Northern Powerhouse Developments Limited & Ors v Gavin Lee Woodhouse

An unless order making continuation of litigation conditional on payment of an earlier costs order is a discretionary sanction. The court must first determine whether the respondent has established, on the balance of probabilities, that the condition would probably stifle the defence. That inquiry includes whether the respondent can raise funds from third parties, not merely whether existing assets are available. The evidence must be assessed in the round, by reference to the underlying financial realities and relevant relationships. Prior breaches of court orders may affect the assessment, but do not remove the protection of Article 6 ECHR. There is no general requirement that a party pay an adverse costs order before paying its own lawyers where the question is whether it can realistically do both.

The claimants sought an unless order requiring Gavin Lee Woodhouse to pay costs of £59,258.30 ordered in earlier interlocutory proceedings. They sought, on default, to strike out his defence and enter judgment for approximately £5.2 million.

The costs had been ordered after findings concerning breaches of asset-disclosure and spending obligations under a freezing injunction. The defendant relied on detailed evidence of his assets, income, expenditure and previous litigation funding, asserting that he could neither pay the costs nor raise the necessary funds. The central issue was whether the proposed condition would probably stifle his defence.

1. Application dismissed. The court declined to make an unless order requiring payment of the outstanding costs as a condition of continuing the defence.
2. The power to impose such a sanction arises from the court’s inherent jurisdiction and is discretionary. The principles identified in Michael Wilson & Partners Ltd v Sinclair [2017] EWHC 2424 (QB) apply. A finding that the defendant has not established the impossibility of compliance is a gateway to the discretionary stage.
3. The decisive question, applying Goldtrail Travel Ltd (in liq.) v Onur Air Taşimacilik AŞ [2017] 1 WLR 3014, was whether the defendant had established on the balance of probabilities that an unless order would probably stifle his defence. The inquiry included whether funds could be raised from an owner, associates, friends or business connections. The court had to assess the probable availability of funds by reference to the underlying realities of the financial position and relationships, rather than taking assertions at face value.
4. The defendant’s evidence prima facie established present impecuniosity. The alleged availability of funds secured against Barkisland Hall was not established, particularly since the claimants themselves contended that the property belonged beneficially to them. The evidence of previous loans and continuing personal support showed difficulty in obtaining funds, rather than a presently available source of payment.
5. Prior breaches of disclosure and spending orders were serious, but they did not justify treating the defendant’s evidence as incredible. A party does not lose Article 6 protection merely because court orders have been breached. Nor did the authorities require the defendant always to pay adverse costs before paying his own lawyers. The practical question was whether he could do both.
6. On the evidence as a whole, the defendant had established that funding to pay the costs order would probably not be forthcoming and that the proposed condition would probably stifle the defence.