Non-party costs are exceptional and are only awarded when it is just to do so and when 'something more' about the non-party's conduct warrants costs.  The involvement of a parent company in litigation and avoiding a realistic settlement is an example of the 'something more' requirement being met.  In Minister of Education v H Construction North Island Ltd (in req and liq) [2019] NZHC 1459, the High Court found that McConnell Ltd's (McConnell) actions in this litigation warranted awarding non-party costs and disbursements of over a million dollars.

The background to this claim is the negligent construction of Botany Downs Secondary College by Hawkins Construction North Island Limited (Hawkins) (as it was known at the time).  The High Court found Hawkins liable for almost $13.5m, the amount required to repair the school. 

Hawkins is one of several subsidiary companies that was owned by McConnell as the parent company.  When Hawkins was unable to pay its own legal fees, another related company called Hawkins Group Limited (HGL) paid its legal fees.  HGL fell behind in payments and in January 2018, McConnell guaranteed payment of Hawkins' legal costs to its lawyers.

The High Court was satisfied that the 'something more' element was established.  McConnell authorised Hawkins' approach, at least implicitly, given commonality of directorships.  There was direct oversight by key figures in McConnell.  The Court considered that McConnell authorised Hawkins vigorously to defend a claim that should have been settled, was complicit in using Hawkins' likely insolvency as a weapon, and guaranteed representation when Hawkins would otherwise have been unrepresented.  McConnell was the 'real party' to the proceeding.

Non-party costs were not awarded against McConnell's directors personally as the directors did not inject any of their own money and there was no evidence that the directors would benefit personally from refusing settlement in favour of a trial. 

The decision can be found here