Merchantbridge & Co Ltd & Safron Advisors Ltd v Safron General Partner 1 Ltd & 9 Ors (2011)


It was appropriate to order non-parties to pay the claimants' costs of an action where those parties had funded, controlled and been interested in the defence put forward.


The applicants (M and S) applied under the Senior Courts Act 1981 s.51 for costs orders against the respondent non-parties. M had provided services to a Cayman Islands company (C), which managed an investment fund, under an investment advisory agreement. C repudiated the agreement and M issued proceedings against it, seeking the recovery of outstanding fees and/or damages for breach of the agreement. C was insolvent at the time and unable to fund a defence. It was decided that it should defend the proceedings and that shareholders would provide funds to enable it to do so. While the case was proceeding, M assigned its rights to the litigation to S. Judgment was given in M's favour. The nine respondents were said to be investors in the relevant fund or involved with funding the costs of C's defence. M and S argued that the respondents should be ordered to pay the costs of the proceedings because they had funded, substantially controlled and been interested in the defence put forward by C.


Four of the respondents should not be made liable for M and S's costs. One had been well above the real fray, and the roles of the other three had merely been mechanical. However, the other five respondents would be ordered to pay M and S's costs, apart from those relating to the initial period when service was being acknowledged and a defence considered, on a joint and several basis. This was not a case involving moral blame, but the five respondents had taken a decision to fund the defence of an action where they had, among other things, an interest of their own to protect. They controlled that litigation by taking major decisions themselves and leaving minor ones to their agent. They were meeting C's other debts but resisting this one. The respondent funders were acting outside their usual role in the ordinary run of cases. C had an interest in the outcome but so did the funders. But for their decision to fund the litigation, M and S's costs in succeeding with their claim would have been very much lower (see paras 42-44 of judgment).

Application granted in part