Non-Party Funders of Litigation – Potential Costs Exposure?

The decision in Mooreview Developments & Ors v First Active plc [2011] IEHC 117 may act as a deterrent against non-party funders of litigation. In Mooreview the Court held that it had jurisdiction to make an order for costs against a non-party who funded long running litigation against First Active and the receiver appointed over the company’s assets.

The company alleged fraud, misrepresentation and negligence on the part of the receiver in respect of his management of the business and assets, however, the actions were largely unsuccessful and costs orders were made against it. The Court then had to decide, on an application by First Active, whether it could make Mr Cunningham, a director (and with his wife the sole shareholder) of the company, personally liable for costs.

The Court held that it had the power to make a non-party funder of litigation liable for costs by joining them as a defendant to an order for costs. In making the order against Mr Cunningham, the Court had regard to the fact that the company and group companies were completely insolvent from the outset, as a result First Active could never hope to recover its costs if it successfully defended the actions, Mr Cunningham funded and was the main driver of the litigation, as the sole shareholders he and his wife would have been the main beneficiaries if the litigation had been successful, the litigation had been conducted in a manner which unnecessarily added to the costs of the litigation, and that First Active had at an early stage in the litigation warned Mr Cunningham that they would seek to make him personally liable for its costs.

The Mooreview decision is under appeal to the Supreme Court.