RUSHBROOKE UK LTD v 4 DESIGNS CONCEPT LTD

The court resolved a contested costs application arising from an earlier strike-out of the applicant company’s injunction application to restrain presentation of a winding-up petition. Key legal principles applied included the court's power under section 51 of the Senior Courts Act 1981 and CPR rule 46.2 to make costs orders against non-parties, the distinction between costs on the indemnity basis and the standard basis, and the summary assessment regime under CPR rule 44.6 and Practice Direction 44. The court held that the director who gave the impugned instructions must indemnify the company for costs (applying the approach in Smith v Butler [2012] EWCA Civ 314) but that there was no basis to order costs on the indemnity basis against the applicant company or to make a non-party costs order against the director under section 51, because there was no evidence of impropriety, bad faith or personal benefit sufficient to show he was the real party to the litigation. The court carried out a summary assessment of costs and reduced the respondent’s claimed fees for excessive hourly rates and failure to delegate, awarding a total of £7,920 (including VAT) on the standard basis.

Background and nature of the application

The applicant company brought an application for an injunction to restrain presentation of a winding-up petition. That application was struck out in earlier reasons handed down on 13 May 2022 on the basis that one of the company’s two directors, Mr Mark Steventon-Smith, lacked authority to give instructions on behalf of the company. The present judgment determines the respondent's costs of that application and related costs questions; a separate judgment will deal with an application for wasted costs against the applicant’s solicitors.

Parties and procedural posture

• Applicant: Rushbrooke UK Ltd.
• Respondent: 4 Designs Concept Ltd.
• First instance hearing on paper in the Insolvency and Companies List before HHJ Paul Matthews.

Relief sought and issues framed

• The respondent sought an order that the applicant company and Mr Steventon-Smith be jointly and severally liable for the respondent’s costs; alternatively that Mr Steventon-Smith be made liable as a non-party under section 51 of the Senior Courts Act 1981 and CPR rule 46.2 on the basis that he was the real party to the litigation. The respondent also sought its costs on the indemnity basis and challenged the applicant’s objections to the quantum and timing of an updated costs schedule.
• The applicant accepted that costs should follow the event but resisted indemnity costs, resisted inclusion of the late updated schedule on the basis of service rules, and opposed a non-party costs order against Mr Steventon-Smith on procedural and substantive grounds.

Court’s reasoning and conclusions

• Indemnity and director indemnification: the court applied the reasoning in Smith v Butler to conclude that, as between the director and the company, the director must indemnify the company for costs incurred because he caused unauthorised litigation. That indemnity did not, however, automatically entitle the respondent to indemnity costs against the applicant company; the question whether the applicant should pay on the indemnity basis was considered separately and declined.
• Basis of assessment: no special conduct by the applicant justified indemnity costs; the court therefore declined indemnity basis and proceeded to summary assessment under CPR rule 44.6 and PD 44.
• Quantum and procedural objections: the court accepted the updated costs schedule despite late service because the applicant suffered no prejudice, but reduced the claimed solicitor hourly rate and made an allowance for lack of delegation. The court conducted a broadbrush summary assessment and reduced the total claimed to £6,600 plus VAT (£7,920 including VAT).
• Non-party costs against the director: the court reviewed the guidance (including Housemaker and the Court of Appeal in Goknur) and concluded there was no sufficient evidence of bad faith, impropriety or personal benefit to justify a section 51 order; additionally, the procedural requirement in CPR rule 46.2 to add the non-party and give him an opportunity to be heard had not been followed; accordingly no non-party order was made.

Other procedural notes: the court recorded that the wasted costs issue against the applicant’s solicitors would be decided in a separate judgment.

The court ordered the applicant company to pay the respondent’s costs of the application, summarily assessed on the standard basis at £7,920 (including VAT), to be paid by 4 pm on 29 June 2022. The court declined to award costs on the indemnity basis against the applicant and declined to make a non-party costs order against Mr Steventon-Smith under section 51 of the Senior Courts Act 1981, on the grounds that there was no sufficient evidence of impropriety, bad faith or personal benefit such as would show he was the real party to the litigation; the director must, however, indemnify the company for those costs as between him and the company. The wasted costs claim against the solicitors was to be dealt with separately.