Deutsche Bank AG v Sebastian Holdings Inc
[2016] EWCA Civ 23
Case details
Case summary
The Court of Appeal dismissed the appeal and upheld Cooke J.'s order joining Mr Alexander Vik as a defendant for costs purposes and ordering him to pay
The court held that (i) applications under section 51 of the Senior Courts Act 1981 are exercises of statutory discretion ancillary to the main proceedings and may be determined summarily where the third party's connection with the litigation is sufficiently close; (ii) Cooke J. was entitled to treat Mr Vik as the "real party" because he controlled, funded and stood to benefit from Sebastian's litigation and had had full opportunity to contest the facts; (iii) the absence of advance warning that a costs order might be sought, the failure to join or to seek security, and issues of witness immunity did not, on these facts, make the order unjust; and (iv) the judge did not err in refusing fresh evidence or in ordering Mr Vik to pay the Bank's costs on account.
Case abstract
Background: Deutsche Bank sued Sebastian Holdings Inc. to recover sums owing on trading accounts; Sebastian counterclaimed. Cooke J. found for the Bank and ordered Sebastian to pay most of the Bank's costs. Sebastian did not pay and the Bank applied under section 51 of the Senior Courts Act 1981 to join Mr Alexander Vik, Sebastian's sole shareholder and director, for the Bank's costs. Cooke J. joined Mr Vik and ordered payment on account of costs. Mr Vik appealed.
Nature of the application:
- (i) Relief sought: an order under section 51 (Senior Courts Act 1981) that Mr Vik, a non-party, be made liable for the Bank's costs (payment on account of on account).
- (ii) Issues framed: the nature of section 51 applications (summary or full proceedings); admissibility and effect of findings in the main action; whether Mr Vik was bound by those findings (privity/issue estoppel/abuse of process); the effect of the Bank's failure to warn or to join Mr Vik; witness immunity; whether Vik had funded or controlled the litigation; security for costs; and Article 6 ECHR concerns.
- (iii) Procedural posture: appeal from Cooke J.'s decision in the High Court ([2014] EWHC 2073 (Comm)).
Court's reasoning and disposition:
- The court explained that an application under section 51 is an exercise of the court's statutory discretion ancillary to the main action; where a non-party's connection to the litigation is sufficiently close the court may deal with the application summarily and admit findings from the trial.
- The court analysed the factors in Symphony Group Plc v Hodgson but emphasised that those guidelines are flexible and must be read in light of later authority, notably the Privy Council in Dymocks; the ultimate test is whether it is just to make the order.
- Applying the law to the facts, the court concluded that Mr Vik was the "real party": he was sole shareholder and director, controlled Sebastian's affairs and litigation, had the opportunity at trial to address relevant factual matters and stood to benefit. Those circumstances justified holding him bound by the trial findings.
- The lack of a prior warning, failure to join or to seek security, and issues of witness immunity did not render the order unjust on these facts. Fresh evidence proffered on appeal was rejected as not credible and unreasonably withheld below.
Result: the appeal was dismissed and the costs order against Mr Vik upheld. The court reiterated that non-party costs orders remain exceptional but must be exercised justly on the facts of each case.
Held
Appellate history
Cited cases
- Henderson v Henderson, (1843) 3 Hare 100 neutral
- Brendon v Spiro, [1938] 1 K.B. 176 neutral
- Hollington v F. Hewthorne & Co. Ltd, [1943] K.B. 587 neutral
- Calderbank v. Calderbank, [1976] Fam. 93 neutral
- Gleeson v J. Wippell & Co. Ltd, [1977] 1 W.L.R. 510 neutral
- Bahai v Rashidian, [1985] 1 W.L.R. 1337 neutral
- Aiden Shipping v Interbulk (The 'Vimeira'), [1986] A.C. 965 positive
- Orchard v South Eastern Electricity Board, [1987] Q.B. 565 neutral
- Palmer v Durnford, [1992] Q.B. 483 neutral
- Symphony Group Plc v Hodgson, [1994] Q.B. 179 neutral
- Metalloy Supplies Ltd v MA (UK) Ltd, [1997] 1 W.L.R. 1613 neutral
- T G A Chapman Ltd v Christopher, [1998] 1 W.L.R. 12 neutral
- Johnson v Gore Wood & Co, [2002] 2 A.C. 1 neutral
- Hamilton v Al Fayed (No. 2), [2003] Q.B. 1175 neutral
- Phillips v Symes (No. 2), [2004] EWHC 2330 (Ch), [2005] 1 W.L.R. 2043 neutral
- Dymocks Franchise Systems (NSW) Pty Ltd v Todd, [2004] UKPC 39, [2004] 1 W.L.R. 2807 positive
- Gray v Going Places Leisure Travel Ltd, [2005] EWCA Civ 189 neutral
- Petromec v Petrobras, [2006] EWCA Civ 1038 positive
- Oriakhel v Vickers, [2008] EWCA Civ 748 neutral
- Equitas v Horace Holman & Co. Ltd, [2008] EWHC 2287 (Comm) neutral
- Threlfall v ECD Insight Ltd, [2013] EWCA Civ 1444 neutral
Legislation cited
- Civil Legal Aid (General) Regulations 1989: Regulation 67
- Civil Legal Aid (General) Regulations 1989: Regulation 69
- Civil Legal Aid (General) Regulations 1989: Regulation 70
- Financial Services and Markets Act 2000: Part II
- Legal Aid Act 1988: Section 18
- Senior Courts Act 1981: Section 51(1)