In Turner & Ors v Thomas & Anor (Costs) [2022] EWHC 1944 (Ch) Mr Justice Zacaroli considered the appropriate principles to be applied as to costs when a defendant was not a party to an appeal made by a co-defendant. The judge decided that the principles were akin to non-party costs orders. On the facts of this case it was appropriate to make an order for costs against the defendant who had not been party to the appeal.
“I consider the correct approach is to apply by analogy the principles derived from cases where costs orders are sought against non-parties.”
THE CASE
The claimants brought an action against a company and an individual. They succeeded at trial. The defendant company, but not the individual, appealed. That appeal was unsuccessful and an order was made for costs. The issue arose as to whether it was the appellant company that should be liable for the costs of appeal, or both defendants. The individual (Mr Thomas) arguing that as he took no part in the appeal he should not be responsible for any costs that appeal.
THE JUDGMENT ON THIS ISSUE
The judge held that, on the facts of this case, it was appropriate that Mr Thomas pay the costs.
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I agree with Mr Thomas to this extent, that the fact that he was made a defendant to the action is not sufficient reason to make a costs order against him on this appeal. I consider the correct approach is to apply by analogy the principles derived from cases where costs orders are sought against non-parties. Applying those principles, and bearing in mind the points made on behalf of Mr Thomas:
(1) The purpose of the procedural requirements relating to those who are not parties at all is to ensure they have proper notice of, and are able to respond to, claims for costs against them. That purpose is satisfied here, where Mr Thomas is already a party, and where he has had ample notice of the respondents’ intention to claim costs against him and has instructed Counsel to make submissions on his behalf. Accordingly I reject the submission that the Court cannot make a costs order against him because the procedural requirements that relate to someone who is not a party at all have not been followed to the letter.
(2) As to the submission that a costs order against a non-party can only be made in “exceptional cases”, that is intended to mean only that it is outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense: see Deutsche Bank AG v Sebastian Holdings Inc [2016] EWCA Civ 23, per Moore-Bick LJ at §62. As was there stated: “the only immutable principle is that the discretion must be exercised justly”.
(3) I accept that the mere fact that Mr Thomas was a co-defendant does not justify a costs order against him. That is not an answer, however, to a costs order by an analogy with a costs order against a non-party.
(4) I also accept that it is the Company that is the proper party to the appeal, as the lease is vested in it, and that the Company alone would have benefitted in a direct sense if the appeal had been allowed. But that does not answer the question whether Mr Thomas was the “real” party in the sense intended in the authorities dealing with non-party costs orders. There, the question looks to the substance of the relationship between the director and the Company, to see whether – notwithstanding the Company is a separate legal personality – it is the director who would in substance have benefitted from the appeal.
(5) In addressing that question, I consider that it is relevant that Mr Thomas is not merely a director of the Company but, according to the facts as agreed for the hearing below was, at the time of the notice to quit, the sole shareholder of the Company and the person responsible for the management of the farming enterprise on behalf of the Company. Mr Thomas has not suggested that the position is any different now. The Company’s participation in the proceedings can therefore only have been controlled by Mr Thomas. In those circumstances, I consider that the available evidence indicates that Mr Thomas was indeed the real party in the sense intended in cases such as Goknur: he would have benefitted from a successful appeal, as it would have enabled him (as the “farmer” of the relevant land – as described in the submissions made on his behalf) to continue farming the land that he had originally leased from the respondents’ predecessor in title, through the medium of the Company.
(6) The fact that Mr Thomas has not funded the appeal out of his personal resources does not detract from that position: it is not an essential element that the person who would benefit from the litigation (and is in that sense a real party) must have funded the litigation before a costs order can be made against them.
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In all the circumstances, therefore, and where the unchallenged evidence is that the Company is impecunious, I consider that it is just to order that the costs of the appeal be paid by Mr Thomas.
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