English High Court Refuses To Grant Non-Party Costs Order Against Defendant's Managing Director

• Published date: 20 October 2020
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Trials & Appeals & Compensation
• Law Firm: Mayer Brown
• Author: Mr Ian McDonald and Robert Hobson

Introduction

It is widely recognised that adverse costs orders represent one of the main risks to parties involved in litigation. However, a risk which is perhaps less apparent is that such orders may also be awarded against non-parties to the proceedings pursuant to section 51(1) and (3) of the Senior Courts Act 1981.

In the recent case of Goknur Gida v Organic Village Ltd & Another¹, the High Court considered whether to make a costs order against a company's managing director. In refusing to grant this order, the court provided helpful guidance on the circumstances in which non-party costs orders may be made. The case is also useful in highlighting the procedural considerations which parties making a non-party costs application should bear in mind.

Background

Goknur Gida's (the "Claimant") claim against Organic Village Ltd (the "First Defendant") was struck out by the court and it was ordered to pay the First Defendant's legal costs.

The Claimant subsequently applied for an order requiring the First Defendant to commence detailed assessment proceedings regarding its costs. An order was duly made which specified that, unless the First Defendant commenced those proceedings by a certain date, its costs would be disallowed and it would be required to pay into court the sums that had been paid by the Claimant throughout the course of the proceedings on account of its costs. The First Defendant failed to commence the detailed assessment proceedings by that deadline.

As the First Defendant did not have the financial means to make the subsequent payment into court, the Claimant applied for a non-party costs order to be made against Mr. Aytacli (the "Second Defendant"), the First Defendant's managing director.

Could the Judge hear the application?

The relevant authorities² make it clear that, save in rare and exceptional circumstances, a non-party costs order application should be dealt with by the trial judge. However, in this case, in the section of the application notice regarding the appropriate level of judge, the Claimant had stated the following: "[the trial judge], if available, or any other QBD judge". That was a clear error by the Claimant and led to a different judge being assigned to the costs hearing.

Therefore, as a preliminary point, the judge had to consider whether it was appropriate for him to hear the application. On the facts of the case, the judge held that he could indeed determine the application because the following "exceptional...