Recovering Legal Fees and Court Costs from Third Parties in Litigation

Recently, the High Court ordered that the legal costs of a case should be paid by a third party who was not involved in it.

The case involved an Italian plumbing parts manufacturer, which was in dispute with its UK distributor as a result of terminating its distribution agreement. The distributor sued for compensation, not knowing that prior to the trial most of the assets of the business of the manufacturer had been transferred to another Italian company. The second company also had directors in common with the previous company.

The distributor won its case and was entitled to the payment of compensation and its legal costs. A little while later, the defendant Italian company was struck off, leaving no assets from which to make the payments ordered by the Court.

The distributor went back to the Court to have a costs order made against the company to which the assets had been transferred. In the view of the judge, the transfer (which was not mentioned at the original hearing by any of the witnesses from the Italian company) was deliberate and the circumstances justified making the order.

Although the circumstances in this case were clear-cut, the door is open for the making of costs orders when assets are transferred in anticipation of an unfavourable judgment.