Asprey Capital Limited v Rediresi Limited

A non-party costs order against a director of an insolvent company is exceptional and depends on whether it is just in all the circumstances. The central question is whether the director was the real party to the litigation. Control or funding are relevant indicators, but they are not a checklist and neither is decisive. The court must consider personal benefit, the reasonableness of defending the claim and the interests of the company’s creditors. Serious impropriety may independently justify an order and may reinforce the conclusion that the director pursued personal interests. A section 51 application remains summary, but disputed facts may be resolved on the documents where that is proportionate and fair. The court ordered the director to pay the costs for which the insolvent company was liable.

Asprey succeeded against Rediresi Limited at trial on the construction of a joint venture agreement and on Rediresi’s estoppel argument. Rediresi was ordered to pay the judgment debt, costs and interest, but entered liquidation without paying. Asprey applied under Senior Courts Act 1981, section 51, for a non-party costs order against Mr Gupta, Rediresi’s sole executive director, controlling shareholder and person responsible for instructing its lawyers.

The application concerned whether Mr Gupta was the real party to Rediresi’s defence, whether he funded it, whether the litigation was pursued in the interests of Rediresi or its creditors, and whether his conduct justified personal liability.

1. The court made a non-party costs order requiring Mr Gupta to pay the costs which Rediresi had been ordered to pay to Asprey. The question under section 51 was whether that result was just in all the circumstances.

2. The guidance summarised in Goknur v Aytacli [2021] EWCA Civ 1037 was applied. An order is exceptional and the touchstone is whether the non-party can fairly be regarded as the real party to the litigation. In an insolvent-company case, the court must consider personal benefit, the reasonableness of defending the claim and whether the director was protecting the interests of creditors. Control and funding are relevant indicia, but they are not mandatory elements of a checklist.

3. The litigation had initially been reasonably arguable on contractual construction and it was not shown that Mr Gupta personally funded the legal fees. Those matters did not, however, determine the wider question. The evidence showed that Mr Gupta treated Rediresi as his investment vehicle, failed to maintain a proper distinction between its interests and his own, and caused substantial payments to HSAL which were not in Rediresi’s interests and were unsupported by the explanation advanced.

4. Rediresi’s purported ASB liability did not establish a substantial independent creditor whose interests Mr Gupta had been protecting. The evidence was contradictory and did not safely establish that the alleged loan agreements had been executed or that the stated liability existed.

5. The manner in which the defence was conducted reinforced the conclusion that Mr Gupta was pursuing personal interests. The trial judge had found aspects of his evidence dishonest, and Mr Gupta was responsible for the failure to engage with settlement despite an ambiguous contractual clause and a substantial Part 36 offer. Legal advice could support defending the claim, but it did not excuse dishonest evidence, unsupported allegations or the refusal to consider settlement.

6. The application was summary, but the court could resolve disputed facts on the documents on the balance of probabilities. Cross-examination was exceptional and proportionality remained important. The absence of advance warning did not justify refusing the order because it would not have altered the conduct or evidence relied upon.