OCM Maritime Nile LLC & Anor v Courage Shipping Co & Ors

Section 51 of the Senior Courts Act 1981 permits a court to order a non-party to pay litigation costs. The order is exceptional and must be just in all the circumstances. Relevant considerations include whether the non-party was the real party to the litigation, controlled or funded it, obtained a personal benefit, or acted improperly or in bad faith. These are indicia, not a mandatory checklist. Where a non-party had a sufficiently close connection with the proceedings, it may be bound by findings made at trial without injustice. Serious impropriety or bad faith causatively linked to unnecessary costs may justify indemnity costs.

The claimants had obtained judgment terminating two bareboat charterparties and granting possession of the vessels. The corporate defendants had been ordered to pay costs but made no payment. The claimants therefore applied under section 51 of the Senior Courts Act 1981 to join Mr Mallah for costs purposes and to order him to pay the costs of the earlier proceedings and the costs of the application.

Mr Mallah had been the beneficial owner and sole director of the defendant companies. He did not appear at the final hearing. The central issues were whether he was sufficiently connected with the litigation to be bound by findings in the earlier judgment, whether he was the real party who controlled and funded the defence for his personal benefit, and whether his conduct justified a non-party costs order on the indemnity basis.

1. Power and procedure. Section 51 of the Senior Courts Act 1981 confers a discretion to determine by whom and to what extent the costs of proceedings are to be paid, including by a non-party. The procedural requirements in rule 46.2 of the Civil Procedure Rules 1998 had been satisfied because Mr Mallah had been joined for costs purposes and given a reasonable opportunity to attend the hearing.
2. Applicable guidance. The guidance in Goknur v Aytacli, [2021] EWCA Civ 1037, was applied. A non-party costs order is exceptional. The principal question is whether the non-party can fairly be regarded as the real party to the litigation. Control and funding are relevant indicia, but personal benefit is particularly important. If litigation was pursued for the company's benefit, some further justification, commonly serious impropriety or bad faith causatively linked to unnecessary costs, is ordinarily required.
3. Binding effect of earlier findings. The court applied the approach in Symphony Group Plc v Hodgson, [1994] QB 179, and Deutsche Bank AG v Sebastian Holdings Inc, [2016] EWCA Civ 23. In a section 51 costs application, the ordinary rules of evidence do not apply in the same way where the non-party had a sufficiently close connection with the proceedings. Mr Mallah was therefore bound by the findings in the March judgment, and reliance on them caused no injustice because he had an opportunity to respond but had not engaged with the proceedings.
4. Application. Mr Mallah controlled the defence, funded it, and pursued it for his own benefit. The corporate defendants had acted in contempt of court and had provided misleading and untruthful information; the court found that Mr Mallah was responsible for that conduct and for the deliberate attempt to mislead the court about his proprietary interest.
5. Orders. It was just to order Mr Mallah to pay the costs of the proceedings to 4 March 2022, assessed on the indemnity basis, and US$1 million on account. He was also ordered to pay the claimants' costs of the section 51 application on the indemnity basis, with the detailed order to be settled.

• High Court (Commercial Court): In the earlier judgment, [2022] EWHC 452 (Comm), the court held that the charterparties had been lawfully terminated and ordered the corporate defendants to pay costs.
• Court of Appeal: The corporate defendants' appeal was dismissed on 29 July 2022, [2022] EWCA Civ 1091.
• High Court (Commercial Court): The present court joined Mr Mallah for costs purposes and ordered him to pay the specified costs and sums.