THE INS AND OUTS OF NON-PARTY COSTS ORDERS – REAL PARTIES OR INVOLUNTARY FUNDERS?
Picture the scene: Company A brings proceedings in the English High Court seeking multimillions in damages from Company B and its directors, based on allegations of deceit and unlawful means. It is ‘heavy’ litigation and, after several interlocutory applications and an unsuccessful mediation, the case proceeds to a final hearing lasting six weeks. A few months later, judgment is handed down: Company A has lost. The defendants duly present their (substantial) bill of costs for Company A’s consideration, only to discover that Company A is now in liquidation.
What should the defendants do next? Are they resigned to celebrate a bittersweet success which has come at considerable expense to the company, its directors and their insurers? Or is there something they can do to recover their reasonable legal costs?
While this scenario has its very obvious limitations (‘surely the defendants applied for security for costs?’, you may well ask) it exposes a common problem in commercial litigation involving thinly capitalised parties. For present purposes, the answer is that the defendants should pursue a non-party costs order from the individuals or entities who controlled the litigation on behalf of Company A and stood to benefit from it. This may appear a daunting prospect and enforcing such an order may not be a straightforward task, particularly if the non-parties are outside the jurisdiction. However, in the cases on this topic there are many examples of successful outcomes.
Jan-Mar 2020 issue
Norton Rose Fulbright LLP