THE SUPREME COURT
[Appeal No. 213/2011]
[High Court Record No. 2003/9018 P]
McKechnie J.MacMenamin J.Dunne J.
MOORVIEW DEVELOPMENTS LIMITED, SALTHILL PROPERTIES LIMITED, VALEBROOK DEVELOPMENTS LIMITED, SPRINGSIDE PROPERTIES LIMITED, DRAKE S.C. LIMITED, MALLDRO S.C. LIMITED, THE POPPINTREE MALL LIMITED and BLONDON PROPERTIES LIMITED
Plaintiffs/Notice Parties
-and-
FIRST ACTIVE PLC, RAY JACKSON and, by order, BERNARD DUFFY
Defendants/Respondents
AND RELATED PROCEEDINGS
JUDGMENT of Mr. Justice William M. McKechnie delivered on the 27th day of July, 2018
Introduction
1. This is an appeal by Mr Brian Cunningham (“the appellant”), who is not a party to the proceedings, against an order of the High Court (Clarke J., as he then was) made and perfected in April, 2011, making Mr Cunningham liable for the costs incurred by First Active in defending the action brought by the plaintiff companies, on the grounds that Mr Cunningham funded the litigation. The background to this appeal is lengthy and complicated, involving numerous linked proceedings. In short Mr. Cunningham was made personally liable for costs which arose both in this case (referred to elsewhere as “Case A”) and also a series of other connected cases (Cases C, E and H). The judgment of the High Court explaining the reasons for the making of said non-party costs order was delivered on the 16th March, 2011 ([2011] IEHC 117; [2011] 3 IR 615). The appellant denies that he was the funder, denies that the Court had jurisdiction to make such order, and submits that, even if it did have such jurisdiction, it was exercised wrongly in this case.
2. The judgment under appeal was a significant one. It is described as “a landmark development in the law on costs” in theAnnual Review of Irish Law(2011, 25(1), p. 521) and as a “groundbreaking judgment” in Delaney and McGrath,Civil Procedure in the Superior Courts(3rd Ed., Round Hall, Dublin, 2012 at para. 23-124). The judgment was one of the first in this jurisdiction in which an order for costs was made against a non-party, and certainly the first in which a director/shareholder of an insolvent company was made liable for costs incurred in defending proceedings brought by the said company. It has subsequently been followed and applied by the High Court in a number of cases, includingUsed Car Importers of Ireland Limited v. Minister for Finance & Ors.[2014] IEHC 256 (Gilligan J.),Nugent Personal Insolvency (Costs)[2016] IEHC 309 (Baker J.) andW.L. Construction Limited v. Chawke and Bohan[2017] IEHC 319 (Noonan J.), albeit in the first and final cases mentioned it seems to have been accepted by the parties that the Court had jurisdiction to join a non-party for the purposes of making a costs order against them. Mr Cunningham, however, disputes that this is so, and maintains on this appeal that Clarke J. erred in concluding that he had jurisdiction to make the order sought.
3. Thus two major issues arise for the consideration of this Court. The first is whether there exists a jurisdiction to make costs orders against a non-party. If so, the Court must then consider the second question, which concerns the factors which are relevant to the exercise of that jurisdiction both generally and on the facts of this case in particular. This judgment also addresses a number of subsidiary issues raised by the appellant.
Related Appeal
4. It should be noted at the outset that this appeal was heard together with the related appeal inFirst Active v. Brian Cunningham,High Court Record No. 2005/272 S. Three issues were raised in that appeal. The first concerned the transfer of the business of First Active plc to Ulster Bank Ireland Limited, and the effect of that transfer on the proceedings. Mr Cunningham has also raised an issue concerning that transfer in this case (see paras. 134-135,infra), although that point can be disposed of for the reasons contained in the judgment of this Court in that related appeal, delivered on the 22nd February, 2018 ([2018] IESC 11). The other two issues addressed in that judgment are not relevant to this appeal: one arose out of the awarding of Courts Act interest by the trial judge and the other concerned the principle ofres judicatain the context of a non-suit/direction. However, this judgment should be read together with the judgment in the related appeal, which provides further context to the issues herein discussed.
Background
5. The factual backdrop and procedural history of this case are long and complex. Full details of same can be obtained by reference to the various other judgments which have been delivered by the High Court and by this Court in these proceedings, many of which are referred to over the course of this judgment. Most of the matters raised for consideration in the main and linked proceedings do not fall to be considered here. Nonetheless, some background information is necessary in order to explain how it is that the High Court came to make a non-party costs order against Mr Cunningham. In setting out this background, I will endeavour to distil it down to its essential elements in order to contextualise the legal issues which arise.
6. These proceedings were brought by Brian Cunningham and companies of which he is a director and/or shareholder (“the Cunningham Group” or just “the companies”) against a number of parties, including (i) First Active plc (“the respondent”) (now known as Ulster Bank Ireland Limited; see paras. 134-135,infra); (ii) Ray Jackson, a receiver appointed by the respondent to various Cunningham Group companies; and (iii) Bernard Duffy, who purchased certain property formerly owned by the Cunningham Group from the respondent as mortgagee in possession. It is common case that the Cunningham Group companies are grossly insolvent.
7. The Cunningham Group and the respondent had a banking relationship in the course of which the respondent advanced money to the companies, principally for the acquisition and development of certain properties. Over time this relationship deteriorated, resulting in the appointment by the respondent of Mr Jackson as receiver to certain of the companies in April, 2003.
8. The plaintiff companies alleged that the respondent and others had committed a fraud against them. Various proceedings were instituted between 2003 and 2007 in which the companies sought damages from different defendants; ultimately, all such proceedings were unsuccessful. It is beyond this judgment to address the multiplicity of claims made. It will suffice to say that the main issue related to the sale of the Finglas Shopping Centre in Dublin and the financing of a property development at Bailey Point, County Galway. The case made by the plaintiff companies was that after representing that it would fund the project at Bailey Point, First Active refused to do so, thereby preventing the completion of the development, preventing the site from opening and thus causing the companies huge losses. In essence, it was alleged that the respondent had perpetrated a fraud against the companies, in that there was never any intention to continue to support the companies at the time when representations were made that such support would be forthcoming. It was alleged that these actions of the respondent destroyed the financial well-being of the companies.
9. Following a lengthy procedural history, the main proceedings were ultimately at trial before Clarke J. in the High Court for 66 days. At the end of the plaintiffs’ evidence, the defendants applied for a non-suit/direction in respect of all claims. On the 15th December, 2008, Clarke J. indicated that he would accede to the application, with his reasons therefor being contained in a comprehensive written judgment delivered on the 6th March, 2009 ([2009] IEHC 214). Various ancillary claims were rejected in subsequent judgments delivered by Clarke J. on the 17th July, 2009, the 31st July, 2009, the 5th February, 2010 and the 9th July, 2010. The respondent further obtained judgment against certain of the plaintiff companies on a counter-claim, and also obtained judgment against Mr Cunningham personally on foot of a capped guarantee (in respect of which see the judgment of this Court inFirst Active v. Brian Cunningham[2018] IESC 11).
Application for an order directing that Mr Cunningham be made personally liable for the costs orders made against the corporate plaintiffs
10. The trial of the main action began on the 28th April, 2008. Previously, on the 11th February, 2008, the respondent had written to the plaintiff companies and suggested that it would seek to make any identified third party funding the litigation liable for the costs of same, should it be successful at trial. The respondent followed through on this when, some months after the delivery final judgment in July, 2010, it issued a notice of motion dated the 18th October, 2010, seeking orders making Mr Cunningham liable for the costs of the proceedings. The Court heard oral argument on the 1st March, 2011, and reserved judgment.
The judgment under appeal
11. The judgment of the Court was delivered by Clarke J. on the 16th March, 2011. It is reported at [2011] 3 IR 615. Where appropriate, the critical portions of the judgment of the High Court are set out in the “Decision” section of this judgment, below. What follows here is but a short overview of the judgment in order to explain the essence of the learned judge’s reasoning.
12. For contextual purposes, it is worth noting that there were two applications before the Court. The first concerned the motion brought by First Active seeking to have Mr Cunningham made personally liable to pay costs awarded in favour of First Active in certain of the linked proceedings concerning the Cunningham Group; the second issue, which is of no continuing relevance on this appeal, related to First Active’s application to have Mr Cunningham cross-examined in aid of execution (together with various connected reliefs) in the context of orders already made against Mr Cunningham personally in one of the linked proceedings. As it happens, that application, which is addressed at paragraphs 6-8 and 56-67 of the report of the High Court judgment, was also acceded to.
13. In respect of the application to make Mr Cunningham personally liable for the companies’ costs, two major issues arose. The first was whether the Court had jurisdiction to make an order of the type sought by First Active. If so, the second issue concerned the criteria to be applied by the Court in the exercise of such jurisdiction, and whether such criteria were satisfied on the facts of this case. These remain the two major issues on this appeal.
14. The learned judge began with the issue of the existence of a jurisdiction to direct that Mr Cunningham be personally liable for costs. Two general bases for such jurisdiction were advanced by First Active. First, it was argued, in reliance on the decision of this Court inByrne v. John S. O’Connor & Co.[2006] IESC 30, [2006] 3 IR 379 (“Byrne v. John S. O’Connor”), that the High Court had jurisdiction to make the order sought pursuant to Order 15, Rule 13 of the Rules of the Superior Courts (“the RSC” or “the Rules”). Alternatively, First Active submitted that a similar jurisdiction exists under the provisions of section 53 of the Supreme Court of Judicature (Ireland) Act 1877 (“the 1877 Act”). Needless to say, counsel for Mr Cunningham argued that no jurisdiction existed under either such basis. The relevant provisions are quoted below (see paras. 27 and 37,infra).
15. Clarke J. dealt first with whether jurisdiction to award costs against a non-party could be founded on Order 15, Rule 13 RSC (see paras. 21-28 of the reported judgment). The learned judge placed much reliance in this regard on the decision inByrne v. John S. O’Connor, which is addressed at some length at paras. 24-28 of this judgment. He agreed with counsel for Mr Cunningham that, based on the wording of that Rule, Mr Cunningham could not be joined as a plaintiff against his will. The real question, therefore, was whether he could be joined as a defendant. Mr Cunningham argued that as the companies for whose costs liability it was sought to make him liable were plaintiffs, there could be no basis for joining him personally as a defendant. The learned judge did not accept this argument. He noted that a non-party can be joined as a defendant to a counterclaim in respect of substantive relief, and it would therefore be strange if a non-party could not be joined as a defendant at all simply for the purposes of seeking a costs order. He found it clear fromByrne v. John S. O’Connorthat a non-party can be joined in order to seek a costs order against him in favour of a plaintiff; unless the wording of the Rule so demanded, it would be absurd if a non-party could be joined to make them responsible for costs which would ordinarily be awarded against a defendant yet could not joined to make them responsible for costs that would ordinarily be awarded against a plaintiff. Thus he was satisfied that jurisdiction existed under the Rules to join Mr Cunningham as a defendant in order to make him liable for the companies’ costs.
16. Additionally, the learned judge was also satisfied that jurisdiction existed pursuant to section 53 of the 1877 Act. This issue is discussed at paras. 29-37 of the reported judgment. In this regard he drew on authorities from Australia, New Zealand and England (all discussed below). In each such jurisdiction it had been held that the courts have the power to award costs against a non-party. Clarke J. was of the view that, while not identical, the key phrase in the equivalent pieces of legislation under consideration in those cases was largely the same, as was the critical phrase of the 1877 Act: there was no real difference in the substance of the language used. The foreign courts had tended to interpret their legislation in broad terms, conferring a jurisdiction to award costs against a non-party in appropriate cases. As the learned judge saw nothing in the language of the 1877 Act to lead him to a different view, he concluded that such jurisdiction exists under that Act as well as under the Rules.
17. The Court also dealt with a few general issues raised by Mr Cunningham which were said to weigh against, or even totally preclude, the existence of the asserted jurisdiction, be it under the Rules or the 1877 Act. At paragraphs 15-17, Clarke J. rejected the argument that recognition of such jurisdiction would amount to a form of impermissible judicial legislation, as in this case there was simply no Irish authority on the question of whether such a jurisdiction might exist under the 1877 Act; indeed, such authority as there was (Byrne v. John S. O’Connor) pointed in the opposite direction. Likewise, the learned judge was not persuaded by the submission that to impose the jurisdiction asserted on behalf of First Active would be to bypass section 390 of the Companies Act 1963 (“the 1963 Act”), which deals with security for costs (now dealt with in section 52 of the Companies Act 2014) (para. 18 of the judgment of the High Court). He also rejected Mr Cunningham’s argument that to make the order sought would pierce the veil of incorporation (paras. 19-20). These latter two issues remain live on this appeal and they are dealt with below.
18. Being satisfied that jurisdiction to make a costs order against a non-party existed on either or both bases, Clarke J. then turned to the second major issue arising out of First Active’s application: how should such jurisdiction be exercised? As the companies were hopelessly insolvent, the learned judge was satisfied that any funding for the litigation must necessarily have been external. Based on,inter alia, the comments of counsel and Mr Cunningham’s failure to deny on affidavit that he was the funder or to identify another funder, Clarke J. concluded that it was reasonable to draw the inference that Mr Cunningham was the funder of all of the litigation (para. 43). Moreover the judge was further satisfied that Mr Cunningham was the moving party behind the litigation (para. 43) and that he and his wife would have been by far the main beneficiaries had the proceedings been successful (paras. 44-45).
19. As to the factors by reference to which the jurisdiction should be exercised, Clarke J. referred to the judgment of Tomkins J. in the New Zealand case ofCarborundum Abrasives Ltd. v. Bank of New Zealand (No. 2)[1992] 3 N.Z.L.R. 757. That case had decided that there was no requirement for the applicant to establish some form of impropriety, fraud or bad faith on behalf of the non-party. Adopting this judgment, Clarke J. held (para. 47) that the key factors to be taken into account by a court when exercising this jurisdiction are (i) the extent to which it might have been reasonable to think that the company could meet an order for costs if the litigation failed; (ii) the degree of benefit to the non-party concerned if the litigation was successful; and (iii) any factors touching on whether the proceedings were pursued reasonably and in a reasonable fashion.
20. Applying those factors to this case, Clarke J. first reiterated that there did not seem to be any basis for believing that any costs ordered could have been met from within the resources of the relevant companies. Second, for reasons already adverted to, he held that Mr. Cunningham and his wife would have been the main beneficiaries of the proceedings if successful. Thus Mr Cunningham had funded proceedings where he knew that First Active, even if successful, would have to bear the costs itself, but where the benefit of the Cunningham Group winning would ultimately have passed to Mr Cunningham and his wife personally. These factors alone overwhelmingly favoured the making of the order sought (para. 48). Finally, by reference to the third factor mentioned in the previous paragraph, the learned judge noted,inter alia, that the proceedings against First Active were the subject of a non-suit, that the Cunningham Group had sought a number of radical changes to the manner in which it pleaded the proceedings, and that the way in which the proceedings were pursued significantly added to the costs. Thus, if anything, an assessment of the reasonableness of the proceedings weighed against rather than for Mr Cunningham (para. 52).
21. The learned judge also noted one further factor of potential relevance, which was whether the non-party sought to be made liable for costs was on reasonable notice that such an order might be sought (paras. 53-54). He held that in this case there was correspondence “at a relatively early stage in the proceedings” which made it clear that First Active was contemplating seeking a non-party costs order against the funder of the proceedings. This occurred before the bulk of the relevant costs had been incurred. Thus on the facts Mr Cunningham must have been aware of the possibility of an application of this type.
22. Accordingly, in all the circumstances, Clarke J. was satisfied that it was appropriate to make an order directing that Mr Cunningham be personally liable for the costs of the relevant proceedings. The said non-party costs order was made on the 4th April, 2011, and perfected on the 26th April, 2011.
Appeal
23. Mr Cunningham now appeals against the said judgment and order of Clarke J. The appeal was retained by this Court after the establishment of the Court of Appeal and was, as above noted, heard alongside the appeal in the related “guarantee proceedings” (see para. 4,supra). As will be seen in the following sections of this judgment, the appellant challenges virtually every aspect of the judgment of the High Court, and also raises a several arguments for the first time on appeal.
Submissions
24. The Court had the benefit of helpful written and oral submissions (including, by direction of the Court, supplemental written submissions) on behalf of both parties, for which it is most grateful to counsel. The substance of parties’ arguments on each aspect of this appeal is engaged with in turn below.
Decision
25. This judgment will first address the existence of the jurisdiction to award costs against a non-party. As I have concluded that the learned High Court judge was correct that such jurisdiction exists, it will then be necessary to turn to the factors which must be considered before it is exercised, and in particular to consider whether it was appropriate to make such order on the facts of this case. Finally, I will consider issues said to arise out of statements made by counsel for the Cunningham Group and for Mr Cunningham, with the essence of the point being made in this regard being that, whatever about the test for making a non-party costs order generally, there was insufficient evidence before the High Court for it to conclude that Mr Cunningham funded the litigation in this case, and accordingly that the order should not have been made.
A. Existence of Jurisdiction to Award Costs against a Non-Party
26. It is necessary to consider two possible bases for the existence of the jurisdiction to make a non-party costs order, as addressed in the judgment of the High Court and the submissions of the parties. In addition, the Court will also deal with three freestanding objections to the existence of such jurisdiction as raised by the appellant.
i. Jurisdiction under the Rules of the Superior Courts
27. Although the learned trial judge did not join the appellant as a party to the action, given that he found an independent statutory basis to order costs against him, it is nonetheless significant that he concluded that he had jurisdiction to do so pursuant to Order 15, Rule 13 RSC. That Rule reads as follows:
“No cause or matter shall be defeated by reason of the misjoinder or non-joinder of parties, and the Court may in every cause or matter deal with the matter in controversy so far as regards the rights and interests of the parties actually before it. The Court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the Court to be just, order that the names of any parties improperly joined, whether as plaintiffs or as defendants, be struck out and that the names of any parties, whether plaintiffs or defendants, who ought to have been joined, or whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the cause or matter, be added. No person shall be added as a plaintiff suing without a next friend, or as the next friend of a plaintiff under any disability, without his own consent in writing thereto. Every party whose name is so added as defendant shall be served with a summons or notice in manner hereinafter mentioned, or in such other manner as the Court may direct, and the proceeding as against such party shall be deemed to have begun only on the making of the order adding such party.”
28. The essence of the trial judge’s basis for holding that this Rule conferred jurisdiction to join Mr Cunningham as a party in order to make an order for costs against him is set out at para. 15,supra. However, the appellant contends on appeal that Clarke J. erred in reaching this conclusion. His arguments are much the same as those made in the High Court. Mr Cunningham submits that the respondent’s application to join him as a party for the purpose of paying costs did not specify whether he was to be joined as a plaintiff or a defendant, but that in fact the application must have been to join him as a plaintiff: he says that to join someone as a defendant, on the basis that they were in control of or funding the plaintiff, would offend our system of adversarial litigation. A plaintiff can only be joined where he consents to same, and Mr Cunningham has never done so. Moreover, he argues that the Rules of the Superior Courts have the force of law (Shell E & P Ireland Limited v. McGrath and ors[2013] 1 IR 247) and therefore should not be departed from at will. The appellant submits that in bringing him into the litigation after its completion, and in forcing him to effectively stand in as a plaintiff against his will, the trial judge circumvented the Rules. He says that it can be no part of the constitutional order to force a person to litigate, and that it cannot be correct to retrospectively add a party to concluded litigation.
29. The appellant objects, in particular, to the emphasis which the learned trial judge put on the judgment of Kearns J. (as he then was) inByrne v. John S. O’Connor. That was a case where an insurer had exercised its right of subrogation to take over the defence of the proceedings, effectively standing in the shoes of the insured. It then made all decisions regarding the conduct of the case, including decisions as to whether the litigation should be fought or compromised. Mr Cunningham submits that subrogation is a recognised legal mechanism whereby an insured is released from the obligations and risks of litigation, with the insurer acting in his place. He says that there is a huge difference between an insurer who subrogates into litigation, and a non-party being joined against his will, after the litigation has finished, in order only to finance the outcome. The former is a long-standing, well-defined and widely-accepted aspect of commercial litigation, involving a known, quantifiable and identifiable risk for those involved; the latter is a novel remedy which circumvents basic principles of law. He further submits that subrogation “hollows out” one party, allowing another to take its place in all but name, whereas if joined under the Rules then two separate legal entities, acting and trading independently, are effectively being conflated. As an illustration, Mr Cunningham submits that he would not have had standing to conduct the litigation in his own name where what was at stake were rights of the companies. Moreover he notes that inByrnethe litigation was ongoing, and the issues had not been decided, when the costs orders were made; he submits that it would have been inappropriate, as it was in this case, for the matter not to be pursued until the end of the trial. Finally, he adds that insofar as Clarke J. also drew comparisons with awards of costs against receivers, the foregoing remains applicable.
30. In addressing these arguments, I should say, first, that one thing is immediately apparent: there can be no question of joining Mr Cunningham as a plaintiff under the Rules. The relevant Rule is perfectly clear: “[n]o person shall be added as a plaintiff … without his own consent in writing thereto.” The appellant has never given any such consent, written or otherwise. This issue is clear cut, is not contested by the respondent, and accordingly does not require to be revisited.
31. Thus what must be considered is whether it is proper to join as a defendant a party who is alleged to have funded the plaintiff, for the purposes of ordering costs against that non-party funder.
32. At one level the appellant is certainly right that the situation of an insurer exercising the right of subrogation to take over the conduct of legal proceedings is markedly different to what is contemplated in this case, namely, joining Mr Cunningham to the proceedings after the fact for the sole purpose of costs. As explained at p. 386 of the report inByrne v. John S. O’Connor:
“Where an insurer exercises its right of subrogation to take over the defence of legal proceedings, as occurred in this case, it effectively stands in the shoes of the party concerned, usually a defendant or third party. It makes all the decisions about the conduct of the case, including ultimate decisions as to whether the litigation should be fully fought out or compromised.”
33. In such circumstances, it is readily appreciable why justice might demand that an order for costs be made against the insurer. The same considerations do not necessarily hold true in respect of a director or officer of a company, where it is sought to make such person liable for costs. Having said that, however, I am not altogether sure that this is a distinction that the appellant can benefit from in this case, for, as found by the trial judge and as explored at some length below, it was undoubtedly he who was the moving party behind and the main beneficiary of this litigation, notwithstanding that much of it was conducted through the plaintiff companies. The comments of Kearns J. to the effect that “the decisions of the insurers as to strategy and tactics have had a direct impact on the interests of the plaintiff who ran up costs” (p. 387 of the report) have a direct parallel with the manner in which Mr Cunningham’s overall conduct of the within proceedings was responsible for the costs incurred by the respondent. Therefore Mr Cunningham’s situation is rather closer to that of the subrogating insurer than his line of argumentation might suggest.
34. Moreover, at the level of principle, there is nothing in the judgment in Byrne which suggests that the jurisdiction to make a non-party costs order is limited to making said order against a subrogating insurer. The sole issue for determination was “whether or not the trial judge was entitled to join the second defendant as a co-defendant in the proceedings with a view to providing for an effective costs order which he felt was appropriate having regard to the history of the case” (p. 384) in circumstances where there was no direct cause of action as between plaintiff and second defendant. Ultimately, this Court was “satisfied that the High Court … did have jurisdiction to make the order [under Order 15, Rule 13]”. The Court further acknowledged that “[t]o the extent that the order may be seen as a discretionary one, this court is also satisfied that the discretion was reasonably exercised” (both p. 388). If the issue of subrogation was to have a relevance at all, it would have gone to whether it was an appropriate exercise of the trial judge’s discretion to make the order sought. I cannot see how the fact that the order was sought against a subrogating insurer would have had a bearing on whether the Court hadjurisdictionto make the order sought in the first instance. Accordingly, I am of the view that that earlier decision of this Court stands for the more general proposition that a non-party can be joined to the proceedings for the purposes of making a costs order against them. I agree with Clarke J. that it would be absurd if the same was possible only in respect of the costs that would ordinarily be awarded against a defendant but not in respect of those costs that one would ordinarily be expected to be awarded against a plaintiff.
35. While it may not be necessary for me to go any further than identifying this general principle fromByrne, I should say that I am satisfied that this is a proper reading of the Rule in question. Simply put, on a plain reading of its terms it is expressed broadly enough to encompass the order made. It provides, in relevant part, that “[t]he Court may at any stage of the proceedings … on such terms as may appear to the Court to be just, order that … the names of any parties, whether plaintiffs or defendants, who ought to have been joined, or whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the cause or matter, be added.” I entirely concur with Kearns J. that “costs can only be seen as a collateral though integral part of the ‘questions involved in the cause or matter’” (p. 387 ofByrne). While there are myriad circumstances in which it would not be proper to join a non-party for costs purposes – the relevant factors are considered at length below – in my view the wording of Order 15, Rule 13, widely drafted as it is, clearly allows for this possibility.
36. Intuitively it does perhaps seem somewhat unusual that the person (sometimes referred to as “the real party to the litigation”, as discussed below) alleged to have funded the plaintiff should be joined as a defendant. However, regard must be had to the fact that the proceedings will have reached their end when such application is made. There is therefore no substance to the suggestion that the party isde factoforced to be a plaintiff or to litigate against their will – the proceedings have all but ended by this point, the case is over. The party is joined for the sole purpose of making the costs order, the underlying basis for which is, at its core, to prevent an injustice from being done to the party who otherwise cannot recover their costs. Even if a somewhat ungainly way of achieving same, I am of the view, keeping in mind that objective, that it is entirely open to a judge to order a non-party to be joined as a defendant in such circumstances, where satisfied that it is appropriate to do so.
ii. Jurisdiction under the Supreme Court of Judicature Act (Ireland) 1877
37. As above noted, Clarke J. held that in addition to having jurisdiction under the Rules, he also had jurisdiction to make a non-party costs order pursuant to section 53 (“Costs”) of the 1877 Act. The relevant part of section 53 states as follows:
“Subject to the provisions of this Act and of rules of Court, the costs of and incident to every proceeding in the High Court of Justice and Court of Appeal respectively shall be in the discretion of the Court, but nothing herein contained shall deprive a trustee mortgagee or other person of any right to costs out of a particular estate or fund to which he would be entitled according to the rules hitherto acted on in Courts of Equity …”
38. As above noted, the learned judge was guided, in reaching the decision which he did, by judgments from Australia, New Zealand and England and Wales. In each such jurisdiction it has been held, on the basis of the rules of court or by virtue of statute, that a court has power to make an order for costs against a non-party. The judgments in question were that of the House of Lords inAiden Shipping Ltd. v. Interbulk Ltd.[1986] A.C. 965 (“Aiden Shipping v. Interbulk”), the decision of the Supreme Court of Queensland inForest Pty Ltd. (Recs and Mgrs apptd.) v. Keen Bay Pty Ltd. & Ors.[1991] 4 A.C.S.R. 107 (“Forest Pty v. Keen Bay”) (reported on appeal to the High Court of Australia asKnight & Anor. v. F.P. Special Assets Ltd. & Ors.[1992] 107 A.L.R. 585 (“Knight v. F.P. Special Assets Ltd”)) and the judgment of the High Court of New Zealand inCarborundum Abrasives Ltd. v. Bank of New Zealand (No.2)[1992] 3 N.Z.L.R. 757 (“Carborundum Abrasives”).
39. Whilst acknowledging the outcome of such cases, the appellant contends that there are certain vital differences between, on the one hand, the rules/statutory provisions at issue in those judgments and, on the other, section 53 of the 1877 Act. Thus it is submitted that Clarke J. erred in construing the Irish provision as creating a jurisdiction in like form to that which has been recognised in other common law countries, the law in those countries being differently worded. Before highlighting what Mr Cunningham says are the key distinctions between the foreign laws and the Irish statutes, I should first set out the relevant provisions from those common law jurisdictions and the central findings of the courts that pronounced upon them.
40. I will begin with the decision of the House of Lords inAiden Shipping v. Interbulk, as it was the earliest in time and was referred to by the New Zealand High Court inCarborundum Abrasivesand the High Court of Australia inKnight v. F.P. Special Assets Ltd.At issue inAiden Shippingwas section 51(1) of the UK Supreme Court Act 1981, which provides as follows:
“Subject to the provisions of this or any other Act and to rules of court, the costs of and incidental to all proceedings in the civil division of the Court of Appeal and in the High Court, including the administration of estates and trusts, shall be in the discretion of the court, and the court shall have full power to determine by whom and to what extent the costs are to be paid.” (Emphasis added).
41. In this case the Court of Appeal had reversed the decision of the trial judge and held, on the basis of two earlier decisions, that an order for costs could only be made against a party to the proceedings in question. A different view was taken by the House of Lords, which held that section 51(1) empowered a court to order the payment of costs against non-parties. For Lord Goff of Chieveley, with whom the other Law Lords agreed, the main issue in the case was whether there was to be implied into section 51(1) a limitation restricting costs orders to orders made against parties to the relevant proceedings: given the broad wording of the section, the starting point was very much that there was no such restriction. Lord Goff placed emphasis on the final clause (“the court shall have full power to determine bywhom… the costs are to be paid” (emphasis in original judgment)) and noted that this was “consistent with a policy under which jurisdiction to exercise the relevant discretionary power is expressed in wide terms, thus ensuring that the court has, so far as possible, freedom of action” (p. 975). Ultimately, he was satisfied that had the legislature intended to limit the jurisdiction to award costs, it could easily have drafted section 51(1) to achieve this. Instead, it had gone with the broad wording, and he could see no justification for implying a limitation to the effect that costs could only be ordered to be paid by parties to the proceedings. It should be said that since that decision there has been extensive UK jurisprudence relating to non-party costs orders, much of which is referred to over the course of this judgment.
42. Turning, then, to the Australian decisions mentioned in the judgment of the High Court. The first such judgment was that of the Full Court of the Supreme Court of Queensland inForest Pty v. Keen Bay. This was an appeal against two decisions of single judges of the Supreme Court to award costs against receivers and managers of companies in liquidation. The central issue was whether there was jurisdiction to award costs against the receiver of a company who stood behind the proceedings taken in the company’s name but was not named as a party to the proceedings. The relevant provision, pursuant to which the orders had been made, was section 58 of the Supreme Court Act (Qld) 1867. That section provided that “[t]he Supreme Court shall have power to award costs in all cases lawfully brought before it and not provided for otherwise than by this section.” Each member of the Court (Ryan, Dowsett and Williams JJ.) concluded that the section conferred jurisdiction to make an order for costs against a non-party, although Dowsett J. was of the view that the discretion to make such an order should not have been exercised on the facts of the case.
43. Ryan J. first reviewed the historical position as traced through a number of 19th Century cases and noted that at the time when the 1867 Act was enacted, “it was only in very exceptional circumstances that the courts made orders for costs against non-parties, and that in the case of common law courts this was a matter of jurisdiction and not merely of discretion or practice” (p. 115 of the report). However, having then referred toAiden Shipping, the learned judge went on to state as follows:
“Section 58, like s 51(1) of the Supreme Court Act 1981 (UK) … confers jurisdiction on the court to make orders as to costs. The discretionary power is conferred in the widest terms. There seems to be no good reason for thinking that the legislature intended that it should be fettered by importing a limitation which could work injustice … It should, on the contrary, be concluded that the legislature, having conferred an unfettered discretion on the court, left it to the court to determine the principles upon which the discretion should be exercised.” (p. 115)
44. It should be noted that much was also said on the definition of the word “party” in the relevant rules of court and legislation, although the same is not of direct relevance to the point under discussion. Ryan J. ultimately concluded that the position in Queensland was as stated inAiden Shipping, namely, that jurisdiction existed to make a costs order against a non-party, and that whether it will be made depends on an exercise of judicial discretion based on the circumstances of the case. On the facts of the case, it would have been “monstrously unfair” to confine the applicants to orders against impecunious companies, and thus he dismissed the appeals. The same conclusion was reached by Williams J.
45. Dowsett J., dissenting, acknowledged that section 58 of the 1867 Act was drafted sufficiently broadly to permit the making of a non-party costs order, but held that the discretion to order costs against a non-party standing behind a company litigant should only be exercised in exceptional circumstances. He considered that a liberal exercise of the section 58 power would have the result of “tearing down the corporate veil” and believed that the security for costs procedure was more satisfactory than an application to make a non-party liable under section 58. Similar submissions have been advanced by the appellant on this appeal, but it is of interest that the majority of the Supreme Court of Queensland evidently did not consider that either such argument precluded the making of the order sought.
46. Leave was granted to appeal to the High Court of Australia, with the question being confined to whether the Supreme Court had jurisdiction to make the orders in question. The judgment is reported asKnight v. F.P. Special Assets Ltd[1992] 107 A.L.R. 585. For reasons that need not detain us, the High Court of Australia took the view that the Queensland Supreme Court had erred in identifying section 58 of the 1867 Act as the source of power for the orders made; rather the relevant source of power was Order 91, Rule 1 of the Rules of the Supreme Court. That Rule provided as follows:
“Subject to the provisions of the Judicature Act and these Rules, the costs of and incident to all proceedings in the Court, including the administration of estates and trusts, shall be in the discretion of the Court or Judge: Provided that nothing herein contained shall deprive an executor, administrator, trustee, or mortgagee who has not unreasonably instituted or carried on or resisted any proceedings of any right to costs out of a particular estate or fund to which he would be entitled according to the Rules heretofore acted upon in Courts of Equity: Provided also, that, subject to the next following Rule, when any cause, matter, or issue is tried with a jury, the costs shall follow the event, unless the Judge by whom such cause, matter, or issue is tried, or the Court, shall for good cause otherwise order.”
47. For Mason C.J. and Deane J., who gave a joint judgment (and for Gaudron J., who agreed with them), the starting point was that the natural meaning of this Rule was broad enough to grant jurisdiction to order costs against a non-party:
“14. According to their natural and ordinary meaning, the words of the rule are sufficiently expansive to enable the Court to make an order for costs against a person, whether that person is formally a party to the proceedings or not. The jurisdiction and the discretion thereby conferred are not limited. Because they are not limited it is easy to postulate a variety of circumstances where an exercise of the jurisdiction against a non-party would be extravagant and unjust. However, the existence of that possibility provides no justification for the imposition by the courts, by way of implication, of an arbitrary limitation upon the general jurisdiction conferred by the rule. To do so would, as will appear, deny power to the Court to order costs against a non-party in cases in which, in the interests of justice, such orders should be made. The inevitable answer to arguments directed to limiting curial jurisdiction based on the supposition that the jurisdiction might lend itself to abuse is that the court will and should develop principles governing the exercise of the discretion which will ensure that the jurisdiction is not exercised in such a way as to give rise to abuse.”
48. The main thrust of the appellants’ argument was that there was a supposed principle that, beyond certain well-established exceptions, the courts do not have jurisdiction to order payment of costs by a non-party. This argument, however, did not find favour with the majority of the High Court:
“26. Having regard to the variety and the nature of the circumstances in which an order for costs was made against a person who was not a party according to the record, we cannot accept that there was before the Judicature Acts a general rule that there was no jurisdiction to order costs against a non-party in the strict sense. It is plain enough that the courts from time to time awarded costs against a person who, not being a party on the record, was considered to be the ‘real party’. It may be that these cases are capable of being explained on various grounds, including the ground that the non-party ordered to pay costs was guilty of abuse of process, taking a very broad view of what constitutes an abuse of process, but to say that does not deny that there was jurisdiction to make an order for costs against a non-party even if the jurisdiction was exercised in limited circumstances only.”
Ultimately the Court was satisfied, by a four to one majority, that Order 91, Rule 1 conferred jurisdiction to make the orders sought.
49. Finally, there is the decision of the High Court of New Zealand (Tomkins J.) inCarborundum Abrasives. Here a Master had declined applications by the first and second defendants for an order for costs against persons who were not parties to the proceedings. The plaintiff had discontinued the proceedings following an application by the first defendant to dismiss the proceedings for want of prosecution resulting from the plaintiff’s failure to meet an order for security for costs. The subsequent applications for non-party costs orders were made pursuant to Rule 46 of the High Court Rules, which at the relevant time provided as follows:
50. The Master had held that this provision conferred a jurisdiction to make an order for costs against a non-party, albeit on the facts he did not consider it appropriate to do so. He had also held that the Court had an inherent jurisdiction to award such costs. These conclusions were not challenged by the appellants, though Tomkins J. nonetheless took some time to set out why he believed that the Master was correct on this jurisdictional issue. The learned judge referred toAiden Shippingand its influence on the law in the UK. He referred to section 51G of the Judicature Act 1908 (New Zealand, since largely repealed), which read as follows:
“Jurisdiction of court to award costs in all cases—
(1) Where any Act confers jurisdiction on the High Court or a Judge thereof in regard to any civil proceedings or any criminal proceedings or any appeal, without expressly conferring jurisdiction to award or otherwise deal with the costs of the proceedings or appeal, jurisdiction to award and deal with those costs and to make and enforce orders relating thereto shall be deemed to be also conferred on the court or Judge.
(2) Such costs shall be in the discretion of the court or Judge, and may, if the court or Judge thinks fit, be ordered to be charged upon or paid out of any fund or estate by the court.”
51. He noted that, unlike the UK Act, the section did not expressly give the Court power to determine ‘by whom’the costs are to be paid, but nor did it contain any limitation on the discretion conferred. Thus for the same reasons as Lord Goff inAiden Shipping, he concluded that there was no reason for limiting the Court’s jurisdiction to award costs to parties by implying into the section and Rule 46(1) such a limitation. On the contrary, he held that it accords with the approach that the Court should have full control over proceedings before it, to hold that in appropriate cases and for proper reasons the Court should be able to order a person who is not a party to the proceedings to make a payment towards the costs incurred by a party. In so doing he noted that this approach accorded with that adopted by the Supreme Court of Queensland inForest Pty v. Keen Bay, which had not by that stage been finally determined by the Australian High Court. However, having weighed up the factors relevant to the exercise of that jurisdiction, Tomkins J. decided that the Master was correct that no order for costs should have been made against the non-party directors, as the exceptional circumstances which would justify same did not exist on the facts of the case.
52. Drawing these decisions together, Clarke J. took the view in this case that the key phrase in each of the pieces of legislation under consideration was largely the same, and that there was no real difference of substance in the language used (paras. 36-37). However, Mr Cunningham argues on appeal that this is not so. He submits that theAiden Shippingcase was determined by the inclusion of the words “by whom” in the UK statute, which words are entirely absent from the Irish 1877 Act. He further argues that the Irish legislative framework and the RSC contain no provision equivalent to section 58 of the Supreme Court Act (Qld) 1867, which section was central toForest Pty v. Keen BayandKnight v. F.P. Special Assets Ltd. His core submission is that the Irish Act which the respondent seeks to rely upon does not contain the power that the foreign courts have relied on in order to found their jurisdiction.
53. It is true that the Irish statute omits the words “by whom”, and in that sense it less obviously permits of the making of a non-party costs order than did the UK legislation under consideration inAiden Shipping. However, merely because the UK Act contains a phrase which better supports the respondent’s case does not mean that the absence of same from the Irish Act is decisive in favour of the appellant. It is notable that Mr Cunningham makes no submission on appeal to explain or distinguish the decision inCarborundum Abrasives,where Tomkins J. acknowledged that the New Zealand legislation and rules also omitted this phrase but did not consider that this deprived him of jurisdiction to make the order sought. I agree with Clarke J. that the wording of the relevant statutes and rules in the foreign jurisdictions is in substance the same as that contained in the 1877 Act, even if it does not quite go as far as the UK Supreme Court Act 1981. Section 51 thereof refers to costs being “in the discretion of the Court” and provides that “the court shall have full power to determine by whom” costs are to be paid; section 58 of the Supreme Court Act (Qld) 1867 grants the court “power to award costs”; Order 91, Rule 1 of the Rules of the Supreme Court of Queensland puts costs “in the discretion of the Court or Judge”; Rule 46 of the New Zealand High Court Rules provides that costs “shall be in the discretion of the Court”; and Section 51G of the Judicature Act 1908 likewise says that “costs shall be in the discretion of the Court or Judge”. The relevant Irish provision, section 53 of the 1877 Act, similarly provides that costs “shall be in the discretion of the Court”. I share the view that, in truth, there is not any real difference in the substance of the language used.
54. However, despite the insight gained by this comparative exercise, the issue must ultimately be decided based on an interpretation of the wording of section 53 the 1877 Act (set out at para. 37,supra) according to the usual principles of statutory construction. Giving the terms of that provision their ordinary and natural meaning, it seems to me that the jurisdiction vested in the courts by that section is not limited to a jurisdiction to award costs against parties to the proceedings only: “the costs of and incident to every proceeding in the High Court … shall be in the discretion of the Court”. The section is broadly phrased and the discretion so vested in the Court is an unrestricted one. It would require the Court to read an implied limitation into the wording of the section in order for that discretion to be fettered in the manner advocated by the appellant. A common theme in the foreign judgments referred to above has been to read the relevant provision broadly, in a fashion which accords with the principle that a court should have full control over the proceedings before it. I agree that this is the correct approach. Accordingly, I am of the view that Clarke J. was entirely correct in his conclusion that he had jurisdiction to make a non-party costs order pursuant to section 53 the 1877 Act.
55. Of course there are myriad situations in which it would be altogether inappropriate to make a non-party costs order, but that is a matter which is addressed in considerable detail later in this judgment. As far as the jurisdiction to make such an order is concerned, I am satisfied that such an order can be founded either on the 1877 Act or Order 15, Rule 13 RSC.
iii. Additional matters raised by the appellant under this heading
56. It is necessary at this stage to address three freestanding arguments raised by the appellant and to explain why they do not displace the conclusion just reached.
a. The principle of finality
57. The appellant refers to the maxim‘interest reipublicae ut sit finis litium’– it is in the public interest that there be an end to litigation. The prevention of protracted litigation saves on costs and allows parties to order their future affairs, aware and confident of their respective positions. At a more fundamental level there exists the ideal that a matter should be heard, disposed of, and then finished forever. The appellant submits that it is an element of the principal of finality that the parties should be able to point to a particular moment in time and say “that is when the case was concluded”. Several long-standing principles of law – such as the rule inHenderson v. Henderson(1843) 3 Hare 100 and the concept offunctus officio– rely on the idea that at some point litigation is considered to be closed and cannot be reopened.
58. Drawing on these principles, the appellant points out that the trial judge heard the main proceedings and gave various judgments on the 6th March, 2009, the 17th July, 2009, the 31st July, 2009, the 5th February, 2010 and the 9th July, 2010, against the Cunningham Group companies and awarded costs against them. The learned judge did not specifically reserve the issue of a third party costs order to a later date, did not order a separate trial of the issue, nor did he give any indication that the proceedings remained open and active. The respondents brought the within application by notice of motion dated the 18th October, 2010, and the written judgment granting the orders sought is dated the 16th March, 2011. Thus it is said that the application was not made contemporaneously or in tandem with the proceedings. This was no mere amplification or clarification of reasons already given; First Active sought a drastically distinct remedy, separated from the main proceedings by a span of months. Thus it is said that Clarke J. should have refused to reopen the matter at all and should have refused to hear the application.
59. I would reject the submission made on two grounds. First, no argument to this effect was ever addressed to the learned trial judge, nor indeed was it raised even in the Notice of Appeal to this Court. For this reason alone, it would be inappropriate to permit Mr Cunningham to now rely on it, and I would dismiss the point. Moreover, even if I was minded to address it on the merits, I am satisfied that there is no substance to the points made. The application in question was made and decided prior to the ultimate determination of costs in respect of the relevant proceedings. The issue of the overall costs in respect of those proceedings did not come on for hearing until the 25th March, 2011, which was after the third party costs order had been made. It is therefore quite unsustainable to suggest that Clarke J. wasfunctus officioat the point that he determined the application, given that the issue of costs remained outstanding at the time. Simply put, the factual background of the case in no way supports the submission made. Indeed I cannot think of any more appropriate time for such issue to be decided than after the relevant hearings had come to a close and alongside or slightly in advance of the overall determination of costs. Furthermore, it is relevant in this regard that the appellant had been put on notice of the possibility of there being an application for a third party costs order by correspondence back in February, 2008, before the trial began (in respect of which see paras. 111-121,infra). Accordingly, I would dismiss the appellant’s arguments concerning the finality of litigation.
b. Alleged circumvention of Security for Costs
60. Mr Cunningham argues that the non-party costs order jurisdiction should not be recognised because there already exists a statutory basis to bring an application seeking security for costs where a company is engaged in litigation and there is a fear that it may not be able to meet the costs of the action if unsuccessful (see section 390 of the 1963 Act, now section 52 of the Companies Act 2014). The case law surrounding such applications is well-known and does not require to be addressed at any length in this judgment. The appellant points out that the issue of third party funders has been addressed by the courts as part of this jurisprudence. In particular, he draws attention to the judgment of McCarthy J. inJack O’Toole Ltd. v. McKeoin Kelly & Associates[1986] I.R. 277, [1987] I.L.R.M. 269. This was a dissenting judgment, but on grounds not relevant to the point highlighted by Mr Cunningham. The learned judge stated as follows at p. 289 of the report in the Irish Reports:
“The section, it is said, contemplates that an insolvent limited company will provide security for costs when ordered to do so, not in every case, but in many cases and that the section thus contemplates that such security will be provided from outside sources—obviously, the real owner of the company; such a backer of the litigation, as backer he is, will thus be risking only his liability to pay for the company’s legal costs and have, as it were, a free run in respect of a successful defendant’s costs, unless the company is obliged to give security. This, it is said, is plainly unjust and should weigh heavily in favour of this defendant.
Albeit the section does envisage that the company’s action will be backed by those with an interest in its survival or in its securing access to the courts and the resolution of its claim, and acknowledging that such outside backers are free from possible liability for the costs of a successful defendant, in my view this is not to the point for it is common to all such cases and therefore not a factor in exercising discretion. Without deciding whether or not this argument should, in the circumstances, be received at all, I would reject it as not being relevant.”
61. The appellant therefore submits that the issue of third parties funding litigation is within the contemplation of the law regarding security for costs, and indeed is a common feature of litigation. As the courts and legislature have already developed a complex and comprehensive procedure to deal with circumstances where impecunious companies embark on litigation, it was inappropriate for the High Court to fashion a new and unorthodox remedy, of uncertain scope and consequences.
62. Very much this same argument was run in the High Court. Clarke J. addressed it at paragraph 18 of his judgment. It is worth setting out in full his reasons for rejecting it:
“It was argued on behalf of Mr. Cunningham that to attempt to impose a jurisdiction such as that asserted on behalf of First Active would be to bypass s. 390. I do not agree. An application for security for costs is brought before the proceedings reach any level of maturity. In many cases an application for security for costs is not brought (or if brought, fails) precisely because the plaintiff company can assert that its impecuniosity is due to the wrongdoing of the defendant. However, an application to make a third party funder liable for the costs of the company concerned comes into play when the proceedings are over and the company has failed in the litigation. The mere fact that it would be unfair to impose an obligation to put up security for costs in advance of a hearing (which might, of course, have the effect of chilling the proceedings) does not mean that it necessarily follows that it would be inappropriate to order costs against the third party funder when the proceedings are over and have failed.”
63. I agree with this analysis. For the very reasons articulated by the learned judge, I cannot accept the argument that the fact that an application may be made seeking security for costs can itself preclude the recognition of what is otherwise a valid discretionary jurisdiction, founded on both statute and the rules of court, to award costs against a non-party. Given the multiplicity of pre-trial, trial and post-trial procedures now available to litigants, all designed with the intention of facilitating the efficient conduct of court proceedings and thereby assisting the administration of justice, it will frequently be the case that there are various discrete avenues by which a party may seek to protect its interests or achieve its ends. The existence of one such procedure does not provide a reason in principle to refuse to recognise another, particularly in circumstances where, as here, the two mechanisms operate at different stages of the litigation: an application for security for costs is of course made before trial, whereas the awarding of a non-party costs order will be consequent upon the outcome of the trial. As acknowledged by Clarke J., it easy to envisage circumstances in which an order for security for costs would not be deemed appropriate, but where by the close of proceedings a very different conclusion could be reached on an application for a non-party costs order. I would also observe that the facility of security for costs has not precluded the recognition of a jurisdiction to order non-party costs in other common law countries.
64. That is not necessarily to say, of course, that the security for costs procedure is totally irrelevant on an application to fix a non-party with the costs of the proceedings. Even if it cannot preclude the existence of the said jurisdiction, it may remain a factor to be considered on an application for a non-party costs order. Some of the older English jurisprudence suggests that, certainly in situations where it is sought to fix a liquidator with costs in an action brought by an insolvent plaintiff company, an application for security for costs is the preferable route. In his judgment inMetalloy Supplies Ltd. v. M.A. (U.K.) Ltd. [1997] 1 WLR 1613 (“Metalloy”), Waller L.J. stated as follows:
“I would myself prefer the approach that ordinarily in the case where a plaintiff is an insolvent company an order for security for costs should be the appropriate remedy. However there may, in any event, be a distinction between the position of receivers and the position of a liquidator. There is a further passage in the judgment of Lindsay J. inEastglen Ltd. v. Grafton(12 March 1996) which refers to the public interest in liquidators being able to perform their duties. His statement is made in the context of not discouraging creditors from assisting the liquidator, it being a creditor who was the non-party being attacked in that case, but the public interest in relation to liquidators also demands that they should not be exposed to personal liability for costs simply where they act for insolvent companies. Certainly, as it seems to me, the primary remedy of a defendant facing a company in liquidation should be security for costs, and I can perhaps summarise my view on the authorities so far as the proper approach to the question whether a liquidator should be made personally liable for costs in the following way. I think (as the judge decided and as I read the noted the district judge also decided) that there is jurisdiction to order a liquidator as a non-party to pay the costs personally; but it will only be in exceptional cases that the jurisdiction will be exercised, and impropriety will be a necessary ingredient, particularly having regard to the fact that the normal remedy of obtaining an order for security for costs is available. The caution necessary in all cases where an attempt is being made to render a non-party liable for costs will be the greater in the case of a liquidator having regard to the public policy considerations.” (p. 1618)
65. The relationship between security for costs and the making of a non-party costs order was again considered by the Court of Appeal inPetromec Inc v. Petroleo Brasileiro SA Petrobras[2006] EWCA Civ 1038 (“Petromec”). Here the trial judge had ordered a third party funder to be added to the proceedings and made liable for costs which had been ordered to be paid by Petromec to the defendants. This was a case in which the defendant had obtained an order for security for costs (albeit that the security put up was not enough to satisfy the claim for costs). On appeal it was argued that the security for costs order ought to have precluded the making of the non-party costs order. This argument was rejected by the Court of Appeal for the reasons set out in its judgment delivered by Longmore L.J.:
“13. The third and final ground of appeal is that the judge failed to take into account the fact Petrobras were entitled and did obtain an order for security for costs. It is said that should have inhibited the judge from making an order that Mr Efromovich was personally liable.
14. This puts the matter much too high. The ability to obtain an order for security for costs and the existence of any security put up as a result of such order are matters which a judge has to take into consideration. Moore-Bick LJ had those factors clearly in mind, see paras 5, 6, 15 and 43 of his judgment. The security that was put up (after opposition) by the Petromec/Maritima interests turned out not to be enough to satisfy Petrobras’ claim for costs. No doubt if more substantial security had been ordered, the current application would not have been necessary. But the fact that in the course of the proceedings a judge (Andrew Smith J in this case) ordered security which, in the event, has turned out to be inadequate should not be any reason for declining to exercise jurisdiction in an otherwise appropriate case. As the judge said in para 43 “it is no more unjust to make the backers of an insolvent company liable for the costs … than it is to require them to provide security for costs on its behalf”.
15. Once again Mr Neish sought to over-analyse the authorities in support of his submission. This part of his submission had two strands. The first strand was thatDymocks v. Todd in the Privy Councildid not purport to be a statement of English law but only of New Zealand law and that the concept utilised by Lord Brown of the real party to the litigation “was inconsistent with decisions of the Court of Appeal of England and Wales by which we were bound”, in particularMetalloy Supplies Ltd v. MA (UK) Ltd[1997] 1 WLR 1613 which had decided that the jurisdiction ought not to be exercised against directors or controllers of insolvent companies, since the remedy of security for costs was available. The second strand of the submission, again relying on theMetalloycase, was that it would be an unacceptable breach of the principle of corporate personality to make a director or controller of an insolvent company liable for the costs because in such circumstances the director or controller was acting for the benefit of the company in attempting to obtain judgment against those owing money to the company.
16. There was, in my judgment, no substance in these submissions. As Lord Brown was at pains to observe, the concept of the real party to the litigation is entirely consistent with the English authorities. In his summary of the principles governing the exercise of the relevant discretion set out in para 25 of the advice of the Judicial Committee, he relied on both English and Commonwealth authorities and the advice is, in my respectful view, to be taken as a statement of English law just as much as of New Zealand law. He did not need to refer to the availability of orders for security for costs from an insolvent company since in the case before him, the respondents were being asked to pay the costs of suing a defendant not of being sued by a claimant company. Inevitably a judge will, in the case of an insolvent company bear in mind the fact that security for costs is an available remedy. No doubt if security could have been applied for but was not, and there is no explanation for that failure, that will weigh against the application. But where, as here, an application has been made and security has been ordered, but has proved insufficient, that is different. As I have said the judge had these factors well in mind. The fact that he did not treat that as decisive against the application cannot be criticised and certainly affords no ground for any interference by this court.” (Emphasis added)
66. That, of course, was a situation entirely distinct from the one presently before the Court, but I refer to the case merely as illustrating the fact that the facility of security for costs cannot be altogether relegated from the judge’s mind on an application such as this. If I may refer to another case of a similar nature, it is the more recent judgment of the UK Court of Appeal inDeutsche Bank A.G. v. Sebastian Holdings Inc. and Alexander Vik[2016] EWCA Civ 23 (see also para. 76, infra) (“Deutsche Bank v. Sebastian Holdings”). There a non-party costs order was made against the appellant, a Mr Alexander Vik, who was the sole director and shareholder of the defendant company. He complained,inter alia,that it had been unjust to make the order as the bank had not applied for security for costs. Moore-Bick L.J., giving judgment for the Court, stated as follows:
“48. Before the judge Mr. Vik argued that the Bank’s failure to apply for an order for security for the costs of the counterclaim made it unjust to make an order for costs against him. The submission rested, once again, on theSymphonyguidelines. The thrust of the argument was that since the Bank could have protected itself by obtaining an order for security, but had chosen not to do so, it would be unjust to enable it to salvage its position after the event at the expense of Mr. Vik.
49. … More important, in our view, is the judge’s observation that a failure to apply for security does not preclude a successful application for an order for costs against a third party. We agree. Each case will turn on its own facts and, as Longmore L.J. pointed out inPetromec v Petrobras, it is no more unjust to make the backer of an insolvent company liable for costs after the event than to require him to provide security for those costs in advance. In this case the close relationship between Mr. Vik and Sebastian meant that he was not prejudiced by the Bank’s failure to make an application for security.”
67. Similarly, inForest Pty v. Keen Bay,Williams J. acknowledged that the availability of an order for security for costs is a fact relevant to the exercise of the court’s discretion to order costs. He too went on to add that while relevant, “it is not necessarily determinative of how the discretion in question should be exercised” (p. 131 of the report). An argument based on the availability of security for costs was again raised on appeal to the High Court of Australia (Knight v. F.P. Special Assets Ltd), where Mason C.J. and Deane J. disposed of it thus:
“26. … No doubt [security for costs] is an appropriate remedy in many cases but there are limitations attaching to the availability of security for costs. These limitations are such that security for costs is not a remedy in all cases in which justice calls for an order for the award of costs against a non-party. Security cannot be ordered against a defendant or a plaintiff who is an individual and who resides in the jurisdiction. The amount awarded as security is no more than an estimate of the future costs and it is not reasonable to expect a defendant to make further applications to the court at every stage when it appears that costs are escalating so as to render the amount of security previously awarded insufficient. And the availability of the remedy is scarcely a reason for denying the existence of jurisdiction to make an order for costs against the ‘real party’ at the end of the trial of an action. The availability of an order for security for costs at an earlier stage of the litigation would, in many situations, be a strong argument for refusing to exercise a discretion to order costs against a non-party, but discretion must be distinguished from jurisdiction.”
68. Ultimately, I must return to the argument regarding security for costs made on this appeal, which was solely directed to the existence or otherwise of the jurisdiction to make a non-party costs order. For the reasons above stated, I do not accept the appellant’s argument on this point and entirely endorse the reasoning of the learned trial judge. In circumstances such as those in this case, a non-party costs order is merely another route by which a party to can protect its costs when engaged in litigation with an insolvent company. That is not to say, however, that whether or not an application for security for costs was made may not be a relevant factor in determining whether to exercise that jurisdiction in future such non-party costs applications, even if it is unlikely to prove decisive. I would dismiss this ground of appeal.
c. Piercing the Veil of Incorporation
69. This argument was also raised in the High Court and was dealt with by the learned trial judge. Clarke J. explained that, in making a third party costs order against the litigation funder, the Court is not requiring the third party funder to take up any underlying liability of the company concerned; rather, it is only exposed to paying the costs incurred by the opposing party in the litigation funded, and not any other liability. The learned judge likened the situation to theByrne v. John S. O’Connorcase: the insurer there only had to pay the costs, and not any damages that might have been awarded against the defendant. Thus the third party funder is held independently liable because it has taken actions which led to costs being incurred by the successful party in the first place, and is not in fact held liable for the company’s debts.
70. The appellant now repeats his submissions based on the alleged piercing of the veil of incorporation by the trial judge in making the third party costs order. He notes the importance of the principle of separate legal personality and submits that modern commercial transactions would grind to a halt without it. It allows shareholders who have committed no legal wrong to walk away from a company that has outstanding debts, thereby facilitating risk-taking and encouraging enterprise. Of course, none of this is contested by the respondent at any level. It is not necessary to enter upon an examination of the concept of separate legal personality in this judgment.
71. The appellant points out that it has not been alleged that the relevant companies were created for the purposes of shielding him from the consequences of the litigation; they were already separate and existing entities with significant commercial lives outside of the context of these proceedings. Though this is true, I do not believe that it provides an avenue by which to attack the reasoning of Clarke J.
72. Mr Cunningham’s key point in this regard is that the learned judge erred in distinguishing between making a non-party liable for debts accrued by a company in trading, on the one hand, and making a non-party liable for adverse costs orders based on such party facilitating a company in conducting litigation, on the other. He submits that “the veil of incorporation is rent either way.” Companies have the right to litigate separate from their shareholders, and shareholder consent is not required to institute litigation. It is said that in reaching past the companies to impose costs on their shareholders, Clarke J. violated their individual and separate existence. Moreover, the appellant submits that often shareholders will input more money into a company that is in financial difficulties in order to keep it afloat and in the hope that it can trade its way out its difficulties. He denies that he funded the within litigation (see paras. 129-133,infra), but points out that the allegation made was that any financial difficulties of the companies were due to fraud on behalf of the respondent. He says that to hold a prominent shareholder liable for funding litigation aimed at redressing a grievous wrong done to the company would allow large companies to victimise smaller ones, confident that they could not be challenged without their shareholders being placed at significant risk.
73. I cannot agree with this submission. Mr Cunningham’s argument is based on a misunderstanding of the nature of both the discretion being exercised and the liability being imposed, as well as the legal basis for same. A non-party costs order does not impose an underlying liability of the company on the funder; rather than being made liable for the company’s debts, the funder, who is in effect the real party to the litigation, has an independent liability based on its own actions having led to costs being incurred by the successful party. Giving judgment for the Privy Council inDymocks Franchise Systems (NSW) Pty Limited v. Todd[2004] 1 WLR 2807 (“Dymocks”), Lord Brown of Eaton-Under-Heywood summarised the principles by which the discretion to order costs to be paid by a non-party is to be exercised. He stated as follows at paragraph 25(3):
“Where … the non-party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party’s costs. The non-party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes.He himself is ‘the real party’ to the litigation, a concept repeatedly invoked throughout the jurisprudence– see, for example, the judgments of the High Court of Australia in theKnightcase 174 CLR 178 and Millett LJ’s judgment inMetalloy Supplies Ltd v MA (UK) Ltd[1997] 1 WLR 1613. Consistently with this approach, Phillips LJ described the non-party underwriters inT G A Chapman Ltd v Christopher[1998] 1 WLR 12, 22 as ‘the defendants in all but name’. Nor, indeed, is it necessary that the non-party be ‘the only real party’ to the litigation in the sense explained in theKnightcase, provided that he is ‘a real party in … very important and critical respects’: seeArundel Chiropractic Centre Pty Ltd v Deputy Comr of Taxation(2001) 179 ALR 406, 414… at [96], [103] and [111].” (Emphasis added)
74. I believe that such considerations fully explain why it is that the jurisdiction being exercised is one based on the independent liability of the third party, the real driving force behind the litigation, rather than any liability of the company. So viewed, the appellant’s arguments based on piercing of the corporate veil simply fall away: because this liability is independent of that of the insolvent company, the question of the corporate veil does not even arise.
75. Two recent judgments of the UK Court of Appeal further illustrate why Mr Cunningham’s submission is not sustainable. As explained by Lewison L.J. inThrelfall v. ECD Insight Ltd[2013] EWCA Civ 1444:
“If a non-party costs order is made against a company director, it is quite wrong to characterise it as piercing or lifting the corporate veil; or to say that the company and the director are one and the same. As Mr Shaw has demonstrated, the separate personality of a corporation, even a single-member corporation, is deeply embedded in our law. But its purpose is to deal with legal rights and obligations. By contrast, the exercise of discretion to make a non-party costs order leaves rights and obligations where they are. The very fact that the making of such an order is discretionary demonstrates that the question is not one of rights and obligations of a non-party, for no obligations exist unless and until the court exercises its discretion. Moreover the fact that the discretion, if exercised, is exercised against a non-party underlines the proposition that the non-party has no substantive liability in respect of the cause of action in question.”
76. That passage was cited with approval in the recent judgment of the Court of Appeal inDeutsche Bank v. Sebastian Holdings. It will be recalled that a non-party costs order was made against a Mr Vik. He objected that the order in question amounted to piercing the corporate veil and treating he and the company as one person. Moore-Bick L.J. gave the judgment of the Court. He acknowledged at para. 50 that Mr Vik’s argument “might appear at first sight to be true”, but went on to clarify that “it is necessary to bear in mind that on an application of this kind the court is not concerned with legal rights and obligations but with a broad discretion which it will seek to exercise in a manner that will do justice.” Having quoted the above extract fromThrelfall v. ECD Insight Ltd.Moore-Bick L.J. concluded that:
“51. It is for that reason that, in appropriate circumstances, the court may find that the third party is the real party to the litigation because he is controlling, and perhaps funding, the litigation and conducting it for his own benefit rather than that of the nominal party to the proceedings. Although the court will not ignore the corporate structure, it is entitled when exercising its discretion in relation to costs to have regard to considerations of that kind.”
77. For these reasons I am satisfied that Clarke J. was right in his analysis. I would dismiss this ground of the appeal.
iv. WL Construction Limited v. Chawke and Bohan [2018] I.E.C.A. 113
78. Since this Court reserved judgment in this case, the Court of Appeal has given its decision inWL Construction Limited v. Chawke and Bohan[2018] I.E.C.A. 113, judgment delivered by Hogan J. on the 26th April, 2018 (“WL Construction”). Evidently, that judgment could not have been addressed by the parties during the actual hearing of this appeal. In normal circumstances, therefore, it might be thought of as being unusual for this Court to consider such a decision. It does so, however, in circumstances where, even though the jurisdiction of the High Court to make a so-called “Moorvieworder” was not in issue inWL Construction,Hogan J. nonetheless spent much of his time reviewing, and in the process very much doubting the correctness of, the decision inMoorview.As the appellant has argued to the same effect, it can only be to his benefit that WL Construction should be considered by this Court.
79. In his judgment, Hogan J. addresses many of the issues originally dealt with by Clarke J. inMoorview. In brief, the view of the learned Court of Appeal judge was that:
(a) the Rules of the Superior Courts usually apply to parties only (paras. 9-10);
(b) the starting point for the statutory construction of the 1877 Act should be to ask whether the jurisdiction is permitted, and not whether it is positively excluded by the language of the section (para. 11);
(c) the general power to award costs under that section is itself subject to the rules of court, which are silent about the matter under consideration (paras. 12-13);
(d) the decision inAiden Shippingis not persuasive; Lord Goff stated that earlier authorities had erroneously relied on an “implied limitation” that the 1981 Act applied only to parties, save where the contrary was expressly stated, but in the view of Hogan J. the entirecorpus jurisof civil procedure can be described as containing that same implied limitation (paras. 15-16);
(e) there is a presumption against unclear changes in the law, and the decision under appeal involves an expansion of the scope of section 53 of the 1877 Act with the real potential to impose potentially large costs liabilities on non-parties for the first time (para. 17);
(f)Byrne v. John S O’Connorcan be disregarded as an authority supportingMoorviewbecause subrogation by insurers, as in that case, falls into a special category (paras. 18-19).
For these reasons, although he considered that it would not be appropriate to express a concluded view on the jurisdiction to make a non-party costs order given that the same had not been argued by the parties, Hogan J. certainly raised some concerns over the correctness of the decision under appeal in this case.
80. As is evident from this judgment, I have also dealt with virtually all of the matters above raised, but have taken a contrary view to that of Hogan J. on many of these issues. Despite his cogent argument and the reasons therefore, which thoughobitermust nonetheless be afforded due weight and respect, I am not persuaded by his analysis. Consequently, such cannot avail the appellants in this case.
81. There is, however, one aspect of the judgment of Hogan J. which requires a more explicit reference. The learned judge, in deciding whether or not to exercise the conceded discretion to make such an order, came to the conclusion that, at a minimum, the non-party sought to be made liable for a costs order must be put on notice of that fact at some appropriate time during the course of the litigation. In other words, he must be informed of the possibility of such an application being made before the conclusion of the trial. As the intended third party in that action had not been so notified, Hogan J. allowed the appeal on that ground. Mr. Cunningham has also argued in this case that the giving of notice is a pre-requisite to the making of a non-party costs order. Accordingly, I will return to this issue at paras. 111-121,infra.
v. Conclusion
82. To conclude on the jurisdictional issue, I am satisfied that Clarke J. was entirely correct that he had jurisdiction to award costs against Mr Cunningham based both on section 53 of the 1877 Act and pursuant to Order 15, Rule 13 RSC. The appellant’s arguments based on the principle of finality, piercing of the corporate veil and security for costs do not compel a different conclusion.
83. Of course, this is far from saying that a judge is entirely at large when it comes to making a non-party costs order; this much is clear from the authorities and indeed as a matter of common sense. For example, inAiden Shipping, which in many respects seems to have been the jumping off point for the availability of non-party costs orders in each of the common law jurisdictions discussed above, it was said by Lord Goff that:
“In the vast majority of cases, it would no doubt be unjust to make an award of costs against a person who is not a party to the relevant proceedings. But, as the facts of the present case show, that is not always so.” (p. 980)
The learned judge continued as follows on the next page:
“Courts of first instance are, I believe, well capable of exercising their discretion under the statute in accordance with reason and justice. I cannot imagine any case arising in which some order for costs is made, in the exercise of the court’s discretion, against some person who has no connection with the proceedings in question.” (p. 981)
84. In his judgment for the Court of Appeal inIn Re Land and Property Trust Co. Plc.[1991] 1 W.L.R. 601 Nicholls L.J. stated that “the circumstances in which it will be just to make a costs order against a person who is not a party to the proceedings will be exceptional. In the nature of things it will very seldom be right to order a person who is not a party to proceedings to pay the costs of the proceedings” (p. 604). This passage was cited with approval by Tomkins J. inCarborundum AbrasivesSimilarly, Mason C.J. and Deane J. stated as follows inKnight v. F.P. Special Assets Ltd:
“32. The conclusion that the wide words of O.91 r.1 should not be read down so as to preclude jurisdiction to make an order for costs against a non-party does not, of course, mean that a judge has an unfettered discretion to make any order that he or she chooses. The wide jurisdiction conferred by the rule ‘must be exercised judicially and in accordance with general legal principles pertaining to the law of costs’ …”
85. Although it must be said that non-party costs applications and orders are altogether more common now than when such judgments were delivered, there remains validity to the considerations above expressed. Thus the general rule must of course remain that an order for costs will be made only against a party to the litigation, even though there exists the jurisdiction to do otherwise. Having made that general point, I will turn now to consider the factors which should guide the exercise of the Court’s discretion when it comes to exercising the jurisdiction to award costs against a non-party.
B. Exercise of the Non-Party Costs Jurisdiction on the Facts of this Case
86. In addressing the relevant considerations, I will first deal with the appellant’s specific arguments (i) that Clarke J. erred in holding that a finding of bad faith, impropriety or fraud was not a pre-requisite to the making of a non-party costs order, (ii) that the test espoused by the learned judge was too broad, (iii) that even on the test favoured by Clarke J., Mr Cunningham should not have been made liable for costs on the facts of this case, (iv) that if the jurisdiction was to be exercised, the learned judge ought to have made a “nuanced” costs order, and (v) that he did not have sufficient notice of the fact that the respondent would seek a costs order against him, and thus the order should not have been made. I will then draw together a summary of the relevant factors which may have a bearing on the exercise of a court’s jurisdiction to award costs against a non-party.
i. The requirement for a finding of bad faith, impropriety or fraud
87. The appellant contends that if jurisdiction exists to order costs against a third party, then it must be exercisable only on the basis of some wrongdoing being present.
88. Although he acknowledges that there are situations where the law imposes the liabilities of a company on its directors, all require some sort of cogent or identifiable wrongdoing on their behalf. He cites, as an example, inappropriate preferences in the payment of debts. He refers toCarborundum Abrasives, saying that the decision of the Master, who would have required bad faith, impropriety or fraud as a pre-requisite to the exercise of the jurisdiction, should be preferred over the judgment of the New Zealand High Court, which said that no evidence ofmala fideswas necessary. He also submits that although the practice of giving a company funds to continue litigation was viewed negatively by the trial judge, it is a normal practice that ought to be treated in like manner to a shareholder who invests more money in a company that is in a precarious position. Finally, Mr Cunningham says that some allegation of wrongdoing is necessary for the doctrine of separate legal personality to be upheld, and that this is doubly important where, as here, it is alleged that the reason for the poor financial health of the Companies was the actions of the respondent.
89. The last-mentioned argument based on separate legal personality can be disposed of for the reasons cited above, which need not be repeated here. As to the over-arching argument that bad faith or wrongdoing should be a precondition to the exercise of the non-party costs jurisdiction, it is instructive to look to the reasons for which the reasoning of the Master was not followed inCarborundum Abrasives. Tomkins J. stated as follows at p. 764 of the report:
“In his judgment, the Master said that without in any way attempting to be exhaustive, it was his view that for an applicant to succeed to obtain an order for costs against a non-party the applicant must establish some form of impropriety, fraud or bad faith on the part of the non-party. With respect to the Master, I do not accept this limitation. Certainly, if a non-party who has been involved in or connected with the prosecution or defence of proceedings through an insolvent company has acted with impropriety or withmala fides, that could be a persuasive reason for the Court exercising its discretion to order costs against such a non-party. But a non-party could become liable for costs where he has acted without impropriety ofmala fides. For example, inForest Pty Ltd. (Recs and Mgrs apptd.) v. Keen Bay Pty Ltd. & ors[1991] 4 A.C.S.R. 107, proceedings were commenced by a company that, on the same day, executed a mortgage in favour of certain banks who also on that day appointed a receiver. Ultimately, the proceedings were discontinued. The Court by a majority held that the receivers should be liable in costs. It was not suggested that the receivers had acted improperly or in bad faith. Ryan J. considered that it was proper that the costs should be ordered to be paid by the receivers when it was clearly established that they were incurred by the receivers primarily for the benefit of a non-party, the bank and with their support.
Indeed, he went so far as to say that it would have been ‘monstrously unfair’ to confine the applicants to order against impecunious companies.
Where proceedings are initiated by and controlled by a person who, although not a party to the proceedings, has a direct personal financial interest in their result, such as a receiver or manager appointed by a secured creditor, a substantial unsecured creditor or a substantial shareholder, it would rarely be just for such a person pursuing his own interests, to be able to do so with no risk to himself should the proceedings fail or be discontinued. That will be so whether or not the person is acting improperly or fraudulently.”
90. Like Clarke J., I too endorse the reasoning contained in this paragraph. The fundamental basis for the exercise of this jurisdiction, which is the injustice which might result where a plaintiff conducts litigation through an insolvent company for his own benefit but without any risk to him if he loses, remains valid regardless of whether or not the plaintiff has acted in bad faith ormala fides.Thus I cannot accept the submission that any element of fraud or impropriety is a pre-requisite to the making of a non-party costs order. Such an approach is consistent with the manner in which the jurisdiction to make a non-party costs order is exercised in the United Kingdom. As held by Rix L.J. for the Court of Appeal inGoodwood Recoveries Ltd v. Breen[2006] 1 WLR 2723:
“59. In my judgment, it is clear … that the law has moved a considerable distance in refining the early approach of Lloyd LJ inTaylor v Pace Developments Ltd[1991] BCC 406. Where a non-party director can be described as the ‘real party’, seeking his own benefit, controlling and/or funding the litigation, then even where he has acted in good faith or without any impropriety, justice may well demand that he be liable in costs on a fact-sensitive and objective assessment of the circumstances.”
91. However, as adverted to by Tomkins J. inCarborundum Abrasives, this is far from saying that whether there has been some such wrongdoing is totally irrelevant when it comes to the exercise of this jurisdiction. Manifestly this is not so; in certain circumstances the presence of bad faith, fraud, improper conduct etc. may provide a compelling reason to make the order sought. The overall point, however, is that, having regard to the reason for making a non-party costs order in the first place, Clarke J. did not err in principle in determining that he could exercise the said jurisdiction notwithstanding the absence of wrongdoing. As stated by Lord Brown inDymocks,“whilst any impropriety or the pursuit of speculative litigation may of itself support the making of an order against a non-party, its absence does not preclude the making of such an order” (para. 33). I agree with this approach. While the presence of wrongdoing, in the relevant sense, may bolster the basis for the making of a non-party costs order, I would not interfere with the exercise of the trial judge’s discretion merely because nomala fidesconduct was present. Thus the appellant’s argument on this point of appeal must fail.
ii. Appropriate factors for the exercise of jurisdiction
92. Having held that he had jurisdiction to order costs against Mr. Cunningham, Clarke J. went on to consider the factors which were to be taken into account in exercising said jurisdiction. He decided, based on an extract from p. 765 of the report inCarborundum Abrasives, that the respondent’s application should be assessed by reference to (i) the extent to which it might be reasonable to think that a company could meet an order for costs if the litigation failed; (ii) the degree to which the non-party would benefit from the litigation if successful; and (iii) any factors which may touch on whether the proceedings were pursued reasonably or in a reasonable fashion (para. 47). Clarke J. went on to apply these factors at paragraphs 48-52 of his judgment, concluding that it was appropriate to make the order sought.
93. Mr Cunningham now submits that even if a non-party costs jurisdiction exists and even if bad faith, impropriety etc. is not a pre-requisite to its exercise, the test must nonetheless be “different and more onerous” than the one identified by Clarke J. The appellant acknowledges that the test in question was drawn from persuasive authority, but submits that it is “far too law a bar when the importance of separate legal personality, and the onerous nature of the order, are considered.” It must be said that in his outline written submissions to this Court, the appellant did not go on to in fact identify a different test, or point to any additional factors that ought to be taken into account. However, a further factor was identified in Mr Cunningham’s supplemental written submissions, made pursuant to a direction of this Court of the 14th July, 2016. Though strictly speaking the appellant was not given liberty to address this issue in his supplemental submissions, I will nonetheless address his proposed additional requirement.
94. Mr Cunningham submits that it ought to be a pre-requisite to the exercise of jurisdiction that the director or shareholder fund the litigation either for some purpose other than the benefit of the company, or that he stood to benefit other than through his shareholding. He points out that a director or shareholder who funds litigation does so for the benefit of the company; the fact that he may ultimately receive the benefit is irrelevant – the company exists separate to him. Under the broad test favoured by Clarke J., without need for wrongdoing, there are very few actions which a shareholder could take to try to save an insolvent company without exposing himself to costs. He says that the test would almost certainly capture large numbers of companies with only one or two shareholders; accordingly, benefit, as distinct from wrongdoing, cannot be the test. The appellant submits that a respondent ought to be required to show that the director had no belief that the action was in the interests of the company. It is submitted that there was no finding to that effect in this case, nor evidence that could have supported one. Mr Cunningham says that it is hard to see how it could be alleged that he would have expended significant amounts of money on the litigation without an implicit acceptance that he had abona fidebelief in the merits of same.
95. This submission is based on a passage in the judgment of Lloyd L.J. for the UK Court of Appeal inTaylor v. Pace Developments[1991] BCC 406 at 409, which provides as follows:
“The controlling director of a one-man company is inevitably the person who causes the costs to be incurred, in one sense, by causing the company to defend the proceedings. But it could not be right that in every such case he should be made personally liable for the costs, even if he knows that the company will not be able to meet the plaintiff’s costs, should the company prove unsuccessful. That would be far too great an inroad on the principle of limited liability. I do not say that there may not be cases where a director may not properly be liable for costs. Thus he might be made liable if the company’s defence is notbona fide, as, for example, where the company has been advised that there is no defence, and the proceedings are defended out of spite, or for the sole purpose of causing the plaintiffs to incur irrecoverable costs. No doubt there will be other cases. But such cases must necessarily be rare. In the great majority of cases the directors of an insolvent company which defends proceedings brought against it should not be at personal risk of costs.”
96. I do not accept the appellant’s argument based on this passage. It is clear from the extract quoted that Lloyd L.J. was not purporting to lay down prescriptive requirements but rather was providing a non-exhaustive list of the circumstances in which a non-party costs order against a company director may be appropriate. As the learned judge acknowledged on the previous page of the report, “[t]here is only one immutable rule in relation to costs, and that is that there are no immutable rules.” Moreover, as acknowledged by Rix L.J. in the extract ofGoodwoodquoted at para. 90,supra,“the law has moved a considerable distance in refining the early approach of Lloyd LJ inTaylor v. Pace Developments Ltd”. It is now recognised in the UK that the overriding criterion is that the discretion in question be exercised in a just manner. In any event, even ifTaylordid stand for the proposition advanced by the appellant, I would reject it. More generally, the appellant’s argument is again based in large part on the separate legal personality of the company, a submission which has been rejected above.
97. Taking account of the reasons behind the exercise of the non-party costs jurisdiction, I am satisfied that the factors proposed by Clarke J. were wholly appropriate. The considerations identified by the learned judge are consistent with those applied in the other common law jurisdictions surveyed in this judgment. That this is so is evident from the majority judgment of the High Court of Australia inKnight v. F.P. Special Assets Ltd, where it was stated that an order for costs should be made against a non-party “where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation”, provided that the interests of justice require that it be made. Similarly, following a review of the authorities, the Privy Council inDymocksconcluded that, generally speaking, “where a non-party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit, he should be liable for the costs if his claim or defence or appeal fails” (para. 29).
98. Accordingly, I do not find any error of law in the test applied by Clarke J. I certainly reject the suggestion that the additional factor proposed by the appellant is a pre-requisite to the exercise of this jurisdiction. However, as is a recurring theme throughout this judgment, I do not rule out the possibility that other subsidiary considerations may weigh one way or the other (see summary at para 125,infra). Before pulling together these various factors, all of which were addressed by Clarke J. in one guise or another, I will first turn to consider further additional arguments raised by the appellant, starting with his objections to the manner in which the test was applied by Clarke J. in this case.
iii. Application of those principles in this case
99. Even on the test identified by Clarke J., Mr Cunningham takes issue with the manner in which the relevant factors were applied in this case. He says that even by reference to the three factors identified by the learned judge, he should not have been made liable for costs.
100. First, in respect of whether it was reasonable to think that the plaintiff companies could meet the costs of the litigation, he submits that it must be remembered that this was a case dealing with fraud, and it was contended that the businesses in question were solvent and profitable until the respondent’s actions severely damaged their positions. The trial judge identified the value of the claim as in excess of €150 million. Mr Cunningham says that to impose costs liabilities on him even where it was contended that the inability of the companies to meet any costs burden arose from the fraud alleged would be unfair and would stifle the companies’ property rights. He again says that security for costs would have been a better avenue (this argument has been dealt with above) and points out that where security is ordered against an individual, it is often only for a fraction of the costs, whereas Mr Cunningham was made liable for the entirety of the costs.
101. I do not accept the plaintiff’s argument in this regard. It is true that one of the special circumstances which may prevent a court from ordering security for costs against a company is the fact that it is alleged that its impecuniosity stems from the wrong alleged. However, the main proceedings were the subject of a successful application for a non-suit; every substantive issue was determined in the respondent’s favour on the basis that the appellant had failed to establish even aprima faciecase. Thus the allegation that the reason for the companies’ impecuniosity was the respondent’s conduct had to be considered in a markedly different light by the end of the trial than it would have been at the outset when a security for costs application would be made. Put simply, it was determined that there was no basis on which the plaintiffs’ case could succeed. Accordingly, the reason for the companies’ impecuniosity was not a relevant consideration. Moreover, there was no debate at trial – nor was there any on appeal – about the core element of this factor, namely, that the companies themselves could not meet the costs of the litigation. This much was clear to all. Thereafter it followed naturally that costs would be awarded against the appellant, and that such would cover the entirety of the respondent’s costs. Though the trial judge could have chosen to exercise his discretion differently, I would not interfere with the manner in which he did exercise it.
102. Second, although Mr Cunningham does not deny that he would have benefited had the companies been successful (given that he is the most significant shareholder and “founder” of the Group), he argues that it would be difficult to delimit in practice the boundaries of a test that involves as an element “the degree of benefit to the non-party” when all shareholders, directors or unsecured creditors stand to benefit from a company succeeding in litigation. Mr Cunningham submits that if this is an appropriate consideration, it was improper to engage in an analysis of the proportion of the benefit to him relative to that of unsecured creditors.
103. I must reject this argument also. It seems to me that it is entirely logical to have regard to who is the likely beneficiary of the proceedings in question. Such is a consideration in each common law jurisdiction in which non-party costs orders are obtainable, and I think validly so. The fact that Mr Cunningham and his wife stood to be the main beneficiaries (see paras. 44-45 of the judgment of Clarke J.) was not determinative of the application in and of itself, but was a particularly weighty factor in favour of making the order made. Manifestly there will be some cases where a director litigates a claim through an insolvent company but does not do so for his own benefit, or substantially for his own benefit. Where that is the case, a compelling reason for the making of a non-party costs order is removed. Here, the figures disclosed that even if it had been successful with only 50% of its claim, the Cunningham Group would have been left with a value somewhere between €20 million to €50 million once its debt to the respondent was accounted for, and with only €3.5 million in liabilities owing to unconnected third parties. Therefore it is clear that the overwhelming benefit of the claim would have passed to the appellant and his wife. Overall, I am satisfied that there was no error in the manner in which this factor was applied by the learned trial judge.
104. Finally, the appellant disputes that the conduct of the proceedings was wasteful. He acknowledges that the companies’ claim was amended after discovery was received and later prior to the trial commencing, but says that the latter amendment was in response to the respondent setting out for the first time, in April, 2008, the reasons why it refused to fund the Bailey Point development. He says that this was a complex fraud case and that the same must be pleaded with great specificity; it is only natural that amendments would be required. More amendments were needed after a new legal team was briefed. The appellant maintains that notwithstanding the amendments, his case remained fundamentally the same: that First Active made a representation in 2002, knowing it to be false.
105. Once again, I do not accept this submission. This litigation contained serious allegations of fraud against First Active and its officers. These claims were repeatedly reformulated and ultimately proceeded with in a form totally distinct to that originally pleaded. Where a claim could not be sustained, it was not withdrawn but was advanced in a modified format. Ultimately the companies did not succeed in making out even aprima faciecase and the main proceedings were determined by a non-suit. Along the way the trial judge was required to give numerous judgments on procedural issues. In his judgment delivered on the 9th July, 2010 (Moorview Developments Ltd & ors v. First Active Plc & ors[2010] IEHC 275), Clarke J. addressed the conduct of the proceedings in the following manner:
“7.2 … It is true to say that some of the points raised from time to time by the Cunningham Group have proved well-founded. In particular, I have held with the Cunningham Group in respect of a number of amendments which they sought to bring to proceedings (although it is now clear that the issues sought to be raised by amendment have failed). But it should also be noted that some of those amendments (for example the original hotly contested amendment in respect of the fraud claim as originally formulated) were ultimately not proceeded with or at least not proceeded with in anything remotely resembling the form in which it was originally sought to plead them. While the Cunningham Group, therefore, succeeded in its application to amend, it ultimately abandoned the case which was included in the pleadings by reason of that amendment. It also seems to me that many of the points now being relied upon by the Cunningham Group are wholly devoid of any merit. At least some of the points which I have had to deal with in this judgment seem to me to be bordering on the unstateable.
7.3 Parties have, of course, an entitlement to argue any points which they wish before the courts and if so argued, the courts have to deal with them. But parties do have an obligation to refrain from wasting court time by raising arguments which either cannot affect the ultimate result or have no real basis. I am afraid I have to say that in some respects the Cunningham Group has trespassed over the line in that regard.”
106. The same general points are made at paragraph 49 of the report of the judgment under appeal. On the facts of these long-running proceedings, I would afford particular deference to the trial judge’s assessment of the manner in which the proceedings were conducted and the serious procedural failures which added to the costs. Clarke J. case managed virtually the entirety of these and the linked proceedings and delivered over a dozen judgments in the proceedings overall. He was uniquely well-placed to assess the conduct of the proceedings. Finally, it should be remembered that the trial judge was minded to make the order sought even without reference to the reasonableness of the conduct of the proceedings; when he had regard to that factor, it merely reconfirmed the conclusion already arrived at. I would dismiss these points of appeal.
iv. Whether there should have been a “nuanced” costs order
107. The appellant’s argument in this respect is based on the fact that part of the High Court’s rationale for the non-party costs order was the prior procedural history of the proceedings. Clarke J. observed that the manner in which the litigation had been conducted had increased the costs of the action. Mr Cunningham submits that if certain parts of the proceedings were considered unsatisfactory, and this was a relevant factor to take into account, the judge should have embarked on a more nuanced review of the costs of the action. He submits that making him wholly liable for the entirety of the costs, on the basis that parts of the litigation were conducted in a sub-optimal manner, amounts to a fundamentally punitive action. He says that even if some blame might attach to him, treating costs as an all-or-nothing remedy was disproportionate; the Court has the ability to make separate costs orders for interlocutory matters and ought to have dealt with such matters separately, where it was felt that this was warranted.
108. Again, I do not believe that there is any merit to this argument. It is abundantly clear from the judgment of Clarke J. that costs were not awarded against Mr Cunningham as some form of punitive measure. Indeed, to so suggest is to fundamentally misunderstand the basis for the awarding of costs against a non-party in a case such as this. As noted at paragraph 48 of the judgment of the High Court, the ultimate justification for the exercise of this jurisdiction is to redress a potential injustice that could arise where a person is able to pursue litigation largely for his own benefit but with no risk as to costs because the litigation is conducted through a company. Here, Clarke J. found that the Cunningham Group companies could not have satisfied any costs ordered against them and that the appellant and his wife would have been the prime beneficiaries had the action succeeded. He expressly stated that these two factors alone overwhelmingly favoured the making of the order sought and, taking account of the reason for such jurisdiction, I agree.
109. The jurisdiction to award costs against a non-party in circumstances such as these should not be exercised in a piecemeal fashion, parcelled out based solely on an assessment of the reasonableness of various courses of conduct pursued during the proceedings. The reason that the jurisdiction exists and the reason that it was exercised in this case is the clear injustice that would be done where a non-party, who initiated and controlled the proceedings, and who stood to be the main beneficiary if successful, could do so with no risk to himself if the claim failed, with the result that the defendant, successful with its application for a non-suit, was unable to recover the costs of defending the proceedings from the insolvent companies. Seen in that light, there is no logic to the suggestion that there should have been some manner of apportionment of the costs based on the reasonableness or otherwise of the conduct of the proceedings; the default position, taking the underlying rationale for the jurisdiction into account, was that costs would be awarded against the non-party litigation funder.
110. Only then did the learned judge turn to consider the conduct of the proceedings. He identified, quite rightly, in my view, that whether it was reasonable to bring or defend an action, even if ultimately unsuccessful, is a relevant consideration. Although he alluded to factors that might “weigh heavily one side or the other”, it seems clear to me that the principal purpose of such exercise was to determine whether, notwithstanding his preliminary conclusion that the order ought to be made, the appellant’s initiation and conduct of the proceedings was reasonable in all the circumstances and therefore that no non-party costs order should follow. Thus the test for making a costs order against a non-party envisages that even where the first two factors are satisfied, the fact that the proceedings were pursued and conducted reasonably may provide a basis not to award costs against the non-party. In fact, as it happened, in this case the unreasonable conduct of the proceedings only copper-fastened the view first reached; said conduct provided afurther reasonto award costs against Mr Cunningham, but the same conclusion already followed from a consideration of the first two elements of theCarborundum Abrasivestest. Had it been found that the initiation and conduct of the proceedings was reasonable, this may have saved Mr Cunningham from the non-party costs order; however, the fact that this did not occur does not mean that the non-party costs jurisdiction was exercised punitively. I would dismiss this point of appeal.
v. Reasonable notice
111. The appellant claims that Clarke J. placed “significant emphasis” on the fact that First Active sent a letter to his solicitors prior to the trial of the action, threatening to make any identified funder liable for the costs. Clarke J. considered this to be a relevant factor on the facts of the case, noting that the letter was sent “at a relatively early stage in the proceedings” and that Mr Cunningham was therefore on notice of the potential for non-party costs to be awarded against him. The appellant objects to this characterisation. He points out that the earliest of the linked proceedings dates from 2003; the letter was sent in February, 2008, and the trial began in April, 2008 (having been given a provisional trial date in September, 2007). He thus submits that the proceedings had been active for five years before the letter was sent, that the briefs were out and that significant costs had been incurred. He says that the application should have been made at any earlier date, and certainly before the matter was set down for trial.
112. The appellant submits that the situation is comparable to one in which security for costs is sought. Delay is a highly relevant matter in such applications because it may leave the respondent thereto in the worst possible position, having already incurred costs but being unable to advance the proceedings any further due to lack of funds. By waiting until after the trial to make the application, First Active maximised the potential waste of costs and the prejudice to the appellant; the order should have been brought ahead of time and in early course. He also submits that simple correspondence was insufficient to ground such an onerous and novel relief.
113. I will deal first with two minor points. First, I am satisfied that the manner in which the notice was communicated to Mr Cunningham was perfectly sufficient: no particular form of words is required, nor is it necessary that the same be communicated by way of a formal or specialised document. It was entirely satisfactory to bring the possibility of the application to the appellant’s attention by way of a simple letter. Notification is therefore a matter of substance and not of form. Second, while it is argued that the application itself should have been made before the trial, I do not think that there is any merit to this view. The letter just mentioned was sufficient to put Mr Cunningham on notice of the possibility of costs being awarded against him in the event that the litigation was unsuccessful and moreover, given that the application necessarily involves an assessment of the reasonableness of the conduct of the proceedings and was contingent upon judgments being made in favour of First Active, I am satisfied that it was appropriate for this application for costs to be made in the usual fashion, that is, after the action had been heard.
114. Turning, then, to the real substance of the point made. One would have to agree that, chronologically speaking at least, the letter was not sent all that early in the proceedings. The main proceedings were initiated in 2003 and were essentially finished in the High Court by 2011. The letter was sent in February, 2008, just two months before the trial of the action. Undoubtedly legal costs had already been incurred by that point. The case had been set down for hearing and so, despite the fact that the majority of the costs were incurred after February, 2008, the analogy with security for costs is apt insofar as the companies would have had to either abandon their claims and therefore to throw away the legal costs incurred to that point in time, or to proceed in the knowledge that the funder might ultimately be liable for all costs if unsuccessful. On the other hand, First Active points out that the appellant was on notice of the likelihood of the application before most of the costs had been incurred. Notice was at least given some time in advance of trial, rather than, say, mid-trial.
115. Although I agree with the appellant that it may not quite be accurate to say that the notice was given “early” in the proceedings, I do not think that this fact can greatly avail him in any event. It is clear fromCarborundum Abrasives, as approved by Clarke J. and now by this Court on appeal, that the giving of notice to the non-party is not an absolute pre-requisite to the exercise of the jurisdiction to make the costs order sought. The relevant factors have been set out above. Applying that test, it is possible to exercise the relevant jurisdiction where those factors are satisfied, even where no notice has been given.
116. It is clear that insofar as Clarke J. found it necessary to consider notice as a factor in these proceedings, that was largely because there may have been “some doubt” as to the existence of the non-party costs order jurisdiction prior to the decision in this case. Such jurisdiction has since been established and has been exercised on a number of occasions, it now being recognised as a risk which a third party will have to be mindful of prior to embarking on litigation for his or her own benefit through a corporate entity, whether insolvent or not, which could not meet a costs order made against it.
117. However, inWL Construction Limited v. Chawke and Bohan[2018] I.E.C.A. 113, Hogan J. decided that as the non-party in that case had never been put on notice, at any stage in the course of the trial, of the fact that the defendants might thereafter seek to recover the costs of the litigation against him personally, it would be unfair to visit him with those costs (see paras. 21-26 of his judgment). In his view, fair procedures and due process demand that the giving of notice to the non-party prior to the conclusion of the litigation is an absolute pre-requisite to making an order of this nature.
118. Although the issue of notice will always be an important factor in a given case, and a lack of notice will present a strong argument not to make a non-party costs order, I am of the view that this matter is better considered as part of an overall exercise based on the discretion of court, rather than being a mandatory precondition to the making of such an order. It must be recalled that the non-party costs jurisdiction will be exercised only in exceptional cases and in order to ensure that no injustice is done. Often it will be unjust to make such a non-party costs order where no notice has been given, but this is not necessarily so. I would not fetter a court’s jurisdiction to make such an order by holding that it cannot be done save where the non-party has been put on notice, even if every other factor of potential relevance strongly suggested that justice lay in favour of such an order being made.
119. Nonetheless, for the reasons stated by Hogan J., whether any notice was given must remain an important consideration for the Court on an application for a non-party costs order. For example, inMetalloyit was stated that “[t]he judge, as I see it, went wrong in the following respects. … the judge did not appear to take any account of the lack of warning that the liquidator had in relation to the seeking of a costs order against him personally” (p. 1618). Although sending such notice is not a pre-requisite to the making of such an order, the order will more readily be granted where the third party in question was put on notice – and the earlier such notice was given, the more heavily it may weigh in favour of making the order. It is possible to envisage a situation where, taking account of all of the circumstances of the case, it is thought appropriate by the trial judge to make only a partial or restricted costs order, an example of which would be to allow only those costs incurred after the third party had been put on notice of the possibility of the application. Such an approach would have the benefit of encouraging the potential applicant to notify their opponent at the earliest stage of the proceedings, which could in turn prevent wasteful costs from being incurred before any third party costs order was ever adverted to.
120. In this context, normally one might expect that notification would be given at the first opportunity on which the intended applicant, if called upon, would be in a position to demonstrate reasonable grounds for the making of such an application. Such would not foreclose on subsequent events also being relevant to the final determination of the application. Whilst one cannot be more precise than that, it must be that to give notification in the absence of such grounds, or for an improper purpose or motive, or as a means or tool for suppressing a legitimate claim, would be entirely abusive and would have to be dealt with as such by the trial judge.
121. However, these remarks are not intended to be in any way prescriptive. It should remain the case that giving notice is not a requirement, and that the making of a third party costs order remains at the discretion of the trial judge, taking account of the all of the factors above discussed. On the facts of this case, taking everything into account, including the reasonableness of the conduct of the proceedings and the fact that some notice was given, albeit not at the earliest opportunity, and even accounting for this being the first case in which a third party funder costs order was sought, I am satisfied that the learned judge was entirely within his discretion in making the order which he did.
vi. Summary of Factors and Proper Method of Application
122. Even after the first non-party costs order inAiden Shipping, orders of that nature remained relatively uncommon in the United Kingdom for a number of years. In that case Lord Goff invited a future appellate court to lay down some principles for the guidance of judges of first instance when asked to make an order for costs against a non-party. This invitation was not taken up until the judgment of the Court of Appeal inSymphony Group Plc v. Hodgson[1994] Q.B. 179. There Balcombe L.J. set out, at pp. 192-194 of the report, a non-exhaustive list of nine material considerations that ought to be considered. The case law then developed over a number of years, with many cases attempting to enumerate the main principles governing the proper exercise of this discretionary jurisdiction. The judgment of the Privy Council inDymockscontains a helpful summary of the relevant principles at paras. 25-29. That summary was thereafter considered the starting point on such applications for some time.
123. More recently, however, judicial authorities in the neighbouring jurisdiction have counselled against over-reliance on precedent and the rote application of potentially inflexible guidelines in the making of a non-party costs order. This much was evident even as early as the judgments of the members of the Court of Appeal inPetromec; for example, Longmore L.J. stated at paragraph 11 that “[t]here is a danger that the exercise of the jurisdiction to order a non-party to proceedings to pay the cost of those proceedings becomes over-complicated by reference to authority”, and Laws L.J. used his short concurring judgment to make the same point:
“19. I agree that this appeal should be dismissed for the reasons given by my Lord, Longmore LJ. I would wish to emphasise my agreement with his statement at para 11 that the exercise of this jurisdiction becomes over-complicated by reference to authority. Indeed I think it has become overburdened. Section 51 confers a discretion not confined by specific limitations. While the learning is, with respect, important in indicating the kind of considerations upon which the court will focus, it must not be treated as a rule-book.”
124. This concern is further evident in the more recent decision of the Court of Appeal inDeutsche Bank v. Sebastian Holdings. In the postscript to his judgment, Moore-Bick L.J. stated as follows:
“61. It will be apparent from what we have said that Mr. Cogley sought to place great emphasis on theSymphonyguidelines to the point of treating them, in particular the third guideline, as laying down requirements that must be satisfied unless the applicant can demonstrate a good reason for failing to do so. In our view that is not the correct approach. When considering those guidelines it is important to bear in mind that they were formulated not very long after the decision inAiden Shipping v Interbulk,at a time when applications for costs against third parties were relatively uncommon, and that they were intended merely to provide guidance, not to lay down rules. Since then there have been many more applications for orders for costs against third parties under a wide variety of circumstances, as a result of which it has come to be recognised more clearly than perhaps it was at that time that each case turns on its own facts.
62. As all three members of the court observed inPetromec v Petrobras, the exercise of the discretion is in danger of becoming over-complicated by authority. The decision of the Privy Council inDymocks, which contains an authoritative statement of the modern law, explains and interprets theSymphonyguidelines in a way which reflects the variety of circumstances in which the court is likely to be called upon to exercise the discretion. Thus, the Privy Council has explained that an order of this kind is ‘exceptional’ only in the sense that it is outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. Similarly, it has made it clear that the absence of a warning is simply one factor which the court will take into account in an appropriate case when deciding whether, viewed overall, it would be unjust to exercise the discretion in favour of making an order for costs against the third party. We think it important to emphasise that the only immutable principle is that the discretion must be exercised justly. It should also be recognised that, since the decision involves an exercise of discretion, limited assistance is likely to be gained from the citation of other decisions at first instance in which judges have or have not granted an order of this kind.”
125. In many respects there is much to commend this approach. I do not believe that a trial judge’s exercise of the discretionary non-party costs jurisdiction should be burdened by an overly complex or unduly rigid set of principles from which no departure is permitted. It is the trial judge who is best placed to assess the overall circumstances of the case and to determine whether such an order is in the interests of justice. Having said that, however, it is evident that there are certain considerations to which the judge should have regard. Without being unduly prescriptive, I would consider that the following factors should be taken into account when making an order of this type:
a. The extent to which it might have been reasonable to think that the company could meet any costs if it failed
b. The degree to which the non-party would benefit from the litigation if successful, including whether it had a direct personal financial interest in the result
c. The extent to which the non-party was the initiator, funder and/or controller of, and moving party behind, the litigation
d. Any factors which may touch on whether the proceedings were pursued reasonably and in a reasonable fashion; the required assessment of the conduct of the proceedings may of course lean either in favour of or against the making of the order sought
e. There is no requirement that there be a finding of bad faith, impropriety or fraud, though of course the same, if present, will support the ordering of costs against the non-party
f. Whether the non-party was on notice of the intention to apply for a non-party costs order; at what point in the litigation such notice was communicated will also be a relevant consideration, as will the extent of the notice so provided
A further consideration to take into account, though rarely likely to be decisive in and of itself, will be:
g. Whether the successful party applied for security for costs in advance of the trial
Finally, and most importantly:
h. The Court’s discretion is a wide one, but it must be exercised judicially and, in all the circumstances, must give rise to a just result.
126. This is not an exhaustive list; other potentially relevant factors can be found in the case law. Moreover, clearly it is not the case that each of the above considerations will have a role to play on every application seeking a non-party costs order. The precise interplay between the factors and the weight to be assigned to each will also vary depending on the circumstances of the case. It should be borne in mind that this list is enumerated in the context of my acceptance that the broad discretionary approach adopted in the UK, based on doing justice in all the circumstances, is the proper approach. I cite the above factors merely as being illustrative of the considerations that a trial judge ought to keep in mind when an order of this nature is sought.
127. The UK jurisprudence establishes that this discretionary jurisdiction will very seldom be exercised against “pure funders”, being those “with no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business, and in no way seek to control its course” (Hamilton v. Al Fayed (No 2)[2003] QB 1175, 1194). This seems a reasonable rule. However, where the non-party not merely funds the proceedings but also substantially controls and stands to benefit from them, justice will typically require the making of the order sought. In other words, a non-party costs order will follow where the non-party was, in reality, the “real party” to the litigation. Thus although I am endeavouring not to set down a rigid rule regarding the weight to be assigned to each factor, it must be said that factors (a), (b) and (c), above, must always carry substantial weight.
128. It is abundantly clear that all such relevant matters were taken into account by the learned trial judge in reaching his decision to order costs against Mr Cunningham. His “test” at paragraph 47 of the reported judgment refers only to three factors, but all of the above were addressed in some capacity over the course of the judgment. Taking all of the relevant considerations into account, I would not interfere with the learned judge’s exercise of his discretion. Moreover, as stressed inDymocksandDeutsche Bank, and as adopted above, the ultimate guiding criterion is whether in all the circumstances it is just to make the order sought. I am satisfied, taking account of all of the circumstances of this case, that it was just to make an order for costs against Mr. Cunningham.
C. Statements by Counsel
129. It is necessary at this point to deal with a subsidiary argument made by Mr Cunningham. He complains that the trial judge incorrectly drew inferences from two statements by counsel, which led him to the erroneous conclusion that Mr Cunningham was the funder of proceedings. He continues to deny that this was so.
130. The first such statement was made by lead counsel for the Cunningham Group companies. During the trial of the main issues in the linked proceedings, he asked for leniency from the Court with regard to with regard to certain procedural matters owing to the difference in resources between the Cunningham Group and First Active. The basis for same was that the proceedings were being privately funded, and on a modest basis; he referred to “a private client on a shoestring”. The respondent then issued correspondence inviting the appellant and his companies to identify the funder, though no response was forthcoming on that issue.
131. The second statement was one made by Mr Cunningham’s own counsel during the motion to cross-examine the appellant in front of the Court as to the state of his personal assets. That motion was run in tandem with the application for a non-party costs order. During the run of that motion, counsel argued that Mr Cunningham was concerned that disclosing any sources of income which he might have might make those income sources available to First Active in order to satisfy its judgment debt in such a way as to prevent Mr Cunningham from mounting appeals to this Court.
132. Mr Cunningham now submits that it is utterly unsustainable to interpret the first statement as an admission that he was the funder of the litigation. He says that it is an insufficient foundation for an order of such impact. As to the second statement, he submits that this too cannot be interpreted as an admission that he funded the litigation. Mr Cunningham points out that he was a personal party to appeals before this Court; if his assets were targeted before the finalisation of those appeals, he might not have been able to afford to pursue them. There was thus an inadequate basis to conclude that the appellant was the funder. Furthermore, Mr Cunningham submits that during the cross-examination of him in aid of execution by the respondent, it became clear that extensive funding had been provided by another company in the Cunningham Group which fell outside of the receivership instigated by First Active. This was confirmed by subsequent discovery.
133. I do not accept the submission that Clarke J. erred in drawing the inference from these statements that the appellant was the funder of the litigation. It was not an unreasonable conclusion to reach on the basis of the comments in question, and for that reason alone I would not interfere with it. Moreover, the statements in question were not the only factors taken into account by the learned judge in finding as he did. It was clear that the relevant Cunningham Group companies were “hopelessly insolvent”, and therefore the funding must have been coming from some external source. The learned judge posited, quite correctly, in my view, that it would be quite surprising if a legal team would take on litigation on the scale of these proceedings without some guarantee of payment, which again suggested that there must be some external source of funding. Most critically, Clarke J. was clearly influenced by the fact that Mr Cunningham did not deny on affidavit that he was the funder, but rather questioned whether there was any evidence to establish that he was. Also significant was the fact that Mr Cunningham refused to reply when requested in correspondence to identify the funder. Moreover, no other explanation for the funding of the litigation to that point had been offered on affidavit. Taking all of these factors cumulatively, I am satisfied that the High Court judge was justified in drawing the inference that Mr Cunningham was the funder of the litigation. Nothing revealed during his cross-examination aid of execution by the respondent displaces this view. I reject these points of appeal.
D. Effect of Transfer
134. In his supplemental written submissions, the appellant makes a number of arguments in relation to the transfer of rights from First Active plc to Ulster Bank Ireland Limited, a related company within the Ulster Bank Group, prior to the trial of the action. This transfer was effected pursuant to a scheme under section 33 of the Central Bank Act 1971 and was approved by an order of the Minister for Finance contained in S.I. 481 of 2009, on foot of a transfer arrangement entered into between First Active and Ulster Bank on the 8th October, 2009. The transfer occurred on the 15th February, 2010.
135. This issue has been determined against the appellant in the related judgment inFirst Active Plc v. Cunningham[2018] IESC 11, which appeal was heard alongside the instant repeal. That judgment fully explores the legal effect of the transfer and addresses the appellant’s submissions in relation thereto. Accordingly, it is not necessary to traverse that ground again in this judgment.
Conclusion
136. It follows, from what is said above, that I am satisfied that Clarke J. had jurisdiction to make an order for costs against Mr Cunningham. Said jurisdiction can validly be founded either on Order 15, Rule 13 RSC or section 53 of the 1877 Act. Moreover, I am of the view that the considerations taken into account by the learned judge in exercising his discretion were entirely appropriate, and that it was just, in all the circumstances of the case, to make an order for costs against the appellant.
137. For the reasons outlined in this judgment, I would dismiss the appeal.
