Secretary of State for Trade and Industry v Backhouse: CA 26 Jan 2001

A non-party costs order was made against the director, because the defence to the petitions was not conducted in the bona fide belief that it was in the interests of the companies. Instead the director, who had treated the companies’ money as his own, defended the petitions to protect his personal reputation and position, without regard to the interests of the companies or its creditors.
Held: The appeal against that order was dismissed.
Aldous LJ said: ‘A crucial question is whether the relevant directors (or director) hold a bona fide belief that (i) the company has an arguable defence, and (ii) it is in the interests of the company for it to advance that defence. If they do then, (in the absence of special circumstances) to make them pay costs of proceedings in which they are not a party would constitute an unlawful inroad into the principle of limited liability . . ‘
Otherwise: In Re North West Holdings PLC and Another


Aldous LJ


[2001] EWCA Civ 67, [2001] 1 BCLC 468, [2002] BCC 441




England and Wales

Cited by:

CitedGoknur v Aytacli CA 13-Jul-2021
Third Party Costs – Director of Insolvent Company
(Organic Village) The Court considered the circumstances Limited in which a director and shareholder of an insolvent company may be personally liable for some or all of that company’s costs liabilities incurred in unsuccessful litigation, pursuant . .
CitedHB v PB FD 9-Jul-2013
Claim for costs against third party local authority, Croydon LBC after four day private law fact finding hearing. F said that M had fabricated illnesses both in herself and the child leading to the LA being asked to prepare a report. That report . .
Lists of cited by and citing cases may be incomplete.

Insolvency, Costs

Updated: 05 May 2022; Ref: scu.200767