Popely & Anor v Popely & Ors

A non-party costs order is exceptional only in the sense that it falls outside the ordinary run of litigation. The controlling question is whether the order is just in all the circumstances. Relevant considerations include whether the non-party substantially controlled or benefited from the litigation, whether the non-party was the real party, whether adequate warning was given, and whether a causal link exists between the non-party’s conduct and the costs claimed. A warning is a factor, not an immutable precondition. A trustee joined as a necessary defendant in a derivative action will not ordinarily be liable merely because it was a losing party, where it neither funded nor benefited from the proceedings and took no active part.

The claimants, John Anthony Popely and Andrew Popely, pursued a double derivative action concerning assets of Casterbridge Properties Ltd. The substantive claim was dismissed in the earlier judgment, [2019] EWHC 1507 (Ch). Ronald Albert Popely then sought a non-party costs order against John Henry Popely, the claimants’ father, and a costs order against Cosmos Trust Ltd, which had been joined as a defendant because it was trustee of the relevant trust.

The issues were whether John Snr was the real claimant because he controlled and benefited from the proceedings, and whether Cosmos should bear costs despite having neither funded nor actively participated in the litigation.

1. The court ordered John Snr to be jointly and severally liable with the claimants for the costs of the action. It refused the costs order sought against Cosmos.

2. Under s.51 of the Senior Courts Act 1981, the discretion to make a non-party costs order must be exercised justly. The principles in Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] UKPC 39; [2004] 1 W.L.R. 2807 remained binding. An order is ordinarily justified where the non-party substantially controls the proceedings or stands to benefit from them and is therefore the real party.

3. The guidance in Symphony Group Plc v Hodgson [1994] Q.B. 179 was subject to the later explanation in Deutsche Bank AG v Sebastian Holdings Inc [2016] EWCA Civ 23; [2016] 4 WLR 17. The absence of prior warning is one factor in the overall justice of the case, not a mandatory requirement. The only immutable principle is that the discretion must be exercised justly.

4. Following XYZ v Travelers Insurance Co Ltd [2019] UKSC 48; [2019] 1 WLR 6075, a causal link is required between the non-party’s relevant conduct and the costs sought. That link existed in John Snr’s case because the proceedings were continued on his instructions, he controlled the litigation, gave instructions to counsel, supplied the principal evidence and stood ultimately to benefit through the trust beneficiaries.

5. Cosmos was a necessary defendant to the derivative action. It did not fund the proceedings, did not stand to benefit from success, and took no active part. Its status as a losing party did not justify a costs order, and there were no good grounds for exercising the discretion against it.

The judgment records that the substantive claim had previously been dismissed in [2019] EWHC 1507 (Ch) and that permission to appeal had been refused. This judgment concerned subsequent costs applications.