CPR 25 in the Context of Litigation Funders

Rowe & Ors [2021] EWCA Civ 29

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In the recent decision in Rowe & Ors v Ingenious Media Holdings PLC & Ors [2021] EWCA Civ 29 (15 January 2021), the Court of Appeal was tasked with considering a CPR 25 application for security for costs against litigation funders collectively known as ‘Therium’.

Between 2002 and 2007 a number of parties were invited by the Ingenious group to invest in tax efficient entertainment financing schemes. HMRC challenged this; and ultimately, in the Upper Tribunal Tax and Chancery Chamber, secured a cross-appeal. Following HMRC’s success, a number of Claimants brought legal challenges against the Ingenious Group/associated further parties, funded, in part, by Therium.


CPR 25: Security for Costs

During the proceedings, the Defendants sought security for costs pursuant to CPR 25.12. The requirements of CPR 25 are simple – the application must be both supported by evidence (CPR 25.12(2)) and must meet the conditions of either CPR 25.13(2), where security is sought against a Claimant, or the narrower CPR 25.14, where sought against a non-Claimant. In both circumstances the application must be just in the circumstances. In relation to non-Claimants, it must be made against a person who can be the subject of such a costs order. 


CPR 25 and Litigation Funding

In the specific context of litigation funders, CPR 25.14(2)(a)/(b) requires it needing to be established that either the case has been assigned with a view to escaping the possibility of an adverse costs order (CPR 25.14(2)(a) or otherwise that the non-Claimant had a vested financial/property interest in any settlement (CPR 25.14(2)(b)).


Rowe & Ors v Ingenious Media Holdings PLC & Ors : The Outcome

The Court sought to consider the position more generally (para 44); and thus, imported the considerations of CPR 25.13(2) such as the financial means of the proposed subject of the order (CPR 25.13(2)(c)).

Therium considered the CPR 25 request and sought a cross-undertaking in damages as a condition of any such order, given the prospect that the Claimants and/non-Claimants may suffer a loss as a consequence of any such order, ie, as a result of being denied access to a percentage of the funded capital of the claim (para 20(1)). The Defendant rejected this on the basis that such a cross-undertaking would only be appropriate in very exceptional circumstances (para 21(1)).

The Court considered that given the capitalised and solvent nature of Therium, the conditions of the security for costs application were difficult to satisfy. It was considered that security for costs against a commercial litigation funder would be ‘rare and exceptional’ (para 72) for such properly capitalised funders (para 75). Security for costs was thus, not required.

Regarding the cross-undertaking in damages, the Court viewed that this would have ‘a number of unsatisfactory practical effects’ (para 67) in that it would promote satellite litigation (para 68), invite investigations of the Defendant’s own financial position/prospects (para 70) and would be an economic disincentive against applications for security for costs (para 71). Such a cross-undertaking furthermore produces the undesirable result that the non-recoverable costs and losses of funding litigation would be swept into any cross-undertaking (para 49-52). It was therefore again, only a ‘rare and exceptional case’ which would require such a cross-undertaking (para 82).

The Court’s decision highlights the fact that such security for costs applications should only be made where the CPR 25.13/25.14 factors have been firmly established, for example, where a party is unlikely to be able to meet payment of adverse costs awards – Litigation Funders generally would not fall into this category. Equally, it is unlikely to be suitable to make a cross-undertaking in damages a condition of such an order, given the range of negative consequences that this would entail.


How Can ARC Costs Assist?

ARC Costs are a team of Costs Draftsman and Costs Lawyers who regularly act as independent costs experts, for either paying or receiving parties. We can assist in preparing Bills of Costs or Costs Budgets, as well as negotiating the best costs outcome. We also specialise in preparing Points of Dispute and Points of Reply, and as costs advocates, we can provide representation at any CCMC or during detailed assessment proceedings.

Should you wish ARC Costs to assist you in a costs matter relating to a costs issue, or if you just have a query, you may contact us on 01204 397302 or email one of our experts at info@arccosts.co.uk.

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