Oriakhel v Groupama Insurance Co Ltd & Anor

Waller LJ, when granting permission to appeal in this case, said:

“The question whether a dishonest witness, alleged to be a party to a conspiracy to bring a dishonest claim, might be ordered to pay costs is worthy of consideration by the Court of Appeal.”

Following the refinement of the issues during the course of argument I do not think that is quite the question we have to decide. Specifically we have to decide whether, on the facts of this case, HHJ Copley’s refusal, by a judgment of 17^th August 2007, to make a costs order against a Mr Mohammed Munaver Khan, was wrong. That question is more fact sensitive than that identified by Waller LJ. In particular it involves the following further factors (a) whether the witness could himself have been or be sued for the dishonest conspiracy, (b) whether the witness was warned that an application for costs would be made against him before he gave evidence in that litigation, (c) whether the witness is bound by any of the findings of fact in that litigation, and (d) whether the real cause of the claimed costs was not the giving of the false evidence by the witness but his taking part in the dishonest conspiracy itself.

The jurisdiction to make an order for costs against a someone who was not actually a party to a piece of civil litigation (“a non-party costs order”) is provided by s.51 of the Supreme Court Act 1981:

“ (1) Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to all proceedings in – (a) the civil division of the Court of Appeal; (b) the High Court . . . shall be in the discretion of the court. . . . (3) The court shall have full power to determine by whom and to what extent the costs are to be paid.”

In Aiden Shipping v. Interbulk   [1986] A.C. 965 the House of Lords made it clear that, contrary to what had previously been thought, the language of the section extended to non-party costs orders – there was jurisdiction to make such orders. The House also clearly laid down via the single speech of Lord Goff that the exercise of that jurisdiction should be “in accordance with reason and justice” and that it would be for this Court:

“to lay down principles for the guidance of judges of first instance for the purpose of controlling the exercise of the statutory power vested in the judges.” (see pp. 980-981).”

Following a series of individual decisions about non-party cost orders, this Court via the leading judgment of Balcombe LJ in Symphony Group v Hodgson [1994] QB 179, first classified the cases where non-party costs orders had been made under a series of heads and went on to lay down some general guiding principles.

Balcombe LJ’s classification of the decided cases was as follows:

(1)

Where a person has some management of the action, e.g. a director of an insolvent company who causes the company improperly to prosecute or defend proceedings [citations omitted] It is of interest to note that, while it was not suggested in any of these cases that it would never be a proper exercise of the jurisdiction to order the director to pay the costs, in none of them was it the ultimate result that the director was so ordered.

(2)

Where a person has maintained or financed the action. [detail omitted]

(3)

In  Gupta v. Comer  [1991] 1 Q.B. 629 this court approached the power of the court to order a solicitor to pay costs under Ord. 62, r. 11 as an example of the exercise of the jurisdiction under section 51 of the Act of 1981.

(4)

Where the person has caused the action. [detail omitted].

(5)

Where the person is a party to a closely related action which has been heard at the same time but not consolidated - as was the case in Aiden Shipping itself.

(6)

Group litigation where one or two actions are selected as test actions [citation omitted].

He added:

“I accept that these categories are neither rigid nor closed. They indicate the sorts of connection which have so far led the courts to entertain a claim for costs against a non-party.”

In providing guidance, he said:

“In my judgment the following are material considerations to be taken into account, although I do not suggest that there may not be others which are relevant.

(1)

An order for the payment of costs by a non-party will always be exceptional: see per Lord Goff in Aiden Shipping at 980F. The judge should treat any application for such an order with considerable caution.

(2)

It will be even more exceptional for an order for the payment of costs to be made against a non-party, where the applicant has a cause of action against the non-party and could have joined him as a party to the original proceedings. Joinder as a party to the proceedings gives the person concerned all the protection conferred by the rules, as to e.g. the framing of the issues by pleadings; discovery of documents and the opportunity to pay into court or to make a Calderbank offer (Calderbank v. Calderbank  [1976] Fam. 93); and the knowledge of what the issues are before giving evidence.

(3)

Even if the applicant can provide a good reason for not joining the non-party against whom he has a valid cause of action, he should warn the non-party at the earliest opportunity of the possibility that he may seek to apply for costs against him. At the very least this will give the non-party an opportunity to apply to be joined as a party to the action under Ord. 15, r. 6(2)(b )(i) or (ii).

Principles (2) and (3) require no further justification on my part; they are an obvious application of the basic principles of natural justice.

(4)

An application for payment of costs by a non-party should normally be determined by the trial judge: see Bahai v. Rashidian  [1985] 1 W.L.R. 1337.

(5)

The fact that the trial judge may in the course of his judgment in the action have expressed views on the conduct of the non-party constitutes neither bias nor the appearance of bias. Bias is the antithesis of the proper exercise of a judicial function: see  Bahai v. Rashidian  [1985] 1 W.L.R. 1337, 1342H, 1346F.

(6)

The procedure for the determination of costs is a summary procedure, not necessarily subject to all the rules that would apply in an action. Thus, subject to any relevant statutory exceptions, judicial findings are inadmissible as evidence of the facts upon which they were based in proceedings between one of the parties to the original proceedings and a stranger: see  Hollington v. F. Hewthorn & Co. Ltd.  [1943] K.B. 587; Cross on Evidence , 7th ed. (1990), pp. 100-101. Yet in the summary procedure for the determination of the liability of a solicitor to pay the costs of an action to which he was not a party, the judge's findings of fact may be admissible: see  Brendon v. Spiro  [1938] 1 K.B. 176, 192, cited with approval by this court in  Bahai v. Rashidian  [1985] 1 W.L.R. 1337 1343D, 1345H. This departure from basic principles can only be justified if the connection of the non-party with the original proceedings was so close that he will not suffer any injustice by allowing this exception to the general rule.

(7)

Again, the normal rule is that witnesses in either civil or criminal proceedings enjoy immunity from any form of civil action in respect of evidence given during those proceedings. One reason for this immunity is so that witnesses may give their evidence fearlessly: see  Palmer v. Durnford Ford  [1992] Q.B. 483, 487. In so far as the evidence of a witness in proceedings may lead to an application for the costs of those proceedings against him or his company, it introduces yet another exception to a valuable general principle.

(8)

The fact that an employee, or even a director or the managing director, of a company gives evidence in an action does not normally mean that the company is taking part in that action, in so far as that is an allegation relied upon by the party who applies for an order for costs against a non-party company: see  Gleeson v. J. Wippell & Co. Ltd.  [1977] 1 W.L.R. 510, 513.

(9)

The judge should be alert to the possibility that an application against a non-party is motivated by resentment of an inability to obtain an effective order for costs against a legally aided litigant. The courts are well aware of the financial difficulties faced by parties who are facing legally aided litigants at first instance, where the opportunity of a claim against the Legal Aid Board under section 18 of the Legal Aid Act 1988 is very limited. Nevertheless the Civil Legal Aid (General) Regulations 1989 (S.I. 1989 No. 339/89), and in particular regulations 67, 69, and 70, lay down conditions designed to ensure that there is no abuse of legal aid by a legally assisted person and these are designed to protect the other party to the litigation as well as the Legal Aid Fund. The court will be very reluctant to infer that solicitors to a legally aided party have failed to discharge their duties under the regulations - see  Orchard v. South Eastern Electricity Board  [1987] Q.B. 565 - and in my judgment this principle extends to a reluctance to infer that any maintenance by a non-party has occurred.”

Principles (2) (3) and (6) have particular relevance to this case. Before turning to it, I should mention some post-Symphony cases, so far as they touch on the point which forms the thrust of the argument before us – namely the that the non-party stood to get a benefit out of the primary litigation if it had succeeded. I do not go to all of the cases – mindful as I am of the good sense of what Longmore LJ said in Petromec v Petroleo Brasileiro [2004] EWCA Civ 1038 at [11]:

“There is a danger that the exercise of the jurisdiction to order a non-party to proceedings to pay the cost of those proceedings becomes overcomplicated by reference to authority”.

First it is not a necessary pre-condition for a non-party costs order that the non-party should have been a funder of the litigation. Longmore LJ in the lead judgment in Petromec put it this way at [10]:

“I would only observe that, although funding took place in most of the reported cases, it is not, in my view, essential, in the sense of being a jurisdictional pre-requisite to the exercise of the court's discretion. If the evidence is that a respondent (whether director or shareholder or controller of a relevant company) has effectively controlled the proceedings and has sought to derive potential benefit from them, that will be enough to establish the jurisdiction. Whether such jurisdiction should be exercised is, of course, another matter entirely and the extent to which a respondent has, in fact, funded any proceedings may be very relevant to the exercise of discretion.”

Longmore LJ elaborates on this a little at [11 -12] but it is not necessary to repeat that here.

Second, the mere fact that the non-party has provided the funds to enable a party to pay his costs in the primary litigation is not a sufficient requirement for such an order – see Hamilton v Al Fayed (No. 2) [2003] QB 1175. Were it otherwise, there would be absurd consequences, for instance a bank making a commercial loan might find itself liable to such an order merely because it knew that the or a purpose of the loan was to fund litigation. Similarly a legal expenses insurer will not normally be subject to such an order, Murphy v Young & Co’s Brewery [1997] 1 WLR 159.

Third, the question of the admissibility, in the application for costs against the non-party, of the findings in the primary proceedings, (Balcombe LJ’s sixth proposition) was considered a little further in Globe Equities v Globe Legal Services [1999] BLR 232. A firm of solicitors were subjected to a non-party costs order where it had not only conducted the primary litigation but had an interest in it (the partners owned the defendants). It was argued on appeal that the findings in the primary litigation were inadmissible. Morritt LJ said:

“[20] The sixth proposition set out by Balcombe LJ in Symphony Group plc v Hodgson, which I have quoted, indicates that the findings in other proceedings may be admissible against a person who was not a party thereto against whom an application for costs is made. The test suggested by him is the closeness of the connection of the non-party with the original proceedings. In my view the proximity of the solicitors on the record for a party could hardly be closer and certainly entitled the judge in his discretion, as confirmed by Brendon v Spiro [1938] 1 KB 176, to rely on his findings in the actions on the application for costs against Miller Gardner. In any event if objection was to be taken it should have been taken before the judge. It was not. I would reject this submission.”

So an objection to admissibility must be taken before the Judge who is being asked to make the non-party costs order. Additionally there must be a close connection between the non-party and the original party.

Fourth the fact that the non-party gave dishonest evidence in the primary proceedings is a factor which may be taken into account in the exercise of a discretion to make a non-party costs order against him. That was the position in R+V Versicherung v Risk Insurance & Reinsurance [2006] EWCA 314 (CA refusing permission to appeal), although the dishonest evidence was far from the only or indeed primary, factor. Chadwick LJ recorded the Judge as saying:

“[15] … The litigation had been pursued on behalf of [the party which had made a fraudulent defence and counterclaim], driven by the [non-party] and for the purpose of advancing a case which [the non-party] knew to be false.”

Finally I should mention the Privy Council case of Dymocks Franchise Systems v Todd [2004] UKPC 39, [2004], 1 WLR 2807 because it was the principal authority relied upon by the Judge to dismiss the claim. The non-party had promoted and funded an unsuccessful claim by an insolvent company substantially for its own financial benefit. It was ordered to pay the costs of the successful party. In that context Lord Brown said in [25]

“(3)

Where, however, the non-party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party's costs. The non-party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes. He himself is "the real party" to the litigation, a concept repeatedly invoked throughout the jurisprudence - see, for example, the judgments of the High Court of Australia in Knight and Millett LJ's judgment in Metalloy Supplies Ltd (in liquidation) v MA (UK) Ltd [1997] 1 WLR 1613. Consistently with this approach, Phillips LJ described the non-party underwriters in TGA Chapman Ltd v Christopher [1998] 1 WLR 12 as "the defendants in all but name". Nor, indeed, is it necessary that the non-party be "the only real party" to the litigation in the sense explained in Knight, provided that he is "a real party in ... very important and critical respects" - see Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406, referred to in Kebaro at pp 32-3, 35 and 37. Some reflection of this concept of "the real party" is to be found in CPR 25.13 (1) (f) which allows a security for costs order to be made where “the claimant is acting as a nominal claimant”.”

The primary litigation was a road accident claim by a Mr Oriakhel against the first defendant whose name was said be Vickers. Groupama, the present appellant was Mr Vickers’ insurer. It contended that the claim was bogus and was joined in as second defendant so it could contest the claim and advance a counterclaim. By its amended Defence and Counterclaim it set forth details of the alleged conspiracy and claimed back sums it had already paid out along with other sums flowing from the conspiracy such as the costs of the investigation which uncovered it. Groupama plainly were in a position at that stage to join Mr Khan as a defendant to the counterclaim alleging that he was a co-conspirator with the claimant, and Vickers. But it did not do so.

At trial Groupama succeeded in proving as against the claimant and Mr Vickers (I emphasis this) that the claim was a dishonest fabrication. “Mr Vickers” failed to appear even though ordered to do so. Evidence was given by the claimant and two friends of his as to the happening of the alleged accident, but they were disbelieved. Groupama showed that “Mr Vickers” had a number of aliases, that he was closely linked to the claimant and that this sort of claim had been a regular practice of the “Mr Vickers”. HHJ Copley, in a judgment of 25^th January 2007 (“the primary judgment”) accepted Groupama’s submissions and dismissed the claim as “fraudulent.”

The present respondent, Mr Khan, was a witness in the primary claim. Prior to trial he had provided a witness statement to the effect that he had a garage, knew Mr Vickers, had arranged for the damaged car to be towed to that and other matters suggesting everything was above board and at arm’s length. The Judge said:

“As far as Mohammed Khan is concerned, there is no doubt that he had links to Vickers, not only as his landlord of 82 Westminster Way but through the various companies with which he, and/or his brother have been concerned and in connection with the various road traffic accidents in which Vickers, by whatever name he has used, has been involved. He also has links to Amadi, he has woven the tangled web, using various limited companies, some having very similar names or trading names and he has sought to obfuscate the issues and his various trading activities. I am equally quite satisfied that he was not telling me the truth and I reject his evidence. I am satisfied that he had the links alleged by the 2^nd defendants and although, as I have indicated, I accept that he was involved, I am not satisfied at this stage that he was necessarily the mastermind or one of the masterminds behind this claim. If necessary I shall hear further submissions in relation to this.”

Mr Khan was not given notice of any proposed application for a non-party costs order until after the evidence was closed. The first formal indication of such an application was when Groupama’s solicitors sent him a copy of its closing submissions. In these, just before a final paragraph suggesting (reasonably) that the case should be referred to the prosecuting authorities, there is a paragraph which starts:

“Mohammed Khan’s conduct already exemplifies why he should be paying costs.”

Some details were given. The allegation was that he with the claimant had “set up this accident and has in effect run this claim.” Reliance was also placed on his false evidence and it was alleged the reason for that is “he was behind the Claimant’s claim.” Curiously the paragraph then said “The legal grounds on which Mohammed Khan should be ordered to pay the second defendant’s costs are .. ” – and then omitted to say anything.

As emerges from the passage which I have quoted, HHJ Copley’s findings in the primary claim do not go as far as to hold that Mr Khan “in effect ran” the claim or was “behind the claim.” Nor was it necessary for the Judge to consider that – all that mattered for the case before him was whether Mr Khan was telling the truth.

Turning back to the notice point, Mr Laughland for Groupama suggested an earlier date should be taken as the date on which notice was given. Groupama’s opening written submissions at the end said:

“The Second Defendants will seek to argue that either Mr Khan, who referred this claim knowing it was dishonest, or the Claimant’s solicitors …. should be responsible for the Second Defendant’s costs.”

It was suggested that these submissions would have been shown by counsel or solicitors for the claimant to Mr Khan so he must have had earlier notice. But one just does not know that and I see no reason to infer notice was given earlier.

When asked why notice was not given directly to Mr Khan and earlier, Mr Laughland said it was so as not to be intimidatory. But indirect notice would be just as intimidatory as direct notice, if not more so because of its insidious nature. And whilst there are cases where the giving of notice is not necessary or can fairly be said to be unjustly intimidatory, in a case where the intention is to allege fair and square that a man is a liar, a perjurer, and a dishonest conspirator and fraudster, there is every reason in fairness to warn him (Balcombe LJ’s third proposition).

The formal application for a non-party costs order was not made until 6^th June 2007, although Mr Khan had been joined as a party at some point earlier for the purposes of making such an application pursuant to the provisions of CPR 48.2(1).

The hearing and judgment on the application were on 17^th August 2007. Shortly before, on 15^th August, Mr Khan prepared a witness statement in which he took issue with some of the matters which had been alleged at the primary trial. He said, inter alia:

“I neither received any referral nor was I funding the case nor to have nay [sic] financial gain as has been alleged.”

and:

“The invoices of the vehicles involved in the said accident have no connection with my Company and I was not to derive any benefit whatsoever as has been alleged.”

Whether the detailed facts referred to in the witness statement, if true, would affect the findings made in the primary case was not explored either before the Judge or before us. They have simply never been considered. For present purposes it is sufficient to note that they are matters which Mr Khan wished to advance in his defence of the non-party costs claim.

During the course of the hearing counsel for Groupama submitted that he did not want to re-litigate the matters decided by the primary judgment. The Judge said:

“The facts are res judicata and I am functus officio.”

and:

“It is a question of I having made those findings, what flows from that as far as Mr Khan is concerned.”

I have to say that was a mistaken view. Whether or not the evidence adduced in the primary case is admissible against the non-party or whether the findings in the primary case can be used as prima facie findings in the claim against the non-party is one thing. But to say that a non-party party to proceedings may not even challenge that evidence or those findings in a case where he was not a party, had no notice of the proposed claim, and was not the man funding or behind the litigation, is another.

To be fair the position was not satisfactory. There was no real objection to the Judge taking the view he did, although on the other hand the Judge seems to have admitted Mr Khan’s witness statement, which is inconsistent with his ruling.

I pass on to the basis of the Judge’s decision to refuse a non-party costs order. It is brief. He said:

“14.

… I go back to the third principle enunciated by Lord Brown in Dymock which states, and I reiterate:

“Where the non-party not merely funds the proceedings but substantially also controls, or at any rate is to benefit from them, justice will ordinarily require that if the proceedings fail, he will pay the successful party’s costs.”

15.

It seems to me that that proposition as set out there envisages the usual position that:

“The non-party not merely funds, but also substantially controls, or at any rate is to benefit from them …”

So we have the alternatives, “controls, or at any rate is to benefit from them”, but in addition to, also, funding the proceedings. Apart from Phillips v Symes which, as I have said, relates to expense incurred by the nature of the evidence given by an expert, which is not the case here, all the other cases involve non-parties who are either funding the proceedings, or are behind those who are funding them, and are controlling the proceedings. It is not suggested that Mr Khan falls into either of these categories.

16.

For all of those reasons it seems to me that this application for an order for costs against Mr Khan, that he should pay the applicant’s costs, must fail. It does seem to me that, as envisaged in those authorities to which reference has been made, the proper course would be for the insurers, if they consider that they have a claim against Mr Khan for these costs, to commence a separate action against him so that the whole matter can be considered.”

Mr Laughland submitted that the Judge erred in thinking that it had to be shown that the non-party was either funding or controlling the litigation. It was enough if it could be shown that the non-party would benefit from it at least where the non-party was a co-conspirator in a fraudulent claim and had given dishonest evidence in support of it.

Accordingly he submitted, the Judge had made an error of principle in exercising his discretion and this court was free to exercise its own discretion. It should do so in Groupama’s favour for the reasons just stated.

It does appear to be the case that the Judge thought that it had to be shown that the non-party was a funder or controller before a non-party costs order could be made. So I think he did fetter his own discretion and we are free to exercise our own discretion.

But I would not exercise that discretion in favour of making a non-party costs order for the following reasons

Since writing the above I have read the judgment of Arden LJ. I agree with it.

In the result I would dismiss this appeal.

I agree with the judgment of Jacob LJ and indeed I would go one further. Jacob LJ has referred to the principle of witness immunity. This is the rule of public policy which protects witnesses from civil actions in respect of the evidence given in court, and the immunity extends to the preparation of that evidence. In Marrinan v Vibart [1963] 1 QB 528, this court held that the principle of witness immunity was not confined to actions of defamation but applied whenever a cause of action was sought to be derived from evidence given by a witness: see per Sellers LJ at 535, with whom Willmer and Diplock LJJ agreed, and see per Diplock LJ at 538. In that case, the plaintiff alleged that two police officers had conspired together to make false statements for the purpose of criminal proceedings against third parties and in disciplinary proceedings against the plaintiff. There was no suggestion in the judgments of the court that this principle was only “the normal rule”, or that there were any exceptions from it.

Although this authority was not cited in Symphony Group plc v Hodgson, Balcombe LJ refers to witness immunity in [7] of the guidance that he gave (which is set out by Jacob LJ at [8] of his judgment). However, I do not read Balcombe LJ’s judgment as deciding that costs can be awarded against a witness under s 51 of the Supreme Court Act 1981 in respect of a matter for which he had witness immunity, even if he is made a party. It seems to me that his guidance leaves this point open.

On this appeal, counsel have not addressed any detailed argument to the question whether an award of costs against a witness on the basis of what he had said in evidence before a court, or in the preparation of evidence to be so given, would involve any infringement of the principle of witness immunity. In my judgment, an award of costs in these circumstances would involve an infringement of that principle.

On the other hand, the principle conferring immunity on a witness would not prevent a person from being liable for damages if he was a party to a conspiracy to defraud another person by some means outside the scope of the immunity, for example by the creation of a false invoice to support a claim under an insurance policy. In Darker v Chief Constable of West Midlands Police [2001] 1 AC 435, it was held that the principle did not apply to the fabrication of evidence or other matters not connected with the judicial process. However, the precise limits of the principle of witness immunity, in so far as not already settled in cases such as Marrinan and Darker, are matters for another day.

The ambit of the alleged conspiracy in this case has yet to be pleaded, and, there is a lack of clarity as to the precise conduct relied on. The existence of witness immunity seems to me to be another reason why this court should not exercise its discretion to award costs against Mr Khan in these proceedings.

On this appeal, we are not concerned with expert witnesses and I express no view on their position. Expert witnesses owe independent duties to the court and they may stand in a different position from other witnesses.

The judge made some extremely serious findings against Mr Khan. Nothing in this judgment is intended to detract from that point. However, if Mr Khan is to be brought to book for his conduct it must be in accordance with the law.

I agree with both judgments.