Costs orders against non-parties and the duty to warn

The claimant applied for a non-party costs order against an individual who was a major shareholder  of the unsuccessful defendant companies. One of the issues raised by this individual was the  failure of the claimant  to warn him that it might be seeking a costs order against him. Akenhead J  rejected an argument that a timely warning is a pre-requisite to a non-party costs order or a factor to be applied to reduce any costs order made. Although the failure to warn is “undoubtedly  a material factor”, there is no fixed and binding requirement to disallow or reduce a costs order  because of it. Although a costs order was reduced in Myatt v National Coal Board (see Weekly Update  12/07) in part because of a failure to warn, Akenhead J distinguished that case on the basis that there had been no hint of impropriety or  the pursuit of a speculative case. In contrast, here certain counterclaims had been speculative and  advanced without any real analysis as to whether there was in reality any prospect of success. Furthermore, given the judge’s views about the individual’s character, he found it  positively unlikely that, had he been warned in advance, he would have adopted a different course  of action. Accordingly, he was ordered to pay the claimant’s costs of defending the counterclaim.

COMMENT: Although the judge did not refer to it in his decision, the case earlier this year of  Deutsche Bank v Sebastian (see Weekly Update 24/14) also reached the conclusion that the failure to warn was a factor of “no real weight at all”, where the court was  satisfied that it would not have made any difference to the non-party’s actions.