Maranello Rosso Limited v Lohomij BV & Ors

A non-party costs order may be made where a funder has a substantial financial interest in litigation and is, in substance, a real party to it. The court must consider all the circumstances and whether the order is just and fair.

The Arkin cap is not an inflexible rule. It may be inappropriate where the funder’s interest, relationship with the claimant and role in enabling the litigation show that the funder co-owned the litigation. Liability may extend to costs incurred after funding ends where the funder remains a co-funder and the litigation retains momentum attributable to the earlier funding.

The underlying claimant brought an unsuccessful claim alleging unlawful-means conspiracy against the defendants. The claim was summarily dismissed as compromised by an earlier settlement, save for one conversion claim, and the dismissal was upheld on appeal.

The defendants recovered their appeal costs from security but remained substantially unpaid for their first-instance costs. They applied under section 51 of the Senior Courts Act 1981 for costs orders against Hamish Vans Agnew, alleging that he had funded the litigation.

The central issues were whether transactions described as vehicle sales were in substance litigation funding, whether the respondent was a pure funder or a real party, whether the Arkin cap applied, and the period and basis of any liability.

1. Jurisdiction and procedure. The court had jurisdiction under section 51 of the Senior Courts Act 1981, as confirmed in Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965. The respondent was joined for costs purposes under CPR rule 46.2. The summary procedure was appropriate because he had a close connection with the litigation and it was just and fair to bind him by the evidence and findings made in the underlying proceedings, applying Deutsche Bank AG v Sebastian Holdings Inc [2016] 4 WLR 17.
2. The court could assess the evidence without cross-examination, while recognising the caution identified in Coyne v DRC Distribution Ltd [2008] EWCA Civ 488.
3. The vehicle sale agreement and funding agreement formed one transaction. In substance, the respondent funded litigation and the car was security for repayment. He was not a pure funder. His entitlement to 10% of any recovery, together with the Ferrari and his close relationship with the claimant’s beneficial owners, gave him a significant interest beyond reimbursement. He was a real party and co-owner of the litigation within the principles in Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 WLR 2807.
4. The Arkin cap, derived from Arkin v Borchard Lines (Nos 2 and 3) [2005] 1 WLR 3055, was not a binding rule. Consistently with ChapelGate Credit Opportunity Master Fund Ltd v Money [2020] 1 WLR 1751, the court retained a discretion. The respondent’s substantial interest and role justified not applying the cap.
5. The respondent’s funding caused the defendants to incur costs until 6 May 2021, when the next significant contribution was made. Thereafter the litigation had momentum of its own, but the respondent remained a co-funder and co-owner. He was therefore ordered to pay the applicants’ costs to 6 May 2021 and one third of their costs thereafter.
6. The costs were ordered on the indemnity basis, subject to detailed assessment if not agreed.

• High Court: the underlying claim was summarily dismissed by HHJ Keyser KC on 6 September 2021: [2021] EWHC 2452 (Ch).
• Court of Appeal: the appeal was dismissed on 21 December 2022: [2022] EWCA Civ 1667.
• High Court (present decision): applications for non-party costs orders granted to the extent stated.