Costs - Non-party costs

Learning Outcomes

After studying this article, you will be able to explain the legal framework for non-party costs orders in civil litigation, identify when a non-party may be liable for costs, and outline the procedural requirements for seeking such an order. You will also be able to apply the relevant principles to SQE1-style scenarios and distinguish non-party costs orders from other types of costs liability.

SQE1 Syllabus

For SQE1, you are required to understand the rules and principles relating to non-party costs orders in civil litigation. Focus your revision on:

  • the statutory and procedural basis for non-party costs orders
  • the circumstances in which a non-party may be liable for costs
  • the key factors the court considers when deciding whether to make a non-party costs order
  • the procedural steps for applying for a non-party costs order
  • the relationship between non-party costs orders and other costs mechanisms

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

  1. What is the statutory basis for a non-party costs order in civil litigation?
  2. Name two key factors the court will consider before making a non-party costs order.
  3. True or false? A non-party who simply funds litigation as a passive lender is always liable for costs.
  4. What procedural step must be taken before the court can make a non-party costs order?

Introduction

Non-party costs orders allow the court to require someone who is not a formal party to litigation to pay some or all of the legal costs. This power is used sparingly and only where it is fair and just. Understanding when and how a non-party may be made liable for costs is important for SQE1, especially in cases involving third-party funders, company directors, or others who control or benefit from litigation.

Legal Basis for Non-party Costs Orders

The court’s power to order a non-party to pay costs is found in statute and the Civil Procedure Rules.

Key Term: non-party costs order
An order requiring a person who is not a party to litigation to pay some or all of the legal costs, usually because of their involvement or interest in the case.

Key Term: Section 51 Senior Courts Act 1981
The statutory provision giving the court broad discretion to determine by whom and to what extent costs are to be paid, including by non-parties.

Key Term: CPR 46.2
The Civil Procedure Rule that sets out the procedure for applying for a non-party costs order, including the requirement to join the non-party for costs purposes and give them a chance to be heard.

When Can a Non-party Be Liable for Costs?

The court will only make a non-party costs order in exceptional circumstances. The main situations where such an order may be considered are:

  • Where a non-party funds and controls the litigation and stands to benefit from its outcome
  • Where a company director or shareholder controls litigation brought in the company’s name
  • Where a non-party uses a party as a “puppet” to pursue their own interests

The court will not make a non-party costs order simply because someone has provided financial support or is interested in the case. There must be a real connection between the non-party’s conduct and the litigation.

Key Term: control of litigation
The extent to which a non-party directs, manages, or influences the conduct of a case, including legal strategy, funding, or decision-making.

Key Term: real interest in outcome
A substantial financial or personal stake in the result of the litigation, beyond mere support or sympathy.

Key Principles for Non-party Costs Orders

The court’s discretion is guided by established principles:

  • Control and Funding: The more a non-party funds and directs the litigation, the more likely they may be liable for costs.
  • Benefit: If the non-party stands to gain directly from a successful outcome, this supports an order.
  • Justice and Fairness: The overriding question is whether it is just to make the order in all the circumstances.
  • Access to Justice: The court is careful not to discourage legitimate third-party funding that enables access to the courts.

A non-party who is only a passive funder, such as a relative helping with legal fees, is unlikely to be liable unless they also control the case or benefit directly.

Worked Example 1.1

Scenario:
A company brings a claim against a competitor. The company is insolvent, but its sole director funds the litigation, instructs the solicitors, and expects to benefit if the claim succeeds. The company loses at trial and cannot pay the costs order.

Answer:
The court may make a non-party costs order against the director, as they controlled the litigation and stood to benefit directly.

Worked Example 1.2

Scenario:
A friend lends money to help a claimant pay legal fees but has no involvement in the case and no expectation of benefit.

Answer:
The court is unlikely to make a non-party costs order against the friend, as they did not control the litigation or benefit from it.

Procedure for Seeking a Non-party Costs Order

The application for a non-party costs order is usually made after judgment. The steps are:

  1. The non-party must be joined to the proceedings for costs purposes only.
  2. The non-party must be given notice of the application and a reasonable opportunity to attend a hearing and make representations.
  3. The applicant must provide evidence of the non-party’s involvement, such as funding, control, or benefit.
  4. The court will consider all the circumstances and decide whether it is just to make the order.

Key Term: joinder for costs
The process of formally adding a non-party to the proceedings for the limited purpose of determining liability for costs.

Relationship to Other Costs Orders

Non-party costs orders are distinct from:

  • Wasted costs orders: Made against legal representatives for improper conduct.
  • Security for costs: An order requiring a claimant to provide security for the defendant’s costs, often where a non-party is funding the claim.
  • Third-party funding agreements: The court will look at the substance of the arrangement, not just its label.

Exam Warning

Non-party costs orders are exceptional. The court will not make such an order simply because a non-party is interested in the case or provides some funding. There must be clear evidence of control, benefit, or improper conduct.

Policy Considerations

The court balances the need to ensure fairness and prevent abuse with the importance of not discouraging legitimate support for litigation. Orders are made only where the non-party’s involvement justifies departure from the general rule that only parties are liable for costs.

Key Point Checklist

This article has covered the following key knowledge points:

  • The court can order a non-party to pay costs under Section 51 Senior Courts Act 1981 and CPR 46.2.
  • A non-party costs order may be made where a non-party funds, controls, and benefits from litigation.
  • The court considers control, funding, benefit, and overall justice before making an order.
  • The non-party must be joined for costs purposes and given a chance to be heard.
  • Non-party costs orders are exceptional and not made against passive funders.

Key Terms and Concepts

  • non-party costs order
  • Section 51 Senior Courts Act 1981
  • CPR 46.2
  • control of litigation
  • real interest in outcome
  • joinder for costs
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