Kerry Underwood

HIGH COURT MAKES NON-PARTY COSTS ORDER AGAINST COMPANY IN SAME GROUP AS CLAIMANT

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In Montpelier Business Reorganisation Ltd v Jones and others [2017] EWHC 2273 (QB) (12 September 2017)

the Queen’s Bench Division of the High Court made a Non-Party Costs Order against the 7th Defendant, NPL, a major shareholder in the insolvent Claimant company which largely lost its breach of contract claim against the first to fifth Defendants.

The court declined to make an order against another company, MPL Leeds, a subsidiary of MPL as there was no evidence that MP Leeds had funded the litigation, or controlled it, to the extent that would justify making a Non-Party Costs Order.

The order against MPL was made under Section 51 of the Senior Courts Act 1981.

The court was satisfied that MPL was the real party to the litigation and thus that it was just to make the order.

It was the vehicle through which the litigation had been funded, by an interest free unsecured loan, and was the party that would benefit directly from the claim succeeding.

The absence of impropriety in MPL’s conduct did not prevent the order from being made.

MPL’s status as a major shareholder did not bring into play the special considerations that applied to directors who funded litigation, which require an applicant for a Wasted Costs Order to show that the funder is something more than a director of the Claimant, for example that there had been improper conduct on their part in conducting the litigation.

The court held that, although the interests of directors and shareholders may often be the same, their status is completely different, as directors are officers of a company and have statutory obligations to act in its best interest.

As to the fact that the allegation that MPL also controlled the litigation was only raised for the first time in the applicant’s skeleton argument, the court held that given the evidence at trial, it should have been clear to MPL that it was being alleged that MPL was controlling the litigation.

In any event, although here there was clear evidence of such control, the absence of control did not prevent an order being made where it was just to do so.

This is a somewhat unusual set of facts in that the Non-Party Costs Order was made against a funder in the same group of companies as the Claimant, in circumstances where the funder was the real party to the litigation and would benefit if it succeeded.

That fact alone, would not of itself justify a Non-Party Costs Order being made.

The 7th Defendant, along with the 6th Defendants, was only joined into the proceedings in order for the court to consider a Section 51 Order and were not original parties to the proceedings.

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Written by kerryunderwood

September 15, 2017 at 1:04 pm

Posted in Uncategorized

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