UK: Insurance And Reinsurance Weekly Update - 1 July 2014

Last Updated: 10 July 2014
Article by Nigel Brook

JSC BTA Bank v Ablyazov

Non-party is ordered to pay the costs of complying with a Norwich Pharmacal disclosure order

A Norwich Pharmacal Order ("NPO") requires a respondent who is "mixed-up" in wrongdoing (whether innocently or not), so as to facilitate that wrongdoing, to provide "full information" on the alleged wrongful act. The applicant will usually be expected to indemnify the respondent in respect of his costs of complying with the order (and those costs can usually subsequently be recovered against the wrongdoer). This case is an example, though, of a respondent being ordered to pay those costs himself (and there has been little judicial assistance to date on this issue). Flaux J made the following general points:

  1. A respondent is under a duty to provide full information, even if he has not incurred any potential liability to the applicant: "all the more so if he has actively and knowingly assisted wrongdoing...even if the [applicant] cannot or chooses not to join him as a defendant". The judge rejected an argument that the court should take into account that the respondent is a "busy businessman" who did not have to consider documents properly.
  2. The applicant does not have to show that the respondent's participation in the NPO process has been a "complete charade". Here, there had been substantial compliance by the respondent but, crucially, his evidence on the critical issues covered by the NPO had been "dissembling and evasive".
  3. A respondent can be ordered to pay costs in a NPO case even if no crime or tort is eventually established at a civil or criminal trial: "The question is whether at the time when the court is considering the appropriate order as to costs (which may well be after compliance or purported compliance with a Norwich Pharmacal Order as in the present case) on the material before the court, the court can be satisfied that the respondent has supported or is implicated in the wrongdoing or has sought to obstruct justice".
  4. Furthermore, it is not only where the claimant establishes at a trial that the NPO respondent was implicated in the defendant's wrongdoing that it is appropriate to depart from the normal costs order. If, at the interlocutory stage, the court is satisfied that the respondent is knowingly implicated in wrongdoing, it can express its disapproval by either ordering the respondent to pay his own costs or by ordering him to pay some or all of the applicant's costs.

Deutsche Bank v Sebastian Holdings

An application for a non-party costs application where non-party was not warned and no security for costs were sought

The claimant obtained judgment against the defendant and was awarded 85% of its costs. Neither the judgment debt nor the costs were paid by the defendant. The claimant therefore sought a non-party costs order, pursuant to section 51 of the Senior Courts Act 1981, against Mr Vik, the sole shareholder and sole director of the defendant. Mr Vik raised certain procedural objections to the making of the order:

  1. The claimant had failed to apply for security of costs during the action. Cooke J acknowledged that prior caselaw supports the view that a failure to apply for security against an insolvent company is a relevant factor if an application for a non-party costs order is subsequently made: "Nonetheless [the claimant] was not bound to make any such application and no doubt it would have been opposed". The defendant had not been prejudiced by the lack of such an application (Longmore LJ having remarked in Petromec v Petroleo Brasileiro SA Petrobras (see Weekly Update 20/06) that it is no more unjust to make the backers of an insolvent company liable for costs than it is to order them to provide security for costs on its behalf). Furthermore, it had not been clear at the time that the defendant would be unable to meet a costs order against it. Accordingly, this consideration carried little weight.
  2. The claimant had failed to join Mr Vik as a party to the action. The judge described this submission as surprising, since there was no obvious cause of action against Mr Vik personally. Non-parties are only usually joined after judgment, when the losing party has failed to pay the costs awarded. Furthermore, given the uncertainty regarding the defendant's financial standing at the time, the claimant could not be criticised for failing to join Mr Vik earlier on.
  3. Mr Vik was not warned by the claimant that this application might be made. There are authorities which refer to the desirability of a warning to be given of a third party costs application. However, the judge said that he was entirely satisfied that a warning at an earlier stage in this case would have made no difference to the conduct of the proceedings. It would also have been surprising had Mr Vik not received advice from his own lawyers about the possibility of a non-party costs order eventually being made against him: "Whether that is so or not – and I have no evidence on that subject – the failure to warn here is, when seen against the other considerations, of no real weight at all".

The judge went on to find that, on the facts, there were very strong grounds for making the non-party costs order here. For example, Mr Vik had transferred assets out of the defendant in order to deplete its assets and therefore make it more difficult for the claimant to recover the judgment debt and its costs, and Mr Vik had controlled the proceedings.

Akhtar v Boland

Allocation to the correct track and whether insurer had admitted an amount in dispute

The issue in this case was whether the claim should be allocated to the fast track or remain in the small claims track (with the result that the claimant would be unable to recover the legal costs of his representation). At first instance, the judge held that the correct track was the small claims track because some of the claim (which, as originally stated, was over the threshold for the fast track) had been admitted in the defence. On appeal, the claimant argued that the defence had not included true admissions but instead only offers (i.e. if the sums admitted were not accepted, everything would be contested at trial instead). It was submitted that an admission that part of a sum claimed was payable was not an admission (because CPR r14.5 provides that it does not lead to judgment unless the claimant seeks judgment).

That argument was rejected by the Court of Appeal. If the court is unclear whether an admission is unqualified, it can seek clarification from the defendant. Here, the judge had interpreted the defence as including an unqualified admission that the claimant was entitled to a certain amount. Once the court had found that the defendant had accepted that the claimant was entitled to that amount, the only sum in dispute (for allocation purposes) was the balance of the claim, which was less than the fast track threshold.

RMJ v Secretary of State for the Home Office

How much are "nominal damages"?

One of the issues in this case was the quantum of nominal damages. The traditional view is that nominal damages mean "a sum of money that may be spoken of, but has no existence in point of quantity" (see Beaumont v Greathead [1846]). However, the claimant sought to argue that the Supreme Court decision of Lumba v Secretary of State [2011] supported his submission his submission that his nominal damages should be GBP 1,000.

That argument was rejected by Spencer J. In Lumba the majority had assessed nominal damages at GBP 1 and the minority members of the court who had referred to a range of between GBP 500 - 1,000 had been talking about modest substantive damages, rather than nominal damages.

The defendant was therefore awarded nominal damages of GBP 1.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Nigel Brook
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