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Sense and strategic sensitivity: withholding disclosure of funding arrangements

Posted on 10 January 2022

In a decision that will be welcomed by both funders and funded parties in ensuring that confidential merits assessments remain confidential, the Competition Appeal Tribunal has refused disclosure of redacted parts of an ATE policy and litigation funding agreement. While the decision in Kent v Apple Inc & Anr [2021] CAT 37 arose in the context of an application for a collective proceedings order, the finding that disclosure of funding arrangements would give the opponent an unfair tactical advantage and should be refused on the grounds of strategic sensitivity, is also of relevance in commercial litigation more generally.

Background

Ms Kent, as proposed class representative (PCR) had applied for a collective proceedings order on behalf of millions of consumers who, she contended, had suffered loss due to Apple's allegedly anti-competitive behaviour in relation to app distribution and payment processing services.

Under the Competition Appeal Tribunal rules, in determining whether to authorise the PCR and make a collective proceedings order the Tribunal must consider whether the PCR will be able to pay the proposed defendant's costs if ordered to do so. The PCR's ability to fund their own costs is also relevant to the decision and, as a result, PCRs will typically disclose substantial aspects of the funding arrangements that they have in place.

In support of her application, Ms Kent therefore served copies of a litigation funding agreement, an after-the-event (ATE) insurance policy, a litigation plan and a litigation budget to trial. However, the premiums payable under the ATE policy and certain sums set out in the litigation funding agreement were redacted on the grounds of confidentiality, privilege and strategic sensitivity. Apple objected to the redactions, arguing that it required further information.

Decision

The Tribunal noted that in considering such applications for disclosure, three issues are likely to arise:

  1. Are the documents sought relevant?
  2. If the documents are relevant, are they privileged? Privilege entitles a party to withhold certain confidential documents from disclosure and can arise in the context of litigation, or where legal advice is sought or given. Although the authorities indicate that litigation privilege will not cover a party's funding arrangements, there is more scope to contend that legal advice privilege may apply.
  3. However, even if a document is relevant and not privileged, then the court may still refuse disclosure as a matter of discretion on the grounds of "strategic sensitivity", taking account of any unfair tactical advantage that disclosure may give to the other party.

ATE premiums

The Tribunal observed that given the structure of the funding arrangements, it was not necessary to know the level of the premiums in order to assess whether Ms Kent would have adequate funds to meet her costs to trial. The disclosure sought was therefore not relevant to the issues at the collective proceedings order hearing.

Further, although in this case the Tribunal was not satisfied on the evidence that the premiums were covered by legal advice privilege, it observed that an assessment of risk and merits is not necessarily the same thing as legal advice. Accordingly, while the Tribunal was not satisfied that disclosure of the premiums would reveal the legal advice given, it might give an insight into the insurers' perceptions and their thinking about the strength of the case, conferring a tactical advantage on Apple that outweighed any peripheral relevance the premiums might have.

Funding agreement

The disclosure sought in relation to the litigation funding agreement related to an excess layer of solicitors' fees above the agreed budgeted amounts, which were not covered by the funder and which were therefore at the solicitors' risk. However, again the Tribunal took the view that Apple had failed to explain why disclosure of this "excess" was relevant to the issues in the collective proceedings order hearing. Further, the Tribunal considered that, in principle, disclosure of the excess might reveal legal advice on the merits of the claim, and thus may be privileged. In any event, disclosure of the excess was likely to reveal the solicitors' assessment of risk and would give Apple the opportunity to engage in litigation tactics by driving up costs beyond budgeted amounts so as to put pressure on Ms Kent's solicitors.

The disclosure application was therefore refused.

Conclusion

This decision will be welcomed by both funders and funded parties in collective actions before the Competition Appeal Tribunal, who will naturally wish to avoid disclosure of any information that may give an indication as to their views of the merits of their case, notwithstanding the need to demonstrate an ability to satisfy costs orders and meet their own costs of proceedings. Even if information in funding arrangements does not meet the threshold required for the protection of legal advice privilege, funders and funded parties will be reassured that the court may well still refuse disclosure on the grounds of "strategic sensitivity".

The "strategic sensitivity" defence may also prove useful to parties in general commercial claims, particularly those facing applications for security for costs and requests for disclosure of evidence demonstrating their ability to fund proceedings.

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