The Court of Appeal allowed an appeal by Halvanto Kitchens Ltd from an order by Robin Stewart QC, sitting as a High Court judge, that it should pay the plaintiff's costs of the action.
The plaintiff claimed that the defendant had left its employment to join Halvanto, a competitor, in breach of restrictive covenants in his contract of employment.
The plaintiff did not join Halvanto as a defendant or initiate proceedings against it or tell Halvanto that it might seek to make it liable for costs. Halvanto's managing director gave evidence for the defendant.
The plaintiff's action for injunctive relief was successful. At an adjourned hearing, the judge ordered that Halvanto should pay the plaintiff's costs of the action.
James Gibbons (Booth & Co, Leeds) for Halvanto; Andrew Hochhauser (Eversheds Hepworth & Chadwick, Leeds) for the plaintiff.
LORD JUSTICE BALCOMBE said that since Aiden Shipping Co Ltd v Interbulk Ltd (1986) AC 965, the courts had entertained a claim for costs against a non-party where a person had some management of the action, where a person had maintained or financed the action, where the person had caused the action, where the person was a party to a closely related action which had been heard at the same time but not consolidated, and in group litigation.
The following were material considerations to be taken into account, although others might also be relevant:
1. An order for the payment of costs by a non party would always be exceptional. The judge should treat any application for such an order with considerable caution.
2. It would be even more exceptional for such an order to be made, where the applicant had a cause of action against the non- party and could have joined him. Joinder as a party gave the person concerned all the protection conferred by the rules, eg the framing of issues, discovery and the knowledge of what the issues were before giving evidence.
3. Even if the applicant could provide a good reason for not joining the non-party against whom he had a valid cause of action, he should warn the non-party that he might apply for costs against him.
4. An application should normally be determined by the trial judge.
5. The fact that the trial judge might have expressed views on the conduct of the non- party neither constituted bias or the appearance of bias.
6. The procedure for the determination of costs was a summary procedure, not necessarily subject to all the rules that would apply in an action. Thus, subject to any statutory exceptions, judicial findings were inadmissible as evidence of the facts on which they were based in proceedings between one of the parties to the original proceedings and a stranger.
Yet in the summary procedure for a solicitor to pay the costs of an action to which he was not a party, the judge's findings of fact might be admissible. That departure from basic principles could only be justified if the connection of the non-party with the original proceedings was so close that he would not suffer any injustice by allowing the exception to the general rule.
7. The normal rule was that witnesses in either civil or criminal proceedings enjoyed immunity from any form of civil action in respect of evidence given during the proceedings. Insofar as the evidence of a witness in proceedings might lead to an application for costs against him or his company, it introduced an exception to a valuable general principle.
8. The fact that an employee or even a director or managing director of a company gave evidence in an action did not normally mean that the company was taking part in that action.
9. The judge should be alert to the possibility that an application for costs against a non-party was motivated by resentment of an inability to obtain an effective order for costs against a legally-aided litigant.
The courts were well aware of the financial difficulties faced by parties who were facing legally-aided litigants at first instance, where the opportunity of a claim against the Legal Aid Board under section 18 of the Legal Aid Act 1988 was very limited.
Nevertheless the Civil Legal Aid (General) Regulations 1989 laid down conditions designed to ensure that there was no abuse of legal aid by a legally assisted person and those were designed to protect the other party to the litigation as well as the legal aid fund.
The court would be very reluctant to infer that solicitors to a legally-aided party had failed to discharge their duties under the regulations and that principle extended to a reluctance to infer that any maintenance by a non-party had occurred.
Applying those principles to the present case, Halvanto had made out its claim that there was nothing to justify the exercise of discretion in making an order for costs against it.
LORD JUSTICE STAUGHTON concurred. LORD JUSTICE WAITE agreed.
Ying Hui Tan, BarristerReuse content