Sandra Bailey & Others v Glaxosmithkline UK Ltd Managed Legal Solutions Ltd (Additional Party)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Foskett |
| Judgment Date | 08 December 2017 |
| Neutral Citation | [2017] EWHC 3195 (QB) |
| Docket Number | Case No: HQ07X04076 |
| Court | Queen's Bench Division |
| Date | 08 December 2017 |
[2017] EWHC 3195 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
THE HON Mr Justice Foskett
Case No: HQ07X04076
and
Nigel Jones QC (instructed by Fortitude Law) for the Claimants
Charles Gibson QC, Nicholas BaconQC, Malcolm SheehanQC andHenry Warwick (instructed by Addleshaw Goddard) for the Defendant
Jamie Carpenter (instructed by Gardner Leader LLP) for the Additional Party
Hearing dates: 7 and 8 November 2017
Further written submissions: 30 November 2017
Introduction
The background to this litigation, which I have been case-managing since 2015, is set out in my previous judgments reported at [2016] EWHC 178 (QB), [2016] EWHC 1975 (QB) and, more recently, [2017] EWHC 377 (QB). Those judgments need to be read to understand the background to the issue raised in the present application. I have been adopting an incremental approach to the case management issues raised.
The last judgment in that series, handed down on 1 March 2017, concerned the Defendant's application dated 14 February 2017 relating to aspects of the Claimants' expert evidence, particularly the evidence of Professor David Healy. It was an application which largely succeeded. By order dated 28 March 2017 I ordered the Claimants to pay the Defendant £30,000 in respect of the costs of that application. Certain other directions were given as agreed between the parties. The full terms of that order are set out in the Appendix to this judgment.
It was contemplated at that stage that there would be a further CMC in June 2017 and, in due course, a date was set for 28 June. However, various events overtook the proposal that there should be a CMC on that date and a further CMC is now fixed for 20 February 2018. The timings of certain obligations under the order were altered by agreement subsequently.
Since the order of 28 March 2017 was made, the revised form of Professor Healy's report has been served.
In the meantime, on 16 June 2017 the Defendant issued an application for security for costs against the Claimants' litigation funder, Managed Legal Solutions Limited ('MLS'), pursuant to CPR r.25.14. MLS has been joined as an Additional Party for the purposes of responding to that application.
Security is sought in respect of the Defendant's costs from 1 August 2015 up to (but not including) trial, presently estimated by the Defendant at a little over £6.8 million. 1 August 2015 is taken by the Defendant to be the approximate date at which MLS commenced funding the litigation. The purpose of seeking security from MLS is that the Defendant intends to seek orders, at the conclusion of (what it says will be) its successful defence of the claim, that MLS should pay its costs pursuant to section 51 of the Senior Courts Act 1981 and there is concern, on the information presently available, that MLS would be unable to comply with such an order.
I heard that application over 1 1/2 days on 7 and 8 November 2017. I was informed subsequently by Counsel that the Court of Appeal had handed down judgment in Premier Motorauctions Ltd v. PWC LLP & another [2017] EWCA Civ 1872 on 23 November 2017 and each party has made written submissions about the suggested implications of that case for the purposes of the present case. In addition to considering those submissions, there has been substantial documentation to review, including a review of other authorities. This judgment has been prepared against the background of an impending CMC in February 2018 and significant constraints on my own time. I cannot deal with every nuance of the arguments presented and will focus on what I perceive to be the most important features.
The principal undisputed issues
It is not in issue that–
(a) the Defendant has a right to apply for security for costs against MLS;
(b) the Court has jurisdiction to make such an order;
(c) it is likely that an order for security will be made;
(d) MLS is "balance sheet insolvent" and is reliant for its liquidity on its sole shareholder, Mr Michael Hunt, who is a 49% shareholder in MLS (and the sole shareholder in CAM: see paragraph 29 below);
(e) MLS has no capital and would need to borrow to provide any security ordered;
(f) MLS is not a member of the Association of Litigation Funders ('ALF').
Although it is some while ago, and the circumstances were different from those obtaining in the present situation, Mr Hunt, who had been managing director of Nissan UK, was sentenced to 8 years' imprisonment and disqualified from being a company director in June 1993 following his conviction for serious dishonesty involving many millions of pounds. The press reports exhibited to Ms Caswell's 5 th witness statement indicate that at the time of his sentence, Mr Hunt was aged 59. He must now be in his mid-80s. The substantive assertions concerning his conviction and sentence have not been controverted.
It is asserted on behalf of MLS that Mr Hunt is very wealthy and "would be in a position to meet any costs order in the event that such an order is made against MLS or him".
The Claimants have the benefit of ATE insurance up to £750,000 provided by BRIT Global Speciality, BRIT Syndicate 2987 ('BRIT') in relation to the costs of the generic issues proceedings – in other words, that sum is available to be paid to the Defendants in the event of the Claimants' case on the generic issues failing unless for any reason the liability of BRIT under the insurance contract is avoided.
The Premier Motorauctions case is directly relevant to the role that such insurance plays in this situation and I will return to it later in the context of issues raised about the potential for the policy to be avoided (see paragraphs 63–71 below).
The principal disputed issues
The essential issue is the quantum of the security to be granted, although it is contended by MLS that the ATE cover, combined with what is contended to be a realistic appraisal of the recoverable costs of the Defendant if successful, is sufficient security and, accordingly, no order should be made. In any event, MLS submits that the amount ordered, if it is, should be limited by the approach referred to in Arkin v Borchard Lines Ltd (Nos 2 and 3) [2005] 1 WLR 3055 (otherwise known as "the Arkin cap") to the current level of the funding facility (£1,200,000) and that there should be a cross-undertaking in damages. The basis for that latter requirement is said to be that MLS will have to borrow the funds to provide the security and thereby incur borrowing costs and/or will not be able to use those funds to pursue other funding opportunities. It is contended that it should be compensated for those losses if the security proves to have been unnecessary or excessive. Finally, if, contrary to those arguments, security is ordered and the Arkin cap does not apply, the security should be very much less than that sought by the Defendant and should certainly only relate to future costs.
These contentions are supported by the Claimants.
The Defendant submits (i) that Arkin was not a case concerning the quantum of security to be ordered pursuant to CPR r.25.14 and is not binding upon this court for the purposes of that issue in this case, nor should it be followed in present circumstances, and (ii) applying the Arkin cap would give rise to a substantial injustice in this case.
That, in a nutshell, is the essential battleground between the parties on the present application.
Mr Jamie Carpenter, for MLS, emphasises that MLS is a party distinct from the Claimants and that MLS and the Claimants are simply in a commercial relationship, albeit with a common interest in seeing the litigation through to a successful conclusion. A successful conclusion would, of course, involve recovery of costs from the Defendant and a share in the proceeds of the case. (That usually "consists of either a percentage of the damages recovered, or a multiple of the amount advanced by the funder, or a combination of the two", according to the ALF website.) He says that any criticisms of the way the Claimants or their representatives have represented the position in relation to the funding should not be laid at the door of MLS. I accept that as far as it goes, but it is potentially of some significance to the court to note briefly the route by which this case has travelled to the present destination because there is plainly a close alignment of the interests of the Claimants and MLS and, it must be assumed, MLS would not have wanted its position to be misrepresented. I will turn to that background after recording the terms of CPR r.25.14.
CPR r.25.14
This provides as follows:
"(1) The defendant may seek an order against someone other than the claimant, and the court may make an order for security for costs against that person if –
(a) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and
(b) one or more of the conditions in paragraph (2) applies.
(2) The conditions are that the person –
(a) has assigned the right to the claim to the claimant with a view to avoiding the possibility of a costs order being made against him; or
(b) has contributed or agreed to contribute to the claimant's costs in return for a share of any money or property which the claimant may recover in the proceedings; and
is a person against whom a costs order may be made."
The background to this rule and some of the factors to be considered in exercising the discretionary jurisdiction were helpfully set out recently by Hildyard J in The RBS Rights Issue Litigation (No. 2) [2017] EWHC 1217 (Ch). I will not cite extensively from the case at this stage,...
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