Larwood Holdings Ltd v Hammond Services Ltd

Before a court makes a costs order under section 51 of the Supreme Court Act 1981 against a person who is not a party to the relevant proceedings, Civil Procedure Rules r 48.2(1) requires that person to be added as a party for costs only and given a reasonable opportunity to attend the costs hearing. The word “must” is mandatory. An apparent failure to follow those steps makes the order arguable, even if the person received advance notice of the application. On a second appeal, permission may be granted where such a procedural point is arguable and raises an issue of general significance, although permission does not indicate that the appeal will succeed.

Mr Hamilton initially brought a £44,220 claim in his own name for services provided to Hammond Services Ltd. The contracts were with Larwood Holdings Ltd, which was substituted as claimant. After Larwood failed to pay security for costs, the claim was dismissed and the district judge ordered Larwood and Mr Hamilton personally to pay costs.

Judge Kennedy QC dismissed Mr Hamilton’s appeal, while recognising that several of his arguments had force. Mr Hamilton sought permission for a second appeal, arguing that he had not been joined to the original claim for costs under Civil Procedure Rules r 48.2(1), and that the procedural history made the personal costs order unfair. The central issues were whether the mandatory procedural requirements had been met and how a circuit judge should approach an appeal concerning costs against a non-party.

Lord Justice Judge granted permission to appeal, with considerable hesitation. He stressed that permission was far from a conclusion that the appeal would succeed.

1. Mandatory procedural safeguards. The proposed personal costs order arose under Civil Procedure Rules r 48.2(1), in connection with the costs jurisdiction under Supreme Court Act 1981 s 51. The rule required a person who was not a party to the proceedings to be added as a party for costs only and to be given a reasonable opportunity to attend the relevant hearing.
2. The papers suggested that the defendants had treated Mr Hamilton as a party to the proceedings generally but not to Larwood’s claim. No application or order appeared to have joined him to that claim for costs purposes. Although the defendants’ solicitors had written to him warning that a personal costs order would be sought, the rule used “must”, which was unequivocal. The apparent failure to comply therefore made it arguable that the district judge ought not to have made the order.
3. General significance. Judge Kennedy had identified substantial points in Mr Hamilton’s favour and said that, with the material before him, he might have made a different order. His conclusion that he could not say the district judge was wrong raised a separate question concerning the proper approach of a circuit judge hearing an appeal from a district judge on a personal costs order against a non-party. That issue had potential general significance.

Permission was granted. The case was directed to be listed before a two-judge constitution of the Court of Appeal.

• Court of Appeal (Civil Division) — Permission granted for a second appeal from Judge Kennedy QC’s order; the case was directed to be listed before a two-judge constitution.
• Brighton County Court — On 10 January 2001, Judge Kennedy QC dismissed Mr Hamilton’s appeal from District Judge Robinson’s costs order.
• Eastbourne County Court — District Judge Robinson ordered Larwood and Mr Hamilton personally to pay costs after Larwood failed to comply with the security-for-costs order; the claim then stood dismissed.