Non-party costs orders—company directors and shareholders

The following Dispute Resolution practice note provides comprehensive and up to date legal information covering:

  • Non-party costs orders—company directors and shareholders
  • Costs recovery from a director
  • Requirement for a warning
  • Litigation for the benefit of the director
  • Bad faith/impropriety by the director
  • Litigation funded by the director
  • Indirect funding
  • Piercing the corporate veil
  • Making an application
  • Illustrative cases

Non-party costs orders—company directors and shareholders

This Practice Note considers non-party costs orders (NPCO) against company directors—the principles also apply to controlling shareholders. The general principles for costs recovery from a director are considered and specific requirements are then considered in greater depth, ie whether the director sought to benefit from the litigation or was guilty of impropriety or acting in bad faith. Consideration is given to the issue of piercing the corporate veil and some illustrative decisions are also provided.

This Practice Note assumes an understanding of the general principles of NPCOs. For guidance, see Practice Note: Non-party costs orders—guidelines.

Costs recovery from a director

When the unsuccessful party in the litigation is a company, the successful party may seek a costs order against the company. It is also possible, depending on the circumstances of the case, to recover costs from a director of that company if they are not already a party to the proceedings. This is done by means of a NPCO which can be sought whether or not the director participated in the proceedings, eg as a witness or by dictating litigation strategy. Although the court can make such orders, they will not automatically be made in place of a costs order against the company. NPCOs are exceptional orders and will only made if it is just to do so in all the circumstances

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