Xhosa Office Rentals Ltd v Multi High Tech PCB Ltd & Ors

The court may order a non-party who is the effective controller and funder of litigation to pay the successful party’s costs. The power under Senior Courts Act 1981, section 51, is discretionary and should be exercised sparingly. The court must consider the particular circumstances, including the non-party’s financial interest, control over the proceedings, funding, conduct of the litigation and the weakness of the claim. Procedural fairness requires that the non-party be added for costs purposes and given a reasonable opportunity to be heard.

The claimant company brought proceedings against the defendants concerning a disputed contract. The claim was funded and effectively controlled by its beneficial owner and main director, Mr Michael Loizakos. Earlier judges had described the claim as weak or barely arguable. The proceedings were ultimately struck out after failure to provide security for costs, and the defendants’ costs were assessed at £308,046.54.

The defendants applied to add Mr Loizakos for costs purposes under CPR 46(2)(i) and (ii), and sought an order under section 51 of the Senior Courts Act 1981 that he personally pay their costs.

1. Application granted. Mr Loizakos was added to the proceedings for costs purposes and ordered to pay the defendants’ costs, subject to detailed assessment. A payment on account of £20,000 was ordered within 28 days.
2. Section 51 of the Senior Courts Act 1981 gives the court a broad discretion to determine by whom and to what extent the costs of proceedings should be paid. The jurisdiction includes making a costs order against a person who is not formally a party.
3. The jurisdiction must be exercised sparingly. The court considered the guidance in Aiden Shipping Company Ltd v Interbulk Ltd [1986] AC 965 and the other authorities cited, while emphasising that each case turns on its own facts, particularly in relation to costs and litigation conduct.
4. The relevant circumstances were compelling. Mr Loizakos was the claimant in substance, funded the claim after the company ran out of money, decided that it should be pursued despite judicial comments on its weakness, supplied all the evidence, controlled the conduct of the proceedings and stood to benefit personally from success.
5. The claim ultimately failed because of Mr Loizakos’s default in providing security for costs, rather than on the merits. The defendants had incurred substantial expense, stress and anxiety, and it was unjust that they should remain out of pocket while the person who was the moving force behind the litigation avoided personal responsibility for the costs.