The Singapore Court recently delivered its judgment in Hyflux Ltd (in compulsory liquidation) v Lum Ooi Lin [2023] SGHC 113 ("Hyflux"). Despite the litigation funding landscape being slightly different in Singapore, the reasoning in Hyflux is likely to be persuasive in the Cayman Islands, as well as other common law jurisdictions.
First instance decision
The Senior Assistant Registrar ordered the Plaintiff to furnish security for the Defendant's costs for the period until the filing and/or exchange of affidavits of evidence-in-chief by way of (a) the provision of a costs undertaking jointly by the litigation funders on terms satisfactory to the Defendant ("the Undertaking"); (b) or a banker's guarantee on terms satisfactory to the defendant; (c) or a solicitor's undertaking on terms satisfactory to the defendant; or (d) if the parties are unable to agree on the terms of the costs undertaking, banker's guarantee, or solicitor's undertaking, then the security shall be provided by way of payment into court. The Plaintiff appealed against the order of the Senior Assistant Registrar's decision as to the form of security. Specifically, the Plaintiff sought to restrict the form of the security to the Undertaking only.
The SGHC decision
The High Court considered two novel issues: (a) whether a plaintiff was restricted to any fixed form of security for costs; and (b) whether the Undertaking was an adequate form of security1.
The Court held that the Plaintiff was not restricted to any fixed form of security and it was the Plaintiff's burden to demonstrate that the proposed form of security was adequate2.
The Undertaking was found to be adequate because:
- it was irrevocable and unconditional;
- there was public information available to confirm the litigation funder had sufficient assets to satisfy the security;
- there was little to no risk of the litigation funder not honouring the Undertaking; and
- it contained provisions that narrowed the scope of points the funders could rely upon in seeking to resist enforcement.
Litigation Funding Landscape in the Cayman Islands
The litigation funding landscape in the Cayman Islands has seen major developments over the past 6 years3. The Private Funding of Legal Services Act (2020 Revision) (the Cayman Act) was enacted to provide adequate protections to facilitate better access to justice. Since then, litigation funding has been seen as an important tool for promoting access to justice.
Since the introduction of the Cayman Act, the court has not handed down a decision detailing the circumstances (if any) in which the costs of litigation may be secured by a funder as a matter of Cayman Islands law. Nevertheless, the Cayman courts are likely to look to other common law authorities on this issue and, in the absence of specific Cayman Islands guidance on point, it may be wise for litigants and funders to reference the approaches other common law jurisdictions, such as Singapore.
Conclusion
The decision and reasoning in Hyflux is interesting in the context of litigation funding generally, and builds on guidance in relation to non-party costs orders, for example.
Hyflux is a helpful decision for at least the following reasons:
- So long as a plaintiff's proposed security is adequate, the purpose of the defendant's security for costs application has been met.
- Once the court can be satisfied that the litigation funder can prove it has the means to pay, will honour the payment without the need for enforcement and has sufficient assets to secure the undertaking, it is likely to be considered adequate.
- The Singapore High Court's judgment provides useful guidance for parties who are considering providing alternative forms of security for costs.
It is trite law that the Court has a discretionary power to order, at any stage of the proceedings, a person in the position of a plaintiff to give security for his or her opponent's costs.
This decision is important for funded parties and litigation funders, as the ability to provide security by way of a costs undertaking, rather than an upfront payment of funds, is obviously helpful from a cashflow perspective. There will be commercial risks in taking this approach, but it is likely that more parties with cases funded by litigation funders will seek to put forward similar undertakings as a recognised and legitimate form of security.
Footnotes
1 In relation to form of security, Hargrave J in the Victoria Supreme Court decision of DIF III Global Co-Investment Fund, LP v BBLP LLC [2016] VSC 401 undertook an extensive analysis of the English and Australia case law, and laid down the following principles to guide a court in the determination of the form of security for costs (see DIF III Global at [40]). Hyflux summarised the principles at para 12.
2 The court found that there will be some forms of security that are more readily characterised as being adequate either due to their inherent advantages or historical usage. It may be easier for a plaintiff to establish adequacy in respect of these forms of security. However, this does not mean that forms of security outside of these traditional ones can never be adequate; it all depends on their characteristics and how they apply to the facts of the case at hand [para 26].
3 https://www.conyers.com/publications/view/a-company-v-a-funder-unreported-23-november-2017/
https://www.conyers.com/publications/view/funding-the-costs-of-litigation-a-comparative-analysis/
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