Brampton Manor (Leisure) Ltd v McLean (No. 2)
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE LEWISON |
| Judgment Date | 17 December 2007 |
| Neutral Citation | [2007] EWHC 3340 (Ch) |
| Court | Chancery Division |
| Docket Number | HC02C03851 |
| Date | 17 December 2007 |
[2007] EWHC 3340 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Justice Lewison
HC02C03851
Mr R Edwards (instructed by Addleshaw Goddard) appeared on behalf of the Applicant.
Mr D Woolf appeared as a litigant in person.
APPROVED JUDGMENT
This is an application for a third party costs order made under the discretionary jurisdiction which is given to the court under section 51 of the Supreme Court Act 198The application is made by Clydesdale Bank plc, which was the successful defendant in an action brought by Brampton Manor (Leisure) Limited (“BML”), of which the third party, Mr David Woolf, is a director.
The action was a claim by BML against the bank alleging that the bank had unlawfully appointed receivers under a debenture granted by the company. In essence, BML's claim was that there was no money outstanding under the debenture because of the bank's misconduct in overcharging the company and in interfering with its business.
The trial occupied a number of days in October and November 2006 and the trial judge, Evans-Lombe J, gave judgment on 28 th November 2006. He decided the case by reference to a different allegation, namely that the company was in breach of the terms of the debenture either by entering into a number of transactions or by opening a bank account at the Alliance & Leicester into which monies were paid, and thereby it ceased to collect the charged debts in the ordinary course of business. He did, however, also consider the allegations made by BML, although he did so relatively briefly, and he found in favour of the bank on all the issues save for one issue relating to what he found was a wrongful deduction from BML's accounts of £15,563.
Mr Woolf is not only a director of BML; he is also the majority shareholder in the company. He signed the statement of truth on the Particulars of Claim. He made a witness statement in support of successful opposition to an application for summary judgment under Part 24 of the Civil Procedure Rules, and he was the company's only witness at trial. He also represented the company at trial when solicitors and counsel withdrew. They withdrew, as I understand, because of a lack of funds. Until the withdrawal the funds to pursue the action had in fact been provided by Mr Woolf.
It appears that the receivers also made a complaint to the Secretary of State about alleged non-cooperation by Mr Woolf in connection with the receivership. The Secretary of State began proceedings under the Directors Disqualification Act and those proceedings came before Judge Behrens in the Newcastle-upon-Tyne District Registry. Mr Woolf applied for a stay of those proceedings, which Judge Behrens granted. Paragraph 2 of his judgment describes the basis of the application as follows:
“The basis of the application is that in the London action Leisure, acting by Mr Woolf, seeks to assert that the appointment of the Receivers was invalid. If the argument succeeds and the court determines that the appointment was void, there would be no insolvency within the meaning of section 6(2) of the Act and thus no jurisdiction to make a Disqualification Order.”
As I have said, the bank made an unsuccessful application for summary judgment under Part 24. That application was heard over three days by Chief Master Weingarten, and he decided that BML had a real prospect of success in the action. He ordered the bank to pay BML's costs, but because there was a cross application for security for costs he ordered that the sum assessed as those costs were to be paid into court.
The bank also made a second application for security for costs. That application failed because it was made so close to trial that an order for security might have stifled the action.
The main point on which the bank won, namely the breaches of the terms of the debenture, was introduced by way of amendment some five weeks before trial. It appeared as paragraph 46(a) of the Re-Amended Defence. Mr Edwards, who appears on this application for the bank and who also appeared at the trial, has shown me his written opening and Mr Woolf's written submissions at the start of the trial, and it is plain from both those documents that the point was a live one and properly before the judge.
The other procedural matter that I should note is that on 15 th June 2006 the bank's solicitors told Mr Woolf by letter that they reserved the right to ask for a third party costs order.
The principles which govern the making of a third party costs order are now authoritatively found in the decision of the Privy Council in Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1WLR 2807. The opinion of the Board was given by Lord Brown of Eaton-under-Heywood. He posed the question in paragraph 24 of his opinion:
“What, then, are the principles by which the discretion to order costs to be paid by a non-party is to be exercised…
He then continued in paragraph 25 and summarised the position as follows (I omit citation of authority):
“(1) Although costs orders against non-parties are to be regarded as “exceptional”, exceptional in this context means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate question in any such “exceptional” case is whether in all the circumstances it is just to make the order. It must be recognised that this is inevitably to some extent a fact-specific jurisdiction and that there will often be a number of different considerations in play, some militating in favour of an order, some against. (2) Generally speaking the discretion will not be exercised against “pure funders”, described…as “those with no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business, and in no way seek to control its course”. In their case the court's usual approach is to give priority to the public interest in the funded party getting access to justice over that of the successful unfunded party recovering his costs and so not having to bear the expense of vindicating his rights. (3) Where, however, the non-party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party's costs. The non-party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes… (4) Perhaps the most difficult cases are those in which non-parties fund receivers or liquidators (or, indeed, financially insecure companies generally) in litigation designed to advance the funder's own financial interests. Since this particular difficulty may be thought to lie at the heart of the present case, it would be helpful to examine it in the light of a number of statements taken from the authorities.”
Lord Brown then refers to a number of authorities. He cited them with approval. The two passages that I think I should quote are the following. First, from the judgment of Fisher J in Arklow Investments Ltd v MacLean, in the High Court of New Zealand on 19 th May 2000:
“'20. … where a person is a major shareholder and dominant director in a company which brings proceedings, that alone will not justify a third party costs order. Something additional is normally warranted as a matter of discretion. The critical...
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