The RBS Rights Issue Litigation [2017] EWHC 1217
Further to the March 2017 decision in the RBS Rights Issue Litigation that opened the door for RBS to ascertain who the funders were (they were confirmed as being Hunnewell Partners and LNCP), RBS sought security for costs against them. The application was for security in the amount of £11.6m. Since trial was listed for 22 May 2017, the application was close to the eve of trial – it being heard on 3 May. There had been further settlements with RBS such that only 58%, by claim value, of the claimants remained. However, the potential adverse cost liability of the remaining claimants was still £35.5m. A consequence of the settlements was that the funders were to receive substantial sums – certainly over £15.5m, the sum that they had funded. RBS suggested that the necessary amounts could be ring-fenced from those payments. The Court, whilst finding that it had jurisdiction to order the security, referred to the balancing exercise that it needed to adopt. It needed to be conscious not to allow the power to order security to operate as an instrument of oppression. It also needed to consider the delay in the making of the application. Since the amount sought from each funder was less than the amount that they had funded, there was no question arising as to the applicability of the Arkin cap.
The Court did not consider that an order for costs or security was appropriate against LNCP. Although Hunnewell roundly objected to the application on the basis that it was entitled to sums well in excess of the amount requested as security, it did itself no favours before the Court when it came to transparency. It did not provide cogent evidence as to its financial worth – as the Court put it “The impression given of deliberate reticence has not been dispelled; the inference that the real reason for such reticence is that in truth Hunnewell BVI cannot demonstrate sufficient resources to meet an order for costs, has not been displaced”. It did not help that RBS had demonstrated that there was a risk of non-recovery in the event of an adverse costs order. Indeed the revelation as to the lack of ATE cover (the “reluctant, stuttering, and still disconcertingly opaque” revelation) was highly material to the Court’s analysis. In the final analysis, the Court ordered that Hunnewell provide security for costs in the amount of £7.5m. As a positive end to the judgment, the Court did order a cross-undertaking of damages in relation to the amount ordered to be posted.