Hilden Developments Limited v Phillips Auctioneers Limited & Anor

A non-party costs order against a director or shareholder is exceptional and must be justified by the circumstances as a whole. The central question is whether the non-party can fairly be described as the real party to the litigation. Control or funding are relevant, but usually the court must also identify personal benefit, or serious impropriety or bad faith causatively linked to unnecessary costs. Personal benefit and impropriety are alternative routes; both are not required. The court must protect limited liability where a director bona fide pursues litigation for the company’s interests. The jurisdiction is fact-sensitive and is not applied as a mandatory checklist. A non-party who controlled, funded and pursued proceedings for personal strategic benefit was ordered to pay part of the company’s unpaid costs.

The underlying proceedings concerned a claim by Hilden Developments Limited concerning title to a painting. The claim failed, and the company was ordered to pay Robert Tibbles’s costs, but did not do so. Robert Tibbles applied for a non-party costs order against Sebastian Tibbles, the company’s sole director and shareholder, who had personally funded the proceedings.

The application was initially also made against Nigel Tibbles, but proceedings against him were stayed because of his ill health and death. The issue was whether Sebastian Tibbles was the real party to the litigation and, if so, whether justice required a costs order against him and in what amount.

1. Application allowed. Sebastian Tibbles was the real party to the litigation and it was just to make a non-party costs order against him.
2. The jurisdiction under Senior Courts Act 1981, section 51, and CPR rule 46.2 is broad but fact-sensitive. The court must decide whether, in all the circumstances, an order is just. The guidance in Goknur was a useful starting point, not a mandatory checklist.
3. Relevant considerations included control and funding of the litigation, whether the non-party sought personal financial, reputational or strategic benefit, whether the company was the real party acting in its own interests, and whether there was serious impropriety or bad faith causatively linked to unnecessary costs. Funding alone did not justify an order, and personal benefit and impropriety were alternative considerations.
4. The contemporaneous correspondence showed that Sebastian Tibbles directed the litigation strategy, personally funded the claim and used it to exert pressure on Robert Tibbles in wider family disputes. His conduct went beyond acting merely to discharge duties owed to the company. He therefore could properly be described as the real party, notwithstanding the absence of an allegation of bad faith or impropriety.
5. The court nevertheless took account of the confusing funding arrangements and the fact that a reasonable director might initially have considered that the company had a more limited claim. Sebastian Tibbles was ordered to pay 50% of the costs which HDL had been ordered to pay up to 15 October 2021, and 100% thereafter.