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Published 3 November 2016
In a decision that will be of interest to claimants with third party funders, and those funders themselves, the High Court has recently ordered the Claimant in a £700m swap mis-selling claim to reveal the identity of its litigation funder.
The facts of the underlying case are not directly relevant to this interim decision, but in summary the claim involves alleged mis-selling by RBS of an interest rate swap, breach of contract, what has been described as "artificial distressing" by RBS's Global Restructuring Group, and LIBOR manipulation. The Claimant in the action is Stuart Wall, owner and controller of the parent company of the Opal Property Group, now in insolvent liquidation.
RBS believes that the claim is being funded by a third party funder or funders who have taken a stake in the claim in return for funding. The Court is empowered under the Civil Procedure Rules to order such funders to provide security for costs to Defendants. Security for costs is, in simple terms, protection afforded to Claimants by way of a payment on account by Defendants to cover the Claimants' legal costs in the event the claim is discontinued or lost and an adverse costs order is made against the Defendants. Mr Hall contended at an earlier hearing that since his possible costs liability to RBS was covered by after-the-event insurance, no security for costs order against him or any funders could or would ever be made.
The Court decided in RBS's favour and ordered Mr Hall to reveal the identity of any litigation funder/s. The Court reached its conclusion on the bases that:
Mr Hall additionally sought to rely on the provisions of the Human Rights Act 1998 ("HRA") in resisting the application. The HRA provides that the Court must exercise its powers under the Civil Procedure Rules in such a way as to be compatible with the fundamental rights and freedoms provided by the European Convention on Human Rights ("the Convention"). Article 8 of the Convention provides that "Everyone has the right to respect for his private and family life, his home and his correspondence." Mr Hall argued that being required to reveal the identity of any litigation funder would constitute an invasion of his private life under Article 8.
The Court rejected this argument. It held:
This decision is a preliminary victory for RBS which will allow them to make an application against Mr Wall's funders for security for costs. The Court was not at this stage deciding that application, but did comment that the existence of Mr Hall's ATE insurance would not of itself defeat any such application.
Third party funders have, in general, reacted with equanimity to this decision. Funders are aware that their involvement in a claim may become known in the ordinary course of litigation, though this is the first time that a Court has ordered a funder's identity to be revealed at such an early stage in the proceedings. The decision to fight the application has been viewed by the funding community and lawyers as puzzling. Many third party funders in a similar scenario are unlikely to have objected to being identified, and indeed many funders are as a rule keen for their involvement in claims to be known. This leads to the conclusion, which is perhaps unfair, that there was some collateral purpose in the Claimant objecting so strenuously (and at such cost) to the application. What effect, if any, this decision will have on the litigation funding market remains to be seen.
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