![Willis v GWB Harthills LLP & Others [2025] EAT 79, His Honour Judge James Tayler, Rule 76 Employment Tribunal Rules 2013, Rule 84 Employment Tribunal Rules 2013, Rule 74 Employment Tribunal Rules 2024, Rule 82 Employment Tribunal Rules 2024, Stage 1 Threshold Conduct, Stage 2 Discretionary Decision, Stage 3 Quantum Decision, Ability to Pay, Costs Discretion, Unreasonable Conduct, Capital Assets in Costs Assessment, Family Home Valuation, Equity Release, Joint Ownership of Property, Detailed Assessment, Standard Basis, Profit Share Entitlement, PHI Payments, Costs Capping, Broad-Brush Assessment, Means Assessment, Proportionality of Costs, Discretionary Factors in Costs Awards, Effect on Third Parties, Honesty of Party, Costs Application Principles, Conduct of Proceedings, Stage 4 Bowel Cancer Context, Zoopla Valuation Evidence, Stage 3 Costs Quantum, Shields Automotive Ltd v Greig, Howman v The Queen Elizabeth Hospital Kings Lynn, Jilley v Birmingham and Solihull Mental Health NHS Trust, Arrowsmith v Nottingham Trent University [2012] ICR 159, Vaughan v London Borough of Lewisham (No 2) [2013] IRLR 713, Doyle v North West London Hospitals NHS Trust, County Court Detailed Assessment, Costs Decision in Employment Tribunals](https://tmclegal.co.uk/wp-content/uploads/2025/06/Shutterstock_351049592-80x80.webp)
Northern Powerhouse Developments Limited & Others v Gavin Lee Woodhouse concerned a dispute over alleged breaches of director’s duties by the defendant, who was the sole director of the claimant companies.
The claimants sought an order in January 2023 that unless the defendant paid the costs of £59,258.30 due under an order of Ms Caroline Shea QC made in June 2022, his defence would be struck out and judgment entered for the claimants in the sum of approximately £5.2 million plus interest.
The case revolved around the court’s jurisdiction to make an ‘unless order’ striking out a statement of case if a party fails to comply with a previous costs order. The key question was whether the respondent cannot pay or will not pay. The defendant’s position was that he could not pay the costs order himself or raise the funds to do so.
The claimants, however, argued that the defendant had not proven his inability to obtain third-party funding, could potentially realise funds from Barkisland Hall, a property he claimed to jointly own with his ex-wife, and had not sufficiently demonstrated his impecuniosity.
The judge, after considering the evidence, found that the defendant had established his present impecuniosity and inability to raise the funds to pay the costs orders. Consequently, the application for an ‘unless order’ was dismissed.
“The evidence put forward by the defendant must be assessed and a view taken on whether he has established that he is unable to raise the funds to pay the costs orders, such that the imposition of an unless order would stifle his defence…. On that key question, I have come to the conclusion that the defendant has established this. There are curiosities in the way in which payments have been routed to him from MavenIQ Ltd but, standing back, what the claimants’ points show is the fact that there are a number of individuals to whom the defendant has been able to turn for financial support to date. That is apparent from his statement of the loans he has received, and also of the support in daily living expenses that he continues to receive. The points about connections with companies other than MavenIQ Ltd highlight this factor, and do not in themselves suggest other sources of funding are available. The fact that the loans from Mr McPhillips were paid through a company that appears now to have no assets is something for which its directors may have to account, but the defendant is not a director of that company. It is not obvious to me that disclosure of why the company acted in this way is disclosure that the defendant is able to give. The fact that he seems to have acted as a consultant under a different name without explanation has given me some pause for thought, but it is not evidence of the availability of funding or, necessarily, or the failure to give full and frank disclosure about sources of funding.”
OUTSTANDING COSTS ORDERS | UNLESS ORDERS
This judgment concerned a legal dispute between Northern Powerhouse Developments Limited, Woodhouse Family Limited, LBHS Management Limited, Fourcroft Hotel (Tenby) Limited (all in liquidation by their joint liquidators, Robert Armstrong and Andrew Knowles) as claimants, and Gavin Lee Woodhouse as the defendant.
The claim was brought by both claimants against the defendant in respect of alleged breaches of director’s duties. The defendant is the sole director of both claimant companies and both claimant companies are in administration and controlled by and act by the joint administrators.
The claimants sought an order in January 2023 that unless the defendant paid the costs of £59,258.30 due under an order of Ms Caroline Shea QC made in June 2022 his defence be struck out and judgment entered for the claimants in the sum of approximately £5.2 million plus interest.
The costs order related to a previous judgment in favour of the claimants, requiring the defendant to provide further information pursuant to the Asset Disclosure Order made as part of a freezing injunction.
The court’s jurisdiction to make an ‘unless order’ striking out a statement of case if a party fails to comply with a previous costs order is well-established. The principles guiding this decision were outlined by Sir Richard Field in Michael Wilson & Partners Ltd v Sinclair [2017] EWHC 2424 (QB):
The key question in such an application is whether the respondent cannot pay or will not pay. In Crystal Decisions (UK) Ltd v Vedatech Corp [2008] EWCA Civ 848, Chadwick LJ emphasized that court orders, even in relation to interim costs, require compliance. The normal consequence of a failure to comply with such an order is that the court should make compliance with that order a condition of the party in question being able to continue with the litigation.
In Goldtrail Travel Ltd (in liq.) v Onur Air Tasimacilik AS [2017] 1 WLR 3014, the Supreme Court considered the principles to apply where it is contended that an order sought may stifle the respondent’s continued participation in the proceedings. Lord Wilson JSC summarised the relevant test in this way:
In MV Yorke Motors v Edwards, Lord Diplock also said that if the respondent would never be able to pay it, the imposition of the condition would necessarily be a wrongful exercise of that discretion. A finding that the defendant has not satisfied the court of the impossibility of complying with a proposed condition is a ‘gateway’ to the exercise of the discretion as explained in the Michael Wilson case.
The question of whether the defendant has established that he cannot pay falls to be considered at the time of the decision. If the defendant had not filed any evidence of his means at the time the costs order was made, the court would be unable to take his alleged impecuniosity into account. While established inability to pay is a factor to be taken into account when considering whether to make an order for payment on account of costs, it is not a bar to an order in the way that it is when considering the imposition of a condition which might stifle the defence to a claim.
It was the defendant’s case that he cannot pay the costs order himself or raise the funds to do so.
The claimants argued that the defendant had repeatedly breached court orders. The defendant had failed to inform the claimants’ legal representatives about his expenditures and their sources beforehand, which was a requirement of the Spending Order. The defendant also failed to disclose a shareholding in Stada Media, potentially breaching the Asset Disclosure Order. The claimants also pointed out the defendant’s procedural breaches, including failure to serve an amended defence and co-operate with Extended Disclosure.
The claimants’ position was that the defendant had not proven his inability to obtain third-party funding, could potentially realise funds from Barkisland Hall, and had not sufficiently demonstrated his impecuniosity.
The claimants argued that the court could not be certain about the defendant’s impecuniosity because not all the evidence had been provided. They highlighted the defendant’s failure to provide certain bank statements and pointed out an error in one of his statements regarding the usage of a specific account.
The judge disagreed with this argument, observing that the level of disclosure given by the defendant was significant, and the mentioned shortcomings were limited to missing bank statements and a single mistaken statement. These did not, he found, undermine the defendant’s prima facie evidence of his impecuniosity. The claimants had also initially suggested that the defendant’s excessive spending had prevented him from paying the costs order, but this argument was not pursued.
The defendant’s position was that the spending had occurred before the order for payment on account of costs was made in June 2022. Therefore, based on the balance of probabilities, the defendant’s evidence, the judge found, established his present impecuniosity, and there was no indication of available assets to meet the costs order.
The defendant sought permission to use Barkisland Hall (a property he claimed to jointly own with his ex-wife) as security for funds, but the claimants disputed his ownership of the property. No agreement was reached, and the defendant did not apply to modify the freezing injunction. The claimants argued that this cast doubt on his claim of impecuniosity. However, the judge found it illogical for the claimants to deny ownership of Barkisland Hall yet refuse its use as security. The property was unavailable as a source of funds, and the claimants could seek a charging order if they believed the defendant had a beneficial interest. The claimants also highlighted the defendant’s failure to pay mortgage installments on the Friendly Inn, resulting in repossession. However, this did not prove his current possession of available assets.
The defendant had produced a table showing the litigation funding he had received since January 2020, and the claimants had commented on it. The claimants had argued that the defendant had not provided a full picture of how he could raise money. They claimed that he had raised at least £96,500 but had chosen to use it for his own representation instead of paying the costs order, which they considered inequitable. The criticisms of the defendant’s evidence mainly focused on the recent loan advances and the source of those funds. The claimants also criticized the defendant’s failure to respond to points raised about payments made between the defendant and various companies. In relation to the defendant’s ability to raise funds from third parties, the defendant’s statement indicated that he had not asked his friends and family for money to pay the costs orders. The claimants relied on these matters to argue that the defendant had not provided full disclosure of his ability to raise funds. However, the judge concluded that the defendant had established his inability to raise the funds to pay the costs orders, considering the evidence of the loans received and the pattern of funding obtained. The judge also noted that prior defaults by the defendant should not carry as much weight as argued by the claimants in assessing the current evidence.
The judge was satisfied with the defendant’s evidence and disregarded the claimants’ submissions that an unless order would likely stifle the defendant’s defense of the claim. Consequently, the application was dismissed. The judge expresses gratitude to both counsel for their clear and focused submissions, which facilitated the efficient handling of this application that could have been derailed, as mentioned previously.
“The evidence put forward by the defendant must be assessed and a view taken on whether he has established that he is unable to raise the funds to pay the costs orders, such that the imposition of an unless order would stifle his defence.” [38]
“On that key question, I have come to the conclusion that the defendant has established this. There are curiosities in the way in which payments have been routed to him from MavenIQ Ltd but, standing back, what the claimants’ points show is the fact that there are a number of individuals to whom the defendant has been able to turn for financial support to date. That is apparent from his statement of the loans he has received, and also of the support in daily living expenses that he continues to receive. The points about connections with companies other than MavenIQ Ltd highlight this factor, and do not in themselves suggest other sources of funding are available. The fact that the loans from Mr McPhillips were paid through a company that appears now to have no assets is something for which its directors may have to account, but the defendant is not a director of that company. It is not obvious to me that disclosure of why the company acted in this way is disclosure that the defendant is able to give. The fact that he seems to have acted as a consultant under a different name without explanation has given me some pause for thought, but it is not evidence of the availability of funding or, necessarily, or the failure to give full and frank disclosure about sources of funding.” [39]
“I consider that it is also instructive to consider the funding which has been received by the defendant to date, the amounts of which do not appear to be disputed by the claimants. Only the sum of £16,000 has been received since the costs order was made. I do not consider that the defendant has simply chosen to pay for his own legal representation instead of paying the costs order. But, in any event, I do not read the authorities as suggesting that a defendant must always pay adverse costs orders before paying his own lawyers. Such a requirement would be a gloss on the key question of whether the imposition of a condition would stifle the defence. The question must be whether he is able to do both.” [40]
“The evidence of loans received supports Mr Cole’s submission that there have been significant difficulties in obtaining funds for the purposes of paying for the defendant’s representation. I was told that if the hearing of this application were adjourned, it could not be guaranteed that funding would be available for his representation at any adjourned hearing. A CCMC hearing was adjourned in October 2022 because the defendant told the court he could not pay for representation at short notice, he then having believed until recently that it may be possible to obtain funding secured on Barkisland Hall. It may also be relevant that the claimants have recently issued a committal application against the defendant, which has yet to be listed, but at which his liberty will be at stake.” [41]
“In my view, I should assess the statement in paragraph 38 of Woodhouse 2 against all of the above factors. I would agree with Mr O’Doherty that read in isolation that statement might support the interpretation that the defendant had not asked the relevant third parties whether they might provide funding. In light of all the evidence and, in particular, the pattern of funding that has been obtained, I am satisfied that if an unless order were made, funding to pay the costs order would probably not be forthcoming and that the order would therefore probably stifle the defence to the claim. I recognise in saying this that the claimants have a real complaint that information has emerged from the defendant later than it should have done throughout these proceedings. I do not consider, however, that these prior defaults on the part of the defendant will bear as much weight as the claimants contend they should when it comes to an assessment of the detailed evidence now before the court.” [42]
“For the reasons set out above, I am satisfied on the defendant’s evidence and despite the claimants’ submissions that the making of an unless order would probably stifle the defendant’s defence of the claim. The application is accordingly dismissed. I record my thanks to both counsel for their clear and focused submissions. This enabled the efficient disposal of this application which, as I have indicated above, could easily have been derailed.” [43]
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