The first instance decision in this case was reported in Weekly Update 24/14. The judge made a non-party costs order against Mr Vik, the sole shareholder and sole director of the defendant. Mr Vik appealed and the Court of Appeal has now dismissed that appeal.

Mr Vik had raised three objections:

  1. It was argued that the application was separate from the underlying action against the defendant and so should be treated in the same way as any independent proceedings. The Court of Appeal held that, in principle, a summary procedure should be adopted by the court considering a non-party costs application. Furthermore, "the critical factor in each case is the nature and degree of [the non-party's] connection with the proceedings, since that will ultimately decide whether it is appropriate to adopt a summary procedure".
  2. Mr Vik also argued that the application should not have been granted because he had not been warned that the claimant might seek an order against him. It was held that, in this case, Mr Vik could and did contest the claimant's factual and legal case. Therefore, the only advantage which a warning would have given him would have been an opportunity to reconsider his own position in relation to the proceedings. However, no evidence had been adduced from Mr Vik to support a suggestion that his approach would have been different, and it was held that it would not be appropriate to admit that evidence now. The Court of Appeal therefore concluded that the judge had been right to find that the failure to warn was "of very little weight at all".
  3. Mr Vik also argued that he should not, in any event, be required to pay the costs of accountants to reconstruct records which the claimant ought to have maintained. The Court of Appeal found that there was no reason to exclude these fees from the costs ahead of a detailed assessment of the costs: "the basis of the judge's order for costs against Mr. Vik was not that he had caused the Bank to incur the experts' fees but that he was the real party to the litigation".

The Court of Appeal also referred to the earlier Court of Appeal decision of Oriakhel v Vickers (see Weekly Update 28/08), in which insurers were refused a non-party costs order against a third party who had acted as a witness, in part because an order would have infringed the principle of witness immunity. That case was distinguished from this one and it was said that the earlier Court of Appeal's views on this issue were only obiter and should be "treated with caution". The witness in Oriakhel had not funded and controlled the litigation for his own benefit. The possibility of a costs order against a witness should not be excluded, although the power should be exercised with considerable care: "To make an order for costs against a witness simply because he has given false evidence might well infringe the principles of witness immunity, but to make such an order on the grounds that he had conspired with others to pursue a claim that was entirely fabricated would not, even if in order to support it he had given false evidence".