Andrew Denny and James Neill, Allen & Overy LLP consider the government’s consultation on the proposed rules which will require individuals to produce financial information at the outset of a judicial review claim.
This post will be of interest to all those advising on the funding of judicial review claims.
The government consultation on proposals for the rules setting out the financial information required from a claimant at the outset of a claim for judicial review (see Legal update, Consultation published on the provision and use of financial information in relation to judicial review) closed on 15 September 2015. Whilst the proposals contain no real surprises (the significant changes having already been set out in the underlying statutory provisions), there is a lack of clarity in the proposals with regards to exactly what information a “body corporate” will now be expected to produce when applying for judicial review. Incorporated associations formed to bring a judicial review should pay close attention to the rules when finalised and will need to make their members aware of the risk of potentially far-reaching enquiries that could be made by the court into individual members’ financial circumstances.
What remains to be seen is whether the provision of this information will result in an increase in third party costs orders. It is hard to see the government’s attempt to increase transparency in third party funding of judicial review proceedings as designed to achieve anything other than that result. However, it is not clear how this will work in practice, in particular how such information will be used by the court to make orders as to costs, given that the proposals also make it clear that such information will not be made available to the defendant.
The backdrop to the consultation – Part 4 Criminal Justice and Courts Act 2015
The consultation follows on from the enactment of Part 4 of the Criminal Justice and Courts Act 2015 (CJCA), and in particular sections 85, 86 and 88 (those provisions were enacted in April 2015 but are not yet in force).
The government states in its present consultation that “those provisions did not affect the law on when costs should be awarded against a third party”. However, even if in principle that is right in relation to the test as to whether to make an order against a third party, it is clear that the new provisions do contain material changes to the way in which the High Court and Court of Appeal (or the Upper Tribunal when exercising its judicial review jurisdiction) determines applications for costs in judicial review proceedings.
In summary, section 85 CJCA introduced a requirement into the Supreme Court Act 1981 for a claimant when making an application for permission to apply for judicial review to supply financial information about the funding of that claim. Section 86 imposed a duty for the High Court, Upper Tribunal or Court of Appeal to have regard to that information when determining a costs application following a claim for judicial review. Section 88(5) makes provision for the level of information to be provided by a claimant seeking a costs capping order.
The details of what information is to be supplied is to be set out in rules of court, but pursuant to section 85(3) the type of information that could be specified in the relevant rules on a permission application includes:
“(a) information about the source, nature and extent of financial resources available, or likely to be available, to the applicant to meet liabilities arising in connection with the application, and
(b) if the applicant is a body corporate that is unable to demonstrate that it is likely to have financial resources available to meet such liabilities, information about its members and about their ability to provide financial support for the purposes of the application”.
The government’s detailed proposals
The current consultation is not on the principle of a claimant having to provide information about third party funding (that ship has already sailed), but on the level of detail of that information.
In summary, the information which the government now proposes as mandatory on a permission application will take the form of a declaration of financial resources, which will only be available to the court. The claimant will be subject to a duty to update the court if there is a material change in their financial circumstances. A threshold figure of £1,500 is proposed for the disclosure of third party funding. The threshold will apply to the total of all contributions made from the same source.
An applicant must also provide a more detailed picture of their financial circumstances when applying for a costs capping order. It will be additional to the information provided when applying for permission for judicial review and will be provided to the defendant.
Lack of clarity regarding bodies corporate
On the face of it, these proposals appear relatively unsurprising in light of the enactment of Part 4 CJCA. However, specifically in respect of the level of information to be provided by bodies corporate, the proposals arguably downplay the significance of the information being sought and would leave the court with a wide discretion to make far-reaching enquiries into the financial circumstances of shareholders.
In the case of both permission applications and applications for a cost capping order, a mandatory minimum level of information is required from a “corporate body” that is “unable to demonstrate that it is likely to have sufficient financial resources to meet the liability arising from an adverse costs award”. This minimum amount of specified information will be about its members, and will include their:
- Interest in and connection to the applicant (for example, shareholding).
The government suggests that the information that would have to be provided would be similar to that which, for example, companies are required to keep as part of their register of members pursuant to section 113 of the Companies Act 2006, and “so it should not be unduly onerous to provide it.”
However, for both types of application, the government’s proposals also suggest that the court would be left with a wide discretion to make further enquiries as to the financial circumstances of members of those bodies corporate.
The court already has the power to order disclosure of the identity of a funder on being satisfied that the party in question is being financially supported by another (for example, because he does not have the means to pay his own lawyers: see Raiffeisen Zentralbank Osterreich AG v Crossseas Shipping Ltd and others  EWHC 1381 (Comm)). The court also has a discretion under CPR 46.1 to order disclosure against a non-party. So the ability to identify a funder of litigation and the power to force that funder to reveal the extent of his or her financial control of litigation probably already exists under the present rules. But that power would only be exercised if the opposing party had made an application to the court. That is very different to a situation here where the court is expected to act on its own initiative, and where the successful party will not have sight of the information to which the court has access. Merely by being a member of a body corporate with significant financial resources would not be sufficient to be the subject of such an application (whether that application is for disclosure or the costs order itself).
Under the new proposals, it is not clear how far those court-instigated enquiries might go, particularly when the court determines who should bear the costs of judicial review proceedings (or at what stage those enquiries might take place). To expect the court on its own initiative to embark on its enquiries (without the successful defendant’s involvement) is an unusual role expected of the court, and it is not clear how it would fit into the current process when the court comes to deal with costs at the end of a judicial review process. One can foresee a significant amount of delay whilst such enquiries are made, and it is not clear whether or how an opportunity would be afforded to members of a body corporate to either object to disclosure or make representations if the court was minded to impose a third party costs on them on them.
In the case of applications for costs capping orders, the proposals contain a discretion for the court to order further information to be provided if it deems it appropriate, “such as if it wishes to consider whether the claimant might seek further capital from its members if it were to face costs at the end of the proceedings”. But there is no further indication about the level of enquiry that might be undertaken by the court when applying section 86 CJCA when determining a costs application.
It is correct that in relation to the first, minimum category of required information the proposals do not go beyond what is currently required under the Companies Act 2006. However, the discretion afforded to the court to make further enquiries and potentially to require a claimant to disclose information about its own members’ financial situation when faced with an adverse costs order will constitute a significant additional risk for members of a “body corporate” formed to bring a judicial review challenge and the likelihood of further procedural complexity when determining costs orders. The government in this consultation does not expressly acknowledge the significance and extent of this discretion nor provide any real detail about the way it will be exercised by the courts.