Bournemouth & Boscombe Athletic Football Club Ltd v Lloyds TSB Bank Plc

A person who repeatedly initiates and conducts hopeless litigation for an insolvent company may, in exceptional circumstances, be ordered to pay the opposing party’s costs as a non-party. The general rule is that a company director is not personally liable for the company’s costs, but that rule is not absolute. Relevant circumstances may include the individual’s role in bringing the proceedings, the hopelessness of the claims or appeal, the company’s insolvency, and the use of directorship or rights of audience to conduct litigation. An order may be made even though the individual was not a director when the underlying events occurred and acted on legal advice.

The Club brought two actions against the Bank alleging breach of a 1994 refinancing agreement. The first action was struck out after the Particulars of Claim were served late. The second action was also struck out by Peter Smith J on grounds including late service and that the claim was bound to fail. The Club’s appeal was dismissed by this court on 10 December 2003, and permission to appeal to the House of Lords was refused.

The Bank then applied for an order that Mr Roy Pack, who had represented the Club and had been added as a defendant for the costs application under CPR Rule 48.2(1), pay the Bank’s costs of the appeal. The central issue was whether the circumstances justified making a non-party personally liable for those costs.

1. Application granted. Mr Pack was ordered to pay the Bank’s costs of the appeal and of the costs application on the standard basis. The costs were to be subject to detailed assessment, and Mr Pack was not bound by the earlier summary assessment of the Bank’s appeal costs.
2. Jonathan Parker LJ treated Re North West Holdings Plc [2001] EWCA Civ 67 as stating the general rule that directors should not ordinarily be made personally liable for a company’s costs. That rule did not prevent an exceptional order in the present circumstances.
3. The court applied Paragon Finance Plc v Noueiri [2001] EWCA Civ 1402, which stated that rights of audience and permission to conduct litigation should only exceptionally be granted to an individual who makes a practice of representing otherwise unrepresented litigants. The court found that Mr Pack was such an individual and inferred that becoming a director strengthened his position to represent the Club where permission would probably have been refused had he appeared independently.
4. Even if Mr Pack had been a director throughout the relevant period, the circumstances were sufficiently exceptional. He had initiated two substantially similar actions for an insolvent company, both were defective, the second was expressly held bound to fail, and he nevertheless pursued an appeal that should never have been brought. A person who misuses the civil justice system by advancing hopeless claims and an unmeritorious appeal must face the financial consequences.
5. The proposed adjournment was refused. Evidence emerging in the separate Hayward proceedings could not affect liability for the Bank’s appeal costs, and the late provision of the correct bundles caused no material prejudice.

• Court of Appeal (Civil Division): On 28 June 2004, the court granted the Bank’s restored costs application and ordered Mr Pack to pay the Bank’s costs of the appeal and of the application on the standard basis, subject to detailed assessment.
• Court of Appeal (Civil Division): On 10 December 2003, the court dismissed the Club’s appeal against Peter Smith J’s order dated 16 April 2003. The Club’s application for permission to appeal to the House of Lords was refused.
• High Court, Chancery Division: Peter Smith J struck out the second action, including on the ground that the claim was bound to fail, ordered the Club to pay the Bank’s costs, and added Mr Pack as a defendant for the non-party costs application under CPR Rule 48.2(1).