Arrow Nominees Ltd & Ors v Graham Blackledge & Ors (2003)
A costs order would not be made against non-parties to a petition under s.459 Companies Act 1985 who had leant money to the petitioners, as they were pure funders and had no interest in the outcome of the litigation other than a hope of repayment of their loans.
Application for costs under s.51 Supreme Court Act 1981 by the first, second and third respondents ('R') against non-parties ('the costs respondents') to the original proceedings, which was a petition under s.459 Companies Act 1985 concerning the affairs of Bodycare (Health & Beauty) Ltd. The petition was struck out (see (1) Arrow Nominees Inc (2) Lorraine Blackledge v Blackledge & Ors (2000) 1 BCLC 709) when it was found that documents disclosed by the petitioners had been forged by the person behind the first petitioner ('T'). The petitioners were ordered to pay R's costs but had no funds with which to make any payment. R sought to recover those costs from the costs respondents on the basis that they had funded the conduct of the petition. R argued that the costs respondents were not pure funders as they had an interest in the outcome of the proceedings other than merely the possible repayment of the sums they had lent, in that they hoped to gain a business advantage through their relationship with T. R also pointed to the scale of the payments and the fact that there were no express terms as to the purpose for which the money would be used or the time for repayment, arguing that there must have been an underlying understanding or at least an expectation of commercial value.
The costs respondents were pure funders and it would not be just to make an order against them under s.51 of the Act. They had lent money out of sympathy and friendship rather than to gain a commercial advantage. None of them made the loans for the purposes of the litigation. Although they were aware of the litigation, they had not known to what purpose the funds would be put. There was no collateral interest in the litigation other than reimbursement of the sums lent. They had a hope or expectation of being repaid but they were not looking to success in the litigation as a source of repayment.