Borough council secures non-party costs order after winning dispute over termination of bus station construction contract
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Blackburn with Darwen Borough Council has won a case in which it sought to recover costs from people who supported litigation brought against it by the administrator of an insolvent company.
HHJ Stephen Davies sitting as a High Court Judge, made a non-party costs order against family members associated with the former Thomas Barnes & Sons construction firm, under s.51 of the Senior Courts Act 1981.
The council brought the case against Thomas and Pamela Barnes and against Craig and Scott Barnes - the latter two only in their capacities as executors of the estate of the late Brian Barnes, brother of Thomas. The brothers had been the two directors.
The Barnes company entered administration in 2016 mainly because of disputes over a contract with the council to build a bus station in Blackburn let in 2014.
It brought proceedings against the council in 2020, seeking just over £3m in damages for what it alleged was the wrongful termination in 2015.
After an 11 day trial HHJ Davies dismissed Barnes’ claim [2022] EWHC 2598 (TCC).
The council applied for costs on the basis that the respondents funded the case, had a direct financial interest in it, controlled the case and were, in substance, the real parties to the litigation.
In July 2016 Dean Watson had been appointed as an administrator of the failed company and commenced legal action against the council.
The judge said: “I am not impressed with the lack of detail in the evidence provided by Mr Watson or Thomas. Whilst it is true that the onus of proof is upon [the council] as applicant, and whilst it is also true that the respondents are not under any obligation to waive privilege, nonetheless in my judgment much of what is said by them or on their behalf is bare assertion, with very little detail and no supporting documentation.
“As I observed in the course of submissions, there is no information as to whether or not, for example, Thomas was involved in strategy meetings with Mr Watson and the legal and expert team. There is an acceptance that Thomas was present at the pre-action meeting, although he gives an explanation for this…which in my view is completely implausible in the absence of hard contemporaneous documentary or other reliable evidence.”
The judge said Thomas and his fellow family members had a substantial interest in the litigation, were funding it and were prepared to provide substantial security for costs to ensure that the litigation continued.
“I find it impossible to accept that [Thomas’s] role was solely that of a former director providing assistance, simply because he was obliged to in that capacity, to the company administrators.”
HHJ Davies went on: “Put bluntly, since the litigation could not have continued but for the willingness of Thomas to provide significant input in relation to the substance of the claim, both as to liability and quantum, and also but for the respondents' willingness to finance the legal and expert fees and disbursements, and to provide security for [the council’s] costs, it would have been extremely surprising if there had not been this dual control [by Thomas and the administrator].”
The judge noted the council’s costs had been around £995,000 of which only £583,000 was repaid by way of security, leaving a shortfall of at least £412,000.
He said all the family members were “in my judgment properly to be treated as the real parties to the proceedings in very important and critical respects.
“On the face of it, therefore, it is just that they, rather than [Blackburn] as the successful defending party, should have to pay the costs of the successful defendant.”
The judge added: “In all of the circumstances in my judgment it is just that there should be a NPCO made against the Respondents in appropriate terms in relation to the outstanding balance of any costs found due to BBC on detailed assessment, if not agreed.”
Mark Smulian
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