05 October 2012 #Dispute Resolution
Two recent cases have shown the challenges that a successful Defendant can face when unable to recover costs from an impecunious Claimant. The general principle employed by the court is that a non-party to the proceedings, but who has funded the litigation, may incur a personal costs liability if they have a financial interest in the outcome of those proceedings.
The Claimant in Chilab –v- Kings College London was a student seeking damages arising from his university’s failure to award him a degree. His claim, which had been funded by his wife, failed and he sought to appeal. The university applied for an order for security for costs against the Claimant’s wife who, apart from contributing to legal costs, had no involvement in the litigation. The university argued that the natural inference was that the claimant had promised his wife a share in the proceeds of a successful claim.
The Court of Appeal disagreed. It took the strong view that the natural inference in these circumstances was that the financial support was given out of natural love and affection. It would be expected that one spouse would support another in a matter of personal importance even if there was no money at stake. The university’s application for security failed.
A different line of attack was taken by the Defendant in Tinseltime –v- Roberts. Again the Claimant was impecunious. Its solicitor agreed to take on the case through a Conditional Fee Agreement (CFA) agreed to personally fund the disbursements in the litigation. Tinseltime did not take out after the event (ATE) insurance cover and, when its claim failed, the successful Defendant had no direct route to recover its legal costs.
Faced with this difficulty, the defendant applied for a non-party costs order and a wasted costs order against Tinseltime’s solicitor. The defendant argued that the solicitor had a financial interest in the outcome of the proceedings because, if successful, he would be paid under the CFA. The Court was quick to reject this argument. There was nothing in this case that took it outside the sphere of a normal case brought with the benefit of a CFA. It did not matter that the solicitor knew that his client was impecunious or that there was no ATE insurance in place against an adverse costs order.
Furthermore, although Tinseltime’s claim ultimately failed the Court did not agree that it lacked merit in its entirety, or that the solicitor had acted recklessly in bringing the claim, so there were no grounds for a wasted Costs Order.