Adris & Ors v The Royal Bank of Scotland Plc

A non-party costs order is an exceptional, fact-sensitive exercise of discretion. The ultimate question is whether, in all the circumstances, making the order is just. Funding, control, personal benefit and causation are important considerations, but no single factor is invariably decisive.

A pure funder will generally not be liable. Where a non-party funds and substantially controls litigation, or is the real party benefiting from it, an order will ordinarily be justified. In the usual control or funding case, the non-party’s conduct should have caused at least some of the costs claimed, although causation alone is insufficient.

The judgment concerned numerous consumer-credit claims brought against banks. The claims had been generated by Cartel Client Review Ltd, a claims-management company, and conducted by Consumer Credit Litigation Solicitors, the practice of Richard Burley. The defendants sought non-party costs orders against CCR, Mr Burley and Mr Carl Wright.

CCR accepted liability jointly and severally with relevant claimants. The central issues were whether Mr Burley or Mr Wright had funded, controlled or been the real party to the litigation, and whether their conduct had caused the defendants’ costs.

1. Applicable principles. The power under section 51(3) of the Supreme Court Act 1981 is exceptional in the sense that it falls outside the ordinary run of litigation. The governing question is whether, in all the circumstances, it is just to make the order. The jurisdiction is fact-sensitive. Pure funders will generally be protected, whereas a non-party who funds and substantially controls proceedings, or benefits from them as the real party, will ordinarily be liable: [2004] 1 WLR 2807.
2. Causation. In ordinary cases based on funding, control or real-party status, causation remains an important element. There should ordinarily be at least some causal connection between the non-party’s conduct and the costs claimed. Causation is not invariably a precondition in every category of case, and it is not by itself sufficient to justify an order.
3. Mr Burley and CCLS. CCLS had responsibility for obtaining after-the-event insurance and failed both to obtain it and to tell clients that they were exposed to adverse costs. The clients therefore could not give informed instructions. The court found a direct causal link: had the clients known the true position, they were likely to have instructed CCLS not to issue or progress the claims. Mr Burley was consequently, through CCLS, controlling the litigation in a relevant sense. The flawed or speculative nature of some claims was insufficient by itself.
4. Mr Wright. The individual claimants remained the principal real parties. Mr Wright did not control the litigation and was not even a real party to it. Although he and his pension fund provided later funding, causation alone did not justify an order. The benefit that might have accrued to him through CCR was no different in principle from the benefit to shareholders of a claims-management company. The court was slow to pierce the corporate veil, particularly since CCR was itself neither claimant nor defendant.
5. Disposition. The applications against Mr Wright were dismissed. The applications against Mr Burley succeeded. CCR had already accepted liability, and CCR and Mr Burley were made jointly and severally liable with each other and with claimants against whom adverse costs orders had been or would be made.