The Secretary of State for Business, Enterprise and Industrial Strategy v Viceroy Jones New Tech Ltd & Ors

The discretion to make a non-party costs order under Senior Courts Act 1981, section 51 is governed by whether the order is just in all the circumstances. Although such orders are exceptional in the sense that they fall outside the ordinary run of litigation, exceptional circumstances are not a statutory precondition. Public-interest winding-up petitions are an unusual form of proceedings. Relevant considerations may include the nature and extent of risks to the public, the non-party’s participation, control or benefit, and the effect of leaving costs with the company’s creditors and investors. The court must assess the particular circumstances without treating reported authorities as a comprehensive checklist. Bad faith, abuse of process or procedural manipulation is not essential.

The Secretary of State sought a non-party costs order under section 51 of the Senior Courts Act 1981 against George Frost, who had been the architect and director of companies involved in a truffle-tree investment scheme. The companies had previously been wound up in the public interest. The application concerned the costs of defending those petitions and also sought a Bathampton order. Mr Frost contended that such orders were exceptional and that he had believed the companies had arguable defences which it was in their interests to advance. The central issue was whether, in all the circumstances, it was just to make him personally liable for the costs.

1. The application was granted. The court ordered Mr Frost to pay the Secretary of State’s costs of the winding-up petitions, subject to specified dates and exclusions, the defending companies’ petition costs where borne by them, the Secretary of State’s costs of the application, and a payment on account. A Bathampton order was also proposed.

2. Section 51 of the Senior Courts Act 1981 confers a full discretion as to by whom and to what extent costs are to be paid. The discretion must be exercised in accordance with reason and justice. CPR 46.2 requires the proposed non-party to be joined and given a reasonable opportunity to attend the relevant hearing.

3. The court rejected the submission that the Secretary of State had to prove that Mr Frost lacked a bona fide belief that the companies had an arguable defence or that defending was in their interests. The earlier focus on those matters in Re North West Holdings plc did not restrict the wider approach in Re Aurum Marketing Ltd. The ultimate question remained whether an order was just in all the circumstances.

4. Non-party costs orders are exceptional only in the sense that they fall outside the ordinary run of cases. That description is not a precondition to jurisdiction. The court must undertake a fact-sensitive assessment and must not convert the authorities into a mandatory checklist.

5. In public-interest winding-up proceedings, the court may consider the nature and extent of the risks to which the public was exposed and the non-party’s participation in the relevant activities. Mr Frost was the architect and controlling participant in a scheme found to lack commercial probity. He knew the true position, could not genuinely have believed that the companies had an arguable defence or that defending was in their interests, and had caused costs to be incurred which would otherwise diminish recoveries for investors and creditors.

6. In those circumstances, leaving the costs with the companies would unfairly burden the public, investors and creditors. The only just order was to visit the costs on Mr Frost.