PR Records Ltd v Vinyl 2000 Ltd & Anor

On an application to join a non-party for the purpose of seeking a non-party costs order, the court should ordinarily consider whether the proposed joinder serves an identifiable procedural purpose and is abusive. It should not ordinarily conduct a preliminary assessment of the merits of the substantive costs application. A merits filter is justified only where the claim is plainly and obviously doomed to fail, such as where a subsequent summary determination would be virtually certain to succeed. Delay may be considered at the joinder stage where it has caused real prejudice, but delay alone is not ordinarily sufficient. The substantive jurisdiction remains fact-sensitive and turns ultimately on what is just in all the circumstances.

PR Records Limited appealed against the Master’s dismissal of its application to add Adrian Owlett as a party under CPR 48.2(1)(a), so that PR could pursue a non-party costs order against him under section 51 of the Supreme Court Act 1981 and CPR 48.2.

The proposed order concerned costs incurred in earlier proceedings in which Vinyl 2000 Limited and Susan Owlett had defended PR’s claim. PR alleged that Mr Owlett had funded and controlled the defence, benefited from it, and had been involved in the transfer of company funds. The Master considered the application only at the joinder stage and concluded that there was no arguable claim. The central issue was whether the court should apply a merits-based filter before allowing the application to proceed to the substantive stage.

1. Appeal allowed. Adrian Owlett was ordered to be joined as a party under CPR 48.2(1)(a). The substantive application for a non-party costs order was to proceed under CPR 48.2(1)(b).
2. The purpose of joinder under CPR 48.2(1)(a) is procedural. The applicant should explain the nature of the proposed claim and the purpose served by joinder. Joinder may be refused where the claim is unidentifiable or the process is abusive. However, the ordinary course is to join the proposed party so that the claim can be defended and determined, including by a possible summary judgment application under Part 24.
3. The court rejected a general requirement that the applicant demonstrate an arguable or good prima facie case before joinder. Following Dranez Anstalt v Hayek [2005] EWHC 2435 (Ch), a preliminary merits hearing would risk duplication, delay and unnecessary expense in a jurisdiction that is itself intended to operate summarily. Only a case so clearly doomed to fail that a subsequent summary application would plainly succeed might justify refusal at the joinder stage. The approach in Robertson Research International Ltd v ABG Exploration BV (The Times, 3 November 1999) was treated as applying to the conduct of the substantive application, not as requiring a merits determination before joinder.
4. Delay was relevant because Mr Owlett had not been joined until more than two years after judgment in the underlying proceedings. Nevertheless, the delay had not caused identifiable prejudice which would make joinder abusive or unfair. The retirement or unavailability of the trial judge and the passage of time did not justify refusing joinder.
5. The court reviewed the substantive principles governing non-party costs orders. The jurisdiction under section 51 was exceptional in the sense that it operated outside the ordinary run of litigation, but the ultimate question was whether an order was just in all the circumstances. The court noted the relevance of funding, control, benefit, the position of pure funders, causation, impropriety, speculative litigation, warning and delay. It declined, however, to determine the substantive application because PR had not been required to present its case fully at the appeal.
6. The matter was not converted into a hearing of the second stage. Directions for that stage were to be considered separately.

• High Court (Chancery Division): The Master dismissed PR’s application to join Mr Owlett under CPR 48.2(1)(a). The High Court allowed the appeal and ordered joinder, with the substantive costs application to proceed.