The RBS Rights Issue Litigation
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Hildyard,The Hon. Mr Justice Hildyard |
| Judgment Date | 09 March 2017 |
| Neutral Citation | [2017] EWHC 463 (Ch) |
| Date | 09 March 2017 |
| Court | Chancery Division |
| Docket Number | Case No: In Claims entered in the Group Register |
[2017] EWHC 463 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Hildyard
Case No: In Claims entered in the Group Register
HC-2013-000484 and others
Jonathan Nash QC, Peter de Verneuil SmithandIan Higgins (instructed by Signature Litigation LLP) for the SG Group of Claimants
David Railton QC, David Murray and Natasha Bennett (instructed by Herbert Smith Freehills LLP) for the Defendants
Hearing date: Thursday 23 rd February 2017
Supplemental submissions in writing on Tuesday 28 th February 2017
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Subject matter of this judgment
This judgment concerns an issue in the RBS Rights Issue Litigation as to the circumstances in which the Court may require disclosure of the names of commercial funders, and the details of any ATE insurance, in advance of a threatened application for security for costs when a trial is imminent.
The first trial on the basic questions of liability ("Trial 1") in these complex and long-running proceedings, which are the subject of a Group Litigation Order ("the GLO"), is due to commence on 8 May 2017.
Trial 1 has been considerably reduced in scope since the Defendants reached full and final settlements in December 2016 ("the December Settlements") with (effectively) all of the claimants in the proceedings save for the SG Group ("the Settling Claimants"). However, the proceedings remain complex, with a time estimate presently of 12 weeks.
The magnitude of the relevant costs and the Claimants' exposure
The estimated costs of the proceedings are very considerable: the Defendants' costs alone thus far exceed £100 million (of which some £6.5 million has been incurred in relation to the claim against the directors joined as individual defendants, "the Director Defendants"); and the Defendants' current estimate is that they will incur approximately £25 million from the date of the settlement to the end of Trial 1. The SG Group Claimants ("the Claimants") are adamant that these costs are so unreasonable and disproportionate that only about 50–60% would be recoverable on a detailed assessment: but even on that basis the figures would remain very large. The Claimants' costs so far exceed some £20 million (exclusive of VAT), though an element of this amount is subject to CFA arrangements and not all amounts have yet been billed to the Claimants.
Further to the GLO and pursuant to an Order made at the third Case Management Conference in the matter, dated 12 February 2014, each Claimant would be severally (but not jointly) liable for a share of the costs incurred by the Defendants if an award of costs is made against them, pro rata to the amounts of their individual subscriptions in the rights issue which is the subject matter of the proceedings.
For the period prior to the December Settlements the costs exposure was spread in this way across the claimants in all the participating groups bringing claims under the GLO. The groups and their constituent claimants who entered into the December Settlements (the Settling Claimants) remain liable pro rata for the costs of the proceedings against the first of the Defendants, the Royal Bank of Scotland Group plc ("RBS plc"). The remaining Claimants are contingently liable (if ultimately an adverse costs order is made against them) for about 23% of past costs referable to the claim against RBS plc itself prior to the December Settlements.
However, after the December Settlements, the Claimants are now solely liable for the adverse costs of the proceedings from the settlement date until the end of the case, as well as 100% of the adverse costs of the claims brought against the Director Defendants (which were never pursued by any of the Settling Claimants, save for the MdR Group Claimants for the period between October 2015 to January 2016).
It is the magnitude of the Claimants' exposure; an increasing uncertainty as to how any order for adverse costs could be met and enforced in light of contradictory statements made on behalf of the Claimants as to their ATE cover; the apparent deficiency of at least the latter; and, in particular, the fact that following the December Settlements the Claimants are alone responsible for the funding of the claim and any adverse costs, that the Defendants now pray in aid as the reasons, catalyst and justification for the present application.
The Defendants' Application
That application is dated 7 February 2017. By their Application Notice, the Defendants (who were represented by Mr David Railton QC, leading Mr David Murray and Ms Natasha Bennett) seek an order requiring the Claimants to provide:
i) The names and addresses of any third parties who, by virtue of having contributed or agreed to contribute to the Claimants' costs of these proceedings in return for a share of any recovery that the Claimants may make, fall within CPR 25.14(2)(b).
ii) Either (i) a copy of any ATE insurance policy held by the Claimants (redacted to conceal privileged material, if any), or alternatively (confirmation that neither the Claimants nor any persons falling within CPR 25.14(2)(b) will seek to rely upon such a policy in opposition to any application for security for costs.
Summary of the Defendants' contentions
The Defendants present the relief they seek as being narrow in scope: and they submit that it is the preliminary step necessary to enable them to consider whether to issue an application for security for costs, either against the Claimants' funders (under CPR 25.14) or against one or more of the Claimants (under CPR 25.12 and 25.13).
More particularly, they contend that they are unable to make any meaningful assessment as to whether such an application is worth pursuing (and, importantly, against whom any application should be made) in the absence of information as to the Claimants' ATE arrangements (if any) and the Claimants' funders, which the Claimants have consistently refused to provide.
As to the jurisdiction they seek to invoke, the Defendants base their application for information in respect of the Claimants' third party funders on the court's inherent jurisdiction ancillary to CPR 25.14; and their application for an order requiring disclosure of ATE policies (unless the Claimants confirm that neither they nor their litigation funders will rely on ATE insurance in response to an application for security for costs) on the Court's case management powers pursuant to CPR 3.1(2)(m).
They justify both applications in the name of efficient case management and the "cards on the table" approach to modern litigation; and they rely on the limited scope of their application in support of the proposition that there is unlikely to be any prejudice to the Claimants in complying.
Summary of the Claimants' contentions in answer
The Claimants, represented by Mr Jonathan Nash QC, leading Mr Peter de Verneuil Smith and Mr Ian Higgins, accept none of this. They contend that unless and until it is clear that the Defendants not only (a) have the settled intention to apply for security for costs unless provided with a suitable ATE policy but also (b) have some realistic prospect of success in such an application, the Court should dismiss the application for details about the funders.
As regards both limbs of the application, the Claimants contend that delay is fatal. They submit that there has been no such fundamental change in circumstances as to warrant an application now when previously the Defendants appear to have been content not to seek any security; that in reality it is most unlikely that the Defendants would proceed with an application for security which would have to be very limited in its scope as well as almost certain to fail; and that the present application is a transparent but objectionable tactic to distract and destabilise the Claimants in their preparation for imminent trial.
More particularly as to the first limb of the application, the Claimants submit that the Defendants are seeking to extract information from the Claimants to support an uncertain application which can already be seen to be hopeless, not least because it is far too late to require security for costs in view of the failure previously to make any such application and the imminence now of trial; and that the first limb should be rejected accordingly.
As to the second limb, the Claimants contend that the application for disclosure of the ATE policy (absent a confirmation it would not be relied on in answer to an application for security for costs), should be dismissed likewise on the ground that it is sought to be justified by reference to an application for security for costs which is hopeless.
Additionally, the Claimants submit that unless and until they or their funders choose to rely on the ATE policy in answer to an application for security, if and when actually made, the Court has no jurisdiction to compel such disclosure. They submit that though it is a premise of the Defendants' application (as regards both its limbs) that their intentions are as yet uncertain they seek to put the Claimants to an election which should only be required to be made if and when they are confronted with an actual application with a real prospect of success; that the Defendants' approach "puts the cart before the horse"; and that there is no proper basis for prying into the Claimants' funding arrangements in this way.
The Claimants further support their objections on the basis that any ATE policy is not relevant to the...
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