The Creative Foundation v Dreamland Leisure Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Arnold |
| Judgment Date | 25 April 2016 |
| Neutral Citation | [2016] EWHC 859 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC-2015-001297 |
| Date | 25 April 2016 |
[2016] EWHC 859 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Arnold
Case No: HC-2015-001297
Jamie Carpenter (instructed by Boodle Hatfield LLP) for the Claimant
Romie Tager QC (instructed by Brook Martin & Co) for the Costs Defendant
Hearing date: 8 April 2016
Introduction
This is an application by the Claimant ("the Foundation") for an order under section 51(3) of the Senior Courts Act 1981 that Rochelle Godden (who I will refer to, without intending any disrespect, as "Rochelle" in order to distinguish her from the other members of her family involved in this case) pay the costs of the Foundation's claim against the First Defendant ("Dreamland"). That claim was for the delivery up of a section of wall bearing a mural painting known as "Art Buff" ("the Mural"). The Mural is attributed to the street artist known as Banksy. The Mural was removed by Dreamland from a building at 44–46 Rendezvous Street, Folkestone ("the Building"). Dreamland is the tenant of the Building. The Foundation brought its claim as the assignee of title to the Mural and of the cause of action of the landlord and freehold owner of the Building, Stonefield Estates Ltd ("the Landlord").
On 11 September 2015 I granted the Foundation summary judgment on its claim against Dreamland for the reasons given in my judgment of that date ( [2015] EWHC 2556 (Ch), [2016] Ch 253, "my first judgment"). The order which I made on that date required Dreamland to pay the Foundation's costs of the proceedings, except any costs which related solely to the Foundation's claims against the Second Defendant ("Jeremy") and the Third Defendant ("Jordan") (as to which, see below), and to pay the sum of £100,000 on account of those costs within 14 days. The order also provided that, as against Jeremy and Jordan, costs should be in the case.
Dreamland has not paid any part of the sum of £100,000 it was ordered to pay. On 8 October 2015 the Foundation served a statutory demand on Dreamland in respect of that debt. On 15 October 2015 the Foundation obtained an order under CPR Part 71 for Jeremy to be examined at a hearing on 2 December 2015.
Dreamland ceased to trade shortly afterwards. Notice of a meeting of creditors was given on 5 November 2015 and Dreamland was placed into creditors' voluntary liquidation on 23 November 2015. Dreamland's statement of affairs as at that date put the total estimated deficiency to creditors at £12,017,191.62. The Foundation has lodged a proof of debt in Dreamland's liquidation for its costs pursuant to the order of 11 September 2015 in the sum of £216,926.65. In the statement of affairs this has been mistranscribed as £316,926.65. Accordingly, Dreamland's deficiency is overstated by £100,000 and should be £11,917,191.62. Nevertheless, it is clear that there will be no distribution to unsecured creditors such as the Foundation.
Following the appointment of the liquidator, the Defendants' solicitors Brook Martin & Co requested the Foundation to withdraw the application for the examination of Jeremy. On 26 November 2015 the Foundation's solicitors stated that the Foundation would withdraw the application if Jeremy agreed "to provide confirmation of how your firm's fees, Counsel's fees and generally the litigation was funded (i.e. by whom and from what source) given that it appears [Dreamland] was insolvent throughout the proceedings …". On 27 November 2015 Brook Martin replied:
"In relation to the legal costs which of course included those relating to the company and Jeremy and Jordan Godden, the arrangement was that such costs would be paid on behalf of the company, Jeremy and Jordan by Mrs Rochelle Godden as the company was not then in a position to fund unbudgeted legal costs. This is the only information that Mr Godden is able to provide either today or during any examination next week."
In the light of that statement, the Foundation withdrew the application for the examination of Jeremy.
Prompted by the statement quoted above, the Foundation launched the present application on 12 January 2016. Rochelle was joined as a party to the proceedings for the purposes of costs only by an order dated 16 February 2016.
Applicable principles
There is little dispute as to the applicable principles. They were authoritatively stated by Lord Brown of Eaton-under-Heywood giving the judgment of the Privy Council in Dymocks Franchise Systems (NSW) Pty v Todd [2004] UKPC 39, [2004] 1 WLR 2807:
"25. (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 in para 40 of Hamilton v Al Fayed (No 2) [2003] QB 1175, 1194 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. He himself is 'the real party' to the litigation, a concept repeatedly invoked throughout the jurisprudence … 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 critical respects' …..
29. … 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.
…
33. … The authorities establish that, whilst any impropriety or the pursuit of speculative litigation may of itself support the making of an order against a non-party, its absence does not preclude the making of such an order."
It is only necessary to add two points. First, the non-party's interest in the litigation does not have to be a direct financial benefit from the fruits of the litigation (see Vaughan v Jones [2006] EWHC 2123 (Ch) at [26] (David Richards J)). The interest may be reputational (see Re North West Holdings plc [2001] EWCA Civ 68, [2001] BCLC 468 at [21], [35] and [36] (Aldous LJ)) or simply personal satisfaction from defeating the opponent or settling a score (see Latimer Management Consultants Ltd v Ellingham Investments Ltd [2006] EWHC 3662 (Ch), [2007] 1 WLR 2569 at [52] (Bernard Livesey QC)).
Secondly, as counsel for Rochelle pointed out, different views were expressed as to the correct approach to the question of causation in this context by Morritt LJ in Globe Equities Ltd v Globe Legal Services Ltd [1999] BLR 232 at [28] and by Chadwick LJ in Byrne v Sefton Health Authority [2001] EWCA Civ 1904, [2002] 1 WLR 775 (in which Globe v Globe was not cited) at [35]. It is not necessary for the purposes of the present application for me to attempt to resolve that difference of view, since it would not make any difference to the outcome. Accordingly, I shall apply the test stated by Chadwick LJ:
"… it cannot be right to make an order under section 51(3) of the 1981 Act unless the court is satisfied that the conduct of the party against whom the order is to be made has been causative of the costs which have been incurred by the person [applying for] the order. There must be a sufficient causal link between the person who is to pay the costs and the incurring of those costs. What is necessary is to determine whether the conduct complained of is really an effective cause of the costs incurred."
Factual background
The Godden family
Rochelle worked at Brook Martin & Co as a legal secretary from about 1980 to 1982. In about 1981 she met James Godden ("James"), who was a client of the firm. In about 1982 she moved to Folkestone to live with James and became involved in his numerous businesses. At some point they were married. Jeremy and Jordan are their sons. James died on 27 March 2012. Prior to his death, James was the owner, and a director, of Dreamland. Since 30 November 2013, Jeremy has been the sole director of Dreamland.
Jeremy and Jordan were granted Letters of Administration of James' estate on 20 August 2013. Although James' will left the shares in Dreamland to Jeremy and James Godden, by a deed of variation dated 19 March 2014...
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