UK: Once Bitten, Twice Shy

Last Updated: 26 May 2010
Article by Nick Gillies

Litigants in costs disputes can now force defendants to disclose further details about third-party funding, says Nick Gillies

Three years ago the defendant's insurers in Plymouth & South West Co-Operative Society Ltd v Architecture, Structure & Management Ltd [2006] EWCH 3252 (TCC) were ordered to pay the claimant's costs in circumstances where the defendant's limit of indemnity had already been met (see 'Bitten by the costs', Solicitors Journal 151/18, 11 May 2007). The decision sounded a warning to third parties who are calling the shots in litigation.

In the latest development on this issue (Thomson v Berkhamsted Collegiate School [2009] EWHC 2374 (QB)) parties may now be forced to disclose documents evidencing a third party's involvement in the proceedings.

In Thomson the claimant sought damages from his former school for bullying. During the trial he discontinued the action and was subsequently ordered to pay the school's costs. However, as there was no prospect of him meeting these, the school applied for an order against his parents, who had funded the claim. To support its application, the school sought disclosure of correspondence between Mr Thomson's parents and his solicitors, experts and counsel, as evidence that they were a driving force behind the litigation.

New Territory

This was a decision on ancillary relief (i.e. disclosure) so we are yet to see whether the court will make an order against Mr Thomson's parents. There are good reasons to believe it will. If an order is made then, as Blake J noted, it will "traverse new territory" in that it is "not a case of a commercial funder or a private or corporate entity that may be regarded as the alter ego of the litigant which was ordered to pay costs".

More immediately, Thomson paves the way for other litigants to seek similar disclosure. In past cases, sufficient evidence of a third party's involvement was already available or emerged incidentally in subsequent procedural steps.When deciding this issue, the court will ask whether disclosure is necessary for the fair determination of the application. The following considerations are relevant:

  1. Strength of the application without the disclosure.
  2. Potential value of the disclosure.
  3. Likelihood that the documents will be privileged.
  4. Proportionality and justice.

Before filing his claim, Mr Thomson instructed new solicitors, who were more careful to refer to him as their client alone. This meant the school had little actual evidence of his parents' involvement in the period following their instruction. Blake J believed the application would turn upon the extent to which the school could point to such evidence – i.e. the application had much better prospects with the disclosure. He also accepted that disclosure was likely to be relevant and may be highly probative in demonstrating control, interference and an assumption of responsibility.

As for privilege, Blake J resolved this by reasoning that legal advice or litigation privilege would not normally arise in communications between a solicitor and a third party which were not connected with the obtaining of a witness statement or the giving of legal advice. Similarly, communications between a third party and experts will not normally attract litigation privilege. The position may differ if a third party was acting as agent for the litigant, but this could only be established from the documents in any event. Instructions or input from the third party on their own account should not attract privilege and would be highly probative.

Blake J therefore ordered the disclosure, and requested that privileged documents be listed individually with some explanation as to the claim to privilege. If any disputes arose, he would inspect the documents and decide whether they were privileged, with the artificial consequence of then disregarding them if they were. This may cause some practitioners discomfort, but it is probably the only sensible method in most cases.

Change of Tack

The facts in Thomson are unusual, but it is not difficult to imagine similar scenarios in a commercial context where, for example, a parent company, insurer, director or other person is controlling the proceedings or stands to benefit from the outcome. Understandably, the prospect of disclosing correspondence with that third party will not sit comfortably with many as it may reveal tactics, commercial information or other sensitive details. However, it must be right that a party can be required to disclose evidence relevant to an application for an order where the application has merit and the disclosure is likely to be fruitful. Surprisingly, no privacy issues were raised in Thomson, but the courts are accommodating of such concerns and measures can be put in place to address them.

If a third party is involved in a client's claim or defence, solicitors should be mindful of the costs risk and take steps to manage this; for example, by:

  1. ensuring correspondence is addressed to the client alone;
  2. avoiding correspondence with the third party, or at least carefully considering the contents and whether it will be privileged;
  3. warning the client of the risk of an order so there are no surprises; and
  4. revisiting tactics; for example, is settlement more imperative?

Two days after Thomson, the High Court made another order – this time against shareholders of a defendant's holding company (Hitachi Capital (UK) Plc v V-12 Finance Ltd [2009] EWHC 2432 (Comm)). Disclosure was unnecessary in that case, but it is a further timely reminder of the court's willingness to oblige third parties for costs in appropriate cases.

As published in Solicitors Journal, 10 November 2009.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.