigation [2017] EWHC 463 (CH)

In the RBS Rights Issue Litigation (RBS later settled with the relevant action group at the start of the trial period), the High Court set out important principles with respect to the circumstances in which the court may order disclosure of the identity of third party funders, and the details of any ATE insurance.

The defendants sought disclosure of: (1) the names and addresses of any third party funding the claimants’ litigation; and (2) a copy of any ATE insurance policy, or confirmation that neither the claimants nor any third party funder would seek to rely upon such a policy in opposition to an application for security for costs.

The defendants argued that they were unable to make an informed decision as to whether to apply for security for costs in the absence of information as to the claimants’ ATE arrangements and funders, which the claimants had refused to provide. Such application would potentially be pointless if adequate ATE cover was in place.

The claimants argued that the court should not exercise its discretion to make the disclosure order because: (1) it was not certain that any application for security for costs would be made; and (2) any such application would have no real prospect of success, largely due to delay. The claimants also argued that the ATE policy was privileged.

Application in relation to third party funder

The judge granted disclosure, holding that an application for security limited to a third party funder was not “so unrealistic or hopeless” that the defendant sought not to be granted some latitude. The judge in this judgment was not encouraging as to the prospects of success of such application, particularly if it were to imperil the trial or its preparation, although an order for security for costs was in fact later made.

He commented that an application for security for costs should come as no surprise to a commercial third party funder, particularly in the context of a group litigation order, where the claimants’ several liability for costs makes enforcement against multiple claimants difficult. Funders provide the “nearest and deepest pockets” and “stand in the front-line”.

Application in relation to the ATE policy

With respect to disclosure of the ATE policy the judge rejected the argument that it was by its nature privileged, although he accepted that some parts of it may attract legal advice privilege and require redaction.

Despite conflicting case law on the point, the judge held that the court has power under CPR 3.1 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.

The judge said the key question was whether, on true analysis, the defendants were seeking to invoke a case management power in aid of the proportionate, expeditious and efficient management of the proceedings, or whether they were in reality seeking disclosure with a view to enforcement or some other objective. The judge concluded that it would be inappropriate to make the order for disclosure of the ATE policy in this case, finding that the defendants’ primary objective was enforcement.