Willers v Joyce & Ors

A non-party costs order against a legal representative remains exceptional. The central question is whether, in all the circumstances, justice requires the order. Legal representatives are ordinarily protected where they act within their professional role, even if they defer payment, act under a conditional fee arrangement, or have a financial interest in the outcome. Control of the litigation and financial interest are not, without more, sufficient indicators because they commonly arise from the legal representative’s role. A legal representative may become liable where he acts outside that role, including as a true third-party funder or quasi-party. The fact that a later claim includes as damages unpaid fees from earlier litigation does not, without more, make the lawyers real parties to the later claim.

The claimant’s malicious prosecution and abuse of process claim had been dismissed after trial, and he had failed to pay the successful defendants’ costs. The defendants applied under CPR r 46.2(1)(a) to add the claimant’s former solicitors and barristers as defendants for costs purposes.

The legal representatives had acted in the earlier Langstone Action and in the malicious prosecution claim. They had unpaid fees from the earlier proceedings and had deferred payment of fees incurred in the later claim. The successful defendants argued that the legal representatives were the real parties because the malicious prosecution claim sought recovery of the earlier costs shortfall. The central issue was whether those arrangements took the legal representatives outside their ordinary professional role so as to justify a non-party costs order.

1. Application dismissed. The court declined to make a non-party costs order against the solicitors or barristers.
2. Under section 51 of the Senior Courts Act 1981, the court has jurisdiction to determine by whom and to what extent proceedings costs are paid. The jurisdiction is exceptional in the sense explained in Dymocks Franchise Systems (NSW) Pty Ltd v Todd and Deutsche Bank AG v Sebastian Holdings Inc, but the controlling question is whether an order is just in all the circumstances.
3. The principles in Tolstoy-Miloslavsky v Aldington, Floods of Queensferry Ltd v Shand Construction and Hamilton v Al Fayed establish a strong public interest in enabling impecunious claimants to obtain legal representation. Legal representatives should not ordinarily face a third-party costs order unless they act outside their role as legal representatives.
4. A lawyer’s close involvement in decisions and financial interest in success are inherent in acting for a client, particularly under a conditional or deferred fee arrangement. Those features therefore do not perform the same analytical role as they do for a pure funder. The court declined to treat the unpaid fees from the Langstone Action, or the fees incurred in the malicious prosecution claim, as sufficient to make the legal representatives real parties in substantial and critical respects.
5. The court rejected the proposed further exception for cases where a later claim includes the unpaid costs of earlier litigation. Creating such an exception would expose lawyers in many professional negligence, contractual, probate and conveyancing disputes to non-party costs liability, or effectively require clients to pay outstanding fees before their former lawyers could act.
6. The attendance note concerning settlement negotiations did not establish that the legal representatives had a veto over settlement or controlled the litigation. The evidence did not show a sufficiently divergent interest from that of the claimant. In light of the claimant’s refusal to waive privilege, the court also assumed, consistently with Ridehalgh v Horsefield and Medcalf v Mardell, that the legal representatives had given honest advice unaffected by their financial interests.
7. The court did not need to determine the ancillary issues concerning causation, the distinction between the firm and company, the distinction between solicitors and barristers, or indemnity costs. It indicated that causation would not have prevented an order had the substantive jurisdictional basis otherwise been established.

The judgment records that the underlying malicious prosecution and abuse of process claim was dismissed by the same court in [2018] EWHC 3424 (Ch). Permission to appeal was refused by Lewison LJ on 19 February 2019. The present application for a non-party costs order was dismissed.