RESPONDENTS CANNOT BE ORDERED TO PAY THE COSTS OF OTHER RESPONDENTS WHEN THERE WAS NO DISPUTE BETWEEN THEM
In Elser v Sands & Ors [2022] EWHC 1419 (Ch) Chief ICC Judge Briggs held that the court did not have power to order one respondent’s costs to be paid by other respondents. There was nothing in dispute between them and there was no successful party.
“In my judgment the term “parties” is more likely than not to refer, when reading CPR 44 as a whole, to the parties between whom there is a dispute. There was no dispute between the First, Second and Fifth Respondents in this case.”
THE CASE
The third and fifth respondents to an application were the unsuccessful parties to an application. The third appeared without legal representation, the fifth did not appear at all. The judge made an order that the third and fifth respondents pay the applicant’s costs. The judge also ordered that the third and fifth respondents pay the first respondent’s case. However, as we shall see, this initial order was not made after consideration by the judge.
COULD THE OTHER RESPONDENTS BE ORDERED TO PAY THE COSTS OF THE FIRST RESPONDENT
The judge , initially, ordered that the third and fifth respondents pay the first respondent’s costs. However after the hearing the judge had concerns about whether he could, in fact, order costs orders between respondents. This caused him to write to counsel for the first defendant and was the only issue in this judgment.
“Before the order is sealed in respect of the hearing yesterday, the 7 June 2022, I wish to raise a concern. On reflection I made an error awarding the costs of the [First Respondent] against Mr McCarthy and Mr Jonns. The [First Respondent] was neutral in respect of the outcome of the challenge to the IVA and was not in any respect an applicant. The [First Respondent] attended and defended the claims made by [the Applicant]. The [Frist Respondent] did not third party Mr Jonns or Mr McCarthy and cannot therefore be said to be a successful party. I regret this change of mind but unfortunately no submissions were made to the above effect. Mr Briggs [counsel for the First Respondent] has an opportunity to respond before the order is drawn, however if he agrees then the order will only relate to the costs of the Applicant, Mr Elser.”
THE JUDGE’S DECISION: THERE IS NO POWER TO ORDER COSTS BETWEEN RESPONDENTS
The judge was doubtful whether the court had power to order costs between respondents.
I accept that the discretion provided to the court by CPR 42(2)(2)(b) is wide. It is wide so as to allow the court to fulfil the aim to “make an order that reflects the overall justice of the case.”
The paragraphs I have cited in HLB Kidsons (A Firm) v Lloyds Underwriters [2007] EWHC 2699 (Comm) demonstrate well how the court is to approach the question of costs. The analysis to be undertaken is aimed at establishing the successful party. Once the successful party is identified the court may proceed to ask whether the general rule should be departed from on the facts of the case.
No authority has been cited to the effect that CPR 42 provides the court with a power to make an order between Respondents where one Respondent or Defendant has made no allegations against another, and no Part 20 claim exists. As between the Respondents none of the factors in CPR 42(4) and CPR 42(5) apply.
Further, the 2022 edition of the White Book does not contemplate such an order in its notes. The authors of the text do comment on what would be a highly unusual order:
“The most strikingly different order would be an order which was completely the reverse to an order in accordance with the general rule, that is to say, an order requiring the successful party to bear its own costs and in addition pay the unsuccessful party’s costs. Less so would be an order (as r.44.2(6) provides) that the unsuccessful party pay only “a proportion of” the successful party’s costs (r.44.2(6)(a)) (sometimes colloquially known as “percentage orders”), or only “a stated amount in respect of” those costs (r.44.2(6)(b)), or only those costs “from or until a certain date” (r.44.2(6)(c)), or costs relating only “to a distinct part of the proceedings” (r.44.2(6)(f)), or any combination of such different orders.”
If the authors consider a reversal of the general rule between the parties “strikingly different” an order between Respondents would be even more striking, yet no commentary contemplates such an order.
In my judgment the term “parties” is more likely than not to refer, when reading CPR 44 as a whole, to the parties between whom there is a dispute. There was no dispute between the First, Second and Fifth Respondents in this case.
THE RESULT IN THE CURRENT CASE
It is correctly conceded that the First Respondent is unable to demonstrate in any meaningful way that it is the successful party vis-à-vis the Second and Fifth Respondents. The CPR provides a wide discretion to permit the court to do justice between the parties in respect of costs. It does not contemplate an award of costs such that the First Respondent be entitled to a “different order” from the “general order” as against the Second and Fifth Respondents. These parties were all respondents to the application made by the Applicant. There was no dispute between them.
As regards discretion, if there is a discretion to exercise, contrary to my finding above, the First Respondent claims it would be “grossly” unfair not to be able to recover the costs of preparing and attending court where the First Respondent was neutral as to the outcome. It is true that the First Respondent was neutral. There was no dispute between him and the other Respondents. In these circumstances, my judgment, it would be unfair to visit the First Respondent’s costs of attending court on these Respondents.
To award costs in favour of the First Respondent would be contrary to the underlying principle to: “make an order that reflects the overall justice of the case.” For this reason, if I have discretion, I exercise it against making an order as an injustice would be visited upon the Second and Fifth Respondent if an order was made in favour of the First Respondent.
A nominee/chairman knows well that a dissatisfied creditor may challenge a decision made at a meeting of creditors. He or she is likely to have regard, when negotiating a fee with the debtor, to the possibility of providing evidence to the court and complying with any legal obligations resulting from his or her position as chairperson if a challenge is initiated.