Omni Bridgeway (Fund 5) Cayman Invt. Ltd v Bugsby Property LLC (a company incorporated under the laws of Delaware)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Jacobs |
| Judgment Date | 03 November 2023 |
| Neutral Citation | [2023] EWHC 2755 (Comm) |
| Court | King's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2023-000682 / CL-2023-000685 |
[2023] EWHC 2755 (Comm)
Mr Justice Jacobs
Case No: CL-2023-000682 / CL-2023-000685
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Robert Marven KC and Theo Barclay (instructed by Taylor Wessing LLP) for Omni Bridgeway
Joseph Sullivan (instructed by Addleshaw Goddard LLP) for Therium Litigation Funding AIC
Jamie Carpenter KC, Duncan McCombe and Guy Olliff-Cooper (instructed by Candey Limited) for Bugsby Property LLC
Hearing dates: Friday 20 th October 2023
Approved Judgment
This judgment was handed down remotely at 9.30am on Friday 3 rd November 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives (see eg https://www.bailii.org/ew/cases/EWCA/Civ/2022/1169.html).
A: Introduction
Bugsby Property LLC (“Bugsby”) applies for fortification of cross-undertakings in damages which have been provided by the two litigation funders, Omni Bridgeway (Fund 5) Cayman Investment Ltd (“Omni”) and Therium Litigation Funding AIC (“Therium”) in relation to injunctive relief that the funders have obtained. The background to the present proceedings is set out in my judgment on Therium's application for injunctive relief – [2023] EWHC 2627 (Comm) – and it is not necessary to repeat it. I shall use the same abbreviations as are contained in that judgment.
Bugsby contends that each funder should provide fortification to the extent of its claimed interest in the Settlement Proceeds which have been received from L&G. The amount sought from Omni is therefore £ 3,283,489.14, and from Therium is £ 4,093,246.48. These sums collectively exceed the estimate of £ 5.14 million which Bugsby has given of its loss resulting from the grant of injunctive relief. However, Bugsby contends that each funder should provide the above sums in case one or other cross-undertakings falls away.
The estimate of a loss of £ 5.14 million, as potentially resulting from the grant of the injunctions, is based upon evidence from Mr Steven Marcus served on behalf of Bugsby. Mr Marcus describes himself as a director of Bugsby Advisory Ltd, which advises Bugsby Investments Ltd in matters relating to Bugsby. The substance of his evidence is that the injunctions will prevent Bugsby from deploying the Settlement Proceeds remaining in the account of its solicitors, Candey, in the potentially lucrative litigation funding market, where returns of around 30% per annum can reasonably be anticipated. The figure of £ 5.14 million is based, as I understand it, on the figure of £ 20,551,766.61 which is the total amount currently held by Candey. Bugsby has assumed a return of 25% which is somewhat lower than that achieved by established litigation funders. It has also assumed a period of 1 year, as being a reasonable length of time before the arbitrators will decide upon the validity of the litigation funders' claims.
Both Omni and Therium contend, for essentially the same reasons, that fortification should not be ordered. They contend that there is no sufficient evidence to justify the figure of £ 5.14 million. They also contend that there is no sufficient case that any eventual judgment in Bugsby's favour, pursuant to the cross-undertaking, will go unsatisfied. Each funder has adduced evidence of its financial structure and (as each would contend) underlying financial strength, whilst recognising that neither funder has assets within the jurisdiction against which Bugsby could enforce a judgment pursuant to the cross-undertaking. Each funder also relies upon the fact that it, or the group of which it forms part, is carrying out a substantial amount of litigation funding in the UK, and that it and the group would suffer significant reputational damage if it were to commit a contempt of court by defaulting upon its cross-undertaking.
B: Legal principles
Bugsby submitted, in its written submissions, that the exercise of the court's discretion involved considering whether the applicant for fortification has a good arguable case that it will suffer loss that it would not have suffered but for the injunction that is capable of intelligent estimation. In my view, that is a fair summary of the principles established in the decision of the Court of Appeal in Energy Venture Partners Ltd v Malabu Oil & Gas Ltd [2014] EWCA Civ 1295. A more complete summary of the principles is contained in the judgment of Calver J in PJSC National Bank Trust v Mints [2021] EWHC 1089 (Comm), paragraph [26]:
“It was common ground between the parties that it is a matter for the Court's discretion as to whether or not to order fortification of an undertaking given by a claimant as the price for it obtaining freezing injunctive relief. In exercising that discretion, the Court will have regard to the principles set out in Energy Venture Partners Ltd v Malabu Oil & Gas Ltd [2015] 1 WLR 2309 (CA) at [52]–[54] (“ Malabu Oil”) as follows:
i. The applicant for fortification must show a good arguable case for it, and does not have to prove the need for fortification on a balance of probabilities ( Malabu Oil at [52]–[53]).
ii. In considering whether to exercise its discretion to order fortification, the Court will take the three criteria – which are inextricably linked factors – into account ( Malabu Oil at [53], applied in Phoenix Group Foundation v Cochrane [2018] EWHC 2179 (Comm) at [14] …:
(a) Can the applicant show a sufficient level of risk of loss to require (further) fortification, which involves showing a good arguable case to that effect?
(b) Can the applicant show, to the standard of a good arguable case, that the loss has been or is likely to be caused by the granting of the injunction?
(c) Is there sufficient evidence to allow an intelligent estimate of the quantum of the losses to be made?”
Calver J went on to analyse each of these criteria in more detail. In relation to the requirement that the applicant show a sufficient level of risk of loss: there must be a solid credible evidential foundation that the claimed loss has been or will be suffered (see paragraph [27 (i)]). In relation to the requirement that the loss is caused by the grant of the injunction: it is only loss which is caused or would have been caused by the preventative or coercive effect of the injunction that is recoverable under the cross-undertaking (see paragraph [27 (ii)]). In relation to the requirement that there should be sufficient evidence to allow an intelligent estimate of the quantum of loses: there must again be solid, credible evidence of future losses, and this ought ordinarily to be supported by some underlying material and ought not to be speculative (see paragraph [27 (iii)]).
These broad principles were ultimately not in dispute. Mr Carpenter floated an argument that the applicable test, in the context of the present injunctions, was “serious issue to be tried” rather than “good arguable case”. Ultimately, he did not press that point, for which he cited no authority and in my view is not consistent with the cases referred to above.
The test of “good arguable case” is well-known in the context, for example, of freezing injunctions. The authorities in this area are summarised in Gee: Commercial Injunctions 7 th edition, paragraphs 12–032 – 12–033 drawing on classic statements of Mustill J. It is not enough to show an arguable case, namely one which a competent advocate can get on its feet. Something markedly better than that is required, even if it cannot be said with confidence that the plaintiff is more likely to be right than wrong. It is therefore not necessary for the applicant to have a case with a better than 50 per cent chance of success.
Accordingly, the parties' arguments were focused on two points, namely whether there is a good arguable case that (as Bugsby put it):
(1) Bugsby will suffer loss as a result of the injunctions;
(2) Omni and Therium are ‘good for’ their respective undertakings.
C: Good arguable case that Bugsby will suffer loss?
The loss in respect of which Bugsby seeks fortification concerns a business in which Bugsby has never previously participated; i.e. the business of providing litigation funding to third parties. There is therefore no evidence of any third party ever having agreed with Bugsby to accept it as the counterparty to a litigation funding transaction. The amounts sought, involving a return of 25% in the first year of participating in this business, are substantial. They are significantly higher than, for example, the successful claim for fortification in Energy Venture Partners where the loss was claimed by reference to the borrowing cost of monies – and where the Court of Appeal said (at [58]) that “where commercial parties are involved...
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