Serious Fraud Office & Ors v Litigation Capital Limited & Ors

The court’s powers to control proceedings and prevent abuse include debarring a party, but debarment is a severe, proportionate remedy directed to the proposed participation before the court. The court must assess all the circumstances, including the effect on the proceedings as a whole, the connection between unpaid costs and the proposed claim, and whether less restrictive measures are effective.

A party’s previous abusive conduct does not make every subsequent application abusive. A discrete legal issue arising from later authority may properly be raised, subject to arguments concerning finality, res judicata and abuse of process. Security for costs may be ordered where the party’s conduct and non-compliance justify a condition of participation.

The proceedings concerned the proposed participation of Mr Nicholas Thomas in a hearing concerning whether litigation funding arrangements established at an earlier trial were affected by the Supreme Court’s decision in PACCAR [2023] 1 WLR 2594.

Harbour Fund II LP sought to prevent Mr Thomas from defending Harbour’s application and pursuing his cross-application. It relied on the Debarring Directions Order made by Foxton J, Mr Thomas’s failure adequately to explain alleged involvement by Dr Gerald Smith and others, his funding arrangements, and unpaid costs orders. Alternatively, Harbour sought security for costs.

The central issues were whether Mr Thomas’s proposed participation was abusive or should be restricted, and whether security for costs was an appropriate condition.

1. Debarring jurisdiction and applicable approach. The court had broad powers under CPR 3.1 and CPR 3.4, and under its inherent jurisdiction, to control proceedings and prevent abuse. Debarring was a severe measure and had to be approached as a proportionate, merits-based assessment of the proceedings as a whole. The relevant question was whether the proposed participation misused the court’s process or made the administration of justice unfair or disreputable: Cable v Liverpool Victoria Insurance Co Ltd [2020] 4 WLR 110; JSC VTB Bank v Skurikhin [2021] 1 WLR 434.
2. A debarring order was a sanction of last resort. The court had to consider the purpose and effect of the order, including whether the trial could fairly proceed and whether a less restrictive condition would protect the administration of justice. The fact that a party had disobeyed orders or acted abusively in earlier proceedings did not establish that a later step was necessarily abusive. The principles in Arrow Nominees Inc v Blackledge and Others [2000] 2 BCLC 167, Hadkinson v Hadkinson [1952] P 285, Assoun v Assoun (No 1) [2017] EWCA Civ 21 and Byers v Samba Financial Group [2020] EWHC 853 (Ch) were applied or explained.
3. The Debarring Directions Order did not make a Relevant Claim permanently stayed unless Mr Thomas supplied evidence which the court considered adequate. Its requirements were relevant factors in the discretionary assessment, but did not fetter the court’s multi-factorial jurisdiction.
4. Although Mr Thomas had persistently sought to avoid the consequences of the Directed Trial and had not satisfactorily explained Dr Smith’s involvement, the PACCAR issue was a discrete legal issue arising from later Supreme Court authority. It was not plainly merely an attempt to recycle arguments already decided. Mr Thomas’s proposed participation was therefore not sufficiently abusive to justify debarment. The court expressly left open whether finality, res judicata or Henderson v Henderson abuse would prevent him from relying on PACCAR at the later hearing.
5. Security for costs was available under CPR r3.1(5). Mr Thomas had breached court orders and had not provided satisfactory protection through his out-of-jurisdiction funder. Having regard to the additional costs caused by his cross-application, the appropriate security was £200,000, to be provided promptly by payment into court or a first-class UK bank guarantee. Suitable ATE insurance could replace that security if agreed or directed.
6. Mr Thomas was not debarred from participating in the Enforceability Hearing, but was required to provide security for costs of £200,000, subject to further argument concerning the effect of his subsequent bankruptcy order.

The judgment describes extensive earlier proceedings, including the Directed Trial before Foxton J and subsequent orders concerning costs, trustees and participation. This was a first-instance decision on Harbour’s debarring and security-for-costs applications.