Thomas Barnes & Sons Plc (In Administration) v Blackburn with Darwen Borough Council

Summary

A council that had successfully defended a construction claim brought by an insolvent company sought its outstanding costs not from the company, which could not pay them in full, but from the family members who had funded the litigation and stood behind it. The application was for a non-party costs order under section 51 of the Senior Courts Act 1981.

The council said the respondents had funded the claim, had a direct financial interest in it, controlled it to a degree and were in substance the real parties to the litigation. The respondents resisted an order making them personally liable for costs beyond the security already provided.

His Honour Judge Stephen Davies made the order. The respondents were the funders of the claim and stood to benefit personally, and one of them substantially controlled the proceedings, so they were the real parties in important and critical respects. It was just that they, rather than the successful defendant, should meet the outstanding costs, on a joint and several basis.

Background and facts

The claimant was a family construction company, later in administration, which had contracted in 2014 to build a new bus station in Blackburn. After the council terminated the contract in 2015, the company sued for substantial damages. Following an eleven-day trial in 2022, the claim was dismissed, in the judgment reported at [2022] EWHC 2598 (TCC).

The company could not meet the council's costs in full. The council had obtained substantial security for costs during the proceedings, but a balance remained. In 2025 it applied for a non-party costs order against family members who had funded the claim, including executors of the estate of a deceased family member.

The issue

The court had to decide whether it was just to make a non-party costs order under section 51 against those who had funded and stood behind the failed claim. That turned on whether they were, in substance, the real parties to the litigation, and on whether any factor, such as the absence of warnings or the public interest in funded litigation, told against an order.

The decision

His Honour Judge Stephen Davies applied the principles in Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] UKPC 39; [2004] 1 WLR 2807 and Goknur Gida Maddeleri Enerji Imalet Ithalat Ihracat Ticaret Ve Sanayi AS v Aytacli [2021] EWCA Civ 1037, which direct the court to identify, in a practical way, who is the real party to the litigation. He found that all the respondents had funded the claim and stood to benefit personally, and that one of them had controlled it:

"I am satisfied that Thomas exercised a real degree of control over the proceedings from start to finish, albeit that the administrators also exercised a real degree of control as was appropriate to their position as officeholders."His Honour Judge Stephen Davies, paragraph 41

On that basis they were the real parties to the proceedings in important and critical respects, so that on the face of it it was just that they should pay the successful defendant's costs. He rejected the points raised against an order. Substantial security had been sought and provided after negotiation, so this was not a case of no warnings, and there was no reason to think warnings would have changed the respondents' decision to fund. Nor did the public interest tell against an order, since these were funders with a real personal interest, not an officeholder or director with little stake or control.

He did not accept that an order would deter proper funding of insolvent claims:

"I do not accept that making a NPCO in these circumstances would have a chilling effect on the ability of officeholders in similar situations being able to fund justified claims against third party debtors of the company in question."His Honour Judge Stephen Davies, paragraph 44

The order was made against all the respondents for the outstanding balance of the council's assessed costs, on a joint and several basis, with the liability of the two executors limited to the estate they represented.

Practical implications

Funders of a failed claim can be made to pay the winner's costs. Where those behind an insolvent claimant funded the litigation and stood to benefit personally, section 51 allows the successful defendant to recover costs from them, to the extent the company and any security cannot meet them.

Control and personal benefit identify the real party. The court looks in a practical way at who funded the claim, who controlled it and who stood to gain. A person who did both is readily treated as the real party, and more than one funder can share that character on a joint and several basis.

Security for costs does not cap the funders' exposure. Providing security may not be the end of it. Where security falls short of the successful party's assessed costs, the funders can be ordered to make up the balance, so security should not be treated as a ceiling on personal risk.

Funding an insolvent company's claim carries real personal risk. An order of this kind was held not to have a chilling effect on justified funding. Those who fund a claim by an insolvent company for their own benefit should assume that, if the claim fails, they may face the defendant's costs beyond the security they provided.

Thomas Barnes and Sons Plc (in administration) v Blackburn with Darwen Borough Council [2026] EWHC 24 (TCC), Technology and Construction Court, His Honour Judge Stephen Davies sitting as a High Court Judge. Judgment handed down 13 January 2026. Substantive judgment: [2022] EWHC 2598 (TCC).