Abraham & Anor v Thompson & Anor

A court should not use its inherent jurisdiction to require security for costs, backed by a stay, where the applicable rules do not permit security and a bona fide individual claimant does not fall within their prescribed categories. An impecunious claimant, including one receiving third-party support, ordinarily retains untrammelled access to the court.

A stay before trial may be justified only where there is a clearly demonstrated abuse of process. The possibility that a future costs order may be difficult to enforce against a funder is insufficient. A prospective application under section 51 of the Supreme Court Act 1981 does not justify pre-trial disclosure to identify a possible funder.

The claimant appealed from an order of Lloyd J in the Chancery Division requiring him to disclose whether a third party had provided a substantial part of the funding for his action against the fifth and sixth defendants.

The defendants suspected that offshore trusts connected with the claimant might be funding the litigation. They sought the information so that they could seek an undertaking or a stay unless provision was made for their possible future costs. The claimant maintained that the court had no jurisdiction to make the disclosure order and that the application was speculative.

The Court of Appeal had announced on 22 May 1997 that the appeal would be allowed. Its later reasons addressed whether an inherent jurisdiction could support disclosure and a stay in advance of any determination of costs under section 51 of the Supreme Court Act 1981.

1. Appeal allowed. Potter LJ, with whom Millett LJ agreed, held that the disclosure order should not have been made. There was no established jurisdiction to obtain disclosure merely to facilitate security, an undertaking, or a possible future costs order against an unidentified funder.

2. Section 51(1) of the Supreme Court Act 1981 operates when costs have been incurred and the court must decide who should pay them. It permits an appropriate investigation of a non-party funder at that stage. It does not create an ancillary pre-trial power to identify a funder in aid of security for costs which may never be payable.

3. C.T. Bowring & Co (Insurance Ltd) v Corsi Partners Ltd [1994] 2 Lloyd's Rep 567 established that Order 23, together with section 726 of the Companies Act 1985, is a complete regime for security for costs. The inherent jurisdiction could not be used to fill an asserted omission in that regime by imposing a stay unless a funder gave security or an acceptable undertaking.

4. The starting point was an individual claimant's right to pursue a properly pleaded and bona fide claim. The risk of an adverse costs order, execution and bankruptcy is the ordinary sanction. A stay is a serious fetter on access to the court. The inherent jurisdiction permits a stay to prevent abuse of process, but it does not permit protection against the ordinary risk of irrecoverable costs simply because enforcement against a maintainer may prove difficult.

5. The evidence did not show that any suspected trust would be unable or unwilling to meet a costs order, or that any support lacked a legitimate basis. The application was a fishing expedition likely to generate satellite litigation shortly before trial. The defendants also had an indemnity from Planal. The appropriate course was to let the action proceed and, if necessary, consider section 51 after trial.

6. No order as to costs.

• Court of Appeal (Civil Division): Allowed the claimant's appeal in [1997] EWCA Civ 2179 and set aside the disclosure order.

• Chancery Division: Lloyd J ordered on 12 May 1997 that the claimant disclose on affidavit whether a third party had provided substantial funding for the action.