Cresta Estates Limited & Ors v MPB Developments Limited & Ors

A non-party costs order is exceptional and fact-specific, but the governing principle is that it must be exercised justly. The court asks whether the proposed non-party was the real party to the litigation or whether another reason, commonly impropriety or bad faith, makes the order just. Either ground may suffice.

Where directors control a company’s defence, pursue a highly speculative case without a genuine belief in solvency, obtain personal benefits and cause substantial costs, they may be treated as the real parties to the litigation. In a hopelessly insolvent company, the company’s interests may be equivalent to those of its creditors; continued litigation aimed at securing personal benefits is not necessarily in the company’s interests.

This was a costs hearing following the winding-up of MPB Developments Limited by an order dated 28 January 2025, for the reasons given in [2025] EWHC 198 (Ch). The applicants sought orders that Paul Hilton and Matthew Welsh personally pay the costs of the winding-up petition, related petitions, and the company’s costs.

The company was the substantive defendant, but the applicants argued that Mr Hilton and Mr Welsh had controlled its defence, funded it, pursued personal benefits and acted improperly. The central issues were whether they were the real parties to the litigation and whether it was just to make non-party costs orders against them.

1. The application for costs orders against Mr Hilton and Mr Welsh was granted. They were ordered to pay the applicants’ costs of the winding-up petition and the related petitions, together with the company’s costs. No secondary order in the requested form was made concerning payment from the company’s assets.
2. The court exercised the jurisdiction by analogy with non-party costs principles. The jurisdiction arises under sections 51(1) and 51(3) of the Senior Courts Act 1981 and is supplemented by CPR 46.2. It is exceptional because such orders are outside the ordinary run of cases, highly fact-specific, and governed by the immutable requirement that the discretion be exercised justly.
3. The central questions were whether the proposed non-party was the real party to the litigation, often shown by personal benefit from the litigation, and whether some other reason, usually impropriety or bad faith connected with the litigation, made the order just. An affirmative answer to either question may suffice.
4. The procedure is summary. It is based on the evidence, facts found at trial and assessment of the conduct of those involved. In the absence of cross-examination, disputed facts were determined on the balance of probabilities. Mr Hilton and Mr Welsh, having been parties who participated in the trial, were bound by the relevant evidence and findings.
5. On the facts, Mr Hilton and Mr Welsh controlled the company’s defence, funded it, continued receiving substantial salaries and pursued settlement proposals that offered them personal benefits. Their reliance on speculative and unrealistic business plans did not establish an honest belief in solvency. They failed to provide necessary expert evidence, continued the defence after legal representation ended, and withdrew the defence on the first day of trial after substantial costs had been incurred.
6. Applying BTI 2014 LLC v Sequana SA, a winding-up order is not invariably contrary to a company’s interests. Where liquidation is inevitable because the company is hopelessly insolvent, its interests may be treated as equivalent to those of its creditors. The respondents’ conduct therefore made them the real parties to the litigation and was, at best, highly speculative and improper.

This was a first-instance costs hearing following the winding-up order made on 28 January 2025. The judgment refers to the earlier decision at [2025] EWHC 198 (Ch); no appellate history is stated.