31 January 2017
Simon Carroll successfully defends non-party cost order application
In a technically complex case, the applicant company, a gym operator, sought to recover its costs of litigation brought against it by a wholly-owned trading company belonging to the respondent charity.
The underlying litigation arose after the defendant gym operator, contracted under a management agreement to provide a gymnasium and related services, ceased making payments and refused to provide its company accounts to enable consideration of fee increases, both of which were contractual requirements, whilst still in occupation and trading.
The gym operator, and defendant in the underlying litigation, applied under the Senior Courts Act 1981, section 51 to recover its costs from the respondent charity after the claimant trading company was forced into administration part-way through the litigation and judgment entered in default on its counterclaim.
The gym operator applicant argued that the discontinued litigation would not have been possible without financial support from the respondent; that the claim had been financed principally for the respondent's benefit to facilitate repayment of intercompany debts; and that costs of the counterclaim were also be recoverable as they were argued as a substantive defence to the claim.
At the one day hearing before a circuit judge in Oxford, consideration was given to whether the circumstances were sufficiently "exceptional" to fall within the categories set out at paragraphs 25(1) to (3) of the leading authority Dymocks Franchise Systems v Todd  1 WLR 2807,  UKPC39, to justify such an order, and in particular: whether the respondent was "the real party" as per paragraph 25(3).
After hearing argument and deferring judgment to give considered reasons, the Judge refused to exercise his discretion to make a third party costs order, upholding the respondent's argument that it was not the "real party" nor was it "promoting the proceedings by the claimant substantially for its own benefit". The Judge re-iterated that the ultimate question was "whether, in all the circumstances, it is just to make [the] order" and, having made compelling factual findings, concluded that it was not.
The application was dismissed with costs.