Globe Equities Ltd v Globe Legal Services Ltd & Ors

Under section 51(1) and (3) of the Supreme Court Act 1981, the court may order a non-party to pay litigation costs where, in all the circumstances, justice requires it. The requirement that the case be “exceptional” describes the contrast with ordinary litigation; it is not a statutory precondition or a separate test. Relevant considerations include the non-party’s benefit from the proceedings, the closeness of its connection with them, and whether its conduct caused the costs claimed. Improper conduct is not essential under section 51. The costs need only have been caused to some extent by the non-party, not by every factor making the case exceptional. Where the party’s liability for costs is on an indemnity basis, a connected non-party may likewise be ordered to pay on that basis.

The appeals arose from four related actions concerning a lease of office premises. The respondent landlord obtained judgments for rent and service charges against the tenant and its guarantors. The tenant’s solicitors, Miller Gardner, conducted the rent actions while the tenant could not pay its own or the landlord’s costs, and the firm occupied the premises as the tenant’s licensee.

Jonathan Parker J ordered the firm to pay the landlord’s costs of the two rent actions under section 51(1) and (3) of the Supreme Court Act 1981, but refused equivalent orders concerning the related option and guarantee actions. The firm appealed against the costs orders, and the landlord cross-appealed against the refusals. The central issues were whether the circumstances justified non-party costs orders, whether the costs were caused by the firm, and whether the orders could extend to the option and guarantee actions.

1. Appeal dismissed. The court upheld the order requiring Miller Gardner to pay Globe’s costs of the First Action and Second Action. The cross-appeal concerning the Option Action and Guarantee Action, and the application for leave to amend, were also dismissed.
2. Section 51(1) and (3) of the Supreme Court Act 1981 confers a broad discretionary power to order a non-party to pay costs. The ultimate question is whether, in all the circumstances, it is just to exercise that power. “Exceptional” circumstances are identified by comparison with the ordinary run of litigation. The expression is not an additional statutory precondition.
3. The firm’s connection with the rent actions was exceptionally close. It conducted the proceedings in substance for its own interests, knew that the tenant could not meet the costs, occupied the premises rent-free, preserved that occupation by resisting judgment, and stood to benefit from the counterclaims. The judge was entitled to rely on findings made in the underlying proceedings because solicitors on the record have a sufficiently close connection with them. No finding of bad faith or improper conduct was required under section 51(1) and (3).
4. The costs claimed had to be caused to some extent by the firm’s conduct. It was unnecessary that every factor making the case exceptional should have caused every item of cost. The defences and counterclaims maintained the firm’s rent-free occupation and therefore sufficiently caused the costs of the rent actions, including the costs relating to the guarantor claim.
5. The lease covenant requiring payment of costs incurred in the “attempted recovery” of arrears covered proceedings which succeeded in law but ultimately failed because the tenant lacked the means to pay. The contractual indemnity was a material consideration, and the same indemnity basis could properly be applied to the connected non-party.
6. The Option Action and Guarantee Action were materially different. The firm obtained no substantial benefit from the option proceedings, and the guarantee proceedings were conducted for an individual apparently able to meet his own costs. The judge was therefore entitled to refuse orders against the firm in those actions.

• Court of Appeal (Civil Division): dismissed the firm’s appeal, Globe’s cross-appeal and the application for leave to amend. The respondent was awarded 90% of the costs of the appeal, application and cross-appeal. Leave to appeal to the House of Lords was refused.
• High Court of Justice, Chancery Division: Jonathan Parker J ordered Miller Gardner to pay Globe’s costs of the First Action and Second Action under section 51(1) and (3) of the Supreme Court Act 1981, but refused equivalent orders in the Option Action and Guarantee Action.