Virdi v RK Joinery Limited

A third-party costs order may be made where, viewed objectively, a non-party was the real party responsible for generating and pursuing unsuccessful litigation and justice requires the order. Dishonesty or bad faith is not essential. The jurisdiction is fact-sensitive and arises under Senior Courts Act 1981, section 51. A person may be responsible for the emergence of a hopeless defence even though they did not control the litigation after it began, funded it independently, or acted dishonestly. A professional person’s conduct in private affairs should not ordinarily be judged by the standards applicable when acting professionally, although professional experience may be relevant to fact-finding.

R K Joinery Limited obtained possession of property occupied by Ramneek Kaur Virdi and succeeded against her defence based on an alleged oral agreement. The county court found that the agreement had not been made and ordered Mrs Virdi to pay costs on the indemnity basis.

The judge then joined Amritpal Singh Virdi for costs purposes and ordered him to pay the claimant’s costs, finding that he had generated and controlled his wife’s unsuccessful defence and would benefit from it. Mr Virdi appealed, challenging the findings on control, benefit, professional standards and the justice of making a third-party costs order.

1. Appeal dismissed. The county court’s third-party costs order was upheld, although the appellate court reached its conclusion for materially different reasons.
2. Section 51 of the Senior Courts Act 1981 confers a wide discretion to determine by whom and to what extent costs are to be paid. Under CPR rule 46.2, the non-party must be joined for costs purposes and given a reasonable opportunity to be heard. The overriding question is whether, in all the circumstances, it is just to make the order.
3. The judge was wrong to find that Mr Virdi controlled the litigation once it had started. His wife had separate representation, her defence had been settled by counsel, and Mr Virdi’s evidence that the supervising solicitor had conduct of the case was unchallenged. The judge was also wrong to apply professional standards to Mr Virdi’s private conduct as though he had been acting as solicitor on the record.
4. Those errors did not invalidate the order. The decisive finding was that Mr Virdi alone generated the defence, made the running in the events leading to the litigation, persuaded his wife and another witness of his mistaken account, and allowed a defence with no reasonable prospect of success to emerge. He stood to benefit from its success because it concerned the family home.
5. The absence of dishonesty or bad faith was not decisive. The authorities recognise a wide, fact-sensitive discretion, and speculative litigation may justify a costs order even without impropriety. Mr Virdi was objectively the real party responsible for the failed defence. He was therefore liable, together with Mrs Virdi, for the claimant’s costs, subject to detailed assessment on the indemnity basis.

• High Court (Chancery Division): Appeal from a third-party costs order made by His Honour Judge Powles QC in the Brentford County Court. The appeal was dismissed.