Nelson v Greening & Sykes (Builders) Ltd

A charging order may attach to an interest in land held by a judgment debtor as trustee where the relevant costs orders were made against him in that capacity. A bare sub-trust does not automatically remove the intermediate trustee from the legal structure, particularly where the trust property is a purchaser’s interest under an executory land contract.

A non-party costs order requires a causal connection between the non-party’s conduct and the costs incurred. The court may make such an order where litigation was pursued for the non-party’s benefit and with that person’s active support. Under section 51(3) of the Supreme Court Act 1981, the court may require the non-party to pay costs already assessed where sufficient identification with the party afforded a fair opportunity to contest quantum.

The appeals arose from prolonged litigation concerning the sale of a building plot. The purchaser, Mr Nelson, acted as nominee for Ms Hanley, who supplied the purchase money and was the intended beneficial owner. Numerous unpaid costs orders were made against Mr Nelson.

HH Judge Langan QC refused to discharge a charging order over the purchaser’s interest in the property. He subsequently ordered Ms Hanley, as a non-party, to pay three sets of costs already assessed against Mr Nelson.

The Court of Appeal considered whether Mr Nelson retained an interest as trustee to which section 2(1)(b)(i) of the Charging Orders Act 1979 applied; whether Ms Hanley’s conduct caused the respondent to incur costs; and whether section 51(3) of the Supreme Court Act 1981 permitted an order for payment of costs already assessed.

1. The appeals were dismissed unanimously. Mr Nelson held the purchaser’s equitable interest in the land on trust for Ms Hanley when the charging order was made. The costs orders could properly be regarded as having been made against him in his capacity as trustee, although they did not expressly describe him in that capacity. Section 2(1)(b)(i) of the Charging Orders Act 1979 therefore authorised the charge: per Lawrence Collins LJ at [43]–[58]; Wall LJ agreeing at [74]–[76]; Ward LJ agreeing at [79].

2. The vendor held the property for Mr Nelson under the qualified vendor and purchaser trust arising from the specifically enforceable contract. Mr Nelson, as Ms Hanley’s nominee, held that interest on trust for her. The rule permitting an absolutely entitled beneficiary to call for a transfer does not itself extinguish an intermediate trust. Ms Hanley had not directed Mr Nelson to transfer his interest before the charging order, and the authorities concerning bare sub-trusts did not govern an executory contract for the sale of land. The intermediate trust therefore continued: at [51]–[58].

3. Causation is a necessary precondition of a non-party costs order. It was satisfied because Mr Nelson and Ms Hanley conducted the litigation in tandem, for her benefit and with her active encouragement. The suggestion that the respondent would have incurred the costs without her support was unsustainable: at [61]–[62].

4. The trustee and beneficiary relationship created no immunity from a non-party costs order. The controlling question was whether, in all the circumstances, it was just to exercise the discretion. This litigation was far removed from an ordinary trustee consulting beneficiaries under section 11 of the Trusts of Land and Appointment of Trustees Act 1996: at [63]–[65].

5. Section 51(3) of the Supreme Court Act 1981 empowers the court to determine both who must pay costs and their quantum. In an appropriate case it may order a non-party to pay costs already assessed. Mr Nelson and Ms Hanley had more than a sufficient degree of identification, and he had opportunities to contest the assessments. It was therefore just to bind her to the assessed sums: at [66]–[70].

1. Court of Appeal (Civil Division): The appeals were dismissed unanimously: [2007] EWCA Civ 1358.

2. High Court, Chancery Division: HH Judge Langan QC refused to discharge the charging order on 9 June 2006. On 3 November 2006 he held that a non-party costs order should be made against Ms Hanley. On 28 November 2006 he held that she should pay the sums already assessed, without a second assessment.

3. High Court, Chancery Division: Peter Smith J imposed the charging order on 13 June 2003 over Mr Nelson’s interest in the property to secure relevant costs orders.