Third party funding is an arrangement between a funder and
client (usually a claimant) involved in litigation or arbitration,
where the funder agrees to finance some or all of the client's
legal fees in exchange for a share of the case proceeds (the
recovered damages). Third party funding is discussed in more detail
in Jonathan Scrine's
In the recent case of Wall v The Royal Bank of Scotland
plc  EWHC 2460 (Comm), which concerned a security for
costs application by RBS, Mr Andrew Baker QC ruled that in order
for such an application to be effective against a third party
funder, there is an inherent power under CPR 25.14(2)(b) requiring
the claimant to identify that third party.
Wall v The Royal Bank of Scotland plc 
EWHC 2460 (Comm)
The claimant, Mr Wall, is currently bringing claims against RBS
in relation to RBS's former dealings with the Opal Property
Group, the parent company of which (OPG) was owned and controlled
by Mr Wall. OPG is now in insolvent liquidation. Mr Wall is now
suing RBS as an assignee of OPG's rights and/or beneficiary of
a trust declared by OPG's liquidators.
The claims, which are said to be worth £700m, involve
allegations of mis-selling by RBS, breach of a mandatory early
termination clause in relation to an interest rate swap and LIBOR
manipulation. RBS has estimated that its costs will run to over
£9m in defending the various allegations.
RBS was understandably concerned that Mr Wall, a private
individual, would be unable to fund such a large, complex and
expensive litigation and that he would not be able to meet the
costs if RBS successfully defends the litigation (i.e. if Mr Wall
"loses"). Whilst RBS believed that Mr Wall had third
party funding, it did not know who the third party funders were and
so could not bring an application for security for costs under CPR
In December 2015, RBS applied for Mr Wall to:
provide the name and address of any
third party funders who were funding the litigation; and
confirm whether any such parties fell
within CPR 25.14(2)(b), which empowers the court to order security
for costs against a third party who funds a claim in return for a
stake of it.
The judgment on 7 October 2016 determined RBS's
In deciding whether the court had the power to make the order
sought by RBS (subject to the impact of Article 8 of the ECHR,
which was not relevant in this business context), Mr Andrew Baker
QC concluded, in line with previous authority (Reeves v
Sprecher  EWHC 3226 (Ch)) that:
where there is good reason to believe
that a claimant has funding falling within CPR 25.14(2)(b), the
court thereby has power to grant a remedy by way of security for
costs against the funder(s) in question;
for an application to be made for the
court to exercise that power, it is necessary to identify the
funder(s) in question against whom the application will be
where the defendant does not know
that identity, but the claimant does, ordering the claimant to
reveal it to the defendant is doing no more than making an order
that is necessary to make effective the primary power (to grant a
security for costs remedy under CPR 25.14); and
the court therefore has the power to
grant RBS's application.
There was therefore found to be an inherent power in CPR
25.14(2)(b) to order a claimant to identify a third party who was
funding the litigation.
Mr Andrew Baker QC also found that it would be prejudicial to
RBS if Mr Wall was not required to identify his funders, but it
would not be prejudicial to Mr Wall.
Third party funders can no longer count on remaining anonymous
to avoid security for costs applications.
Where there is a reasonable belief that a claimant has a funder
falling within CPR 25.14(2)(b) and a serious basis for inferring
that security will be granted (i.e. it is likely that the claimant
would not be able to pay the costs if the defendant successfully
defended the claim), then the court may order disclosure of the
funder's identity to facilitate the security application.
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.
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The English Commercial Court has published two recent judgments of Mr Justice Popplewell in a single anonymised case concerning the removal of two arbitrators under section 24(1)(d)(i) of the Arbitration Act 1996.
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