SFL Ace 2 Company Inc. v DCW Management Limited & Ors

Disclosure in support of an application for a non-party costs order is exceptional. The application is ordinarily determined summarily by the trial judge on the evidence and documents already available. A high threshold of necessity applies. Disclosure should be ordered only where it is proportionate and genuinely required for the fair determination of the application.

The central question is whether the non-party was the real party to the litigation, because the proceedings were conducted for that person’s benefit. Funding, control and alleged personal benefit are relevant indicia, but they are not a checklist. Broad requests aimed principally at challenging witness evidence or pursuing a speculative asset-stripping case constitute a fishing expedition and should be refused.

The claimant succeeded at trial in proceedings arising from an alleged guarantee of a charterer’s obligations. It then applied under Senior Courts Act 1981, section 51 and CPR 46.2 for a non-party costs order against three defendants who had allegedly funded and benefited from the defence.

The claimant sought search-based disclosure, including communications, funding requests, restructuring agreements, valuation attachments and email attachments. It alleged that the funding enabled an asset-stripping scheme designed to frustrate enforcement. The respondents resisted the application on grounds of relevance, proportionality and the summary nature of the costs jurisdiction. The issue was whether the requested disclosure was necessary for the fair determination of the proposed non-party costs application.

1. Application dismissed. The court refused all categories of search-based disclosure. The application for a non-party costs order was not struck out, but the judgment gave no encouragement to its continuation.
2. Applications for non-party costs are summary proceedings, ordinarily determined by the trial judge at the end of the trial using the evidence and documents already available. Disclosure is the exception rather than the rule. A high test of necessity and proportionality applies.
3. The touchstone is whether the non-party was the real party to the litigation, for whose benefit the litigation was conducted. The court must distinguish between relevant evidence of funding or benefit and material sought merely to challenge a witness’s account or generate further factual disputes.
4. The communications request, even after narrowing, was too broad. Its principal purpose was to test whether the stated reasons for funding were genuine and to develop an alleged asset-stripping scheme. The request therefore amounted to a speculative fishing expedition.
5. The requests for funding communications were refused because the fact of funding was common ground and the further material was sought principally to challenge the evidence. The natural next step would have been cross-examination, which was inappropriate in this summary context.
6. The agreements, valuation attachments and email attachments were also refused. The agreements added little to facts already agreed. The valuation material was not relevant to whether the funding companies were the real parties to the litigation, and disclosure risked diverting the application into a collateral insolvency dispute. The rationale for the restructuring was sufficiently apparent from the disclosed emails.