Kerry Underwood

NON-PARTY COSTS ORDERS AND DISCLOSURE

leave a comment »


Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

In

Rudd v Bridle & Anor [2019] EWHC 1986 (QB) (24 July 2019)

the Queen’s Bench Division of the High Court refused a claimant’s application for disclosure of the defendants’ funding arrangements, and in doing so set out the relevant legal principles.

The purpose of the application was to obtain information to support an application for a costs order against a non-party under section 51(3) of the Senior Courts Act 1981.

Here, the claimant succeeded in part against the first individual defendant, but failed against the second company defendant.

The losing individual was ordered to pay half of the claimant’s costs, but to pay, on the indemnity basis, the claimant’s costs in relation to the failed action against the company.

The claimant sought an order relating to “the identity of the individuals, companies or entities who have financed or provided financial support to the defendants or either of them during and in relation to the present litigation and related documents.”

 

The court set out the general principles:

 

Funding Disclosure

Legal framework

8. The basic legal framework is not in dispute. The court has power to make orders for costs against non-parties. This is part of the general power to make orders as to the costs of proceedings which is conferred by s 51(3) of the Senior Courts Act 1981: see Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965. There are many circumstances that could in principle justify a third-party costs order, but commonly, third parties are targeted on the basis that they have funded an unmeritorious claim or defence.

9. The factors to be considered, and the relevant principles, have been the subject of consideration in a substantial number of reported and unreported cases, including Symphony Group Plc v Hodgson[1994] QB 179 (CA), Hamilton v Al Fayed (No 2)[2002] EWCA Civ 665[2003] QB 1175Dymocks Franchise Systems (NSW) Pty Ltd v Todd & Others [2004] UK PC 39 [2004] 1 WLR 2807,Petroleo Brasileiro SA v Petromec Inc [2005] EWHC 2430 (Comm) [2005] All ER (D) 48, and Deutsche Bank AG v Sebastian Holdings Inc [2016] EWCA Civ 23. The general principles that can be extracted from these authorities include the following:

(1) The power to make a costs order against a non-party is exceptional in the sense that such orders are not usually made. Such an order may only be made where there has been conduct by the non-party such as to render the order just and reasonable: see Symphony Group at 192H (Balcombe LJ);

(2) The power will not generally be used against “pure funders”, that is to say persons who provide financial support to a litigant but who have no personal interest in the litigation, who do not stand to benefit from it, who do not fund the litigation as a matter of business, and who do not seek to control its course: Dymocks [25(1) – (3)] (Lord Brown).

10. The modern jurisprudence is well summarised in Turvill v Bird [2016] EWCA Civ 703[2016] BLR 522, where Hamblen LJ (with whom Gross LJ agreed) said this:

“24. A number of recent authorities have stressed that this is a jurisdiction which must be exercised in the interests of justice and that its exercise should not be overcomplicated by authority.”

He was referring, among others, to these observations of Moore-Bick LJ in the Deutsche Bank case at [62]:

“We think it important to emphasise that the only immutable principle is that the discretion must be exercised justly. It should also be recognised that, since the decision involves an exercise of discretion, limited assistance is likely to be gained from the citation of other decisions at first instance in which judges have or have not granted an order of this kind.”

11. Hamblen LJ went on to say this:

“27. The authorities illustrate “the variety of circumstances in which the court is likely to be called upon to exercise the discretion” and “the kind of considerations upon which the court will focus”, but are not to be treated as providing “a rulebook”. The kind of considerations illustrated by the authorities include the following:

(1) Whether the non-party funds the proceedings and substantially also controls or is to benefit from them and is the “real party” to them;

(2) Whether the non-party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit;

(3) Whether there is impropriety by the non-party in the pursuit of the litigation.

(4) Whether the non-party causes costs to be incurred….

28.(1) (2) and (3) are all examples of circumstances in which non-party costs orders have been made. Generally (4), causation, is also required “to some extent” (per Morritt LJ in Global Equities Ltd v Globe Legal Services Ltd [1999] BLR 232) although it is not a necessary pre-condition, as held in Total Spares & Supplies Ltd v Antares SRL [2006] EWHC 1537 (Ch). In that case, however, there was still a causal link between the non-party’s actions and the claimant’s costs recovery in that he had deprived the claimant of any realistic opportunity of recovering its costs. The link was with the recovery of costs rather than the incurring of costs, but in both cases the claimant has to bear costs in circumstances where he otherwise would not have done.”

12. Procedurally, a court considering whether to exercise the power to make a third-party costs order must add the third party to the proceedings for the purposes of costs only, and give the person a reasonable opportunity to attend a hearing at which the court will consider the matter further: CPR 46.2(1). There may of course be a need to identify third parties, as a preliminary step towards engaging them in this process. Funders may be covert, or anonymous. It is clear that the court has a discretionary power, ancillary to its costs jurisdiction, to require a party to disclose to the other party the names of those who have financed the litigation: Abraham v Thompson[1997] 4 All ER 362, 368 (CA), Raiffeisen Zentralbank Osterreich AG v Crossseas Shipping Ltd[2003] EWHC 1381 (Comm)[7] (Morison J). This is the power relied on by the claimant on this application.

13. There is authority that this power extends to directing the disclosure of information going beyond the mere identity of the third-party funder. The court can make whatever ancillary orders will make the section 51 remedy effective, so that in an appropriate case the court may exercise a discretion to order more against the party who has been funded than simply the disclosure of the names of those individuals who have funded the litigation: see Automotive Latch Systems Ltd v Honeywell International Inc [2008] EWHC 3442 (Comm) [13], [16] (Flaux J).

14. The disclosure sought and ordered in the Automotive Latch case extended to the identities of any funders; the amount of such funding; the terms on which it was provided; the extent of each such party’s involvement in the conduct of the action; and the nature and extent of the third party’s interest (financial or otherwise) in the outcome of the action: see ibid [3] and [17]. The order sought on this application tracks the form of order granted in that case.”

 

On the facts, the court refused the application.

 

Please see –

COSTS ROUND-UP

LEGAL OMBUDSMAN: AN OMBUDSMAN’S VIEW OF GOOD COSTS SERVICE SECOND EDITION

COURTS MUST NOT CONSIDER JACKSON REFORMS ETC. SAYS COURT OF APPEAL

Advertisements

Written by kerryunderwood

August 8, 2019 at 8:54 am

Posted in Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: