How Conduct Effects Third Party Cost Orders

BW Legal will be sharing advice and expertise from our experts across different departments in the business. In our latest article, our senior solicitor, Richard Camidge reviews the effect of conduct on third party cost orders.

Richard, a 30 year qualified Senior Lawyer, is an integral part of the BW Legal Litigation team. He discusses situations which can arise in court actions where the conduct of an individual or company who are not party to the action can cause costs to be incurred or escalated. 

 An individual’s conduct throughout the life of a claim can have serious implications in respect of costs.

Whilst it should not impact on the legal decision, a party can be penalised when the discussion of costs is reviewed by the Court. This can also be the case when the individual is not a party to the claim.

Examples of this can be where a company director’s conduct escalates the costs in litigation where his company is the party.  In other cases, it can be a close relative who, although not a party to the action, is instrumental in the conduct or escalation of the matter and consequential legal costs.

What is a Third Party Cost Order?

The power to make 3rd Party Costs Orders stems from section 51 (1) of the Senior Courts Act 1981 which states:

“the costs of and incidental to all proceedings… [are] in the discretion of the court”

It goes on to say in section 51(3) that:

“the court shall have full power to determine by whom and to what extent the costs are to be paid”.

The courts have an inherent jurisdiction to order any person to pay the costs, whether or not they were themselves a party to the proceedings.

However, such orders are in general considered to be “exceptional” and that the conduct of the non-party is shown to have caused the costs to be incurred.

The question of whether it is exceptional means “outside the ordinary run of cases where parties pursue or defend claims 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.

How Is a Third Party Cost Order Obtained?

To obtain such an order, you have to show to the satisfaction of the court that the 3rd Party falls into one or more of the following categories:-

  1. Controller: they had a hand in controlling the proceedings (i.e. they exerted “real control” over the conduct of the case)

 

  1. Funder: they maintained or financed the proceedings

 

  1. Legal Representative: they were the legal representative of the party

 

  1. Causative person: they caused the proceedings

 

  1. Related person: they were a litigant in related proceedings

 

  1. Group litigant: they had an interest in the proceedings by reason of the case being a test claim in group litigation or representative proceedings.

Subject to satisfying the criteria, the 3rd Party is then added to the main claim.

Case Studies

A recent case had multiple claimants but two had settled their dispute. Only one claimant subsequently proceeded to a full trial and lost.  Despite this the two claimants, who had settled their cases, were held liable to contribute to the costs.

In another case, a company director added to the claim as he’d part-funded the litigation and had hoped to indirectly benefit from proceedings. The court refused to order him to pay costs as his actions were not “exceptional” as they did not go beyond the ordinary conduct of a director or shareholder of a company pursuing a legal claim.

Finally it should be noted that there is no “but for” test.  The fact that the costs might have been incurred had the 3rd Party not been involved is not relevant.

It is imperative when dealing with litigation that you, your company and anyone indirectly involved maintains positive conduct throughout the life of the claim. Good communication goes a long way at a final hearing and also assists settlement discussions along the way.

If you would like any advice or wish to speak to Richard Camidge about how we can assist you, please contact 0113 468 3000.

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