Hitachi Capital (UK) Plc v V-12 Finance Ltd & Ors

Under Supreme Court Act 1981, a non-party costs order may be made where a person effectively controls proceedings and seeks a potential financial benefit. Funding is relevant but is not a jurisdictional prerequisite. The court must separately consider whether exercising the discretion is just.

Where a costs application involves a claim over between the non-party and the person conducting the litigation, the court should consider both the non-party’s conduct towards the claimant and the relationship between the parties to the claim over. Section 51 is not a suitable summary mechanism for resolving a substantive contractual dispute. A failure to warn of a costs application is a contextual factor, not an automatic bar.

The claimant sought costs orders under section 51 of the Supreme Court Act 1981 against Mr and Mrs Davies, who had funded and controlled the defence of claims brought against an insolvent company, V-12 Finance Ltd. Mr and Mrs Davies sought a corresponding costs order against Clode Retail Finance Ltd, alleging that Clode had impeded settlement while exercising contractual rights under a share purchase agreement.

The underlying litigation concerned Hitachi’s claim for an indemnity under an agreement governing consumer finance arrangements. V-12 had lost preliminary issues concerning the construction of that agreement and was unable to satisfy the resulting liability. The central questions were whether costs orders should be made against the Davieses and whether section 51 was an appropriate mechanism for determining the dispute involving Clode.

1. Costs against Mr Davies. The principles stated in Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] UKPC 39 applied. Mr Davies had managed and funded V-12’s defence to protect his wife’s financial position under the loan notes. His conduct caused Hitachi to incur the litigation costs. The fact that he had conducted the defence reasonably and sought to reduce costs did not answer the application.
2. Costs against Mrs Davies. The documentation supported the inference that Mr Davies had acted as her agent in pursuing their shared financial interests. Her silence, her financial interest in the outcome and the terms of the proposed settlement justified treating the litigation as a joint enterprise. She was therefore also liable for Hitachi’s costs.
3. Jurisdiction and discretion. The approach in Petromec v Petroleo Brasileiro [2004] EWCA Civ 1038, as cited in Oriakhel v Vickers and others [2008] EWCA Civ 748, was adopted. Effective control and an attempt to derive a potential benefit could establish jurisdiction; funding was not essential. Whether jurisdiction should be exercised remained a separate discretionary question.
4. Claim over against Clode. Clode had been deeply involved in the litigation and had impeded settlement, but its involvement did not amount to control of the proceedings. More importantly, the dispute arose in the context of contractual rights under the share purchase agreement. Section 51 was not the proper summary mechanism for resolving that dispute. Any claim between Clode and the Davieses had to be determined in separate proceedings.
5. Warning. The absence of a warning was a factor in exercising the discretion. Following Dymocks, Oriakhel and Equitas Ltd and another v Horace Holman & Co Ltd and another [2008] EWHC 2287 (Comm), its significance depended on context and did not create a technical obstacle where experienced parties had conducted the litigation aggressively.

Mr and Mrs Davies were ordered to pay Hitachi’s costs. The application against Clode was dismissed.