WHEN SHOULD A LITIGATION FRIEND BE LIABLE FOR COSTS? INTERESTING COURT OF APPEAL DECISION
In Glover v Barker & Ors  EWCA Civ 1112 the Court of Appeal overturned a decision where costs were awarded against a litigation friend. It is a particularly important judgment for those acting as litigation friends for defendants.
THE CASE: COSTS AWARDED AGAINST A LITIGATION FRIEND
The judge awarded costs against the litigation friend of two children who had applied to become parties to complex litigation regarding trusts. Their applications were not successful. The judge ordered that their litigation friend pay costs of the action.
THE LITIGATION FRIEND’S SUCCESSFUL APPEAL
The Court of Appeal overturned the judge’s decision. There is an important distinction here in that a litigation friend for a claimant is required to give an undertaking as to costs. There is no such requirement for a litigation friend for a defendant.
THE JUDGMENT OF THE COURT OF APPEAL ON THIS ISSUE
The jurisdiction to make a costs order against a non-party, whether a litigation friend or any other third party, nowadays derives from section 51 of the 1981 Act. This proved to be common ground. Mr Saoul submitted that the question whether Ms Glover should be ordered to pay costs has to be seen through the lens of section 51, and the other counsel agreed.
In Dymocks Franchise Systems (NSW) Pty Ltd v Todd, Lord Brown spoke of the “ultimate question” being “whether in all the circumstances it is just to make the order”. In a similar vein, Moore-Bick LJ observed in Deutsche Bank AG v Sebastian Holdings Inc at paragraph 62 that the “only immutable principle” which applies in relation to the exercise of the power to order a non-party to pay costs is that “the discretion must be exercised justly”.
As, however, XYZ v Travelers Insurance Co Ltd shows, more specific principles may be applicable to a “distinct part of the broad spectrum of non-parties”. That, to my mind, is the case with the “part of the broad spectrum” occupied by litigation friends. The guidance given “at the very highest level of generality” (to quote Lord Briggs in XYZ at paragraph 28) in Dymocks Franchise Systems (NSW) Pty Ltd v Todd as to the circumstances in which a costs order should be made against a non-party is not obviously apt for litigation friends. The Dymocks case did not involve a litigation friend and so Lord Brown had no reason to consider the position of litigation friends or factors that might be special to them.
In practice, the Court may not often need to consider whether to make an order under section 51 of the 1981 Act against a litigation friend of a claimant. By virtue of CPR 21.4(3)(c) and 21.5, a person must give an undertaking as to costs to become a litigation friend without a Court order. Likewise, CPR 21.6(5) bars the Court from appointing anyone as a litigation friend who does not satisfy “the conditions in rule 21.4(3)”, and one such condition, in the case of a litigation friend of a claimant, is that an undertaking as to costs is given. A claimant’s litigation friend will commonly, therefore, be answerable for costs as a result of having given an undertaking without the Court making an order for costs against him pursuant to section 51.
Supposing, however, that a question arises as to whether to order a claimant’s litigation friend to pay a defendant’s costs of an unsuccessful claim (say, because no order for costs is thought appropriate against the claimant himself with the result that an undertaking to pay “any costs which the child or protected party may be ordered to pay”, as required by CPR 21.4(3)(c), does not bite), it seems to me that it will usually be appropriate to make such an order if an order would have been made against the claimant himself had he not been a child or protected party. That would reflect both the sense of CPR 21.4(3)(c) and pre-CPR authority. As long ago as 1739, a “prochain amie” was liable to costs by “the uniform practice of all the Courts” and subsequent cases show that the practice endured. The Judge considered that nothing in the 1981 Act or the CPR undermined the reasoning in the earlier cases or called for it to be reconsidered (see paragraph 31 of the Costs Judgment). In my view, it remains the case that liability for costs should typically be imposed on a claimant’s litigation friend, but with the important caveat that, when deciding whether to make such an order, the Court is exercising a discretion and entitled to have regard to the particular circumstances of the case.
i) The pre-CPR authorities indicate that a defendant’s guardian ad litem was not treated in the same way as a plaintiff’s next friend or guardian for costs purposes. On the basis of the cases of which he was aware, the Judge observed in paragraph 43 of the Costs Judgment that there was “really only one case (Morgan v Morgan) which provides any support for the proposition that the court will not make an order for costs against the litigation friend of a child defendant in the absence of gross misconduct”. The Judge was unaware, however, of Reynolds v Mead and Hooper v Mackenzie. Those decisions seem to me to confirm that a defendant’s guardian ad litem would not be required to bear costs unless he had been guilty of gross misconduct;
ii) Distinctions between a defendant’s litigation friend and a claimant’s also emerge from the CPR. While a claimant’s litigation friend must supply an undertaking as to costs in accordance with CPR 21.4(3)(c), the CPR, unlike the FPR, impose no such requirement on a defendant’s litigation friend. Mr Cloherty sought to dismiss CPR 21.4(3)(c) as “simply akin to requiring some security for costs where a claim is brought by a litigation friend”, but an undertaking in compliance with CPR 21.4(3)(c) creates only a personal obligation and, even if security were conferred, the fact would remain that it had been thought right to differentiate between a claimant’s litigation friend (who has to give an undertaking) and a defendant’s (who need not). It is significant, too, that, by virtue of CPR 21.2 and 21.3, the general rule is that a claim simply cannot proceed against a child or protected party unless a litigation friend is appointed. A step taken before a child or protected party has a litigation friend has no effect unless the court orders otherwise, CPR 21.3(4) explains;
iii) There is force in Mr Saoul’s policy argument. Children and protected parties who are being sued need litigation friends both so that their rights are protected and because the litigation cannot otherwise proceed. Yet there must be a risk that, if a defendant’s litigation friend were usually vulnerable to an adverse costs order, that would deter suitable individuals from taking on the role. Mrs Talbot Rice downplayed the potential difficulties on the footing that, if no one else is able and willing to act for a child or protected party, the Official Solicitor will step in, but the Official Solicitor is not willing to accept a case unless there is adequate provision for payment of her own costs. More than that, a general principle that a defendant’s litigation friend should bear the claimant’s costs of a successful claim would, on the face of it, expose the Official Solicitor to the prospect of a costs order against her if the claim succeeded, yet it seems most unlikely that the Official Solicitor would wish to run that risk. Mrs Talbot Rice also pointed out that CPR 21.2(3) gives the Court a discretion to permit a child to conduct proceedings without a litigation friend, but exercise of that power would only rarely provide an adequate solution in the case of a child and could never do so with a protected party;
iv) Where a director causes a company to defend a claim unsuccessfully, he is unlikely to be ordered to pay costs personally in the absence of “some impropriety or bad faith on his part” even if he provided the company with funding, unless at least he can be seen to have acted for his own benefit, notably through a shareholding. It is not easy to see why a defendant’s litigation friend should be in a worse position. While the litigation friend might be said to have controlled the defendant’s participation in the litigation, the same might be said of the company director. That tends to suggest that a defendant’s litigation friend who does not stand to benefit substantially should generally escape liability for a claimant’s costs unless guilty of impropriety or bad faith;
v) Authorities addressing the position of the Official Solicitor also provide support for the view that there is no general principle to the effect that a defendant’s litigation friend should be liable for such costs as the child or protected party would normally be required to pay. Far from the Official Solicitor being ordered to pay a claimant’s costs where a defendant on whose behalf she has acted has failed, the cases show that a claimant (or other applicant) may be ordered to pay the Official Solicitor’s own costs, and that even where the claimant/applicant has not asked the Official Solicitor to become involved. In Re PC (An Infant), Buckley J drew attention to the fact that the Official Solicitor’s appointment was “a sine qua non to the proceedings going on and being effectively disposed of” and, in Northampton Health Authority v Official Solicitor, Bingham MR agreed that there was a general principle that, where parties have become involved in a situation in which it has become necessary to seek the assistance of the Official Solicitor, it is not unreasonable for him to ask that they should meet or contribute towards the cost of his intervention. Such points find an echo to an extent in Mr Saoul’s policy argument. Of course, the Official Solicitor might be thought to be in a somewhat different position from, say, a parent acting as litigation friend for a child, but there is also a distinction in terms of the relief at issue. The question in the Official Solicitor cases is whether a successful claimant/applicant should be ordered to pay the costs of the litigation friend of a defendant/respondent. The question where someone other than the Official Solicitor has acted as litigation friend will be whether the litigation friend should have to bear the claimant’s costs;
vi) CPR 21.9(6) does not imply that a defendant’s litigation friend should be held liable for costs. That provides for the liability of a litigation friend for costs to continue until a notice stating that the appointment has ceased has been served. As, however, the Judge said in paragraph 32 of the Costs Judgment, the rule “shows that there can be cases in which a litigation friend is liable for costs but the rule itself does not define what those circumstances are”. I agree;
vii) CPR 44.2(2) is not in point because that deals with costs as between parties, not with when costs orders should be made against non-parties.
i) At any rate where a litigation friend has not previously given an undertaking to pay the costs at issue, the power to make an order for costs against a litigation friend derives exclusively from section 51 of the 1981 Act;
ii) When deciding whether an order should be made against a litigation friend under section 51, the “ultimate question” is “whether in all the circumstances it is just to make the order”;
iii) It will typically be just to order a claimant’s litigation friend to pay costs if such an order would have been made against the claimant himself had he not been a child or protected party, but it remains the case that the Court is exercising a discretion and entitled have regard to the particular circumstances;
iv) There is no presumption that a defendant’s litigation friend should bear costs which the defendant would have been ordered to pay if not a child or protected party. That the litigation friend controlled the defence of a claim which succeeded will not of itself generally make it just to make an adverse costs order against the litigation friend. Factors that might, depending on the specific facts, be thought to justify such an order include bad faith, improper or unreasonable behaviour and prospect of personal benefit. If a director causes his company to litigate “solely or substantially for his own benefit” (to quote Lord Brown in Dymocks), that may point towards a costs order against him. The fact that a litigation friend stands to gain a substantial personal benefit must also, I think, be capable of weighing in favour of a costs order against him.
It follows that, in my view, the Judge was mistaken in thinking that, “the court should apply the general approach that, as regards costs, the litigation friend is expected to be liable for such costs as the relevant party (if they had been an adult) would normally be required to pay” and so erred in principle.
In the present case, it is not suggested that Ms Glover acted in bad faith and she did not stand to gain a substantial personal benefit from the Twins’ Application. The Judge noted that “if Tom and Freya did make a financial recovery as a result of these proceedings (and further proceedings) then there could be an element of an indirect benefit to Ms Glover”, since such a recovery would have alleviated the financial burden on her and perhaps enabled Tom and Freya to pay back debts she had incurred. He also, however, observed that the proceedings against Confiance which were contemplated “would have been for the benefit of Tom and Freya and not directly for the benefit of Ms Glover” and, as Mr Saoul pointed out, the period over which the financial burden on Ms Glover could have been eased would have been attenuated by the fact that Tom and Freya were already turning 16 when the Twins’ Application was issued. As for improper or unreasonable behaviour, the respondents argued that the Twins’ Application had poor to non-existent prospects of success and was speculative at best. In this connection, Mr Cloherty drew attention to paragraph 81 of the Costs Judgment, in which the Judge said that, by the time the Twins’ Application was initiated, Ms Glover “knew or ought to have known of the difficulties she would have to overcome” but “nonetheless went ahead”. He further relied on Lord Brown’s reference in Dymocks to “the pursuit of speculative litigation” being capable of supporting the making of an order against a non-party. To my mind, however, the Twins’ Application was not so obviously flawed as to justify a costs order against Ms Glover. A key element in the Judge’s analysis in the Principal Judgment was that section 28 of the IHTA was to be construed in the way that the Court of Appeal thought was probably correct in the Negligence Claim, but the Court of Appeal’s judgments were not available until December 2017, by which time the Twins’ Application had not only been issued but had its first hearing day. Beyond that, the matter was the subject of sustained argument by leading counsel at a hearing extending over, in all, several days and the Judge spoke of the Twins’ Application having to overcome “difficulties” rather than of its being hopeless. Nor do I consider that the fact that costs orders made in favour of Mr Barker and Confiance in the Twin Benefits Proceedings have not been satisfied provides a sufficient reason to impose liability for costs on Ms Glover in the present context. Ms Glover was never herself a party to the Twin Benefits Proceedings or under any liability in respect of their costs. While, moreover, Ms Glover may have been a director and shareholder of Twin Benefits, the company was “used as a vehicle … in order to insulate Mr Baxendale-Walker from a potential costs liability” and it was he who provided the funding and “the bulk of the instructions” and who exercised substantial control (see Birss J’s judgment of 25 October 2017, quoted in paragraph 12 above). An order for costs was, accordingly, made against Mr Baxendale-Walker. No such order was either made or sought against Ms Glover.