Harcus Sinclair (a firm) v Buttonwood Legal Capital Ltd & Ors

An order for costs against a solicitor who represented an unsuccessful litigant is not justified merely because the solicitor financed the litigation or would be paid if the client succeeded. The court must consider whether the solicitor became a real party to the litigation, including the extent of funding, control and potential benefit. It must also consider whether the solicitor acted outside the proper role of solicitor for the client, or for a purpose outside that role. A costs order remains discretionary and turns on whether, in all the circumstances, it is just. A benefit which is merely the ordinary consequence of the client’s success will not ordinarily suffice.

The claimant solicitors held monies as stakeholders under a litigation funding agreement between Buttonwood Legal Capital Ltd and the other defendants. In an earlier interpleader judgment, [2013] EWHC 1193 (Ch), the court held that the agreement had been validly terminated and ordered the borrowers to pay Buttonwood’s costs.

Buttonwood then applied for costs against Rylatt Chubb, the borrowers’ solicitors, both as an alleged unsuccessful party and under section 51 of the Senior Courts Act 1981. The central issues were whether Rylatt Chubb had been a party to the interpleader issue and whether the circumstances justified a non-party costs order.

1. Party status. Rylatt Chubb was not an unsuccessful party to the interpleader issue. Although named as a defendant in the originating action, it was not joined to the issue determined by the court, which was between Buttonwood and the borrowers. It therefore could not succeed or fail on that issue.
2. Non-party costs jurisdiction. The starting point was Dymocks Franchise Systems v Todd [2004] 1 WLR 2807. Costs orders against non-parties are exceptional in the sense that they fall outside the ordinary run of litigation, but the ultimate question is whether an order is just in all the circumstances. Relevant considerations include funding, control, benefit and whether the non-party was the real party to the litigation.
3. Solicitors as non-parties. A solicitor’s provision of funding or credit does not, by itself, make the solicitor a real party or justify an order. Nor does the prospect of being paid from the client’s recovery suffice where that benefit is merely the ordinary consequence of acting for the client. The court should look for an indication that the solicitor acted outside the proper professional role, or for a purpose outside it. Any lack of congruence between the solicitor’s and client’s interests may be important, but the extent of any discrepancy and other circumstances may justify refusing or limiting an order.
4. Rylatt Chubb might have received payment of existing fees and disbursements, might have continued to act in the underlying action, and might have recovered its fees if the borrowers had succeeded. The first two benefits were connected with the client’s recovery under the funding agreement, while the third was the ordinary consequence of successful representation. These circumstances did not justify an order under section 51(1) or (3) of the Senior Courts Act 1981. The application was dismissed. Even if an order had been appropriate, it would have been limited to a very modest proportion of the costs.