“It is most unusual for an employer to bring a claim against an employee (even a manager) for breach of the duty of care implied into his contract of employment, in order to recover damages from the employer’s pure economic loss. Whilst (as discussed above) there is no bar to such a claim, there is a real risk that a court would consider that in doing so the employer is acting heavy-handedly and oppressively, perhaps out of a desire for “revenge”.”
“Atlantic needs to take a hard commercial view as to whether Mr. Hoff would be worth suing. There would be little point in Atlantic racking up substantial legal costs on claims which are not straightforward (some of which costs will be irrecoverable even if Atlantic win), only to recover relatively modest damages.”
“The Claimant is presently in the course of restructuring. The Claimant has now contacted Administrators. Although the Claimant has not yet been formally put into administration this now appears probable. In the circumstances the Claimant is not prepared to make any final decision with regard to the Claim until an administrator is appointed. Clearly if an administrator is appointed any decisions with regarding this litigation will be made by the Administrator.”
“The financial statements have been prepared on a going concern basis as the loan creditor has undertaken to financially support the company for the foreseeable future to enable it to meet its liabilities as they fall due.”
“It is not an abuse of the process of the Court or in any way improper or unreasonable for an impecunious plaintiff to bring proceedings which are otherwise proper and bona fide while lacking the means to pay the defendant's costs if they should fail. Litigants do it every day, with or without legal aid.”
"The court has a discretion to make a costs order against a non-party. Such an order is, however, exceptional, since it is rarely appropriate. It may be made in a wide variety of circumstances where the third party is considered to be the real party interested in the outcome of the suit. It may also be made where the third party has been responsible for bringing the proceedings and they have been brought in bad faith or for an ulterior purpose or there is some other conduct on his part which makes it just and reasonable to make the order against him. It is not, however, sufficient to render a director liable for costs that he was a director of the company and caused it to bring or defend proceedings which he funded and which ultimately failed. Where such proceedings are bought bona fide and for the benefit of the company, the company is the real plaintiff. If in such a case an order for costs could be made against a director in the absence of some impropriety or bad faith on his part, the doctrine of the separate liability of the company would be eroded and the principle that such orders should be exceptional would be nullified."
“Where however the non party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them justice will ordinarily require that if the proceedings fail he will pay the successful party’s costs. The non party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes. He himself is “the real party” to the litigation: a concept repeatedly invoked throughout the jurisprudence.”
“In the light of these authorities their Lordships would hold that generally speaking where a non party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit he should be liable for the costs if his claim or defence or appeal failed. As explained in the cases, however, that is not to say the orders are invariably made in such cases, particularly so where the non parties themselves are a director or liquidator who can realistically be regarded as acting rather in the interests of the company (and more especially shareholders and creditors) than in his own interests.”
“Thirdly Associated submit that there is no impropriety involved in their promoting this appeal. On the contrary, they and the Todds had independently received encouraging advice from leading counsel. This cannot however avail them. The authorities establish that whilst any impropriety or the pursuit of speculative litigation may of itself support the making of an order against a non party its absence does not preclude the making of such an order.”
“The judge found that Mr Eframovich controlled the proceedings brought by Petromec, funded those proceedings and would have benefited from them if they had been successful. He therefore thought it right that Mr Eframovich should pay the successful party their costs.”
"In these circumstances it is not necessary to discuss the authorities at any length. I would only observe that, although funding took place in most of the reported cases, it is not, in my view, essential, in the sense of being a jurisdictional pre-requisite to the exercise of the court’s discretion. If the evidence is that a respondent (whether director or shareholder or controller of a relevant company) has effectively controlled the proceedings and has sought to derive potential benefit from them, that will be enough to establish the jurisdiction. Whether such jurisdiction should be exercised is, of course, another matter entirely and the extent to which a respondent has, in fact, funded any proceedings may be very relevant to the exercise of discretion. In the present case, however, the judge rightly drew no distinction between the pre- and post-October 2003 proceedings because the reality was that Mr Eframovich was funding them throughout."
“so that there is no issue of eroding the principle of the separate liability of the company.”
“However, I would not necessarily regard these matters on their own as being sufficient for the courts discretion to be exercised in favour of making a non-party costs order against Mr Kirby, given that there is evidence of a prima facie claim against Mr Hoff, namely Mr McLaren’s advice. I will therefore consider the other factors in respect of which submissions were made.”
“I do not conclude that there is any evidence of impropriety against Mr Kirby, but I do conclude that there is evidence of bad faith as follows:”
“It was only when it became apparent that the company was not prepared to fund any adverse costs orders that the warning became necessary.”
"i) I accept that Mr Kirby had advice that, although Atlantic Air was advised against bringing the proceedings on a commercial basis, there were some genuine claims. However, it is entirely unclear why Mr Kirby should give instructions for Atlantic Air to bring proceedings, and then decide to discontinue funding the company at such an early stage in the proceedings, if it was seriously intended to pursue the claim against Mr Hoff. Mr Kirby must have considered at the outset of these proceedings how the company was to fund them to their conclusion, and on the evidence of their company accounts that can only have been if he was prepared to make further funding available to the company, a decision which rested entirely with him. ii) The only conclusion I have drawn, in the absence of any evidence from Mr Kirby as to this, is that he did so to cause the maximum amount of costs and inconvenience to Mr Hoff because of his antipathy towards Mr Hoff, caused by his disagreement with Mr Hoff over the work to the Dauphin, and the fact that Mr Hoff had secured what Mr Kirby obviously considered to be an unwarranted award in the employment claim. The timing of the entry into liquidation, very shortly before the third party debt order over the funds in the escrow account was to be made final, reinforces this conclusion. iii) The evidence, the lack of any evidence to the contrary from Mr Kirby, and the chronology of events, are such that I have concluded that it is most likely that Mr Kirby embarked upon these proceedings, knowing that if an adverse costs order were to be made against Atlantic Air either at the end of the proceedings or during the proceedings, or if a security for costs order was made against the company, he could simply take the decision to put Atlantic Air, an entity controlled only by him, into liquidation, in the knowledge that there would be no assets to meet any such adverse costs orders of security for costs order, because the viability of the company as a going concern depended up on his continuing to fund the company."
“The aim was not, as I understand is now being alleged, to cause Mr Hoff to incur maximum costs and inconvenience but to pursue what I believe were valid claims by the company.”
“I did not agree to the issue of proceedings by the company against Mr Hoff in February 2009 knowing that if an adverse costs order was made against the company I could simply take the decision to put the company in liquidation in the knowledge that there would be no assets to meet a costs order. Indeed, I did not think in those terms at all. It would not have made sense for me to think like that either since at the time the proceedings were issued the company was the owner of the Dauphin, a key asset whose value I wished to protect.”