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Can you pay your litigation bills? You might be required to show proof…

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18/03/2014

In a group action for damages for defects in breast implants [1], the claimants were concerned about the financial position of the lead defendant (Transform). They wanted to see Transform’s liability insurance to find out if it could finance its way through the litigation and, ultimately, pay damages and costs. To obtain this information, they applied to the court for further information and clarification using CPR 18 and CPR 3.1 (2) (m).

On the evidence, the judge found that Transform might not be able to fund the litigation – or pay damages or costs. Were Transform to become insolvent during the proceedings, the court would have to make substantial adjustments to the running of the group action, including the establishment of new sample cases, a review of the case management directions and, possibly, a new trial date. By not providing the insurance details, Transform was therefore risking wasted costs and court time at the public’s expense.

The key issue was whether the court could use CPR 18 or CPR 3.1(2)(m) to order disclosure of the insurance details [2].

The claimants’ application under CPR 18 for clarification or further information was quickly dismissed on the basis that Transform’s insurance position – and the requested information about it – had nothing to do with the matter in dispute in the group action.

Next for consideration was CPR 3.1 (2) (m), which allows the court to ‘take any other step or make any other order for the purpose of managing the case and furthering the overriding objective’. The Judge found that:

  • CPR3.1(2)(m) allowed disclosure of information relating to the litigation funding – but not the payment of damages and costs;
  • there was an obligation under the Overriding Objective to deal with the case in a way which is proportionate to the financial position of each party [3] (CPR 1.1(2)(iv)). To do that, the court needed to know Transform’s financial position;
  • the financial information was necessary to help the claimants decide whether to pursue Transform. It was also needed to ensure effective case management; and
  • CPR 3.1(2)(m) must therefore be taken to include the power to order parties to provide such information.

In ordering Transform to deal with the required information in a witness statement, the judge ensured she could manage the case in the light of adequate information and avoid wasted court time and costs without either prejudicing Transform’s position or giving the claimants an unfair advantage.

What does this mean for litigants? Courts are now obliged to exercise strict case management and will not tolerate any activities that risk wasted court time and wasted costs. This decision flags up the court’s willingness to review a party’s ability to finance its claim or defence insofar as impecuniosity might affect the management of court proceedings. If your business accounts are not in good health – prepare to be asked for proof that you can pay your bills.

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[1] XYZ v Various companies (PIP Breast Implant Litigation) [2013] EWHC 3643 (QB) (22 November 2013)
[2] CPR 18: http://www.justice.gov.uk/courts/procedure-rules/civil/rules/part18
CPR 3.1(2)(m): http://www.justice.gov.uk/courts/procedure-rules/civil/rules/part03#3.1
[3] CPR 1.1(2)(iv): http://www.justice.gov.uk/courts/procedure-rules/civil/rules/part01

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