Rowe & Ors v Ingenious Media Holdings PLC & Ors [2021] EWCA Civ 29

• United Kingdom

• Costs Unit
• Financial services disputes and investigations
• Litigation and dispute management

12-02-2021

Court of Appeal provides guidance on circumstances in which a defendant seeking security for costs may be required to provide a cross undertaking in damages as a condition of ordering security – and whether any special considerations attached to funded cases.

Facts of the Case

In the multi-party Ingenious Litigation (Rowe & Ors v Ingenious Media Plc and Ors), the high court ordered litigation funder, Therium, to provide four of the defendants with security for costs pursuant to CPR 25.14.  In response, Therium (and the claimants) sought a cross undertaking in damages:

• as a condition of security. This was awarded by the high court but was limited to the “ external costs ” of putting security in place (for example the costs of fortifying an ATE insurance policy)

• both parties appealed and the appeals were heard by the court of appeal (“CoA”) on 10 November 2020

Court of Appeal Decision

• The CoA dismissed the claimants’ appeal that security should be limited to external costs only, and allowed the defendants’ cross-appeal that a cross undertaking was required at all. In doing so, the CoA held that the court should only require a cross-undertaking in favour of a claimant as a condition of ordering security of costs in “ rare and exceptional ” cases

• The CoA emphasised that only in even rarer and exceptional circumstances would it require a cross-undertaking in favour of commercial litigation funders as a condition of ordering security for costs

Analysis

• The leading judgment of Lord Justice Popplewell addressed the following issues from the parties submissions:

1.    does the court have jurisdiction to require a defendant to provide a cross-undertaking in damages as a condition of ordering security for costs in its favour; and

2.    should such a cross-undertaking be required in favour of a litigation funder and if so, in what circumstances?

• As regards issue 1:

  • the court has jurisdiction to require a defendant to provide a cross-undertaking. The jurisdiction lies both in the discretionary nature of an order for security under CPR 25 and the express terms of CPR 3.1.

• As regards issue 2:

  • only in rare and exceptional cases should the court require a cross-undertaking in favour of a claimant as a condition of ordering security for costs, and only in even rarer and more exceptional cases should it do so in favour of commercial litigation funders; and

  • there were no such rare and exceptional circumstances present in this case

• The judgment contains a lengthy assessment of the reasons behind Popplewell LJ conclusion on issue 2, including:

(a)  In respect of the costs of funding litigation:

• the starting point is that claimants are not insulated from having to bear costs or losses incurred as a result of pursuing claims in civil litigation; and

• losses pursued through the cross undertaking would be seeking to reallocate losses caused by the funding of an aspect of the litigation, namely the funding of putting up security for costs, and would be “ an exceptional departure ” from the practice that “ funding costs or losses lie where they fall ”

(b)  In respect of Article 6 of the ECHR:

• balancing one party’s right to access to justice under Article 6 ECHR and the other’s right to security for costs under CPR 25 is struck by the stifling principle in which security would not be ordered where a claimant showed they would not be able to raise the sum required as security

(c)   In respect of the claimants’ submission that cross-undertakings are analogous with interim injunctions:

• an order for security for costs is not analogous to an interim injunction or freezing order

(d)  If a cross undertaking is to be required it would have a number of unsatisfactory practical effects which may include:

• a significant increase in inquiries into damages under cross-undertakings and satellite litigation; and/or

• an increase in the scope, time and cost of security applications; and/or

• defendants being discouraged from seeking security by the fact that an open-ended unquantifiable liability is being undertaken

(e)  In respect of the role of litigation funders generally:

• the costs incurred by a litigation funder in providing  security for  costs are not to be treated any differently from any other costs incurred by the funder in funding the litigation

• security for costs is a normal and foreseeable aspect of the funder’s investment and it can be expected to have made appropriate provisions in its business model; and

• commercial litigation funders should be appropriately capitalised in order to meet an adverse costs order should the claim fail

Comment

The CoA decision provides helpful guidance on the circumstances in which a cross undertaking would be ordered, and in particular, where litigation funders are involved.

The decision will make it difficult for any funded claimant to succeed in persuading a court that a cross undertaking should be required where security is ordered against its funder.

Popplewell LJ suggested that if there was to be a new practice in this area, it would be preferable for this to be achieved through legislation (which could then by followed by a synoptic review by the Law Commission or Civil Procedure Committee) rather than individual judicial decision.

Eversheds Sutherland (International) LLP acts for HSBC UK Bank Plc, one of the successful Defendants in the appeal.