Clarke v Meadus
| Jurisdiction | England & Wales |
| Judge | Mr Justice Warren |
| Judgment Date | 02 August 2012 |
| Neutral Citation | [2012] EWHC 3729 (Ch) |
| Court | Chancery Division |
| Docket Number | Claim No: HC08C02390 |
| Date | 02 August 2012 |
[2012] EWHC 3729 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
Rolls Building,
110 Fetter Lane,
London EC4 1NL
Mr Justice Warren
Claim No: HC08C02390
MR A CRAIG (instructed by DWT Legal Ltd) appeared on behalf of the Claimant.
MR S SINNATT (instructed by Travers Smith Braithwaite) appeared on behalf of the First Defendant.
MR H SMITH (instructed by Thomson Snell & Passmore) appeared on behalf of the Third Party Defendants.
Approved Judgment
Thursday, 2 August 2012
I have already given two judgments in this action: the first allowing an appeal from Master Bragge, who had granted summary judgment or a strike-out to Mrs Meadus; the second dealing with the costs of the summary judgment proceedings. This judgment is supplemental to and should be read together with those judgments, and I do not repeat anything in them.
Mrs Clarke now makes two applications. The first is for an order for immediate assessment of the costs which I ordered Mrs Meadus to pay to her. The second is for an order that Anne Watson, Mrs Clarke's sister, and her husband David (Mr and Mrs Watson), be joined for the purpose of costs only and that directions be given for the hearing of an application that Mr and Mrs Watson be liable together with Mrs Meadus in relation to my costs order. The directions sought include disclosure of various documents said to go to the funding which Mr and Mrs Watson had afforded to Mrs Meadus. These applications, although theoretically separate, are practically linked (as will become clear). I do not think that the applicable law in relation to either application is in any serious contention.
So far as concerns assessment, the default position under CPR 47.1 is that assessment does not take place until the end of the proceedings. The court has a discretion. It can be exercised at any time in terms of jurisdiction. It does not matter that an application was not made at the time of the order, or even shortly thereafter. However, I consider that delay in making an application is a factor to be taken into account, and it is the impact of delay, especially when the application is made near to trial, that is important. A change of circumstance is not necessary for an order to be made, but clearly it is a factor to be taken into account.
The jurisdiction to make a third party costs order is found in Section 51 of the Senior Courts Act 1981. The Rules of Court in CPR 48.4 deal with how an application is to be made. There is, in essence, a two-stage approach. The first stage is to determine whether a party should be added, and the second stage, designed to give a reasonable opportunity to attend, is that there is a hearing at which the court will consider the matter further.
There has built up a significant body of case law. One of the important cases is Systemcare UK Ltd v Services Design Technology Ltd [2011] EWCA Civ 546, a decision of the Court of Appeal. At paragraph 21 Lewison J (as he then was), sitting in the Court of Appeal, said this:
"This court has also said that an application for costs against a non-party should not be over-complicated by reference to authority: Petromec Inc v Petroleo Brasileiro SA Petrobras… However, there is now a considerable body of learning on the topic; and I fear that, despite those warnings, it is necessary to refer to some of it."
He goes on to give some general guidance in the light of a number of cases which he refers to. In the light of that, I do not propose to rehearse at length the authorities in this judgment, at risk perhaps of criticism by a higher court in this case or another at a later stage. I should say, however, that I have taken into account and read the following cases, as well as the entirety of Systemcare itself and what was said there about those other cases: Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 WLR 2807; PR Records Ltd v Vinyl 2000 Ltd [2007] EWHC 1721; Merchantbridge & Co Ltd v Safron General Partner 1 Ltd [2006] EWHC 1332 (Comm); Thompson v Berkhamsted Collegiate School [2009] EWHC 2374 (QB); Nelson v Greening & Sykes (Builders) Ltd [2007] EWCA Civ 1358; and Dranez Anstalt v Hayek [2008] EWHC 90107. That is plenty to be getting on with.
None of these cases concerned the making of a third party costs order before the end of the trial, but I do not doubt that the jurisdiction to do so in an appropriate case exists. It is worth emphasising that each case is heavily fact-dependent, as is emphasised at paragraph 6 of the judgment in Systemcare. The funding of a mother by her daughter does not necessarily fall to be dealt with in the same way as the funding of a company by its 100 percent shareholder and sole director.
At paragraph 16 of his helpful skeleton argument, Mr Randall says this:
"An application for an order to join a party will normally be expected to explain the nature of the claim against the intended party and the purpose to be served by joining that party. Only if it was clear that a joinder of the intended party would be an abuse of process would it be appropriate for the court to dismiss the application. At the stage of joinder, it would be inappropriate to attempt a preliminary assessment of the merits in order to see whether an application for a non-party costs order had a real prospect of success."
He refers to PR Records v Vinyl and Dranez Anstalt v Hayek. It is worth taking account (but I am not going to read into this judgment) paragraphs 27, 34, 51 and 55 of the decision in PR Records.
I do not dissent from that approach in an ordinary case, where the order is sought after the end of the trial, but I make four observations. Where an application is made before the end of proceedings, when it is not known who has won and who has lost, the court can be expected to look with particular care at whether a possible case really can be made out for a third party costs order. Some view of the merits is highly relevant to that in a way in which it is not relevant to the normal sort of application the court has to deal with at the end of proceedings. A refusal at the end of proceedings is final, subject to appeal. A refusal from an early stage is more akin to case management.
In a case such as the present, where the third party is sought to be made liable for the costs in the same way as the actual litigant, it would only be in the rarest sort of case, in my judgment, that the court should make an order for costs against that third party which could result in a liability to pay actually arising as against the third party, but not the primary litigant. It would therefore be an exceptional case to make an order for costs with an immediate assessment against the third party if the litigant himself or herself was not subject to an immediate assessment.
It follows that an applicant would need to show strong grounds, even for joinder, at a preliminary stage before the end of proceedings in the absence of an immediate assessment against the true litigant. This is because the litigant may win at trial and find himself or herself as the net beneficiary of a costs order. In those circumstances, it is difficult to envisage a case where the third party could be made liable actually to pay costs of an earlier skirmish when the litigant was not bound to do the same, since that would require an assessment which, ex hypothesi, is not taking place against that litigant. This sort of consideration is no doubt why Mrs Clarke seeks immediate assessment against her mother.
The general principles to be distilled from Thompson, Merchantbridge and Systemcare are these. I now read into this judgment (and I take it as accurate) the summary from paragraph 17 of Mr Randall's skeleton argument:
"(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.' Dymocks Franchise Systems (NSW) Pty Ltd v Todd & Ors [2004] 1 WLR 2807, per Lord Brown.
(2) 'Generally speaking the discretion will not be exercised against 'pure funders', Dymocks supra at page 2815. Pure funders are '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.' [ Hamilton v Al Fayed (No 2) [2003] QB 1175, 1194 per Simon Brown LJ]. Pure funders are in a similar position to 'disinterested relatives' who might fund a litigant's case merely out of love or familial duty. An order under section 51 will not normally be appropriate where a disinterested relative has, out of natural affection, funded costs of a claim or a defence that is reasonably put forward.
(3) However, the position will be different if the relative or friend has a personal stake in the outcome and/or is controlling the litigation."
Quoting from Dymocks, Mr Randall says:
"'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. He himself is 'the real party' to the litigation…
(4) Nor, indeed, is it necessary that the non-party be 'the only real party' to the litigation…provided that he is 'a real party in … very important and...
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