BRENDA ELIZABETH TURNER & Ors v OWEN GWILYM THOMAS & Anor

A costs order may be made against a co-defendant by analogy with the principles governing non-party costs orders. The fact that a person was joined as a defendant is not, by itself, sufficient. The court must ask whether the person was the real party in the relevant sense, having regard to the substance of the relationship, personal benefit, control and funding. Funding from personal resources is not essential. Procedural safeguards applicable to non-parties may be satisfied where the person is already a party and has had adequate notice and an opportunity to make submissions. The discretion is exceptional only in the sense that such orders fall outside the ordinary run of litigation, and the governing principle is that it must be exercised justly.

The appeal concerned costs following the dismissal of the Company’s appeal from an order of HHJ Jarman QC dated 20 January 2022. The respondents had agreed costs of the appeal in the sum of £12,750. They sought an order against both the Company and Mr Thomas, who was a co-defendant at first instance but had not appealed.

The issue was whether Mr Thomas should personally pay the appeal costs. The respondents relied on the principles governing costs orders against non-parties, alleging that Mr Thomas controlled and funded the Company’s defence and would benefit from success. Mr Thomas argued that he was not the real party, had not funded the appeal personally, and should not be exposed to costs merely because he had been joined as a defendant.

The appeal costs were ordered to be paid by Mr Thomas as well as by the Company.

1. Procedural fairness. The procedural requirements in CPR 46.2(1) exist to ensure notice and an opportunity to respond. They did not prevent an order here because Mr Thomas was already a party, had long known that costs were sought against him, and had made submissions through counsel.
2. Applicable approach. The principles governing non-party costs orders applied by analogy. The fact that such orders are described as exceptional means only that they fall outside the ordinary run of cases. The governing principle is that the discretion must be exercised justly, as explained in Deutsche Bank AG v Sebastian Holdings Inc [2016] EWCA Civ 23.
3. Real party. Joinder as a co-defendant was not enough. The court considered the substance of the relationship between Mr Thomas and the Company. He was its sole shareholder, controlled its participation in the proceedings, managed the farming enterprise, and would have benefited from a successful appeal by continuing to farm the land through the Company. He was therefore the real party in the sense described in Goknur v Aytacli [2021] EWCA Civ 1037.
4. Funding. Personal funding was not an essential condition. The fact that the appeal had not been funded from Mr Thomas’s personal resources did not prevent a costs order where he stood to benefit and was the real party.
5. Given the Company’s impecuniosity and the unchallenged evidence, it was just to order Mr Thomas to pay the costs of the appeal.

• High Court (Chancery Division): On 26 July 2022, the court determined the disputed costs issue following dismissal of the Company’s appeal.
• Caernarfon County Court: HHJ Jarman QC ordered both defendants to pay the claimants’ costs on 20 January 2022. The Company appealed the substantive decision; that appeal was dismissed by judgment dated 26 May 2022. Mr Thomas did not appeal.