Ujima Housing Association Limited v Building Principles Limited and Walter Parker (Unreported, 2006) saw the Court make a costs order against the director of a company who improperly caused the company to issue a statutory demand. This is despite the fact that the director was not a party to the litigation.
Mr Parker was the director of the defendant, Building Principles Limited (“BPL”). He issued a statutory demand against Ujima for a debt which he knew was the subject of a significant dispute. Mr Parker then failed to cause BPL to withdraw the demand or undertake not to present a winding up petition. Ujima applied for an injunction against BPL restraining the presentation of a winding up petition. BPL was insolvent and so was unlikely to be able to satisfy any costs order awarded against it. The Court therefore held that Ujima should be awarded its costs against Mr Parker personally.
The Courts are taking a more robust view when it comes to making costs orders against a non-party director who has managed litigation on behalf of a company and who has acted badly during the course of the proceedings. It is well established that indemnity costs can be obtained against a company or individual who issues a statutory demand against a company based on a debt which is the subject of a genuine dispute. The decision in Ujima may provide a further deterrent to directors who cause statutory demands to be served when they know the debt is disputed.