AP (UK) Ltd v West Midland Fire & Civil Defence Authority

A non-party costs order is governed by section 51 of the Senior Courts Act 1981 and the costs discretion in CPR 44. Once a person has been joined for costs purposes, the court may order payment of all or a proportion of the receiving party’s costs. The court must consider all relevant circumstances, including the conduct of both sides, proportionality and the overriding objective. A party seeking to recover costs must take reasonable steps to contain avoidable expenditure, including complying with applicable pre-action procedures, considering a stay or ADR, and seeking security for costs where appropriate. An appellate court may interfere with a discretionary costs decision only where a fundamental matter was overlooked and that omission produced a significantly erroneous result.

The Authority sought a non-party costs order against three members of the Patel family after their company’s second claim was struck out as res judicata and an abuse of process. The company became insolvent and was dissolved, leaving the Authority’s costs unpaid. The Master decided in principle that the Patels should be jointly and severally liable, and at the second stage ordered them to pay 80% of the Authority’s assessed costs.

The Patels appealed against the apportionment. The Authority cross-appealed, contending that the Master had no discretion to reduce the order below the full costs. The central issues were whether a proportionate non-party costs order was legally available, whether the Master’s exercise of discretion was reviewable, and what proportion should be ordered.

1. Power to apportion. Once a non-party is joined for costs purposes, it is a party for the purposes of CPR 44. The court therefore has the same costs discretion as in an ordinary inter partes costs decision. That discretion includes ordering payment of a proportion of the receiving party’s costs. CPR 48 and CPR 44 must be read together.
2. Relevant considerations. The decision whether to apportion, and the percentage selected, is fact-sensitive. The court must consider all relevant circumstances, including the conduct of the non-parties and the receiving party, the overriding objective and proportionality. The bona fide purpose of the litigation, the absence of impropriety, and differences between the respondents could properly justify a reduction.
3. Reviewability. The Master had a wide margin of appreciation because she had managed the case and heard the evidence. Her decision could nevertheless be reviewed because she failed to consider the Authority’s own failure to comply with the pre-action procedure and to seek an early stay, ADR or security for costs.
4. The Authority had been served with the claim without warning. It should have sought to use the pre-action process and obtain security before incurring substantial costs in the strike-out proceedings. Those steps would probably have brought the litigation to an end at much lower cost. The Authority’s conduct therefore materially increased the irrecoverable costs and had to be reflected in the order.
5. The 80% order was set aside and re-determined at 50% of the Authority’s reasonably assessed costs incurred in the striking-out proceedings. The Authority’s cross-appeal seeking all its costs failed.

• High Court (Queen’s Bench Division): The appeal from the Master’s 80% non-party costs order was allowed to the extent that the proportion was reduced to 50%.
• Master Fontaine: The Master had ordered the Patels to pay 80% of the Authority’s assessed costs after deciding in principle that a non-party costs order should be made.