The Liability Of A Litigation Friend For Costs: Glover V Barker In The Court Of Appeal

• Published date: 07 October 2020
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation
• Law Firm: 4 New Square Chambers
• Author: Paul Parker

On 21 August 2020 the Court of Appeal handed down judgment in Glover v Barker [2020] EWCA Civ 1112, overturning the decision of Morgan J. in Barker v Confiànce Ltd [2019] EWHC 1401 (Ch) and giving comprehensive guidance as to the circumstances in which a defendant's litigation friend might be liable for the costs of a successful claimant.

The facts in outline

Mr Iain Barker is a wealthy and successful businessman. In the late 1990s he decided to sell his shares in a group of companies which he had controlled, and sought tax planning advice so as to avoid paying what turned out in due course to be a tax liability of over '11 million. Mr Barker was also a fertile man. Between 2001 and 2006 he fathered five children by three different mothers. The tax planning advice which he received from Baxendale Walker Solicitors involved the creation of an employee benefit trust and a sub-trust, the principal beneficiaries of which included the five children.

In 2010 HMRC raised assessments on the basis that the trust arrangements were not effective a means of Mr Barker's avoiding being taxed on income and gains arising via the trust and sub-trust. He settled with HMRC in April 2013 for about '11.3 million.

Mr Barker then brought proceedings seeking, in effect, to unravel the trust and sub-trust with a view to the proceeds of sale of the shares being restored to him. The proceedings were instituted against the trustee (Confiànce), one of the children (Euan, purportedly on behalf of all the children), a representative of the companies' former employees, and certain other adult principal beneficiaries of the sub-trust. Those proceedings were in due course compromised on terms that '500,000 would be settled on discretionary trusts for the former employees and '1 million would be settled on discretionary trusts for the benefit of family beneficiaries (essentially the principal beneficiaries of the sub-trust). The balance, after payment of legal costs, was to be held on trust for Mr Barker absolutely. It was a term of the compromise that the family beneficiaries gave up any claims they might have against Confiànce.

The compromise was approved by the court - as it had to be, involving minors - in July 2014, and those proceedings were stayed. At that time the two oldest children, Tom and Freya (twins, then about thirteen), and their mother, Ms Susan Glover, knew nothing about the proceedings that Mr Barker had brought or about the compromise, and the court was not informed of their ignorance. (Morgan J. was subsequently deeply critical of the fact that those proceedings and compromise had been deliberately concealed from the twins and Ms Glover and that that information had been deliberately withheld from the court.)

In June 2017 the twins, with Ms Glover as their litigation friend, made an application to be added as defendants to the stayed proceedings, for such stay to be lifted, and for a declaration that the compromise was not binding on them. The motivation for this application appears to have been to free the twins from the release in the compromise so as to enable them to bring proceedings against Confiànce for breach of trust in parting with trust assets to Mr Barker. Morgan J. was to give judgment on that application in November 2018.

Meanwhile Mr Barker had in 2013 brought negligence proceedings against Baxendale Walker Solicitors. He finally succeeded in those proceedings in the Court of Appeal in December 2017. The Court of Appeal posited, obiter, an interpretation of section 28 of the Inheritance Tax Act 1984 ("IHTA 1984") which gave the result that the trust (and so the sub-trust) was invalid. That interpretation of section 28 enabled Morgan J., in his judgment on the twins' application which he gave in November 2018 ([2018] EWHC 2965...