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
3) If costs would have been incurred in any event even without
the involvement of the non party they should again escape an
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
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
Their arguments were:
1) Admatch, by Mr Weston was in breach of previous Court
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
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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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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In our Offshore Lawyers' Liability article in April 2014, we noted the growth of professional liability claims and allegations of professional misconduct against lawyers and law firms in offshore jurisdictions.
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