Germany v Flatman [2011] EWHC 2945 (QB)

[2011] EWHC 2945 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 10 November 2011
Before
THE HONOURABLE MR JUSTICE EADY
Case No QB/2011/0180
Between
GILL GERMANYAppellant/GAVIN FLATMANRespondent/Case No: QB/2011/0179
Between
BARCHESTER HEALTHCARE LIMITED Appellant/DefendantRICHARD WEDDALL Respondent/Claimant
Simon J Brown (instructed by Plexus Law) for AppellantsGeorge Spalton (instructed by Godfrey Morgan Solicitors Ltd) for Respondents’ solicitorsHearing Hearing date: 25 October 2011
Judgment
[1]On 25 October 2011, I heard two appeals in separate personal injury cases from rulings of His Honour Judge Moloney QC on, respectively, 20 and 25 January of this year. The appeals were ordered to be heard together by Holroyde J because they raise similar issues. The background is that in each case the Defendant successfully resisted a personal injury claim and obtained an order for costs, but there is no real prospect of recovery as it appears that each of the relevant Claimants is without funds. They were both represented by a firm of solicitors trading as Godfrey Morgan Solicitors (“GMS”) under a conditional fee agreement – but without after the event insurance.[2]The Defendants, who had insurers in common, suspect that the claims were funded by the solicitors to some extent and, therefore, made application to Judge Moloney, as the trial judge, for disclosure orders intended to throw light on the funding arrangements. Those orders were refused. So far there is no application against GMS for a third party costs order, as the Defendants do not have the information yet to justify it. All they seek is further information so as to enable them to make an informed decision.[3]There was a lack of clarity as to whether the Defendants were out of time in seeking permission to appeal, as there seemed to have been administrative confusion both at Norwich District Registry and in London. In so far as any extension was required, I granted it at the outset of the hearing. I also gave permission to both Defendants and then proceeded to hear the substantive appeals.[4]The first case, in point of time, is Flatman v Germany, which arose out of a motorcycle accident on 8 September 2005. The Claimant sued the Defendant, Ms Germany, for allegedly causing gravel to be strewn over the road, which caused him to crash. The claim was dismissed with costs on 21 January 2010 at the Norwich County Court. Judge Moloney held that the Claimant had fallen far short of discharging the burden of proof. The Defendant’s costs, as claimed, amount to £14,420.51 but, as I have said, there is no prospect of recovery. By contrast, had the Claimant succeeded, then GMS would have claimed £41,304.78 (i.e. £20,652.39 plus an uplift of 100%) inclusive of VAT. The outlay by way of disbursements was the modest sum of £2,035.82, which included a court fee together with a medical report and records. There were no disbursements in respect of counsel as he too had entered into a CFA arrangement.[5]The Defendant’s solicitors suspect, at this stage purely on the basis of inference, that those disbursements were defrayed by GMS, as the Claimant was unemployed at the time of the accident and was claiming for three years loss of earnings. Accordingly, on 21 December 2010, they applied for GMS to be joined as a party and for an order revealing how the claim had been funded. The applications were dismissed by Judge Moloney on 20 January 2011.[6]The other case is Weddall v Barchester Healthcare Ltd, in which the Claimant alleged assault by a fellow employee. On 9 November 2010, Judge Moloney also dismissed that case with costs. (An appeal was heard by the Court of Appeal on 12 October 2011 and the result is awaited. Plainly, if it succeeds, the present appeal will no longer serve any useful purpose, but the parties agreed that the sensible course was for both appeals to be argued out, as the costs had already been incurred.)[7]In the Weddall case, GMS’ estimate of their profit costs was £23,500 inclusive of VAT. It is reasonable to suppose, therefore, that if the claim had succeeded they would have sought to recover some £47,000. There is a lack of clarity as to who has funded the disbursements. GMS have said that one set of court fees was paid by the Claimant himself and that the cost of the medical report was deferred to the end of the trial. No further information has been forthcoming, except to the extent that nothing was paid out of insurance policies. There is no evidence of any commercial funder. Yet again, therefore, the Defendant’s advisers submit that the most likely source of the funding was GMS. On 16 November 2010, an application was made for further information in this respect. On 25 January 2011, Judge Moloney dismissed this application also.[8]There is a power under s.51 of the Senior Courts Act 1981 to determine by whom and to what extent the costs of litigation, including in the county court, shall be paid. It is clear that such an order can in appropriate circumstances extend to a non-party: see e.g. Aiden Shipping Ltd v Interbulk Ltd [1986] 1 AC 965. Indeed, there may be circumstances in which such an order can be made against a party’s solicitor. On the basis of the relevant modern authorities, what would be required to justify such an order would be evidence showing that he or she had gone beyond the scope of a solicitor’s ordinary role and, for example, acted as a funder of litigation. The law has been rather refined in this respect over the last few years. Shortly before the CFA regime came in, the circumstances in which a costs order could be made against a party’s solicitor were rather narrowly defined by Rose LJ in the Court of Appeal in Tolstoy-Miloslavsky v Aldington [1996] 1 WLR 736, 745-6 to the following effect:
“ … there are only three categories of conduct which can give rise to an order for costs against a solicitor: (i) if it is within the wasted costs jurisdiction of section 51(6) and (7); (ii) if it is otherwise a breach of duty to the court, such as, even before the Judicature Acts, could found an order, e.g., if he acts, even unwittingly, without authority or in breach of an undertaking; (iii) if he acts outside the role of solicitor, e.g., in a private capacity or as a true third party funder for someone else.”
[9]It is now necessary to take account of the summary of the principles to be found in the opinion of the Privy Council in Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 WLR 2807. A number of points emerge from the analysis of Lord Brown of Eaton-under-Heywood.[10]First, although costs orders against non-parties are to be regarded as “exceptional”, in this context it means no more than “outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense”. Moreover, the ultimate test to be borne in mind is whether or not, in all the circumstances, it is just to make the order. He emphasised also that the jurisdiction is to an extent “fact-specific” and there will generally be, in any given case, a number of different and probably competing considerations to be taken into account. It is thus tolerably clear that there are no hard and fast rules. Whenever invited to make such an order, the court will need to apply an intense focus to the facts of the particular case and weigh up the competing considerations in order to arrive at a solution which is tailored to the needs of the particular case.[11]Secondly, however, one can at least say that “generally speaking” the discretion will not be exercised against those referred to as “pure funders”: see e.g. Hamilton v Al Fayed (No 2) [2003] QB 1175, 1194 at [40]. The term is generally used to apply to those with no personal interest in the litigation, who do not stand to make any gain from it, and who are not seeking to fund it “as a matter of business” or to “control its course”. This is not a rigid rule or principle. It is simply that the court’s usual approach, in those circumstances, would be to give priority to the public interest in the funded party gaining access to justice over the competing public interest in a successful unfunded party recovering his costs.[12]Conversely, a non-party can expect that the court will probably not regard him as a “pure funder” if he substantially controls the course of the litigation, or stands to benefit from it. He will be on risk of having to pay the successful party’s costs in the event of failure. In such circumstances, as Lord Brown explained, the court is less likely to accord priority to the desideratum of gaining access to justice, since on that hypothesis the non-party may well be gaining access to justice primarily for his own purposes. The court may regard him as “the real party” to the litigation – terminology regularly used throughout the jurisprudence: see e.g. Knight v F P Special Assets Ltd (1992) 174 CLR 178; Metalloy Supplies Ltd v M A (UK) Ltd [1997] 1 WLR 1613; Chapman (TGA) Ltd v Christopher [1998] 1 WLR 12; Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406, 414. Lord Brown also pointed out that the notion of a “real party” is reflected in CPR 25.13(2)(f), which allows for an order to be made for security for costs where the “claimant is acting as a nominal claimant”.[13]A difficult area to which Lord Brown drew particular attention, as being relevant to the case then before the Privy Council, was that of non-parties funding receivers or liquidators (or indeed financially insecure companies generally) for the purposes of litigation designed to advance the funder’s own financial interests. As it does not arise on the present appeals, however, I need not address it in detail. Nevertheless, it was in that context that Lord Brown drew attention to two New Zealand authorities which seek to explain issues of public policy which are also of relevance in the rather more straightforward scenarios I am now having to consider.[14]There is a helpful passage to be found in the judgment of Tompkins J in Carborundum Abrasives Ltd v Bank of New Zealand (No 2) [1992] 3 NZLR 757, 765; “Where proceedings are initiated by and controlled by a person who, although not a party to the proceedings, has a direct personal financial interest in their result, such as a receiver or manager appointed by a secured creditor, a substantial unsecured creditor or a substantial shareholder, it would rarely be just for such a person pursuing his own interests, to be able to do so with no risk to himself should the proceedings fail or be discontinued. That will be so whether or not the person is acting improperly or fraudulently.” Reference was also made to an unreported decision of Fisher J in Arklow Investments Ltd v MacLean, 19 May 2000:
“19. The guiding principle here is that costs orders against third parties are exceptional but that they are warranted in cases where there would otherwise be a situation in which a person could fund litigation in order to pursue his or her own interests and without risk to himself or herself should the proceedings fail or be discontinued. 20. … where a person is a major shareholder and dominant director in a company which brings proceedings, that alone will not justify a third party costs order. Something additional is normally warranted as a matter of discretion. The critical element will often be a fresh injection of capital for the known purpose of funding litigation. 21. … the overall rationale [is] that it is wrong to allow someone to fund litigation in the hope of gaining a benefit without a corresponding risk that that person will share in the costs of the proceedings if they ultimately fail.”
[15]In the High Court of Australia, in the Knight case, cited above, at 192-193 Mason CJ and Deane J made the following observation:
“For our part, we consider it appropriate to recognise a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. The category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.”
[16]The analyses offered by the courts in these various jurisdictions appear to contemplate that a third party costs order can be made, and may often be appropriate, even in circumstances where a funder could not be described as “the real party”. It may suffice to show that he is “a real party”, in the sense that he has an interest in the outcome of the litigation. That is to say, it is not an essential requirement that the actual claimant has no beneficial interest in the outcome or is a mere “stooge”. It may suffice, depending upon the circumstances, that the funder has something to gain alongside the nominal party. In the case of a solicitor, for example, it is not necessary to demonstrate that in the event of the litigation leading to a successful outcome he would be the sole beneficiary. Even though his client may recover compensation for himself, the solicitor could still be regarded as benefiting, or potentially benefiting, from the case to the extent that a costs order should be made against him.[17]The Privy Council was prepared to hold that “ … generally speaking, where a non-party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit, he should be liable for the costs if his claim or defence or appeal fails. As explained in the cases, however, that is not to say that orders will invariably be made in such cases … ”.[18]It was also emphasised in the Dymocks case at [35] that it is one thing for a solicitor to be prepared to risk not recovering part of his fees, in the event of failure, but quite another for a secured creditor (or, presumably, in different circumstances a solicitor) to provide the necessary funding.[19]Since the principles were reviewed by the Privy Council, the position of solicitors has been considered by the Court of Appeal in Myatt v National Coal Board (No 2) [2007] 1 WLR 1559. In the light of that background, Dyson LJ explained the current position at [8]-[9]:
“In my judgment, the third category described by Rose LJ in the Tolstoy-Miloslavsky case should be understood as including a solicitor who, to use the words of Lord Brown in Dymocks Franchise Systems (NSW) Pty Ltd v Todd,is ‘a real party … in very important and critical respects’ and who ‘not merely funds the proceedings but substantially also controls or at any rate is to benefit from them’. I do not accept that the mere fact that a solicitor is on the record prosecuting proceedings for his or her client is fatal to an application by the successful opposing party, under s.51(1) and (3) of [the Senior Courts Act 1981], that the solicitor should pay some or all of the costs. Suppose that the claimants had no financial interest in the outcome of the appeal at all because the solicitors had assumed liability for all the disbursements with no right of recourse against the clients. In that event, the only party with an interest in the appeal would be the solicitors. In my judgment, they would undoubtedly be acting outside the role of solicitor, to use the language of Rose LJ.”
[20]One of the distinctions drawn is between “pure funders” and those who assist in funding litigation by way of business. “Pure” funders in the eyes of the court appear to be those who donate funds altruistically to enable a litigant to have access to justice – but without the prospect of personal gain for themselves: see e.g. Hamilton v Al Fayed (No 2), cited above. The concept would also embrace the relative who offers funds out of “natural affection”: see e.g. per Phillips LJ in Murphy v Young & Co’s Brewery Plc [1997] 1 WLR 1591, 1603-1604.[21]It was emphasised in the Myatt case at [13]-[14] that there is a need for parties who think that they may apply for an order for costs against solicitors to warn them at an early stage, so as to give them a reasonable opportunity for deciding whether or not to continue with the proceedings. Of course, as a matter of practicality, that can only apply in circumstances where there are good grounds, at that time, for thinking that the individual in question has gone beyond the normal scope of a solicitor’s role and become a funder.[22]It is clear that it is now necessary to take into account the effect of the introduction of the CFA regime and also the considerations of public policy which underlay those important reforms. They were explained conveniently by Lord Bingham in Callery v Gray [2002] 1 WLR 2000 at [1]-[2]:
“1. My Lords, for nearly half a century, legal aid provided out of public funds was the main source of funding for those of modest means who sought to make or (less frequently) defend claims in the civil courts and who needed professional help to do so. By this means access to the courts was made available to many who would otherwise, for want of means, have been denied it. But as time passed the defects of the legal aid regime established under the Legal Aid and Advice Act 1949 and later statutes became more and more apparent. While the scheme served the poorest well, it left many with means above a low ceiling in an unsatisfactory position, too well off to qualify for legal aid but too badly off to contemplate incurring the costs of contested litigation. There was no access to the courts for them. Moreover, the effective immunity against adverse costs orders enjoyed by legally-aided claimants was always recognised to place an unfair burden on a privately-funded defendant resisting a legally-funded claim, since he would be liable for both sides’ costs if he lost and his own even if he won. Most seriously of all, the cost to the public purse of providing civil legal aid had risen sharply, without however showing an increase in the number of cases funded or evidence that legal aid was directed to cases which most clearly justified the expenditure of public money. 2. Recognition of these defects underpinned the Access to Justice Act 1999 which, building on the Courts and Legal Services Act 1990, introduced a new regime for funding litigation, and in particular personal injury litigation with which alone this opinion is concerned … The 1999 Act and the accompanying regulations had (so far as relevant for present purposes) three aims. One aim was to contain the rising cost of legal aid to public funds and enable existing expenditure to be refocused on causes with the greatest need to be funded at public expense, whether because of their intrinsic importance or because of the difficulty of funding them otherwise than out of public funds or for both those reasons. A second aim was to improve access to the courts for members of the public with meritorious claims. It was appreciated that the risk of incurring substantial liabilities in costs is a powerful disincentive to all but the very rich from becoming involved in litigation, and it was therefore hoped that the new arrangements would enable claimants to protect themselves against liability for paying costs either to those acting for them or (if they chose) to those on the other side. A third aim was to discourage weak claims and enable successful defendants to recover their costs in actions brought against them by indigent claimants. Pursuant to the first of these aims publicly-funded assistance was withdrawn from run-of-the-mill personal injury claimants. The main instruments upon which it was intended that claimants should rely to achieve the second and third of the aims … are conditional fee agreements and insurance cover obtained after the event giving rise to the claim.”
[23]It is thus necessary for me not to lose sight of the public policy aim of discouraging weak claims and, in particular, enabling successful defendants to recover their costs in actions brought against them by indigent claimants. This is a factor which has relevance to the present appeals.[24]The CFA regime offers solicitors the opportunity sometimes to profit significantly from a piece of litigation. In these two cases, GMS plainly stood to gain if the litigation could be sustained. In such cases, where the proposed claimant is impecunious, it may take only a limited sum of money to launch the litigation and thus provide those opportunities. Yet the litigant himself may not be in a position to prime the pump with the necessary disbursements. That is the kind of situation where there is scope for ambiguity.[25]If the solicitor pays for the court fees (say) or expert reports at the beginning of a personal injury claim, on the basis that the client will reimburse him later, there is nothing inherently improper about that: see e.g. the observations of Lord Brown in Dymocks, cited above, at [35]. On the other hand, if the sums are paid out by the solicitor, whether from client account or office account, on the basis that they will be recovered from the other side, in the event of success, or not at all in the event of failure, that would be a different matter. The solicitor would indeed then have become a funder, albeit sometimes in only a small way. He may have the capacity to make the difference between the defendant in question being sued, with all the cost and vexation involved, and his being left in peace. What is more, in such a hypothetical situation the solicitor would clearly be providing the funds “in the way of business” – in effect laying out a modest investment with a view to significant gains for himself or his firm if the claimant succeeds (perhaps greater gains than those actually accruing to the client). For reasons of public policy, it may well be thought that any such funding role, on the part of a solicitor, should only be countenanced, and regarded as legitimate, if it carries with it at least the risk of having to pay the defendant’s costs, or part of them, if he is ultimately successful.[26]It will, in the nature of things, often be difficult for a vulnerable defendant, or for that matter his insurer, to establish what exactly has passed between the claimant and his solicitor. It may be necessary, therefore, to make an order for disclosure of documents or for the provision of further information.[27]In the Weddall case, the Judge dismissed the claim on the basis that the attack on the Claimant was carried out when the assailant was off duty and was in no sense acting in the course of his employment. He awarded the Defendant its costs on the standard basis up to 26 April 2010 and thereafter on the indemnity basis, with interest running at the rate of 8%. The Claimant and his solicitors were ordered to notify the Defendant’s solicitors in writing, within a week, whether there had ever been a relevant insurance policy in respect of the costs and, if so, the name and address of the insurer and the dates between which the policy was in effect. The Judge was thereby acknowledging, to an extent, a legitimate interest on the part of the successful Defendant in obtaining information about how the claim had been funded. That order was not complied with initially and this gave rise to the application made on 16 November 2010 to which I have already referred.[28]Where the court has power to order a third party to pay the costs of litigation, there is correspondingly the jurisdiction to require disclosure of information relevant to that issue. It is observed by the editors of Civil Procedure, Vol 1 (2011) at 48.2.2 that the court “necessarily has the ancillary power to order a party to proceedings, or the solicitors who had been on the record for that party, to disclose to the other party the names of those who have financed the litigation. Where the power exists to grant a remedy there must be, inherent in that power, the power to make ancillary orders to make the remedy effective”: see Abraham v Thompson [1997] 4 All ER 362; Raiffeisenzentralbank Osterreich AG v Crossseas Shipping Ltd [2003] EWHC 1381 (Comm).[29]When a judge is asked to make an order that a solicitor provide further information in circumstances such as these, there is clearly a considerable element of judicial discretion involved in the exercise. Some assistance was provided by Blake J in Thomson v Berkhamsted School [2009] EWHC 2374 (QB) as to some of the factors which would be appropriate to take into account in exercising that discretion. He made the following comments at [19]:
“In considering whether, in the light of the particular facts and issues in the case, disclosure is necessary for the fair determination of the application I conclude that I should consider: (i) the strength of the application as it now appears unassisted by disclosure; (ii) the potential value to the fair determination of the application of the documents of which the claimant seeks disclosure and whether they are likely to elucidate considerations highly probative of the exercise of the court’s discretion, or threaten to drag the application into a side alley of satellite litigation with diminishing returns for the overall issue; (iii) whether on a summary assessment it is obvious that the documents for which disclosure is sought will be the subject of proper legal professional privilege; (iv) whether the likely effect of any order the court might be minded to make will be proportionate and just in all the circumstances.”
It is clear that Judge Moloney QC had those considerations in mind and he referred to the judgment in his Weddall ruling, which was rather more detailed than that in Flatman. He went on to list and consider the four points identified by Blake J. (i) the strength of the application as it now appears unassisted by disclosure; (ii) the potential value to the fair determination of the application of the documents of which the claimant seeks disclosure and whether they are likely to elucidate considerations highly probative of the exercise of the court’s discretion, or threaten to drag the application into a side alley of satellite litigation with diminishing returns for the overall issue; (iii) whether on a summary assessment it is obvious that the documents for which disclosure is sought will be the subject of proper legal professional privilege; (iv) whether the likely effect of any order the court might be minded to make will be proportionate and just in all the circumstances.”[30]The learned Judge concluded that the information sought by the Defendants would seem to be “important probative matters on the question whether those costs should be paid”. He also took the view that it was not so plain and obvious that legal professional privilege would arise that this consideration would in itself be a bar to the success of the applications. As to proportionality, he considered that the time and trouble that would be expended by the solicitors in answering the relevant questions would be slight in proportion to the importance of the issue of costs to the Defendants. Taken by themselves, of course, these factors tend to weigh in favour of the Appellants’ case.[31]The Judge went on, however, to express concern that the effect of the application in the Weddall case “ … could be to undermine or perhaps even to destroy the workings of the CFA system as it currently runs”. Indeed, he attributed the following stance to the Defendants’ representatives:
“What they are saying is that solicitors who operate the CFA system and do nothing more than is necessary or at any rate appropriate for the bringing forward of their client’s case can nevertheless find themselves liable for costs, which would of course powerfully deter them from assisting people, perhaps impecunious people, in bringing their cases. The third party costs jurisdiction is an exceptional one, yet here it is sought to be involved in a case that is not exceptional.”
The learned Judge observed that the arguments of policy and principle were so strongly against the application that he considered it wholly improbable that, even if they obtained the evidence they were seeking, they would ultimately succeed in obtaining an order for third party costs.[32]I believe that there may be a degree of misunderstanding here as to the effect of the submissions made on behalf of the Appellants. They are not concerned to establish that an order for third party costs should, in any sense, become the norm in CFA cases. They confine themselves to applying the test approved in the appellate authorities from which I have made citations above; that is to say, they would only make an application for third party costs if the evidence revealed to them discloses that the solicitors in question have stepped outside the “normal role” of a solicitor (including, of course, the normal role of a solicitor involved in CFA litigation). In other words, they would only seek to make the application if the solicitor is shown to have become a funder of litigation “in the way of business”.[33]Furthermore, the learned Judge made the point that the Defendants would have “ … at least to disclose some sort of prima facie case that the documents or information in question exist or might exist”. As he observed, “mere speculation is fishing”. It is true that there is very little concrete which the Defendants’ solicitors can offer in support of the application, but that is because the information sought has not been forthcoming. So far, the case is based on inference, as I have already indicated. Where they are prevented from obtaining a full picture, however, it is surely legitimate to draw an inference, provided that it is a reasonable inference, from the limited information available.[34]There has been some outlay in respect of disbursements on behalf of litigants who appear, on the face of it, to be impecunious. If the solicitors funded those disbursements only on a temporary basis, and are able to point to contractual arrangements between themselves and their clients that are inconsistent with their truly being “funders”, then no doubt the Defendants and their advisers would retreat and decide to make no application for a third party costs order. They only persist with this appeal for the reason that they have not been satisfied so far by the provision of the limited information requested – which cannot, as Judge Moloney observed, be unduly onerous to provide.[35]The Judge also picked up in his ruling an observation from the notes in Civil Procedure at 48.2.1 to the effect that a judge should be alert to the possibility that an application for costs against a non-party has been motivated by “resentment or inability to obtain an effective order for costs against a legally aided litigant”. I see no reason to suppose that the Defendants, or their insurers, in the present appeals are so motivated.[36]The learned

Judge concluded his judgment with these words:

“If such an application of the present sort can properly be made in this case it could properly be made in every such case and it would add a further turn to what has been referred to in another context as the artificial saraband of the litigation.”
As I have already indicated, I do not believe it is entirely fair to attribute to the Appellants’ arguments the “floodgate” consequences apprehended by the Judge. Such applications tend to be, as Lord Brown commented in Dymocks, “fact-sensitive”. Where there are reasonable, albeit slender, grounds to suspect that a solicitor has stepped outside the ordinary role of a litigation solicitor, it may be appropriate to make an order. That is unlikely to be a situation that arises in every piece of CFA funded litigation. I understand, for example, that it is nowadays unusual not to take out ATE insurance. The point is unlikely, for this reason alone, to arise in the majority of cases.[37]The grounds of appeal in the Weddall case include the following propositions: i) The Judge misdirected himself … by requiring the Defendant to show that any future application for a third party costs order would be successful. … By requiring the Defendant to show that a third party costs order would be made, he set too high a threshold and applied the wrong test. ii) Alternatively, the Judge was wrong to decide, in the absence of information as to how the Claimant’s claim was funded, that any future application for third party costs against the Claimant’s solicitor would be unsuccessful. iii) In refusing the Defendant’s application for an order that the Claimant disclose information relating to the funding of the claim, the Judge failed correctly to exercise his discretion by reason of the following factors: a) The Judge failed to take account of the guidelines in Dymocks, cited above, as to when a third party costs order would be made. b) Alternatively, the Judge failed to take sufficient account of the guidance in Dymocks. c) Alternatively, the Judge wrongly applied the guidelines in Dymocks in concludingthat a third party costs order would not be made. Such a determination was premature in the absence of information showing how the claim had been funded. d) The Judge wrongly held that this was not an “exceptional” case. … As information as to funding had not been disclosed, the Judge could not conclude whether or not this was an exceptional case. e) The Judge misapplied the Court of Appeal decision in Myatt, cited above, in holding that a third party costs order would not be made against a solicitor unless the solicitor acted improperly or for a “collateral benefit”. … f) The Judge did not take account of the disadvantage faced by parties in the position of defendants who are unable to recover costs against impecunious claimants, where the claimants’ solicitors act under a CFA and the claimant has no ATE. g) By contrast, the Judge took too much account of the position of solicitors acting under a CFA, and the consequence of a third party costs order on the CFA regime. … h) Alternatively, the Judge wrongly applied a “floodgates argument”, in holding that an order for disclosure of information as to the funding of this case would “destroy” the CFA regime as it runs at present. … iv) There was no evidential basis for the Judge’s finding that disclosure of information as to funding would “destroy” the CFA regime. … Solicitors are able to obtain ATE insurance cover and no such order would be made where that opportunity was taken. … Some solicitors acting under a CFA already offer clients an indemnity against adverse costs orders: see e.g. Sibthorpe v Southwark LBC [2011] EWCA Civ 25. v) The Judge was wrong to hold that the Defendant had failed to adduce sufficient evidence that the Claimant’s solicitors had funded the case. The Defendant could not reasonably be expected to adduce specific evidence that the solicitors had funded the case: the very purpose of the application was to obtain evidence to discover whether this was the case or not. These grounds are somewhat prolix and repetitive. (I hasten to add that they were not drafted by Mr Brown.) I propose to address the central issues rather more briefly.[38]I am naturally conscious of the Judge’s considerable experience of CFA funding in litigation of this kind and of case management more generally. Nevertheless, on this occasion I have come to the conclusion, without addressing each ground seriatim, that the Judge did to an extent misdirect himself in the course of an ex tempore judgment, in the sense that he overestimated the consequences of the Defendants’ applications for the day to day working of the CFA regime as a whole. He may have allowed himself, therefore, to be unduly influenced by a public policy consideration that did not actually arise. These appeals turn largely upon the particular facts. Either GMS were funders of these cases or they were not.[39]In these circumstances, it falls to me to exercise the court’s discretion afresh on the information before me. For the reasons identified in the evidence of Mr Alan Rennie, I consider that there is sufficient material available to justify ordering the disclosure of the documents and/or information which the Defendants now seek. Subject to any genuine issues of legal professional privilege, I consider that openness is the best policy. Whether, following such disclosure, either of the Defendants will see fit to make an application for a third party costs order I cannot tell. Any such application would have to be considered on its merits. That is a matter for the future.[40]In all the circumstances, I will allow these appeals and grant the orders sought.[41]Some points of detail were raised at the hearing. It was submitted that the costs order below was inappropriate, since it should have been made in respect of the individual Claimants rather than GMS who are not (yet) parties. That is probably right, but no doubt the order will be sorted out as a result of agreement or further (written) submissions once this judgment has become available.[42]There is also a minor dispute as to whether GMS the partnership should be the respondent to these applications or its associated corporate entity. That is a rather sterile debate and I do not believe that the matter is incapable of being sorted out with sensible co-operation between the parties. The case cannot be decided on a technicality, where the Appellants are in no way to blame for any confusion there might be.

Cited in 1 later judgment