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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Locabail (UK) Ltd v Bayfield Properties Ltd & Ors [1999] EWHC 261 (Ch) (20 December 1999) URL: http://www.bailii.org/ew/cases/EWHC/Ch/1999/261.html Cite as: [1999] EWHC 261 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		20 December 1999

Introduction

1. The trial of these proceedings concerned the enforcement of a charge over a substantial property in Chobham, Surrey, called Hawks Hill. The registered proprietor was at one time a Panamanian company, Aurora Enterprises S.A. ("Aurora"), which was owned by Mr Ares Emmanuel. In 1985 Mr Emmanuel procured Aurora to grant a first charge over Hawks Hill to Locabail (UK) Ltd. ("Locabail"). In 1995 Locabail and Mr Emmanuel agreed that Hawks Hill would be transferred to the first defendant, Bayfield Properties Ltd., an Isle of Man company ("Bayfield"), and the Locabail charge would be replaced by a charge in favour of Allied Trust Bank Ltd. ("Allied Trust"), which would advance funds to Bayfield for the purchase of Hawks Hill from Aurora. The Allied Trust loan went into default at once.
2. Mrs Barbara Emmanuel (Mr Emmanuel's second wife) was in occupation of Hawks Hill. Mrs Emmanuel sought to set aside a possession order obtained by Allied Trust, whose rights had been assigned to Locabail, and to have the register rectified so as to show her as the proprietor. The basis of her claim was that Mr Emmanuel, who controlled Aurora and Bayfield, made oral representations prior to their marriage, and in the years after their marriage, which led her to believe that Hawks Hill was her property, and that in reliance on the representations and in the belief that the property was hers, she spent considerable sums on the property. She claimed that by the time Allied Trust took a charge on Hawks Hill, she had acquired an interest under the doctrine of proprietary estoppel, which she claimed was an overriding interest in priority to the rights of Locabail as assignee of Allied Trust.
3. After a sixteen day trial in October and November 1998 I gave judgment in this (and in a related case relating to a property in Knightsbridge called Hans House) on 9th March 1999. In that judgment I dismissed Mrs Emmanuel's application to set aside the possession order. The primary ground of my decision was that she had not satisfied me that the representations and assurances had in fact been made by Mr Emmanuel. I also decided that (even if the representations had been made) she had not shown that she had made the bulk of the payments which she said she had made in reliance on the representations. On 29th March 1999 I ordered that Mrs Emmanuel should pay LUK's costs of the proceedings.

Application for costs order

4. This is an application that Mr Peter Tavoulareas ("Mr Tavoulareas") should be ordered to pay the costs pursuant to section 51 of the Supreme Court Act 1981. Mr Tavoulareas was Mrs Emmanuel's first husband. They had known each other since childhood, and they married when she was still a college student. In the early 1980's they moved to London so that he could manage his shipping business. They had two children. Mr Tavoulareas' shipping interests were held through Atlas Shipping & Trading Co. S.A., of which he owned two-thirds. The other third was owned by his associate Mr Emmanuel. In 1984 Mr Tavoulareas and Mrs Emmanuel were divorced, and she married Mr Emmanuel in the same year. There were very acrimonious and lengthy proceedings between Mr Tavoulareas and Mrs Emmanuel concerning the custody of their children, then aged 4 and 8.
5. At the trial in this action Mr Tavoulareas gave evidence in support of Mrs Emmanuel's position. In the course of cross-examination Mr Tavoulareas gave evidence that it was he who had recommended Mrs Emmanuel to the solicitors who first asserted a proprietary right in Hawks Hill on her behalf, and who acted for her in her application to be joined. He volunteered that he did not envisage that he would "participate in this case in any way, shape or form, except to help finance it". After some evidence that he knew little about the issues in the case, the cross-examination by Mr Mann QC proceeded as follows (with some editorial corrections to the transcript):

"Q Are you funding this litigation for Mrs Emmanuel?

A Yes, I am.

Q Why are you funding this litigation for Mr Emmanuel?

A Because I firmly believe that her position is a proper position, that she was promised these homes.

...

I just felt - through a variety of sources I became of the opinion that Barbara's position was a correct position and, without my funding, my children and Barbara could find themselves potentially homeless in this country, and it certainly wouldn't - you know, although I have no financial obligation towards Barbara, she is the mother of my two children and it really wouldn't do me well to see the mother of my two children without a home.

Q And it is also a way of getting at Ares Emmanuel.

A I do not understand that correlation at all. Why have that connection?

Q Well, you are helping Mrs Emmanuel to attack her husband's interest, to get a slice of her husband's property.

A I think - I thought he was bankrupt. You know, how am I doing that?

Q You don't see it that way?

A That is a non sequitur.

Q It is the case that you feel rather bitter though, however, about ---

A Ares is a creep. I mean, you know. Everybody will tell you. But, you know, the oddest set of circumstances is that he has acted so poorly throughout his whole life that I think he has got to be the one that is suffering more than anybody. I get a great deal of satisfaction out of that.

Q Have you funded this litigation throughout ever since it started?

A Since it started?

Q Yes

A You mean, two years ago?

Q Yes. When you sent her to D J Freeman.

A Yes. Yes.

...

MR MANN: It sounds as though you have had meetings with the lawyers about this case. Yes, or not? Am I right, yes or no?

A No, not till yesterday.

Q You had never had a meeting with the lawyers?

A No, not till this morning.

Q You had never had a meeting with D J Freeman?

A No. I keep on having to repeat myself, but this is not a big part of my life.

Q It must be quite an expensive part of your life.

A Mr Mann, without trying to brag right now, I am involved in a project that involves the Chancellor of Germany, the Saudi Government and my job it is to build a billion dollars worth of ships. That is taking 150 per cent of my time. I was - I did not sleep last night; I was on the phone to Los Angeles, Saudi Arabia, New York, Washington - You know, it is a bigger priority for me than this case. If I had nothing more to do, you'd be absolutely correct, I'd probably spend a lot more time on this."

6. On the same day on which I made the final order in the proceedings (including the order for costs against Mrs Emmanuel), I also gave leave under RSC Ord. 11, r.9(4) for a summons to be issued and served on Mr Tavoulareas in Florida seeking an order that he pay Locabail's costs pursuant to the power in section 51(1) of the Supreme Court Act 1981.
7. Mr Tavoulareas was served with the summons, but, when the matter came before me in June 1999, I expressed doubts whether the issue and service of a summons in the action was an appropriate method in a case where the non-party was outside the jurisdiction, even though it was the normal practice where the non-party was within the jurisdiction. I therefore set aside my original order and ordered that Mr Tavoulareas be joined in the action and that permission be granted to serve him out of the jurisdiction under R.S.C. Order 11, r.1(1)(c) as a necessary or proper party to the claim for costs, the quantification of which was still outstanding. Since then, in another case, the Court of Appeal has decided that issue and service abroad of a summons under R.S.C. Ord. 11, r.9(4) was indeed the appropriate course under the rules prior to the new Civil Procedure Rules where the non-party was abroad: Comninos v. Prudential Assurance Co. Ltd. (The Ikarian Reefer (No. 2), The Times, 15th October, 1999.
8. Mr Tavoulareas has not been represented on this application, and his lawyers in Florida, Messrs Sachs, Sax & Klein, P.A., wrote on 18th June 1999 to Locabail's solicitors to say that he did not intend to appear at the hearing scheduled for 21st June 1999. They said:

".... the London court does not have personal jurisdiction over Mr Tavoulareas. He is a Florida resident with no assets in the United Kingdom. Moreover, the only connection he has to the above referenced litigation is that he testified as a witness therein. He did not have a personal interest in the litigation. At most, he lent money to his ex-wife, partly in interest.

Additionally, the judgment for fees and costs associated with the above referenced litigation against Mr Tavoulareas would not be recognized in the State of Florida. Florida law provides for various grounds upon which the court can reject a foreign judgment against a Florida resident. These grounds include, but are not limited to, judgments obtained when the foreign court did not have jurisdiction over the defendant; judgments based on causes of action which are repugnant to the public policy of the State of Florida; and judgments where jurisdiction is based solely on personal service and the foreign court was a seriously inconvenient forum for the trial of the action.

As I am sure you are aware, Florida law does not provide for an award of costs and fees against the non-prevailing party in litigation, unless such an award is sanctioned by a specific statute or contractual provision. Florida courts certainly do not allow for costs or fees to be assessed against a person who is not even a party to the litigation."

The letter also went on to object to my sitting on the matter, because of an alleged conflict of interest, which I take to be a reference to the objection which was rejected by the Court of Appeal in these proceedings: The Times, 19th November 1999. On 22nd November 1999 they wrote

"As we previously advised you, it is Mr Tavoulareas' position that the London Court has no jurisdiction over him and cannot properly enter any order or enforce any judgment in connection with the claims you have asserted. Accordingly, this letter confirms that no one will be appearing on Mr Tavoulareas' behalf on November 26, 1999."

9. It is clear in principle, and is confirmed by the decision of the Court of Appeal in The Ikarian Reefer (No.2), ante, that the English court has international jurisdiction to order a non-party resident abroad to pay the costs of English proceedings. As the Court of Appeal pointed out in that case, there may be difficulties in the way of enforcing the judgment abroad, but that is not an objection to the existence of the jurisdiction or its exercise. Enforcement may be particularly difficult in the United States, where rules visiting the losing party with legal fees are generally limited to cases of misconduct, and where the English rule is sometimes regarded as an unjustified limitation on access to justice. But there was some discussion (to call it evidence would be to put it too high) of Mr Tavoulareas' business interests in this country, and he may have assets here. I should add also that Mr Tavoulareas was at one time resident in England, and (as I have said) went through a bitterly contested custody dispute. He would have been aware, at the least, of the normal rule that the losing party pays the legal costs.
10. On this application, in the absence of Mr Tavoulareas, Mr Anthony Mann QC, for Locabail, very properly drew my attention to arguments which might have been adduced by Mr Tavoulareas had he been represented.

Principles

11. In Symphony Group plc v. Hodgson [1994] Q.B. 179, 191-194, Balcombe L.J. summarised the categories of cases in which, following the decision in Aiden Shipping Co. Ltd. v. Interbulk Ltd. [1986] A.C. 965, non-parties had been ordered to pay the costs of proceedings; and laid down some principles for guidance of judges at first instance.
12. Among the categories mentioned by Balcombe L.J. in which a non-party has been ordered to pay the costs are (a) where a person has the management of the action, and causes the party under its management improperly to prosecute or defend proceedings; (b) where a person has maintained or financed the action; (c) where a person has caused an action.
13. The relevant passages for the purposes of this application from the guidelines are these

"(1) An order for the payment of costs by a non-party will always be exceptional: see per Lord Goff in Aiden Shipping Co. Ltd. v. Interbulk Ltd [1986] A.C. 965, 980F. The judge should treat any application for such an order with considerable caution.

...

(5) The fact that the trial judge may in the course of his judgment in the action have expressed views on the conduct of the non-party constitutes neither bias nor the appearance of bias. Bias is the antithesis of the proper exercise of a judicial function: see Bahai v. Rashidian [1985] 1 W.L.R. 1337, 1342H, 1346F.

(6) The procedure for the determination of costs is a summary procedure, not necessarily subject to all the rules that would apply in an action. Thus, subject to any relevant statutory exceptions, judicial findings are inadmissible as evidence of the facts upon which they were based in proceedings between one of the parties to the original proceedings and a stranger: see Hollington v. F. Hewthorn & Co. Ltd. [1943] K.B. 587; Cross on Evidence, 7th ed. (1990), pp. 100-101. Yet in the summary procedure for the determination of the liability of a solicitor to pay the costs of an action to which he was not a party, the judge's findings of fact may be admissible: see Brendon v. Spira [1938] 1 K.B. 176, 192, cited with approval by this court in Bahai v. Rashidian [1985] 1 W.L.R. 1337, 1343D, 1345H. This departure from basic principles can only be justified if the connection of the non-party with the original proceedings was so close that he will not suffer any injustice by allowing this exception to the general rule.

(7) Again, the normal rule is that witnesses in either civil or criminal proceedings enjoy immunity from any form of civil action in respect of evidence given during those proceedings. One reason for this immunity is so that witnesses may give their evidence fearlessly: see Palmer v. Durnford Ford [1992] Q.B. 483, 487. In so far as the evidence of a witness in proceedings may lead to an application for the costs of those proceedings against him or his company, it introduces yet another exception to a valuable general principle."

14. The indication by Balcombe L.J. that the jurisdiction should be exercised only in exceptional circumstances has been applied, or referred to with approval, in many cases. In Murphy v. Young & Co.'s Brewery [1997] 1 WLR 1591, 1604 (C.A.), Phillips L.J. said that an order under section 51 that a non-party pay costs will only be justified when exceptional circumstances make such an order reasonable and just; and in Chapman Ltd. v. Christopher [1998] 1 WLR 12, 20 (C.A.) he said that the question is whether the relevant features are "extraordinary in the context of the entire range of litigation that comes to the courts".
15. In Globe Equities Ltd. v. Globe Legal Services Ltd., March 5, 1999, the Court of Appeal re-emphasised that the ultimate question was whether it was reasonable and just to make the order. Morritt L.J. (with whom Butler-Sloss and Sedley L.JJ. agreed) said:

"...[T]here appears to me to be a danger of treating the requirement that the circumstances are 'exceptional' as being part of the statute to be applied. It is not. The epithet originates in the first proposition enunciated by Balcombe LJ in Symphony Group plc v. Hodgson, but it is based on what Lord Goff said in Aiden Shipping Co. Ltd. v. Interbulk Ltd. [1986] 1 AC 965, 980.

'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 this case show, that is not always so.'

In none of the cases to which I have referred have 'exceptional circumstances' been elevated into a precondition to the exercise of the power; nor should they be.

Ultimately the test is whether in all the circumstances it is just to exercise the power conferred by subsections (1) and (3) of s.51 Supreme Court Act 1981 to make a non-party pay the costs of the proceedings. Plainly in the ordinary run of cases where the party is pursuing or defending the claim for his own benefit through solicitors acting as such there is not usually any justification for making someone else pay the costs. But there will be cases where either or both these two features are absent. In such cases it will be a matter for judgment and the exercise by the judge of his discretion to decide whether the circumstances relied on are such as to make it just to order some non-party to pay the costs. Thus, as it seems to me, the exceptional case is one to be recognised by comparison with the ordinary run of cases not defined in advance by reference to any further characteristic."

16. One of the well-established categories mentioned by Balcombe L.J. in which costs orders against non-parties have been made is where the non-party has funded the litigation: see Singh v. Observer Ltd. [1989] 2 All E.R. 751, rvd. on the facts [1989] 3 All E.R. 777n. In Murphy v. Young & Co.'s Brewery [1997] 1 W.L.R. at 1601, Phillips L.J said that where the funder had been guilty of maintenance (which was until the Criminal Law Act 1967 a tort and a crime, but which remains contrary to public policy) the court would be receptive to an application that the maintainer pay any costs attributable to the maintenance. He referred to the re-statement of earlier authority by Lord Mustill in Giles v. Thompson [1994] 1 AC 142, 161 of the policy against maintenance:

"It is directed against wanton and officious intermeddling with the disputes of others in which the meddler has no interest whatever, and where the assistance he renders to one or the other party is without justification or excuse."

17. The old law of maintenance regarded as legitimate the financing of litigation where the maintainer had family or social ties, or a legitimate financial or commercial interest in supporting the litigation. It is clear however that the jurisdiction may be exercised against a person who has funded litigation even if there is no question of maintenance. It is also clear that the mere fact that a non-party had funded litigation is not of itself a factor which requires the court to find that it is just and reasonable to make the non-party responsible.
18. The discretion is not, of course, to be exercised by reference to the facts of earlier cases, but (in the same way as the cases on insurance cover have been regarded as posing questions of principle) I have been referred to modern cases in which the responsibility for costs of family members who have funded litigation has been considered.
19. I was referred to two cases on which a costs order had been sought against a person who had financed the legal costs of a relative. In Cooper v. Maxwell, unreported, March 20, 1992, (a decision of the Court of Appeal, decided before Symphony Group plc v. Hodgson) the background was that Kevin Maxwell had refused to answer questions put to him by the provisional liquidators of Bishopsgate Investment Management Ltd. and he sought (unsuccessfully) before Hoffmann J. and the Court of Appeal to set aside, on the grounds that he had a privilege against self-incrimination, an order under the Insolvency Act 1986, s.236: [1993] Ch. 1. The liquidators learned that Kevin Maxwell had been funded by his mother, Mrs Elisabeth Maxwell. The judgment indicates that, at least initially, she agreed to pay a substantial sum to Kevin Maxwell for legal fees without knowing for what specific proceedings the money was to be used. A costs order against Mrs Maxwell was refused.
20. The essence of the decision was that there was no automatic rule that a non-party who has funded litigation will be ordered to pay the costs; and the bona fides of the litigant were an important factor. Dillon L.J. said:

"Whether the proceedings are being brought or defended bona fide is obviously an important consideration. The court would much more readily make an order for costs against a third party who had funded the proceedings if the court held that the proceedings were not brought bona fide. In the present case, however, we do not have to consider that. It is conceded by the Provisional Liquidators that there was no impropriety in the conduct of Mr Kevin Maxwell's defence in these proceedings and that the appeal, although dismissed by this court, was brought bona fide. It has only to be stated that there had been a difference of opinion between judges at first instance in the Chancery Division on an important question of law to make it quite clear that there was bona fides in the appeal. It may well be that Mr Kevin Maxwell felt happily relieved when he was told that there was a strong point of law that he was entitled to refuse to answer questions on the ground of self-incrimination, but that does not make it not bona fides for him to have rested on what were arguably, as he would have been advised, his rights. We have therefore in this case the position in which a mother has provided substantial sums of money for the assistance of her son in this and other matters of litigation or legal advice. There cannot of course be any objection to a mother providing money for her son to obtain advice where currently there is no litigation; it is only the funding of litigation which could fall within the section in the Supreme Court Act.

...

The development of the authorities has not been that there will automatically be an order for costs against a person who is not a party to the proceedings if that person has funded the litigation. More is required. It is not suggested that a bank which funded litigation by providing an overdraft for a party to litigation on commercial terms would automatically be ordered to pay the other side's costs if the litigation was unsuccessful. The position could be different with a trade union which has an interest in funding the litigation of a member in the industrial field and habitually does pay the costs if the litigation fails. I do not see that there is anything in the circumstances of Mrs Maxwell in the present case which makes it right that the court should make an order against her to pay the costs of Mr Kevin Maxwell's unsuccessful appeal."

21. Thistleton v. Hendricks (1992) 32 Con. L.R. 123 falls on the other side of the line. That was decided after Cooper v. Maxwell, but before Symphony Group plc v. Hodgson. It is reported only on the costs order, and the report contains no details of the underlying action, except: (a) a builder, Mr Thistleton, had sued a landowner for the balance of the price of building works involving an extension to Mr Hendricks' home; (b) judgment was given for Mr Hendricks on a counterclaim (presumably relating to the quality of the work); (c) in cross-examination of Mrs Thistleton, the plaintiff's mother, she said that she was paying or had agreed to pay his solicitors' bills; (d) it seems that it was Mrs Thistleton who originally put Mr Hendricks in touch with her son, that she paid for some of the building materials, and that she claimed to have lent Mr Hendricks some money. On the application there was evidence that Mrs Thistleton's payments to her son were loans. HH Judge Hicks QC ordered Mrs Thistleton to pay the costs. After rejecting the argument that potential liability in costs should be confined to unlawful maintainers, and considering the policy considerations, he referred to Cooper v. Maxwell, ante, and indicated a view that, where mala fides was alleged, it seemed that the state of mind of the funder as well as the funded litigant was material. The material matters which HH Judge Hicks QC took into account are, at least in part, mentioned by reference to a statement of facts which is not set out fully in the report, but, in deciding that she should pay £7,000 towards Mr Hendricks' costs, he said:

"...I have regard in particular to (i) my finding that Mrs Thistleton knew when funding her son's litigation that he was unlikely to be able to pay Mr Hendricks' costs if ordered to do so, (ii) the fact that Mr Thistleton was the plaintiff in that litigation, and (iii) the fact that Mr Hendricks is a private individual.

I take the view that those considerations, general and particular, outweigh the facts, which I take into account on the other side, that Mrs Thistleton, also a private individual, acted out of maternal affection and that (as I find in the absence of any evidence to the contrary) she believed her son's claim to be bona fide, notwithstanding that in the event it was unsuccessful."

22. Cooper v. Maxwell and Thistleton v Hendricks were discussed in Murphy v. Young & Co's Brewery [1997] 1 WLR 1591, 1603, where Phillips L.J. said of Cooper v. Maxwell:

"Funding alone will not justify an order against the funder under section 51. I do not consider that an order under section 51 will normally be appropriate where a disinterested relative has, out of natural affection, funded costs of a claim or a defence that is reasonably advanced."

23. It is tempting to start from the position that a third party who finances the prosecution or defence of a claim of a litigant, who is unsuccessful and who is unable to meet the costs, should be responsible for these costs: the policy reason would be that the costs sanction is intended to deter the unmeritorious prosecution or defence of claims, and that policy would be furthered by making those who fund litigation at risk for costs if the party funded fails. But it is absolutely clear from the judgments of Dillon L.J. in Cooper v. Maxwell, ante, and of Phillips L.J. in Murphy v. Young & Co's Brewery, ante, that that is not the law, and that more is required, whether it is put on the footing of "exceptional circumstances" or what is just and reasonable.

Basis of application

24. The application (and also the application for permission to serve Mr Tavoulareas outside the jurisdiction) was supported by evidence which relied on the following grounds:

(i) Mrs Emmanuel fought and lost this action in the circumstances and for the reasons detailed in the judgment delivered after the trial. The crucial factual allegations which were made by Mrs Emmanuel and which formed the foundation of her case were rejected. The way in which she presented her case (which Mr Tavoulareas was called to support) and the court's rejection of it, are relevant factors.

(ii) In the course of his evidence Mr Tavoulareas expressly accepted that he was funding this action on Mrs Emmanuel's behalf, and that, without the support of Mr Tavoulareas, Mrs Emmanuel could not have fought the action, and she is not in any better position to pay the costs that have now been ordered against her.

(iii) Mr Tavoulareas was the first husband of Mrs Emmanuel and they have two children both of whom are over the age of 18. It was the evidence of both Mrs Emmanuel and Mr Tavoulareas that the children had previously been the subject of a very bitter custody dispute between them. Mr Tavoulareas had no legitimate interest in supporting these proceedings. He may have been motivated, at least in part, by a desire to do down Ares Emmanuel, who is the second husband of Mrs Emmanuel (and the man for whom Mrs Emmanuel left Mr Tavoulareas). In the course of his cross-examination Mr Tavoulareas made disparaging comments about Ares Emmanuel.

Maintenance

25. Mr Tavoulareas is not now a relative of Mrs Emmanuel, but it is clear that the old law of maintenance had no application where the funder had family or social ties with the party to the litigation, or a legitimate interest in supporting the litigation. In this case Mr Tavoulareas is Mrs Emmanuel's first husband and the father of their children. His evidence was that he was financing the costs of Mrs Emmanuel in order that she and the children of their marriage should not be homeless.
26. Mr Tavoulareas was plainly hostile to Mr Emmanuel, and Mrs Emmanuel was plainly bitter about the predicament in which Mr Emmanuel's financial dealings had placed her and her children. Mr Emmanuel had three substantial, unencumbered, properties when he married her. All were ultimately charged to Locabail; one was sold, and there are orders for possession in respect of the other two. Mr Tavoulareas was hostile to Mr Emmanuel. He gave evidence that he derived some satisfaction from Mr. Emmanuel's predicament, and he may have had some satisfaction in appearing as Mrs Emmanuel's saviour. But these factors do not make his support for her illegitimate in the light of his wholly believable evidence as to his primary motivation, namely to protect Mrs Emmanuel and their children from eviction.

Other factors

27. The conduct of the non-party must have been a cause of the applicant incurring the costs it seeks to recover: Bristol & West plc v. Bhadresa (No. 2), The Times, November 23, 1998, cited in Globe Equities Ltd. v. Globe Legal Services Ltd., ante. Locabail has made out its case on causation. In this case Mr Tavoulareas accepted in cross-examination that without his funding Mrs Emmanuel and the children could have found themselves homeless, and it follows that he must have known that she could not discharge any costs order made against her if she were to fail. For the purposes of this application I do not consider that it makes any difference whether the funding was by way of loan or gift. Mr Tavoulareas must have known that it could not be repaid if she lost.
28. In Cooper v. Maxwell, Dillon L.J. said that whether the proceedings are being brought bona fide or defended bona fide was an important consideration, and in Murphy v. Young & Co's Brewery [1997] 1 WLR 1591, at 1603, Phillips L.J. spoke of a claim or defence that is reasonably advanced. In Thistleton v. Hendricks (1992) 32 Con. L.R. 123, at 135, HH Judge Hicks QC expressed the view that it was the bona fides of the funder, as well as that of the party funded, that was relevant for present purposes.
29. I must also have in mind Balcombe L.J.'s warning to take into account that to make a party liable for costs as a result of evidence given by him as a witness would be contrary to the policy of encouraging witnesses to give evidence fearlessly: Symphony Group plc v. Hodgson [1994] Q.B. 179, at 193. Staughton L.J. said (at 196) that the relevant witness and the party to the litigation had not:

"...had any warning that questions which would tend to make out such a case would be asked. Neither had reason to obtain professional advice on the topic before Mr Bramley gave evidence. Neither was represented by counsel at the trial, who might, for example, have asked further questions in re-examination. The main purpose of pleadings is to inform one party of the case which the other will seek to make against him. That is an essential feature of justice, and was entirely absent here.

Nevertheless there are cases, as Balcombe L.J. has shown, where a person may be ordered to pay costs on the basis of evidence given and facts found at a trial to which he was not a party. Before such an order is made, it must be just and fair that the stranger should be bound by that evidence and those findings."

On the facts the Court of Appeal did not think it just to order the non-party to bear the costs.

30. Locabail limits its evidence (reflected in its skeleton argument) to these points: (a) Mrs Emmanuel fought and lost this action in the circumstances and for the reasons given in the judgment; (b) the crucial factual allegations which were made by Mrs Emmanuel and which formed the foundation of her case were rejected; (c) the way in which she presented her case (which Mr Tavoulareas was called to support), and the court's rejection of its, are relevant.
31. Mr Tavoulareas' evidence in the action was that Mr Emmanuel had made clear in the custody proceedings that Hawks Hill and Hans House would be secure homes for his children and Mrs Emmanuel and that they would always be entitled to live there. Mrs Emmanuel told him "repeatedly" that Hawks Hill was 100% hers, and never mentioned there were any charges. In oral evidence he accepted that the expression "repeatedly" was an exaggeration.
32. In my judgment I said that in the witness box he had an engaging personality, but he was clearly prone to exaggeration, and accepted that he had exaggerated in using the word "repeatedly" in relation to Mrs Emmanuel telling him that she believed Hawks Hill was hers; that he did not give any evidence about Mr Emmanuel's statements, and therefore what he said was not evidence that Mr Emmanuel gave the assurances; and that he was not a satisfactory witness. I said that Mr Lemos (an associate of both Mr Tavoulareas and Mr Emmanuel) had, in answer to questions by me, given two answers which were inconsistent with Mrs Emmanuel's position: he had said that Mr Emmanuel was not generous, and also (contrary to Mrs Emmanuel's evidence) that Mr Emmanuel was not a violent person. Mr Tavoulareas saw Mr Lemos the day before Mr Tavoulareas was to give evidence: Mr Tavoulareas said he did not discuss the case with Mr Lemos (beyond asking how it went) but in evidence Mr Tavoulareas volunteered that Mr Emmanuel was prone to violence and was generous. I found that they discussed the implication of Mr Lemos' answers and that Mr Tavoulareas volunteered evidence tailored to assist Mrs Emmanuel's case.
33. The main holding in my judgment was that I did not accept Mrs Emmanuel's evidence that Mr Emmanuel had promised her the property, and I found her evidence incredible, although I said it was possible that she had persuaded herself of the truth of her case. But I also found that she had not been frank about many matters in the case.

Exercise of discretion

34. The question for me is whether the combination of factors in this case amounts to such exceptional circumstances as to make it just and reasonable for Mr Tavoulareas to be responsible for the costs.
35. In Cooper v. Maxwell, Thistleton v. Hendricks and Murphy v. Young & Co.'s Brewery, the bona fides or reasonableness of the claim or defence was treated as a relevant factor. In Thistleton v. Hendricks HH Judge Hicks Q.C. said that the bona fides of the funder was also relevant. It will normally only be possible to test the bona fides of the funder if he gives evidence, and even then the scope of the evidence may be constrained by legal professional privilege. In this case Mr Tavoulareas was not cross-examined on the state of his mind as to the bona fides of Mrs Emmanuel's position and, in any event Mrs Emmanuel's privilege would have been compromised by such a line of questioning, since it would inevitably have led to what she told her solicitors and counsel, and what they in turn advised her. His evidence was, as I have said, that he did not envisage that he would participate in the case, that he knew little about the issues, and that he had not had a meeting with Mrs Emmanuel's lawyers until the day before he gave evidence. In my judgment, it would be unfair to make any finding about Mr Tavoulareas' bona fide belief in the merits of Mrs Emmanuel's position. In my view, whether the funder has that bona fide belief is not determinative. It is simply one of the relevant factors.
36. Nor would it be right to visit Mr Tavoulareas with the costs simply because he was an unsatisfactory witness, or because he exaggerated his evidence. That would be penal and disproportionate. Mr Tavoulareas cannot be punished by the award against him of very substantial costs on the basis of the combination of funding and of unsatisfactory behaviour as a witness. But I have come to the conclusion that the relevant factors do make this one of those cases with such exceptional circumstances as would justify an order of costs. I do so on the combination of (a) Mr Tavoulareas' funding of the proceedings and the fact that it follows from his evidence that he knew Mrs Emmanuel would not be able to satisfy a costs order if she lost; (b) his intense identification in his evidence with Mrs Emmanuel's position; (c) his indifference to the legal and factual issues; and (d) my rejection of the factual basis of Mrs Emmanuel's case. I am conscious that, but for the fact that he gave evidence, two of these factors would not have been apparent, and that he may not have had the opportunity to obtain professional advice on his potential liability before he gave evidence. Nevertheless, I do not consider that it would be unjust or unfair for Mr Tavoulareas to bear the consequences of funding litigation, the object of which he fully supported, in which he participated and with which he ultimately identified himself. Accordingly, I will make the order sought.