“Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to all proceedings in— ... (b) the High Court.... ... shall be in the discretion of the court.” “The court shall have full power to determine by whom and to what extent the costs are to be paid.”
“Although costs orders against non-parties are ‘exceptional’, exceptional means only that the case is outside the ordinary run of cases which parties pursue or defend for their own benefit and at their own expense. The ultimate question in any such exceptional case is whether in all the circumstances it is just to make the order. Inevitably, this will be fact specific to some extent.”
“If however the non-party not only funds but controls or benefits from the proceeding, justice will ordinarily require that they will pay the successful party’s costs if the funded party fails. The non-party is not so much facilitating access to justice as themselves gaining access to justice for their own purposes and are themselves a real party to the litigation.”
“Without in any way suggesting that these authorities give rise to a sort of mandatory checklist applicable to a company director or shareholder against whom a s.51 order is sought, I consider that the relevant guidance can usefully be summarised in this way: a) An order against a non-party is exceptional and it will only be made if it is just to do so in all the circumstances of the case... b) The touchstone is whether, despite not being a party to the litigation, the director can fairly be described as ‘the real party to the litigation’... c) In the case of an insolvent company involved in litigation which has resulted in a costs liability that the company cannot pay, a director of that company may be made the subject of such an order. Although such instances will necessarily be rare... s.51 orders may be made to avoid the injustice of an individual director hiding behind a corporate identity, so as to engage in risk-free litigation for his own purposes... Such an order does not impinge on the principle of limited liability... d) In order to assess whether the director was the real party to the litigation, the court may look to see if the director controlled or funded the company’s pursuit or defence of the litigation. But what will probably matter most in such a situation is whether it can be said that the individual director was seeking to benefit personally from the litigation. If the proceedings were pursued for the benefit of the company, then usually the company is the real party... But if the company’s stance was dictated by the real or perceived benefit to the individual director (whether financial, reputational or otherwise) then it might be said that the director, not the company, was the ‘real party’, and could justly be made the subject of a s.51 order... e) In this way, matters such as the control and/or funding of the litigation and particularly the alleged personal benefit to the director of so doing are helpful indicia as to whether or not a s.51 order would be just. But they remain merely elements of the guidance given by the authorities, not a checklist that needs to be completed in every case... f) If the litigation was pursued or maintained for the benefit of the company, then common sense dictates that a party seeking a non-party costs order against the director will need to show some other reason why it is just to make such an order. That will commonly be some form of impropriety or bad faith on the part of the director in connection with the litigation... g) Such impropriety or bad faith will need to be of a serious nature... and, I would suggest, would ordinarily have to be causatively linked to the applicant unnecessarily incurring costs in the litigation.”
“Therefore, without being in any way prescriptive, the reality in practice is that, in order to persuade a court to make a non-party costs order against a controlling/funding director, the applicant will usually need to establish, either that the director was seeking to benefit personally from the company’s pursuit of, or stance in, the litigation, or that he or she was guilty of impropriety or bad faith. Without one or the other in a case involving a director, it will be very difficult to persuade the court that a s.51 order is just. Mr Benson identified no authority in which a s.51 order was made against the director of a company in the absence of either personal benefit or bad faith/impropriety. Conversely, there is no practice or principle that requires both individual benefit and bad faith/impropriety on the part of the director in order to justify a non-party costs order. Depending on the facts, as the authorities show, one or the other will often suffice.”
“The only immutable principle is that the discretion must be exercised justly.”
“It is difficult to see how the decision not to represent the claimants could possibly have been taken with their best interests in mind in circumstances where it could only lead, as I am sure Ms Kaur understood, to a dismissal of the claim.” and that: “It would appear from various observations she made on the first day of the trial, including as to the existence of criminal proceedings involving her personally, that her decision not to represent the claimants may more likely have been motivated by her own personal interests than by consideration of what might be in the best interests of the claimant companies.”