In advance of a trial in the High Court, the claimant issued an application pursuant to section 34 of the Senior Courts Act 1981 and the procedure set out in CPR r 31.17 by which he sought third party disclosure from the trustees of two Cyprus-based trusts of documents held electronically by the trustees’ solicitors in England and Wales, on the basis that they were likely to be relevant to one of the issues in the trial. The judge granted the claimant permission to serve the application on the trustees out of the jurisdiction pursuant to gateway (20) in paragraph 3.1 of CPR PD 6B, which permitted such service where a “claim” was made under an enactment which allowed “proceedings” to be brought against persons not within the jurisdiction. The trustees applied to set those orders aside, contending that the court had not had jurisdiction to order service out of the jurisdiction. The set-aside application was refused and the trustees’ subsequent appeal dismissed. The judge ordered the trustees to pay the costs of the failed jurisdiction challenge, applying the general rule in CPR r 44.2(2)(a) that an unsuccessful party would be ordered to pay the costs of a successful party. He gave reasons, stating that the jurisdiction challenge was a self-standing application, to whose costs CPR r 46.1 did not apply, and that costs should therefore follow the event. The trustees appealed that order on the grounds that the judge should have applied the general principle for third party disclosure applications, reflected in CPR r 46.1, which was that a successful applicant should pay the third party’s costs of the application unless the third party had behaved unreasonably. It was reasonable for the trustees to have advanced the jurisdiction challenge in circumstances where at the lowest there was doubt as to whether the court had jurisdiction to order disclosure. To treat the jurisdiction application as “self-standing” was to promote form over substance. The challenge to jurisdiction and to the merits of the application were simply two grounds for resisting the disclosure application.
On the trustees’ appeal—
Held, appeal allowed. There was no reason why, if the costs of a Norwich Pharmacal application could be treated as costs of the action against the wrongdoer, as the authorities stated they could, the same was not true of the costs of a disclosure application under CPR r 31.17. Section 51 of the Senior Courts Act 1981 empowered the court to award costs of and incidental to all proceedings. CPR r 44.2(6)(e) permitted orders for costs relating to particular steps in the proceedings. Those were sufficient to give the court the necessary powers. The general rule in CPR r 46.1(2) applied to the “costs of the application”. The “application” was that referred to in CPR r 46.1(1), which was, in the instant case, the disclosure application under CPR r 31.17 and section 34 of the Senior Courts Act 1981. The question was therefore one of construction of the rule: did the costs incurred in relation to the jurisdiction application come within the description “costs of the [disclosure] application”? The answer was yes, both as a matter of the spirit and (per Popplewell and Males LJJ) the letter of the rule. It was apt to describe the costs of the jurisdiction application as part of the costs of the disclosure application against the trustees because the jurisdiction challenge was one of two bases on which the trustees resisted giving disclosure. A third party might legitimately seek to protect the privacy of its information by challenging jurisdiction as well as, or instead of, challenging the merits of the application. The jurisdiction challenge, if successful would have that effect. The disclosure application would thereby be dismissed. There was no reason as a matter of language or logic why costs incurred in such an endeavour were not within the rubric of costs of the disclosure application. To hold otherwise (per Popplewell and Males LJJ) would favour form over substance. If it was not unreasonable for an innocent third party to resist disclosure, there was no justification for having a different costs rule where the resistance was on the grounds that the court had no power to make the order from that where there was resistance on any other grounds. That gave effect to the rationale for the general rule in CPR r 46.1(2), which applied in the present case. The claimant was seeking disclosure against innocent third parties, and the general rule was that he should bear and pay the costs of establishing his entitlement to the documents sought. Establishing that the trustees were amenable jurisdictionally to an order for production was part of the process of establishing that entitlement. Moreover as between the innocent trustees and the innocent claimant (assuming him to be so), it was right that the costs should if appropriate be recoverable by the claimant from the defendant as costs of the action, rather than costs which the trustees had to bear and which were irrecoverable by them from the defendant. Accordingly, the judge fell into error in treating the jurisdiction application as a “self-standing” application which took the costs outside the scope of CPR r 46.1 (paras 27, 30, 31–37, 39, 41–42,45, 46, 50).
Richard Mott and Harry Stratton (instructed by Enyo Law LLP) for the trustees.
Mark Belshaw (instructed by CMS Cameron McKenna Nabarro Olswang LLP) for the claimant.