Party time? Non-party costs orders and parties to proceedings
The turbulent economic climate of recent years has heightened the importance to litigants (and their advisers) of establishing the solvency of all parties to proceedings. Where a party looks to be in financial difficulty, the wise litigator will question how and by whom the litigation is being funded. If there is a (solvent) third party involved, parties should consider applying for a non-party costs order (NPCO) under s.51 Senior Courts Act 1981 (SCA) and Civil Procedure Rules r.46.2 (CPR).
Recent case law demonstrates an increased and pragmatic willingness by the courts to make NPCOs, and to hold directors and/or shareholders liable for the company’s costs. But what happens where the director has also been joined to the proceedings? Two recent cases (Axel Threlfall v ECD Insight Ltd & Anor and Pintorex v Nasser Keyvaner & Ors) provide an interesting insight into how the courts approach this issue.
In the county courts, High Court and Court of Appeal, the jurisdiction to make NPCOs derives from their general discretion to award costs, as contained in sections 51(1) and (3) of the SCA. The first instance of a the court ordering a third party to pay the costs of litigation to which it was not a party was the House of Lords decision in Aiden Shipping v Interbulk Ltd. The CPR now set out the procedure to be followed when the court is considering whether to exercise its discretion to ‘make a costs order in favour of or against a person who is not a party to proceedings’ (para 46.2, previously para 48.2 prior to 1 April 2013)…
Click on the link below to read the rest of the Penningtons Manches briefing.