High Court Orders Security For Costs Against Member Of Association Of Litigation Funders

In a recent decision in the group litigation brought in respect of the Ingenious Media film partnerships, the High Court has granted the defendants' application for security for costs against the claimants' litigation funder, Therium: Rowe v Ingenious Media Holdings PLC [2020] EWHC 235 (Ch).

The decision follows the court's approach to security applications against litigation funders in the RBS Rights Issue Litigation [2016] EWHC 3161 (Ch) (considered here) and is the first successful such application against a member of the Association of Litigation Funders.

As in the RBS case, it was a significant factor in granting security that, if the claim failed, the claimants would each be liable for only a proportion of the defendant's costs, in light of the court's order providing for several rather than joint liability. It was also significant that the funder had provided no evidence as to its financial position, and therefore the court could not be confident that it would meet any order for costs made against it. Whilst some value was attributed to the after-the-event (ATE) insurance policies the claimants had in place in respect of their potential adverse costs liability, those policies were not a complete answer to the application given the risk that they would not respond in full.

Damien Byrne Hill, John Mathew and Holly McCann consider the decision further below.

In another recent development affecting litigation funders and defendants to funded claims, the Court of Appeal has recently found that there is no fixed limit on a funder's liability for adverse costs when the claim fails. See our blog post on that decision here.

Background

The applications were made as part of the Ingenious Litigation, in which claims are brought by over 500 individual claimants in relation to their investments in the Ingenious Media film partnerships. The Ingenious partnerships were promoted from 2002 to 2007 as tax-efficient vehicles involved in the production of films and video games, through which investors could set off the trading losses of the relevant partnership against their own taxable income. HMRC challenged the tax treatment of the partnerships, and that challenge was upheld on appeal to the First Tier Tribunal and the Upper Tribunal. The result is that, subject to any further appeal, no loss relief is available to investors.

The claimants seek to recover their losses from various companies and individuals associated with the Ingenious Media group. A large number of the claimants also claim against the financial institution which provided lending to facilitate the investments, and some of the claimants claim against the...