Thomas Barnes & Sons Plc (In Administration) v Blackburn with Darwen Borough Council

A non-party costs order under Senior Courts Act 1981, section 51, is exceptional only in the sense that it falls outside the ordinary run of litigation. The controlling question is whether the order is just in all the circumstances. A person who funds litigation and has a substantial personal financial interest, particularly where that person also exercises real control, may properly be treated as a real party to the proceedings. Control, funding and personal benefit are indicia rather than a mandatory checklist. The court must assess the practical reality of the person’s involvement. Warnings and security for costs are relevant but not determinative. In litigation pursued by an insolvent company, the public interest in enabling officeholders to pursue claims does not prevent an order where the funders are also substantial beneficiaries and, in one case, exercised significant control.

The claimant, an insolvent company in administration, brought a substantial claim against the defendant local authority concerning the alleged wrongful termination of a construction contract. The claim was dismissed after an 11-day trial in 2022. The defendant then applied under section 51 of the Senior Courts Act 1981 for a non-party costs order against family members who had funded the litigation and provided security for costs.

The application required the court to determine whether the respondents had a sufficient financial interest and involvement in the proceedings to be treated as the real parties to the litigation, and whether it was just to require them to meet the defendant’s outstanding recoverable costs.

1. Application granted. The respondents were ordered to be jointly and severally liable for the outstanding balance of the defendant’s costs, subject to detailed assessment if not agreed. The liability of the two respondents acting as executors was limited to the deceased’s estate. No order for contribution between the respondents was made.
2. The court applied the principles summarised in Dymocks Franchise Systems (NSW) Pty Ltd v Todd (Costs) [2004] UKPC 39; [2004] 1 WLR 2807. A non-party costs order is exceptional, but the ultimate question is whether it is just in all the circumstances. Pure funders without a personal interest, benefit or control will generally not be liable. Where a non-party funds and controls proceedings, or funds them for substantial personal benefit, justice will ordinarily require payment if the litigation fails.
3. The guidance in Goknur Gida Maddaleri Enerji Imalet Ithalat Ihracat Ticaret ve Sanati AS v Aytacli [2021] EWCA Civ 1037 was applied. Control, funding and personal benefit are helpful indicia, not a checklist. The court must take a practical view of whether the person was the real party in very important and critical respects. It is ordinarily unnecessary and unworkable to identify two co-existing real parties through a granular analysis.
4. All respondents funded the claim and stood to benefit personally. Thomas exercised a real degree of control over the proceedings, while the administrators retained real control appropriate to their office. The other respondents were not shown to have directly controlled the litigation, but they supported it financially. Collectively, they were real parties in important and critical respects.
5. The provision of security for costs and the existence of warnings about a possible order were relevant circumstances, but neither was determinative: Dolphin Quays Developments Ltd v Mills [2008] 1 WLR 1829; Deutsche Bank AG v Sebastian Holdings Inc and another [2016] EWCA Civ 23. The public interest in creditors funding claims pursued by officeholders did not outweigh the justice of an order on these facts.