EC Medica Group UK Ltd & Ors v Dearnley-Davison & Ors

The court has a broad discretion under Senior Courts Act 1981, section 51, to order a non-party to pay costs where, in all the circumstances, that is just. Such orders are exceptional because the case must fall outside the ordinary run of litigation pursued for a party’s own benefit and expense. Relevant considerations include the non-party’s connection with the proceedings, causation, whether the non-party was the real party to the litigation, any personal benefit, and whether a warning was given. A warning is not a prerequisite, particularly where the non-party controlled the litigation. The availability of an alternative remedy does not prevent a section 51 order. On the facts, the controlling director’s conduct, misleading assurances about costs, and apparent asset transfers justified joint and several liability for 70% of the claimants’ costs.

The claimants had previously succeeded on only two minor aspects of their claims. Most claims were dismissed, and the defendants obtained substantial costs orders. The claimants were ordered to make an interim payment of £233,100 but made no payment. Two related companies were subsequently wound up, while assets and the claimants’ business appeared to have been transferred to connected entities.

The defendants applied for Mr Bennetts, a Part 20 defendant and the claimants’ controlling director, to be jointly and severally liable with the claimants for the costs of the claim. He relied, among other matters, on the absence of an earlier warning and the availability of remedies in the liquidation proceedings. The central issue was whether it was just to make a non-party costs order under section 51.

1. Application granted. Mr Bennetts was ordered to be liable jointly and severally with the claimants for 70% of the costs of the claim.
2. Section 51 of the Senior Courts Act 1981 gives the court full power to determine by whom and to what extent costs are payable. The jurisdiction extends to non-parties. The exceptional nature of such an order means that the case must be outside the ordinary run of litigation conducted for a party’s own benefit and expense. The ultimate question is whether the order is just in all the circumstances.
3. The relevant circumstances included Mr Bennetts’ close connection with the proceedings, the causal relationship between his conduct and the defendants’ inability to recover costs, whether he was the real party to the litigation, any personal benefit, and the significance of the absence of a warning. These considerations were not rigid conditions or an exhaustive checklist.
4. Mr Bennetts controlled the litigation, supplied the principal factual evidence, and was the controlling mind of the claimant companies. He could therefore properly be regarded as the real party. His assurances about the claimants’ ability to pay costs were unsupported and contradicted by subsequent events. The apparent transfer of intellectual property, premises and business assets without a satisfactory account of the proceeds strongly supported the conclusion that value had been moved away from the claimants to avoid payment.
5. The absence of a warning did not preclude the order. It was unlikely to have altered Mr Bennetts’ conduct, particularly because he already knew the claimants’ financial position and had represented that they could meet any costs order. The possible remedy in the liquidation proceedings was relevant but did not outweigh the justice of making the order. There was also no absolute requirement to limit the order strictly to the value of assets of which the defendants had been deprived.

The judgment records an earlier merits judgment dated 27 July 2018 and a consequential costs order dated 6 September 2018. No appellate decision is stated. The present application was determined at first instance.