Dweck v Forstater

Non-party costs orders are exceptional. The central question is whether making the order is just, having regard to all the circumstances. A family member who funds litigation from love and affection, without a direct financial interest or control, is ordinarily a pure funder and should not be made liable merely because the claim is unsuccessful or funded through loans or a discretionary trust. An order may be justified where the litigation is malicious, oppressive, vexatious or pursued for an ulterior purpose, or where the funder has an active interest in or control over it. On a first-tier appeal involving a fact-sensitive discretion, the appellate court must respect findings reasonably open to the lower court, but may intervene where the decision falls outside the generous ambit of reasonable disagreement or was procedurally unjust.

Leslie Dweck brought a fraud action against Mark Forstater seeking to set aside an earlier judgment and associated costs order. The fraud action was struck out by Master Eyre as an abuse of process. Master Eyre subsequently made non-party costs orders against Cynthia Rowbury, Richard Dweck and Suzy Dweck, who had funded the action, holding them jointly liable for Forstater’s costs.

The three non-parties appealed with permission. They argued that they were genuine family funders, that the loans and discretionary trust were genuine, and that the Master had made adverse findings without giving them a fair opportunity to respond. The central issues were the applicable approach to reviewing the Master’s discretion and whether the circumstances justified an exceptional non-party costs order.

1. The appeal was allowed and the non-party costs order application was dismissed. The Master’s decision was both wrong and unjust because it depended materially on findings and inferences that were not reasonably open to him and had been reached without a fair opportunity for the appellants to answer the allegations or be cross-examined.

2. The jurisdiction under sections 51(1) and 51(3) of the Supreme Court Act and CPR 48.2 is exceptional and fact-specific. The ultimate question is whether the order is just. Impecunious claimants should not ordinarily be denied access to the courts, and pure funders without a direct financial interest, control or business motive are generally protected.

3. The appellants’ family relationship with Dweck gave them only an indirect emotional or familial interest. Their loans were bona fide loans, repayable from any recovery, and the funding provided through the discretionary trust was genuine. The earlier funding of the commission action was irrelevant to the later application.

4. The appellants were entitled to prove their debts in Dweck’s bankruptcy. That conduct did not obstruct the bankruptcy or justify an adverse inference. Knowledge that Dweck could not satisfy a costs order was insufficient, without evidence that they knew of any risk of personal liability or acted with an improper motive.

5. The fraud action was genuinely brought, though mistakenly, to remedy what Dweck and the appellants believed was an injustice. It was not shown to have been malicious, vexatious, oppressive or pursued for an ulterior purpose. The ordinary protection for pure funders therefore applied.

6. The appellants were entitled in principle to summary assessment of their costs, payable by Forstater and not set off against Dweck’s outstanding liabilities, subject to any further agreement or submissions on costs.

High Court (Queen’s Bench Division): the appeals from Master Eyre’s order dated 22 October 2009 were allowed. The non-party costs orders were set aside and the application was dismissed.