Jackson & Ors v Thakrar & Ors

A costs order against a non-party funder under section 51 requires a causal link between the funding and costs incurred by the applicant. If those costs would have been incurred in any event, the application fails.

A private funder motivated by natural affection will ordinarily be protected by a presumption against liability. The presumption may be displaced in exceptional cases, such as oppressive, malicious or ulterior-purpose litigation. A funder’s separate position as a company director or shareholder is irrelevant without more. Section 51 orders remain exceptional and depend on the justice of the particular case.

The trustee in bankruptcy of Subhash Kanji Thakrar sought an order under section 51 of the Supreme Court Act 1981 against Kiran Thakrar, who had funded her husband’s legal representation at a hearing concerning an alleged compromise of complex litigation.

The trustee had incurred costs in opposing the compromise application. Kiran contributed £10,000 towards Subhash’s representation, but another defendant, Glen International Ltd, was the principal party pursuing the compromise application. The issues were causation, Kiran’s status as a private or interested funder, the relevance of her company directorship and shareholding, and the exercise of discretion.

1. Application refused. The trustee would have incurred precisely the same costs whether or not Kiran funded Subhash’s representation. The compromise hearing would have proceeded substantially as it did, with Glen conducting the principal case. The funding therefore did not cause the costs that were the subject of the application.
2. The relevant causation inquiry is whether the non-party’s funding caused the applicant to incur costs which would otherwise not have been incurred. The court applied the principles stated in Hamilton v Al Fayed (No. 2) [2002] EWCA Civ 665 and Dymocks Franchise Systems (NSW) Pty Ltd v Todd & Ors [2004] UKPC 39. The alternative formulation in Koninklijke Philips Electronics N.V. v Aventi Limited and Ors [2003] EWHC 2589 (Pat) was consistent with that approach.
3. Even if causation had been established, Kiran was at least akin to a pure private funder. The ordinary presumption is that such a funder will not be made liable under section 51. The presumption is displaced only in exceptional circumstances, principally where the litigation is oppressive, malicious or pursued for an ulterior motive. The fact that litigation is unmeritorious is neither necessary nor sufficient by itself.
4. Kiran’s directorship and shareholding in a separately represented company did not alter her status. Applying the reasoning in Metalloy Supplies Ltd (in liq) v MA (UK) Ltd [1997] 1 All ER 418, a director is not ordinarily liable merely because the company’s proceedings were funded and failed, absent impropriety or bad faith.
5. Finally, section 51 orders are exceptional in the sense that they are rarely appropriate. The compromise application was principally pursued by a substantial company, while Subhash’s funded participation was a defensive sideshow. Justice did not require an order against Kiran.