Costs - Non-party costs

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Overview

Non-party costs orders play a key role in managing civil litigation expenses, particularly relevant for SQE1 FLK1 exam candidates. These orders allow courts to require costs from those not directly involved in a case, balancing procedural fairness with financial responsibility. Understanding their application and legal foundations is vital for aspiring solicitors, as they relate to core principles of civil procedure and judicial discretion.

Legal Framework and Statutory Basis

The authority for non-party costs orders is found in Section 51 of the Senior Courts Act 1981, which provides courts wide discretion to assign costs. Civil Procedure Rule (CPR) 46.2 elaborates on this by specifically addressing how these orders can be applied to non-participants.

CPR 46.2 requires:

  1. A person being considered for a costs order:
    • Must be added as a party solely for costs purposes.
    • Given a chance to attend a hearing regarding the decision.

This ensures procedural fairness and respects the principle of natural justice.

Conditions for Imposition

Non-party costs orders are rare and require strict conditions:

  1. Exceptional Circumstances: Used only in rare cases where a non-party has played an important role in the litigation.
  2. Control Over Proceedings: The non-party must have a substantial influence, such as:
    • Financial: Providing significant funding.
    • Strategic: Influencing litigation decisions.
    • Operational: Guiding legal representation.
  3. Interest in Outcome: The non-party should have a clear stake in the result, whether financial, reputational, or strategic.
  4. Causative Link: A direct connection between the non-party’s actions and the incurred costs.
  5. Fair Warning: The non-party must be warned of potential liability for costs.
  6. Proportionality: The order should match the non-party’s involvement.
  7. Opportunity for a Fair Hearing: The non-party must have a chance to present their case, including:
    • Notice of proceedings.
    • Right to be heard.
    • Access to relevant materials.

Case Law and Judicial Interpretation

Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] UKPC 39

This decision is significant in understanding non-party costs orders. It highlights that:

  1. Such orders, while rare, are not restricted to specific cases.
  2. The primary consideration is whether it's just to make the order based on the non-party's connection to the case.

Deutsche Bank AG v Sebastian Holdings Inc [2016] EWCA Civ 23

This case reaffirmed that merely funding a case is inadequate for imposing costs. The court must assess whether the non-party’s involvement exceeded that of a standard funder.

Examples and Applications

  1. Commercial Dispute:

    • Scenario: A parent company directs a subsidiary’s litigation.
    • Role: The parent has control and stands to gain from a favorable outcome.
    • Outcome: A non-party costs order could be considered if the subsidiary cannot cover costs.

  2. Environmental Lawsuit:

    • Scenario: An NGO backs a claimant against a corporation.
    • Role: The NGO influences strategy and funds the case.
    • Outcome: A non-party costs order might apply if the claim fails.

  3. Personal Injury Claim:

    • Scenario: An insurer funds a defense in a road accident claim.
    • Role: The insurer controls litigation strategy.
    • Outcome: The insurer’s involvement could lead to a costs order.

Procedural Considerations

Key steps in obtaining a non-party costs order include:

  1. Application: Made post-proceedings.
  2. Notice: Proper notification to the non-party.
  3. Hearing: A separate hearing to review the application.
  4. Evidence: Providing evidence for the order.
  5. Timing: Prompt application after relevant facts are known.

Policy Considerations and Practical Effects

The court’s stance reflects broader concerns:

  1. Access to Justice: Avoid discouraging legitimate funding.
  2. Deterrence: Prevent inappropriate interference in lawsuits.
  3. Fairness: Ensure those who benefit or influence cases bear related costs.
  4. Proportionality: Orders should match the non-party’s involvement.

Conclusion

Non-party costs orders are complex and require careful understanding of legal principles, procedural requirements, and policy issues. For SQE1 FLK1 exam candidates, key takeaways include:

  • The exceptional nature of such orders.
  • The necessity of control and interest in outcomes.
  • The influence of case law on these orders.
  • The balance between preventing undue influence and supporting legitimate funding.
  • The procedural steps to secure a non-party costs order.
  • The broader policies guiding these judicial decisions.

Understanding these elements equips future solicitors to handle this challenging area effectively and provide sound advice on third-party litigation involvement.