As the final whistle sounds on the long running case between Leeds United, Admatch and Admatch's director Mr Weston, the Court of Appeal has reaffirmed the law on the issuing of costs against a non-party to court proceedings and clarified the occasions when indemnity costs will be ordered. Firstly, for the uninitiated, a "non-party" is someone who, although not a party to the proceedings, has some connection with it and plays some part in it. In this case although not a named party to the proceedings Mr Weston as a director of Admatch appeared on its behalf. Secondly, indemnity costs means that costs are paid on a higher scale than usual and are given as a "penalty" where the party ordered to pay costs on that scale has acted in a manner where the Court feels that its conduct falls short of what it expects in Court proceedings.
Costs against a non party
"The Court has full power to determine by whom and to what extent costs are to be paid," said Jones JA, giving the judgment of the Court. He also took the opportunity to reiterate the general principles by which the Court would be guided when using its discretion to issue costs against a non party.
1) Although such orders are exceptional and will be fact specific, the ultimate considerations will be reason and justice as between the party seeking the order and the party against whom the order is sought.
2) Persons with no personal interest in the litigation and who do not stand to benefit from it or fund it as a matter of business and in no way seek to control its course should escape any order;
3) If costs would have been incurred in any event even without the involvement of the non party they should again escape an order;
4) However, if a non party promotes and funds proceedings by an insolvent company or for his own benefit they should be made liable in costs if they lose.
So if you are a non party and do not dip into your own pocket to fund the litigation and you do not stand to benefit you should be okay when it comes to a costs order.
In the instant case Mr Weston was a director of Admatch. Mr Weston appeared for Admatch throughout the proceedings. The Court found that Admatch itself had no real reason for defending the proceedings. It was insolvent and dormant. The only reason for the defence of the proceedings was Mr Weston's own personal interests and one or more of his other companies. In those circumstances, said the Court of Appeal, it was both just and reasonable that Mr Weston should be found personally liable for the costs of and incidental to the hearing.
The most recent Court of Appeal judgment on indemnity costs set out the following test "A court may make an indemnity costs order only where there has been some culpability, some abuse of process such as deceit, underhanded or unreasonable behaviour, abuse of court procedures, or the submission of voluminous and unnecessary evidence".
The Court of Appeal considered that formulation and decided that the inclusion of the word "only" was a mistake. The impact of this is obvious and in the writer's view common sense. In such circumstances there can be no closed list of examples where indemnity costs could be considered.
The new formulation keeps the Court's options open in all circumstances and is commensurate with its pronouncement that it has "full power to determine by whom and to what extent costs are to be paid".
The plaintiff argued strongly that Mr Weston's conduct was such that he ought to be ordered to pay costs on the indemnity scale.
Their arguments were:
1) Admatch, by Mr Weston was in breach of previous Court Orders;
2) The directors of Admatch including Mr Weston had refused to wind Admatch up;
3) Admatch had no interest in the proceedings it was all for the benefit of Mr Weston;
4) Admatch by Mr Weston was ignoring further orders of the Court;
5) Admatch could have appointed a lawyer to act on its behalf to ensure compliance with Court orders.
The Court of Appeal considered all of the reasons set out and declined to make an indemnity costs order against Mr Weston. Although clearly his conduct fell within what could be described as abuse of process, abuse of court procedures and unreasonable behaviour it may be that the Court considered that the making of an order for costs against him as a non party was enough of a sanction without going that step further.
Specifically the Court did not accept that the right of a person to appear in person without appointing a lawyer was a reason for issuing an indemnity costs order against them. So although the final whistle has blown, who knows - we may be into a penalty shoot out. Certainly, neither side has the stomach for extra time.
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