Oriakhel v Groupama Insurance Co Ltd & Anor

A non-party costs order is exceptional and must accord with reason, justice and procedural fairness. Where the applicant could have sued and joined the non-party, an order is still more exceptional. The non-party should ordinarily receive early notice and an opportunity to contest the allegations.

Findings in the original proceedings cannot bind a non-party unless the connection with those proceedings was sufficiently close. Anticipated benefit, dishonest participation and false testimony do not alone establish that proximity.

Witness immunity prevents an award founded on evidence given or prepared for proceedings. It does not protect conduct outside the judicial process, such as participation in a conspiracy involving fabricated evidence.

An insurer successfully resisted a road-traffic claim which the county court found fraudulent. A witness, Mr Khan, was found to have links with those involved and to have given untruthful evidence. The insurer had alleged before trial that he was a conspirator, but had neither joined him to its counterclaim nor warned him in time that it would seek costs against him.

His Honour Judge Copley refused the insurer’s subsequent application for a non-party costs order. He considered that the authorities ordinarily required the non-party to have funded or controlled the litigation. The insurer appealed, arguing that anticipated benefit from the fraud and dishonest supporting evidence were sufficient.

The central issues were whether the judge had unlawfully restricted his discretion and, if so, whether the Court of Appeal should itself order the witness to pay the insurer’s costs.

1. Appeal dismissed. The county court judge had wrongly treated funding or control of the litigation as a necessary condition for a non-party costs order. Funding is not a jurisdictional prerequisite. Effective control combined with an intended benefit may establish jurisdiction, although the making of an order remains discretionary. The Court of Appeal was therefore entitled to exercise the discretion afresh.

2. Per Jacob LJ, the discretion should not be exercised against Mr Khan. The insurer had alleged before trial that he was a dishonest conspirator and could have joined him to its counterclaim. Joinder would have enabled him to obtain advice, understand the pleaded issues, adduce evidence and make informed procedural decisions. The insurer remained free to pursue an independent conspiracy claim in which the reasonable costs of defeating the fraudulent claim could, if proved, be claimed as consequential loss.

3. The lack of timely notice was independently important. A person accused of lying, perjury, conspiracy and fraud should ordinarily be warned sufficiently early to obtain advice, deploy evidence and apply for joinder. Notice first given after the evidence had closed did not provide that protection.

4. The findings made in the primary proceedings were neither res judicata nor binding on Mr Khan. A non-party may be bound in summary costs proceedings where the connection with the original litigation is so close that reliance on the findings causes no injustice. That may occur where the non-party effectively funded or controlled the litigation and was a real party to it. Mr Khan did neither. His anticipated benefit, participation in the alleged conspiracy and dishonest testimony did not, separately or together, supply the necessary proximity.

5. Per Arden LJ, with whom Jacob LJ and the Master of the Rolls agreed, witness immunity supplied a further reason for refusing the order. The immunity protects evidence given in court and its preparation. A costs order founded on such evidence would infringe that immunity. It does not, however, prevent liability for a conspiracy carried out by conduct outside the judicial process, such as creating a false invoice. The precise external conduct alleged had not yet been pleaded or clearly identified.

• Court of Appeal (Civil Division): By [2008] EWCA Civ 748, unanimously dismissed the insurer’s appeal. Although the county court judge had wrongly restricted the scope of the discretion, the Court of Appeal declined to make a non-party costs order.
• Willesden County Court: His Honour Judge Copley dismissed the fraudulent road-traffic claim on 25 January 2007. By a further judgment dated 17 August 2007, he refused the insurer’s application for a non-party costs order against Mr Khan.