Asprey Capital Ltd v Rediresi Ltd
| Jurisdiction | England & Wales |
| Judge | Patricia Robertson |
| Judgment Date | 12 January 2023 |
| Neutral Citation | [2023] EWHC 28 (Comm) |
| Docket Number | Case No: CL-2020-000113 |
| Court | Queen's Bench Division (Commercial Court) |
and
[2023] EWHC 28 (Comm)
Patricia Robertson KC
SITTING AS A DEPUTY JUDGE OF THE HIGH COURT
Case No: CL-2020-000113
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
COMMERCIAL COURT
Royal Courts of Justice,
Rolls Building, Fetter Lane,
London, EC4A 1NL
Daniel Hubbard (instructed by Scott + Scott UK LLP) for the Claimants
Roger Mallalieu KC (instructed by Trowers & Hamlins LLP) for the Respondent
Hearing dates: 1 December 2022
Approved Judgment
This judgment was handed down remotely at 10.30am on 12 th January 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives (see eg https://www.bailii.org/ew/cases/EWCA/Civ/2022/1169.html).
Patricia Robertson KC
Patricia Robertson KC:
Introduction and preliminary matters
The issue before me is whether to make a Non-Party Costs Order (“NPCO”) against the Respondent (“Mr Gupta”).
In October 2021, following a 9-day trial, Sir Michael Burton GBE found for the Claimant (“Asprey”) on both of the issues before him: a point of contractual construction and the Defendant's fallback argument, based on estoppel. In a further judgment dealing with consequential matters, he ordered the Defendant (“RR”) to pay Asprey £2,503,776 (the full extent of its claim) as a debt, its costs of the proceedings, £525k on account of those costs, and interest. Costs were awarded on an indemnity basis from the latest date for acceptance of a Part 36 offer and interest was awarded at a rate of 8% over base rate.
This judgment should be read in conjunction with Sir Michael Burton GBE's trial judgment ( [2021] EWHC 2662 (Comm)) (“the Trial Judgment”) and the transcript of his judgment on the consequential matters on 25 October 2021 (“the Consequentials Judgment”, the material part of which I have set out below) (collectively “the Judgments”). I will not repeat his account of the nature of the dispute or the basis on which that was resolved in favour of Asprey. I shall come in more detail, below, to some criticisms the Judge made in the Judgments of aspects of RR's defence to the claim and of Mr Gupta's evidence.
By the time that Sir Michael Burton was dealing with his consequential order, it was evident from RR's accounts, which were in evidence before him, that during the period of the litigation RR “has at all times been in a negative asset position”. RR has so far paid Asprey nothing in respect of its judgment debt or costs and interest. RR was wound up by Order of the Court on 12 January 2022 and Finbarr O'Connell was appointed liquidator on 9 March 2022 (the “Liquidator”).
By application notice dated 29 June 2022, Asprey applied for an NPCO against Mr Gupta. The matter comes before me, rather than the trial judge, because Sir Michael Burton GBE has retired and is now past the age at which he would be able to sit.
Relevant legal principles
The power to make an NPCO arises under s.51 of the Senior Courts Act 1981, which provides that the costs of all proceedings in the High Court shall be in the discretion of the Court and that it “shall have full power to determine by whom and to what extent the costs are to be paid”.
Fundamentally, the question is whether in all the circumstances it would be just to make an NPCO against Mr Gupta. The decided cases have provided helpful guidance as to factors to consider in making that assessment and, also, as to the approach to be taken to this summary procedure.
In particular, a number of cases have dealt with situations where, as here, the issue is whether to make an NPCO against the director of an insolvent company in relation to litigation pursued or defended by the company. In such cases, the principle of limited liability would be undermined if a director were to be made personally liable for costs in a situation where, albeit he is controlling and/or funding the litigation, he is nevertheless properly to be regarded as discharging his duty to act in the interests of the company (or, where the company is insolvent, the interests of its creditors) by causing the company to pursue or defend the litigation in question.
The relevant guidance has been usefully summarised by the Court of Appeal, after a comprehensive survey of the relevant cases, in Goknur v Aytacli [2021] EWCA Civ 1037 (Lord Justice Coulson, with whom the rest of the Court agreed, at [40]). I have substituted into the citation below the full references for the cases there referred to:
“a) An order against a non-party is exceptional and it will only be made if it is just to do so in all the circumstances of the case ( ( (2000) WL 33116500 Gardiner v FX Music Limited 27 March 2000, unreported), Dymocks Franchise Systems (NSW) Pty Limited v Todd and others [2004] UKPC 39, [2004] WLR 2807, Threlfall v ECD Insight Limited and Anr. [2015] EWCA Civ 144; [2014] 2 Costs LO 129).
b) The touchstone is whether, despite not being a party to the litigation, the director can fairly be described as “the real party to the litigation” ( Dymocks, Goodwood Recoveries v Breen [2005] EWCA Civ 414, Threlfall).
c) In the case of an insolvent company involved in litigation which has resulted in a costs liability that the company cannot pay, a director of that company may be made the subject of such an order. Although such instances will necessarily be rare ( Taylor v Pace Developments Ltd [1991] BCLC 406), s.51 orders may be made to avoid the injustice of an individual director hiding behind a corporate identity, so as to engage in risk-free litigation for his own purposes ( North West Holdings Plc (In Liquidation (Costs) [2001] EWCA CIV 67). Such an order does not impinge on the principle of limited liability ( Dymocks, Goodwood, Threlfall).
d) In order to assess whether the director was the real party to the litigation, the court may look to see if the director controlled or funded the company's pursuit or defence of the litigation. But what will probably matter most in such a situation is whether it can be said that the individual director was seeking to benefit personally from the litigation. If the proceedings were pursued for the benefit of the company, then usually the company is the real party ( Metalloy Supplies Ltd v MA (UK) Ltd [1997] 1 W.L.R. 1613). But if the company's stance was dictated by the real or perceived benefit to the individual director (whether financial, reputational or otherwise), then it might be said that the director, not the company, was the “real party”, and could justly be made the subject of a s.51 order ( North West Holdings, Dymocks, Goodwood).
e) In this way, matters such as the control and/or funding of the litigation, and particularly the alleged personal benefit to the director of so doing, are helpful indicia as to whether or not a s.51 order would be just. But they remain merely elements of the guidance given by the authorities, not a checklist that needs to be completed in every case ( Systemcare (UK) Limited v Services Design Technology [2011] EWCA Civ 546).
f) If the litigation was pursued or maintained for the benefit of the company, then common sense dictates that a party seeking a non-party costs order against the director will need to show some other reason why it is just to make such an order. That will commonly be some form of impropriety or bad faith on the part of the director in connection with the litigation ( Symphony Group plc v Hodgson [1994] QB 179, Gardiner, Goodwood, Threlfall).
g) Such impropriety or bad faith will need to be of a serious nature ( Gardiner, Threlfall) and, I would suggest, would ordinarily have to be causatively linked to the applicant unnecessarily incurring costs in the litigation.”
Useful as this guidance is, this is, in the end, a highly fact-specific jurisdiction. As Lord Justice Moses has pithily observed, “there is now an abundance of authority on the absence of any need for abundant authority on the principles which should guide a judge as to whether to make a third party order for costs.” ( Alan Phillips Associates Ltd v Terence Edward Dowling t/a The Joseph Dowling Partnership & Ors [2007] EWCA Civ 64, at [31].)
“Exceptional” simply means “outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense” Dymocks at [25]. In the particular context where the order is sought to be made against the director or shareholder of an insolvent company, there must be some factor that makes it just to make the order, notwithstanding the principle of limited liability. The decided cases offer examples but are not exhaustive of the factors that might be relevant, or the ways in which these might combine in a given case to tip the balance. As the Court of Appeal stated in Deutsche Bank v Sebastian Holdings [2016] EWCA Civ 23 at [62]: “…the only immutable principle is that the discretion must be exercised justly.”
Funding, by itself, may be consistent with the director pursuing the proceedings for the benefit of the company. Equally, however, the absence of funding will not preclude the making of an order if the proceedings were being run for the personal benefit of the director, rather than in the interests of the company. Impropriety in the conduct of the proceedings, where serious, may justify an order even where the element of personal benefit is lacking. However, it does not follow that some lesser degree of impropriety is irrelevant in a case where there are also other factors in favour of making an order. Ultimately, it is not a matter of operating a “checklist” but an exercise of a broad discretion. Something that would not be sufficient by itself may be the feather that tips the scale when it is viewed cumulatively with other features of the case.
Whilst this is a “summary...
To continue reading
Request your trial
-
Hilden Developments Ltd v Phillips Auctioneers Ltd
...points which had been identified by Patricia Robertson KC, sitting as a Deputy High Court Judge, in Asprey Capital Limited v Rediresi [2023] EWHC 28 (Comm) and which he adopted. Drawing on those ten points, I summarise the additional points of relevance to the present application as follow......