Court of Appeal confirms that a party seeking third party disclosure must pay the costs – but there is no blank cheque

The Court of Appeal has overturned a decision requiring a small company to pay part of the costs of a third-party disclosure application after it had not complied with an informal request for documents. The court awarded the company its costs of the appeal, but stressed that these must be reasonable and proportionate.

Background

In Jofa v Benherst [2019] EWCA Civ 899, a property investor requested disclosure from a small building company to assist in the investor’s claim against a property manager for fraudulently presented invoices for £675,000, most of them apparently originating from the building company. The sole director and shareholder of the building company immediately contacted the Investors’ solicitor denying any knowledge of the fraud allegations and offering to provide copies of actual invoices and to meet with the investor’s solicitors. Throughout the matter, the director of the building company indicated his willingness to provide copies of the requested documents, but he did not actually do so at any point. The investors applied to the court for a third party disclosure order.

At the initial hearing of the application, the director again confirmed his willingness to provide the documents, and the third party disclosure order was made. The building company was also ordered to pay a contribution of £23,000 to the investor’s costs, as it had not provided the documents when requested.

The building company appealed the costs order on the basis that it is usual for the party requesting disclosure to pay its own costs and those of the party ordered to give disclosure.

Decision

The Court of Appeal held that it was reasonable for a third party to require a court order before disclosing confidential information and documents, and this was not a reason to depart from the usual order for costs. The court rejected the investor’s argument that there was a basis to order at least a contribution to costs because the building company appeared to be involved in the alleged wrongdoing and had not provided the documents when requested.

However, the court reduced the building company’s costs of its successful appeal from £71,000 to £13,000 on the basis that much of the time claimed by the solicitor was manifestly unreasonable in relation to an appeal of an order to pay £23,000 and was duplicated by the comparably reasonable costs of the instructed barrister.

Comment

The decision confirms that the usual order for costs on a third party disclosure order is that the party seeking the disclosure pays the costs of the application. It also establishes that not voluntarily providing the documents is not a reason to depart from this position. However, parties must bear in mind that the usual basis for assessment of costs will apply, and disproportionate costs will not be allowed.

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