Spartafield Ltd v Penten Group Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Mr A Nissen |
| Judgment Date | 27 January 2017 |
| Neutral Citation | [2017] EWHC 1121 (TCC) |
| Docket Number | Case No: HT/2016/000097 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 27 January 2017 |
[2017] EWHC 1121 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
The Rolls Building,
7 Rolls Building, Fetter Lane, London,
EC4A 1NL
Mr A Nissen, QC
(Sitting as a Deputy High Court Judge)
Case No: HT/2016/000097
Mr P Darling, QC appeared on behalf of the Claimant
Mr S Edwards appeared on behalf of the Defendant
(As Approved)
THE DEPUTY JUDGE: This is an application pursuant to section 51 of the Senior Courts Act made by the claimant, Spartafield, against Mr Ranjith Ratnasingham, now joined as a second defendant to the proceedings only for the purposes of this application.
Section 51(3) simply states:
"The court shall have full power to determine by whom and to what extent the costs are to be paid."
The jurisdiction for the court to make such an order is not in dispute, nor indeed are the central legal principles which counsel have helpfully drawn to my attention. There is really only one question: is it just to make an order (see Systemcare (UK) Ltd v Services Design Technology Ltd and Sharif [2011] 4 Costs LR 666 at paragraph 26)? I have well in mind the Court of Appeal's deprecation of excessive citation of authority in Petromec Inc v Petroleo Brasileiro SA Petrobras [2005] EWCA Civ 891 and also in the Systemcare (UK) Ltd v Services Design Technology Ltd cases. The authorities provide guidance of principles, not rules, and are emphatically not to be treated as a statute. Accordingly I do not intend to overburden this judgment with lengthy citation, although I make clear that I have read and have had regard to all the passages cited to me as guidance for that purpose.
The core principles are those set out in in paragraph 25 of Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 WLR 2807. Without reading it, the third of those principles is particularly apposite, and the fourth identifies the most difficult cases as those in which non-parties fund financially insecure companies generally in litigation designed to advance the funder's own financial interests. This case may be said to be an example of a case in that category.
In paragraph 29 of the Dymocks case Lord Brown said:
"In the light of these authorities their Lordships would hold that, generally speaking, where a non-party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit, he should be liable for the costs if his claim or defence or appeal fails. As explained in the cases, however, that is not to say that orders will invariably be made in such cases, particularly, say, where the non-party is himself a director or liquidator who can realistically be regarded as acting rather in the interests of the company (and more especially its shareholders and creditors) than in his own interests."
That case and others were reviewed in Goodwood Recoveries Ltd v Breen [2006] 1 WLR 2723 at paragraphs 45 to 59.
The question is whether the non-party director, Mr Ratnasingham, can properly be described as the real party seeking his own benefit, controlling and/or funding the litigation. If so, then even if he has acted in good faith and without impropriety, justice may require that he may be liable for costs, but that question must always be considered on a fact-sensitive and objective assessment of the circumstances. In this case Mr Darling QC acting for Spartafield adds to the list of considerations Mr Ratnasingham's conduct and propriety.
As Lewison J made clear in Systemcare, the challenge in these difficult cases is to have well in mind the principle of corporate limited liability. In a case of bad faith or impropriety, that principle can indeed be outflanked. Mr Edwards for Mr Ratnasingham relied initially on the lack of notice which had been given of this application, that being a relevant factor in the exercise of my discretion (see the third material consideration in Balcombe LJ's list in Symphony Group Plc v Hodgson [1994] QB 179). Mr Darling pointed out that the relevance of notice was whether it would have changed anything as a matter of practice. In this case I would regard the absence of notice as irrelevant. Spartafield was not in a position to give notice until it knew or suspected that grounds for the application had arisen, and this did not occur until after the trial. I cannot see how it is a material consideration in the present case and put it to one side.
In his oral submissions Mr Darling emphasised four factors in support of the claimant's submission that this was a case out of the ordinary run of cases and thus makes it exceptional for the purposes of exercising the section 51 jurisdiction. The four factors are (a) Mr Ratnasingham's role in the company, (b) his funding of the litigation, (c) the personal benefit that Mr Darling submitted Mr Ratnasingham derived from the litigation and (d) his conduct. The first is uncontroversial. It is an accepted fact that Mr Ratnasingham is the sole director of Penten Ltd and the owner of its entire share capital. Moreover, as Mr Ratnasingham himself accepts in the evidence, in that capacity he was the only person who gave instructions to Penten's solicitors, Goodman Derrick, in respect of the conduct of the litigation.
Rightly, Mr Darling accepts that this cannot in itself provide a sufficient basis for making the application and that something more is required. He says that something more is found in the three matters which I have already identified, whether taken individually or cumulatively. So, first, funding the litigation. Again, the basic facts are not in dispute. Mr Ratnasingham has either paid or remains personally liable to pay the entirety of fees of Mr Lewis, who appeared at the trial. They total about £34,000 including VAT. Mr Ratnasingham did not fund and is not personally liable to pay the fees of Penten's solicitors, Goodman Derrick. Their fees are about £100,000 including VAT. So in total Mr Ratnasingham has funded about 25 per cent of the total costs of the litigation.
Next, the personal benefit. The factual background to this submission is that Mr Ratnasingham has made personal loans to the company to the tune of £900,000. That is not in dispute. Mr Darling contends that in one of two ways Mr Ratnasingham pursued this litigation as the real party for his own benefit and refers to the points made at paragraphs 5 to 11 of his written submissions. First, he says, the purpose of the litigation was to enable the company to obtain recovery of the money held in court pursuant to the order of Mr Acton Davis QC sitting as a deputy High Court judge in respect of the enforcement of the adjudicator's decision and, once in the company's hands, to exercise his right to demand...
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