When can a litigation friend be personally liable for costs?

Minors and adults who lack capacity to conduct proceedings – or, to use the Civil Procedure Rules (“CPR”) terminology, children and protected parties[1] – can become parties to civil litigation in a very wide range of circumstances. When this happens, the child or protected party will almost invariably need a litigation friend to conduct the proceedings on his or her behalf.[2] In practice, the role of litigation friend is often played by a family member or friend who can fairly and competently conduct the proceedings[3] and has no interest adverse to that of the child or protected party.[4]

It is not surprising if, before agreeing to act as litigation friend, such a family member or friend asks: what about costs? And more specifically: is there a risk that I might be personally liable to pay any costs?

On 21st August 2020 the Court of Appeal decided Glover v Baker,[5] which provides some useful authoritative guidance on this important question.

Facts

The underlying facts were fairly complicated, but for present purposes can be sufficiently summarised as follows.

Iain Barker had five children: Tom and Freya, twins whom he had with Susan Glover (“Ms Glover”, the appellant); Euan and Rowan, whom he had with Deborah Barker; and Lauren, whom he had with Julie Chadwick.

In the late 1990s, Mr Barker wanted to sell his business. To do so in a tax efficient way, he was advised by Baxendale Walker Solicitors to create an employee benefit trust (“EBT”), which he duly did. The trustees of the EBT then declared a sub-trust (“the Sub-Trust”) for the benefit of Mr Barker’s immediate family.

In 2010 HMRC challenged the tax efficiency of the scheme and in 2013 Mr Barker settled tax tribunal proceedings by paying HMRC around £11.3m.

Mr Barker then issued proceedings (which the Court of Appeal referred to as “the Main Proceedings”) seeking to recover the assets which had been transferred into the EBT and Sub-Trust. In 2014 Asplin J (as she then was) was asked to approve a compromise of the Main Proceedings which involved (in effect) the retention of some money in the EBT and Sub-Trust for the benefit of their respective beneficiaries, and the return of other assets to Mr Barker.

Only one of Mr Barker’s children, Euan, was joined as a defendant to the Main Proceedings. He was still a minor, and so a solicitor was appointed to act as his litigation friend. As well as being asked to approve the compromise, Asplin J was asked to appoint Euan as representative of all five of Mr Barker’s children. She did both on 25 July 2014.

However, it later transpired that Asplin J had not been told that Tom and Freya, and their mother Ms Glover, had not been informed of the Main Proceedings or the proposed compromise, and therefore knew nothing about either. Morgan J in his costs judgment[6] was highly critical of this, describing it as “completely unacceptable for the court not to have been given a fair account of the position”.[7]

Following various other legal battles, in June 2017 Tom and Freya, with Ms Glover as their litigation friend, issued an application (which the Court of Appeal described as “the Twins’ Application”) seeking an order declaring that the 25 July 2014 compromise did not bind them.

After a multi-day hearing, Morgan J dismissed the Twins’ Application,[8] holding (in summary) that the settlement which Asplin J had approved on 25 July 2014 was in Tom and Freya’s best interests and one which he would have approved, and that by declaring that the 25 July 2014 order was not binding on them, he would not be giving them anything of value.

First instance costs decision

The respondents to the Twins’ Application then asked Morgan J to add Ms Glover as a party to the proceedings for the purposes of costs and to order her to pay the costs of the Twins’ Application. Two of the three respondents also asked Morgan J to order Tom and Freya to pay the costs of the application.

In his reserved costs judgment,[9] Morgan J added Ms Glover as a party for the purposes of costs and ordered her to pay the respondents’ costs of the Twins’ Application; however, he refused to make a costs order against Tom and Freya.

In reaching this decision, Morgan J considered costs decisions in cases involving litigation friends dating back to 1727, from which he derived the following guidance:[10]

When considering whether to make an order for costs against a litigation friend, who has acted for an unsuccessful child party, the court should apply the general approach that, as regards costs, the litigation friend is expected to be liable for such costs as the relevant party (if they had been an adult) would normally be required to pay. The governing rule is that the court has regard to all the circumstances of the case and it is open to the litigation friend to point to any circumstance as to their involvement in the litigation which might justify making a different order for costs from that which would normally be made against an adult party.

Morgan J rejected the submission that a special rule existed “to the effect that the court will not make an order for costs against a litigation friend for an unsuccessful child ‘defendant’ in the absence of gross misconduct”.[11] However, he considered that if – contrary to his view – such a rule did exist, then:

  • it would be necessary to establish how one is to distinguish between a ‘claimant’ and a ‘defendant’ for the purposes of this special rule”’.[12] He held that one would do so by “ask[ing] whether, in a particular case, the party acting by a litigation friend had started the process which led to the costs being incurred”.[13] In answering that question “the court should have regard to the substance of the matter and not merely the form of the proceedings”;[14]
  • on the facts, the rule would not apply because Tom and Freya were in substance ‘claimants’ for the purposes of the rule.

Ms Glover appealed the costs order made against her to the Court of Appeal.

Court of Appeal decision

The Court of Appeal allowed Ms Glover’s appeal and set aside the costs order Morgan J’s had made against her.

The Court disagreed with Morgan J’s analysis of previous case law and the general guidance he had derived from it. It held instead that there was an important distinction to be drawn between the liability for costs of claimants’ litigation friends and that of defendants’ litigation friends.

As regards claimants’ litigation friends, the Court considered[15] that the issue whether to join a claimant’s litigation friend as a party for the purposes of costs and whether to make a costs order against him or her was unlikely to arise often in practice. This is because a claimant’s litigation friend is required by the CPR – as a precondition to becoming a litigation friend – to undertake to pay any costs which the child or protected party may be ordered to pay in relation to the proceedings.[16] Therefore in practice, in cases where it was just to do so, a court would simply make a costs order against the claimant child or protected party, and the litigation friend would be personally liable for those costs as a result of the undertaking (subject to any right to be repaid from the assets of the child or protected party).[17] However, in cases where the issue did arise, the Court concluded it would “usually be appropriate to make [a costs order against a claimant’s litigation friend] if an order would have been made against the claimant himself had he not been a child or protected party”.[18] The Court indicated that it usually would be appropriate impose a costs liability on a claimant’s litigation friend, but emphasised “the important caveat” that, when deciding whether to do so, the Court “is exercising a discretion and entitled to have regard to the particular circumstances of the case”.[19]

The position of defendants’ litigation friends was, however, different. The Court held that there is “no presumption that a defendant’s litigation friend should bear costs which the defendant would have been ordered to pay if not a child or protected party[20] and the fact that “the litigation friend controlled the defence of a claim which succeeded will not of itself generally make it just to make an adverse costs order against the litigation friend”.[21] The court might decide on the facts that it was just to make such an order, and factors which “might…be thought to justify such an order include bad faith, improper or unreasonable behaviour and prospect of personal benefit”.[22] One of the policy reasons the Court expressly relied on in reaching this conclusion was that “if a defendant’s litigation friend were usually vulnerable to an adverse costs order, that would deter suitable individuals from taking on the role”.[23]

The Court of Appeal also provided the following guidance where – as in the case before it – it was not entirely clear whether a party should be characterised as a claimant or as a defendant in order to determine which of the two different approaches should apply:[24]

Where…a party for whom a litigation friend acts is neither a conventional claimant nor a conventional defendant, the Court’s decision on the litigation friend’s liability for costs need not be governed by simple characterisation of the party as claimant or defendant. The Court should consider whether the nature and circumstances of the party’s participation point to application of, on the one hand, the approach adopted in relation to claimants’ litigation friends or, on the other hand, that adopted in relation to defendants’ litigation friends before arriving at an overall conclusion as to how it should exercise its discretion on the particular facts.

On the facts, the Court of Appeal decided that “the nature and circumstances of Tom and Freya’s participation make it appropriate to apply the approach adopted in relation to defendants’ litigation friends rather than that adopted in relation to claimants’ litigation friends”.[25] It went on to conclude that the circumstances did not justify making an adverse costs order against Ms Glover personally, and therefore set Morgan J’s order aside.

Take-home points

  1. When it comes to potential personal liability for costs, litigation friends for claimants are in a different position from litigation friends for defendants.
  2. A claimant’s litigation friend is required by the CPR to provide a costs undertaking. Such a litigation friend should usually expect to be personally liable for costs pursuant to the undertaking if the claim fails (subject to any right to be repaid from the assets of the child or protected party).
  3. On the other hand, a defendant’s litigation friend should not usually expect to be personally liable for costs even if the defence he or she has conducted fails. The court may however make a defendant’s litigation friend personally liable for costs where he or she is guilty of bad faith, improper or unreasonable behaviour, and/or where he or she has a prospect of personal benefit.
  4. In most cases it will be clear whether a child or protected party is a claimant or a defendant. In cases in which it is not, the court should “consider whether the nature and circumstances of the party’s participation point to application of, on the one hand, the approach adopted in relation to claimants’ litigation friends or, on the other hand, that adopted in relation to defendants’ litigation friends before arriving at an overall conclusion as to how it should exercise its discretion on the particular facts”.

(Author: Edward Hewitt)

[1] See CPR rule 21.1(2).

[2] See CPR rule 21.2. Under CPR rule 21.1(3) the court “may make an order permitting a child to conduct proceedings without a litigation friend”.

[3] CPR 21.4(3)(a).

[4] CPR 21.4(3)(b).

[5] [2020] EWCA Civ 1112.

[6] [2019] EWHC 1401 (Ch).

[7] [2019] EWHC 1401 (Ch) at [70], quoted by the Court of Appeal at [8].

[8] [2018] EWHC 2965 (Ch).

[9] [2019] EWHC 1401 (Ch).

[10] Ibid. at [58].

[11] Ibid. at [47].

[12] Ibid. at [47].

[13] Ibid. at [47].

[14] Ibid. at [48].

[15] [2020] EWCA Civ 1112 at [61].

[16] CPR 21.4(3)(c) and 21.5.

[17] CPR 21.4(3)(c).

[18] [2020] EWCA Civ 1112 at [62].

[19] Ibid.

[20] Ibid. at [64(iv)].

[21] Ibid.

[22] Ibid.

[23] Ibid. at [63(iii)].

[24] Ibid. at [78].

[25] Ibid. at [80].