Peter Mark Arnstein v Coplexia Collaborative LLP & Anor

A non-party costs order under section 51 is discretionary and must be determined justly by an objective, fact-sensitive assessment. A controlling director need not have funded the litigation personally. Relevant indicators include control, personal benefit and the director’s conduct, but they are not a mandatory checklist. Where an insolvent company’s litigation is pursued for the director’s personal purposes, rather than the company’s benefit, and serious bad faith is causatively linked to unnecessary costs, the director may fairly be treated as the real party and ordered to pay those costs.

The petitioner presented a winding-up petition against Coplexia Collaborative LLP based on unpaid costs orders. The petition raised the coronavirus test under Schedule 10 to the Corporate Insolvency and Governance Act 2020. The court concluded that the LLP had not shown that coronavirus had a financial effect on it and that, in any event, the relevant insolvency ground would have applied without that effect.

The LLP was subsequently wound up. The petitioner then sought an order under section 51 of the Senior Courts Act 1981 requiring Amir Khodaparast, who had controlled the LLP’s response to the coronavirus issue, to pay the petitioner’s related costs. The central issue was whether it was just to make that order.

1. Adjournment. The application for a further adjournment was refused. The evidence did not establish that Mr Khodaparast’s health, alleged vulnerability, other commitments or pending appeal prevented him from participating fairly. A further adjournment would have been disproportionate and would have consumed additional court resources.
2. Applicable principles. Under sections 51(1) and (3) of the Senior Courts Act 1981, the court has a discretionary power to order a non-party to pay costs. The question is whether, in all the circumstances, such an order is just. The touchstone is whether the non-party was the real party to the litigation. Control and funding are relevant indicators, but both need not be present and they are not a prescriptive checklist. Personal benefit, impropriety and bad faith may also be significant.
3. Application. Mr Khodaparast controlled the LLP’s response to the petition and was its controlling mind in relation to the coronavirus issue. There was no evidence that he personally funded the defence, but that did not preclude an order. The LLP’s position on the coronavirus issue was hopeless and was not advanced for its benefit. Mr Khodaparast used the LLP as an insolvent shell to pursue his own personal agenda and to cause the petitioner to incur costs without personal financial risk.
4. Mr Khodaparast filed materially misleading evidence in bad faith. The misleading account of the effect of coronavirus was causatively linked to the petitioner’s unnecessary costs.
5. It was just to order Mr Khodaparast to pay the petitioner’s costs of and occasioned by the coronavirus issue and the non-party costs application. The costs were to be subject to detailed assessment if not agreed.