Petroleo Brasileiro S.A. & Anor v Petromec Inc & Ors

A non-party costs order is exceptional only in the sense that it falls outside the ordinary case. The court may make such an order where a non-party controls litigation, funds it, or has a substantial interest in its outcome, provided the conduct was instrumental in causing the costs. A pure funder without an interest in or control over the litigation will ordinarily not be liable. Security for costs is a relevant factor, but it is not an exclusive remedy. The decisive question is whether, on an objective and fact-sensitive assessment, the non-party is the real party to the litigation.

Petrobras applied under section 51 of the Supreme Court Act 1981 and CPR rules 19.4 and 48.2 to join Maritima, Devonshire and Mr German Efromovich to two earlier actions for costs purposes. Petrobras sought orders making them jointly and severally liable with Petromec and Petromec Holdings for costs already awarded against Petromec in the Upgrade and Total Loss actions.

The applications arose because Petromec was unlikely to satisfy those costs orders. The central issues were whether each respondent had controlled, funded or benefited from the litigation, and whether those matters justified a non-party costs order.

1. Jurisdiction and principles. Section 51 of the Supreme Court Act 1981 confers a wide discretion to make a costs order that is just in all the circumstances, including against a person who was not originally a party. Permission to join the proposed non-party is required under CPR rule 48.2.
2. Applying Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] UKPC 39, the court treated non-party costs orders as appropriate where a person substantially controls or funds proceedings, benefits from them, and is in substance the real party. The conduct must also have been instrumental in causing the costs: Goodwood Recoveries Ltd v Breen [2005] EWCA Civ 414.
3. Control, funding and interest in the outcome were the most important factors. None was automatically decisive, and the order had to reflect the respondent’s responsibility for maintaining the litigation. The availability or extent of security for costs was relevant but did not provide an exclusive alternative remedy.
4. The application against Maritima failed. It neither controlled nor funded Petromec’s litigation and had no relevant interest in its outcome. The application against Devonshire also failed. Its loans were repayable independently of the result, and it had no material control or other interest in the proceedings.
5. Mr Efromovich controlled the litigation, directed the funds used to maintain it, and had a personal beneficial interest in those funds and in the outcome. He was therefore the real party to the litigation. He was added as a party and made jointly and severally liable with Petromec and Petromec Holdings for Petrobras’s recoverable costs in both actions.

The judgment concerned applications arising from earlier first-instance decisions and appeals in the Upgrade and Total Loss actions. No appellate history of this costs decision is stated in the judgment.