Summary

Unsuccessful application for costs pursuant to s.51 Supreme Court Act 1981 against a director of and/or the solicitors for the claimant company.

Facts

Application by the first defendant ('SCL') for orders pursuant to s.51 Supreme Court Act 1981 against the second claimant ('F') and the former solicitors ('WF') for the first claimant ('FOQ') on the basis that one or both of them had funded or maintained FOQ's action. In March 1999 judgment was given for the FOQ against SCL in a sum lower than a payment into court by SCL in March 1995. SCL was ordered to pay FOQ's costs up to that date and FOQ was ordered to pay SCL's costs thereafter, with the judgment sum being treated as an interim payment by FOQ to SCL on account of its costs. FOQ was unable to pay the balance due to SCL, some or all of which SCL now sought to recover by this application. SCL contended that F and/or WF had funded or maintained the action because: (i) F had provided security for a sum which FOQ had been required to pay as security for SCL's costs and had lent approximately £60,000 at various times between 1997 and 1999 in order to fund certain steps in the proceedings; (ii) WF had continued to act for FOQ notwithstanding a very large and ever-increasing unpaid bill for their costs. In addition, the parties were unable to agree who was entitled to the proceeds of an "after-the-event" legal expenses insurance policy obtained by FOQ in 1997/98. The issues for determination were: (a) whether F had funded or financed the proceedings brought by FOQ; (b) whether it was just in all the circumstances to make F pay some or all of SCL's unrecovered costs; (c) if the court had jurisdiction over WF under s.51 of the 1981 Act, whether they had funded or financed the proceedings brought by FOQ; (d) whether it was just in all the circumstances to make WF pay some or all of SCL's unrecovered costs; and (e) to whom the insurance proceeds should be paid.

Held

(1) It could not be said that F had financed or funded the proceedings. The provision of security did not constitute funding in the sense of intervening. The payment of £60,000 was not a material contribution to the costs of the action, which far exceeded that figure. (2) There was no basis for ordering F to pay any part of the costs of the proceedings. A company director was not ordinarily to be at risk of an order under s.51 of the Act, and there was nothing exceptional in the circumstances to warrant departure from that general rule. It was not wrong or unusual for a controlling shareholder of a small family company to conduct litigation as if it were his own as long as it was pursued for the interests of the company, shareholders and creditors. Taylor v Pace Development (1991) BCC 406 considered. (3) The jurisdiction under s.51 was only exercisable over solicitors if they were guilty of some improper, unreasonable or negligent act or omission. That could not be said of WF. (4) WF had not funded or financed the action. A solicitor was not to be put at risk of an order under s.51 by foregoing or withholding from making demands for payment of his fees. (5) The proceeds of the policy were payable to SCL.

Judgment accordingly.