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September delivered critical decisions on costs budgeting, indemnity costs thresholds, and procedural jurisdiction. The NOx Emissions litigation saw budgets slashed by 62%, whilst courts clarified when “annoying” behaviour remains insufficient for indemnity basis awards. Pre-action applications now definitively constitute “proceedings” for costs purposes. Practitioners must note the firm line drawn against Part 36 offers demanding total capitulation and the narrow scope for costs-only joinder applications.

Detailed Assessment & CPR 44.11

No Procedural Tension Between CPR 44.11 And s57 of the Criminal Justice and Courts Act 2015 Costs Judge Nagalingam refused permission to appeal, holding that CPR 44.11 and s57 Criminal Justice and Courts Act 2015 serve distinct purposes with no procedural tension. Detailed assessment cannot become a forum for quasi-fundamental dishonesty findings that should have been pursued at trial, and settlement without apportionment prevents retrospective allocation of damages to specific heads of loss.

Trust and Estate Costs

Executor’s Litigation Costs Indemnity Denied And Personal Costs Ordered In Hostile Trust Dispute 

HHJ Paul Matthews dismissed an appeal against costs orders depriving an executor of estate indemnity for litigation costs. Executors defending hostile removal proceedings in their own interests rather than for the estate’s benefit lose entitlement to indemnity under Trustee Act 2000 s31, even where administration costs indemnity is preserved.

Section 51 Jurisdiction

Court Of Appeal Confirms That Pre-Action Applications Constitute ‘Proceedings’ for Costs Purposes
Lord Justice Cobb held that pre-action injunction applications constitute “proceedings” under s51 Senior Courts Act 1981, closing a loophole where parties might escape costs consequences through procedural technicalities. Courts possess costs jurisdiction for any application where they are seised and asked to make orders, regardless of whether a claim form was issued.

Costs Budgeting

High Court Slashes Claimants’ Costs Budgets by 62% In NOx Emissions Litigation
Cockerill J and Senior Costs Judge Rowley approved just £21m of £55.7m sought by claimants for Tranche 3 of the NOx Group Litigation. The court criticised continued “over-lawyering”, drastically reduced budgets for CMC attendance from 32 fee earners to 9 in-person attendees, and confined non-lead firms’ recoverable involvement to narrow circumstances, with routine “keeping abreast” work deemed non-recoverable inter partes.

CPR 3.15(8) | £870 Hourly Rate And £90,000 Brief Fee For Leading Counsel Deemed Disproportionate In £1.2m Claim
The High Court reduced trial preparation and trial budgets through broad-brush phase reductions where solicitors’ rates substantially exceeded London Band 2 guidelines and counsel brief fees totalled £90,000. Courts can address excessive rates without breaching CPR 3.15(8)’s prohibition on fixing hourly rates by applying downward adjustments to disproportionate phase totals following GS Woodland Court GP1 Ltd v GRCM Ltd.

Indemnity Costs

Being ‘Annoying and Difficult’ Not Sufficiently ‘Out Of The Norm’ For Indemnity Costs In Failed Liquidator Challenge
The Chancery Division refused indemnity costs against an unsuccessful creditor applicant, finding his conduct, though creating a weak application, did not meet the “out of the norm” threshold. Personal circumstances including head injury and deep investment in the liquidation distinguished the case from authorities like Beattie v Smailes where extravagant applications warranted higher basis awards.

Part 36 Offers

When Part 36 Offers Demand Total Capitulation | Matière v ABM
Alexander Nissen KC held that a Part 36 offer of nil for a multi-million pound counterclaim was not a genuine attempt to settle that aspect of proceedings, making it unjust to apply indemnity costs consequences under CPR 36.17(4) to counterclaim costs. The offer’s genuine nature regarding the claim secured full Part 36 benefits for those costs only, demonstrating offers must involve realistic concessions across all dispute aspects.

Costs Capping

Costs Capping Order | Court Sets Different Caps Despite Defendant’s Push For Parity In Facial Recognition Challenge
Farbey J set reciprocal but non-identical costs caps at £70,000 (claimants) and £100,000 (defendant) in a judicial review of Live Facial Recognition technology policy. Courts will look beyond specific fundraising to assess campaign organisations’ true financial resources, expecting strategic deployment of unrestricted funds whilst recognising that “reciprocal” caps under Criminal Justice and Courts Act 2015 ss88-89 need not be identical.

Fixed Costs Regime

CPR 45.8 Fixed Costs Apply To Interim Applications From Date Of Provisional Track Allocation
Sheldon J quashed a costs order of £10,653 where the case had been provisionally allocated to the Intermediate Track, limiting recoverable costs to £333 plus £303 court fee under CPR 45.8. Fixed costs regime applies from provisional allocation, not formal allocation, and conducting litigation as an unauthorised person constitutes a reserved activity barred under Legal Services Act 2007 absent specific exemption.

Costs-Only Proceedings

Court Refuses Costs-Only Joinder But Orders Consolidation in Will Dispute
HHJ Paul Matthews refused to join a will-writing company as a costs-only party under CPR 46.2 where it contested negligence allegations requiring full trial on breach, causation and quantum. Summary procedure under s51 Senior Courts Act 1981 is inappropriate where non-parties actively dispute liability; consolidation under CPR 3.1(2)(h) offers broader case management solutions where separate proceedings exist.

The world of Qualified One-Way Costs Shifting (QOCS) in England and Wales has seen significant shifts since the Civil Procedure Rule (CPR) amendments of April 6, 2023. For legal practitioners, understanding these changes is not just beneficial, it’s essential for navigating the complexities of litigation in 2025 and beyond. These reforms have fundamentally altered defendants’ ability to recover adverse costs and have breathed new life into the strategic power of CPR Part 36 offers. Meanwhile, the application of QOCS to “mixed claims” – those combining personal injury with non-personal injury elements – continues to be a dynamic area, shaped by ongoing judicial interpretation.

This post will delve into these critical developments, highlighting the increased financial risks for claimants and the imperative for legal professionals to adopt proactive, informed, and agile litigation strategies.

QOCS | A Refresher and the Game-Changing 2023 Reforms

QOCS was introduced on April 1, 2013, as a cornerstone of Lord Jackson’s civil justice reforms. Its primary aim was to ensure access to justice for individuals pursuing personal injury claims, particularly against well-resourced defendants. The core principle is straightforward: an unsuccessful claimant in a personal injury case generally isn’t liable for the defendant’s legal costs. This was designed to reduce the financial burden on claimants and lessen the need for After-the-Event (ATE) Legal Expenses Insurance. 

However, QOCS protection isn’t absolute. Exceptions exist, notably when a claim is found to be fundamentally dishonest. Other instances include claims struck out for lacking a cause of action or those pursued primarily for a third party’s benefit. The application of QOCS has been continually refined through case law. 

The most recent and impactful legislative intervention came on April 6, 2023, with significant amendments to the Civil Procedure Rules, particularly CPR 44.14. These revised rules apply exclusively to claims where proceedings were issued on or after this date. The government’s motivation for these reforms was to provide defendants with greater opportunities to recover costs, especially in cases deemed unmeritorious , aiming to rebalance a costs regime some felt had become overly skewed towards claimants. 

Enforcement | The Post-2023 Reality

The Old Rules: A Shield for Claimants

Before April 2023, defendants faced significant limitations in recovering costs under QOCS. A claimant’s liability for adverse costs was strictly capped at the monetary value of damages and interest awarded by a court order. This “damages cap” ensured claimants wouldn’t be out-of-pocket for adverse costs beyond their compensation.

Two appellate decisions further restricted defendant recovery:

• Cartwright v Venduct Engineering Ltd EWCA Civ 1654: This ruling extended QOCS protection to damages recovered through settlement agreements (like Part 36 offers or Tomlin Orders), meaning defendants often couldn’t recover costs even when a claim settled in their favour.
• Ho v Adelekun UKSC 43: The Supreme Court ruled that adverse costs could not be set off against a claimant’s recoverable costs. This meant recovery was limited solely to awarded damages.

These judgments made it extremely difficult for defendants to recover costs, even when successful. This often made it “cheaper and more time efficient than contesting the claim and taking the case to court” for defendants to simply settle. The Ho v Adelekun decision, while initially seen as a claimant victory, was ultimately a “pyrrhic victory” , leading to outcomes widely considered “counter-intuitive and unfair to defendants” , which directly prompted the swift legislative response.

The New Rules | Expanded Enforcement Powers (CPR 44.14)

The Civil Procedure (Amendment) Rules 2023 explicitly reversed the effects of both Cartwright and Ho. The scope of enforcement has expanded considerably: adverse costs orders can now be enforced without court permission against “any order or agreement to pay or settle a claim for damages, costs and interest made in favour of the claimant”. This includes damages recovered via Part 36 offers and Tomlin Orders, directly overturning Cartwright.

The “general enforcement cap” has also been raised. Defendants can now recover costs up to the aggregate amount of damages plus costs awarded to the claimant, moving beyond the previous damages-only limitation. This means a defendant’s costs order can potentially “completely erode the combined sum that the Claimant recovered in damages and costs”. Crucially, the right to set off adverse costs against the amount owed to the claimant has been restored, directly reversing Ho v Adelekun.

Practical Implications for Claimants and Defendants

This post-April 2023 landscape has “tipped the balance in favour of defendants” , introducing “new challenges for claimants”. Claimants now face “greater financial risks” and may find themselves “liable for significant costs”. This shift has been described as a “devastating blow to Claimants and their representatives”.

A direct consequence is the renewed and increased necessity for claimants to obtain After-the-Event (ATE) insurance. While QOCS aimed to reduce this need, ATE cover may now be “vital” in cases with potential for significant adverse cost orders. This creates a paradox: the mechanism designed to facilitate access to justice now, through its rebalancing, imposes a greater financial hurdle. This could deter legitimate claims, especially those with lower damages where the cost of ATE or heightened risk might outweigh potential compensation.

The changes also signal a shift in litigation dynamics. Defendants are now “more likely to contest a claim that they dispute rather than simply paying to settle”. The reforms aim to restore a “sense of balance” in costs recoverability, encouraging more vigorous defence where merited.  

Table 1 | Key QOCS Rule Changes (Pre- vs. Post-April 2023)

Part 36 Offers | A Renewed Strategic Weapon

The April 2023 reforms have profoundly amplified the strategic importance and effectiveness, or “bite,” of defendant Part 36 offers. Previously, Cartwright and Ho had significantly diminished the costs consequences for claimants who failed to beat a defendant’s Part 36 offer, as enforcement against settlements or set-off against recoverable costs was largely precluded. This effectively “robbed Part 36 offers of much of their teeth” for defendants.  

Under the amended CPR 44.14, if a claimant rejects a defendant’s Part 36 offer and then fails to secure a more advantageous judgment at trial, the defendant’s costs incurred from the expiry of the relevant period can now be enforced. This enforcement can be levied against the aggregate amount of damages, costs, and interest recovered by the claimant. This restoration of enforceability means the “full utility” of Part 36 offers for defendants has been reinstated. Defendants now have greater leverage and are more inclined to contest disputed claims rather than settling solely to avoid costs exposure, creating a “more level playing field”.  

Claimants’ Heightened Risks and the Critical Need for Early, Robust Claim Valuation

The increased enforceability of adverse costs places claimants and their legal representatives under considerable pressure. They must now “think very carefully before rejecting offers”. The prospect of their own damages and recoverable costs being eroded or entirely wiped out by a defendant’s costs order is a significant concern, especially for cases funded by Conditional Fee Agreements (CFAs), where the potential erosion of the claimant’s legal costs is of “particular concern”. 

This heightened risk necessitates a “critical need for early, robust claim valuation”. Legal practitioners advising claimants are now strongly advised to “get a grip of the value of claims as early as possible”. This proactive approach is essential for effective case management and mitigating substantial costs risks. It implies greater “frontloading of claims for claimants” , requiring thorough assessments earlier. Claimants will also have to “carefully consider any offer to settle a claim, sometimes before the value is capable of being assessed, to ensure that they obtain a fair settlement whilst mitigating the risk of a costs order against them”. 

Impact on Settlement Negotiations, Interim Applications, and Multi-Defendant Cases

The revised QOCS regime has far-reaching implications:

• Settlement Negotiations: Claimants must approach settlement offers with extreme caution. The need to “carefully consider any offer to settle a claim, sometimes before the value is capable of being assessed” is paramount to prevent a costs order from reducing or eliminating their settlement. This compels claimants to be more pragmatic and potentially accept reasonable offers earlier. 
• Interim Applications: Adverse costs orders from interim applications (e.g., for relief from sanctions or disclosure disputes) are now enforceable against the claimant. This means practitioners must give “proper thought to whether or not they should make/resist any applications”. A loss on an interim application will now “inevitably diminish” the claimant’s potential net recovery. 
• Multi-Defendant Cases: The previous QOCS regime inadvertently encouraged claimants to issue proceedings against multiple defendants “protectively,” knowing they could later discontinue against some with limited costs exposure. The new rules fundamentally alter this. “Settlement against one defendant cannot now be followed by the swift and carefree discontinuance of a claim against another” , as such discontinuance triggers a deemed order for costs in favour of the discontinued defendant, now fully enforceable. This demands “careful thought and thorough investigation” before issuing against multiple defendants.  

Recent Case Law

Courts continue to interpret and apply the new QOCS rules, providing crucial guidance. One notable case is:

• Amjad v UK Insurance Ltd EWHC 2832 (KB): Mr Justice Ritchie overturned a lower court’s decision to lift the QOCS cap where the claimant failed to beat the defendant’s Part 36 offer. The ruling reaffirmed that the QOCS cap can be lifted only in “certain defined circumstances” and applies specifically to personal injury damages. This highlights ongoing judicial scrutiny of QOCS cap lifting and its interaction with Part 36 offers. 

Mixed Claims | CPR 44.16(2)(b) Discretion

Defining “Mixed Claims”

“Mixed claims” involve a claimant seeking damages for personal injuries alongside other claims not strictly defined as personal injury damages. While personal injury damages under QOCS include pain and suffering, and directly linked heads like loss of earnings and treatment costs , claims for vehicle damage, credit hire, data protection breaches, human rights claims, or police malfeasance constitute the “non-PI” elements that create a mixed claim. The presence of these non-PI elements fundamentally alters QOCS application. 

The Court’s Discretion | “Just to Do So”

In mixed claims, QOCS protection isn’t automatic. CPR 44.16(2)(b) grants the court discretion. The key question is whether the claimant is asserting “anything other than damages for personal injuries”. If so, the court determines “whether, and if so to what extent, it is just to permit enforcement of a defendant’s costs order”. The court doesn’t need to dissect interconnected causes of action; the focus is on the presence of any non-PI claims.  

Analysis of Recent Key Judgments

Recent judgments provide crucial guidance on applying QOCS to mixed claims:

• The Commissioner of Police of the Metropolis v Brown EWHC 2046 (Admin) (upheld by Court of Appeal): This landmark case clarified that QOCS protection doesn’t automatically apply when non-PI elements are present. The court noted that if two claims are “inextricably linked,” this can influence discretion in the claimant’s favour, potentially limiting costs enforcement. 
• ABC & Ors v Derbyshire County Council & Ors, Re Costs EWHC 1337 (KB): This High Court judgment provides significant post-April 2023 guidance. Claimants brought Human Rights Act (HRA) and negligence claims, all dismissed. The judge ordered claimants to pay defendants’ costs but limited enforcement to 5% of total costs. The court acknowledged QOCS relevance even with other claims and considered “exceptional features” to justify a substantial reduction. This case demonstrates the court’s willingness to limit enforcement, even when non-PI claims are unsuccessful, acting as a safeguard against disproportionate outcomes.
• Amjad v UK Insurance Ltd EWHC 2832 (KB): This case (also discussed under Part 36) involved mixed claims (PI + credit hire). The court reaffirmed QOCS applies only to PI claims, but discretion in mixed claims depends on who benefits (claimant vs. third party). 

Table 2: Summary of Recent Key Judgments on Mixed Claims (Post-April 2023)

Practical Advice for Practitioners Handling Mixed Claims

For legal professionals navigating mixed claims, a nuanced approach is essential:

• Careful Claim Dissection: Meticulously identify all potential non-personal injury elements and understand their implications for QOCS protection. 
• Strategic Pleadings: Consider how claims are pleaded to best position the claimant for QOCS protection or to argue for favourable judicial discretion under CPR 44.16(2)(b), especially if claims are “inextricably linked”. 
• Defendant Strategy: Proactively seek costs recovery orders where circumstances permit, particularly if there’s exaggeration in non-PI heads of claim. Be prepared to argue why enforcement would be “just.” 
• Settlement Offers: Frame settlement offers in mixed claims to explicitly address costs. Consider offers where no payment for claimant’s costs is made until defendant’s costs are agreed and an offset is formally agreed. 

The Road Ahead: What to Expect in 2025 and Beyond

Simplified Costs Budgeting Pilot Scheme (Effective April 2025)

From April 1, 2025, to March 31, 2028, a pilot scheme for Simplified Costs Budgeting, or “Costs Budgeting Light,” will streamline the process for claims under £1 million, particularly in Business & Property Courts and specific District Registries where QOCS applies. New forms (Precedent Z, ZR, ZT) are introduced.

In QOCS cases, claimants ordinarily won’t need to serve a budget discussion report. This reflects the principle that claimants generally don’t bear defendant’s costs. However, the court retains discretion to costs manage defendant’s costs, especially if fundamental dishonesty is alleged. Full costs management (Precedent H) can also be directed if necessary. While aiming for efficiency, this dual system could lead to initial procedural uncertainty. Robust initial budgeting and preparedness for detailed costs management remain essential. 

Ongoing Government Consultations: Extending QOCS?

The government is actively considering extending QOCS beyond personal injury and clinical negligence claims. A call for evidence on extending QOCS to discrimination claims closed on February 19, 2025, exploring options like cost-capping and direct QOCS application. 

The rationale is that the prospect of adverse costs is a “major barrier to bringing claims of all types”. Discrimination cases often involve a power imbalance similar to personal injury claims. Various bodies, including Disabled People’s Organisations, advocate for QOCS extension to disability discrimination cases. The Ministry of Justice also launched a broader call for evidence on equality law changes, including proposals for extending equal pay claims to ethnicity and disability, open until June 30, 2025. This indicates a wider governmental review of costs protection mechanisms in social policy. While the April 2023 reforms tightened QOCS in personal injury, these concurrent discussions about extending it to other areas signal a complex and potentially contradictory policy landscape. 

Emerging Case Law and Ongoing Satellite Litigation

The “seismic shift” introduced by the April 2023 QOCS amendments is expected to generate “further litigation concerning its interpretation and application”. Courts will continue to clarify the nuances of the new enforcement rules, Part 36 interaction, and mixed claims application. Recent judgments like Amjad v UK Insurance Ltd and ABC & Ors v Derbyshire County Council & Ors, Re Costs illustrate the judiciary’s active role. 

The concept of “fundamental dishonesty” remains a critical exception and will continue to be tested and refined. Any significant legislative change inevitably leads to “satellite litigation” , as rules are applied to diverse factual scenarios. These cases provide concrete examples, clarifying ambiguities and establishing boundaries. The true “mastery” of the post-2023 landscape will come from understanding this evolving body of case law, making continuous legal research critical for practitioners.  

Strategic Recommendations for Practitioners

To effectively navigate the post-April 2023 QOCS landscape in 2025, legal practitioners must adopt a multi-faceted and proactive strategic approach:

• Proactive Case Management and Early Valuation: Claimants’ solicitors must conduct rigorous and continuous case valuation from the earliest stages, understanding potential damages, recoverable costs, and how adverse costs might impact them. Defendants should ensure Part 36 offers are well-pitched and timely.
• Thorough Client Advice on Costs Risks and ATE Insurance: Transparency and comprehensive client education on increased financial risks are paramount. Detailed discussions about potential erosion of damages and recoverable costs by adverse orders should be standard. The necessity and benefits of ATE insurance must be clearly explained.
• Strategic Approach to Part 36 Offers: Claimants must approach Part 36 offers with extreme caution, understanding the implications of rejection. Carefully weigh the risks of failing to beat an offer against potential for a less favourable outcome and significant costs consequences. Defendants should leverage their enhanced Part 36 “bite.”
• Navigating Mixed Claims with Precision: For mixed claims, meticulously identify and assess all non-PI components. Prepare arguments for the court’s discretion under CPR 44.16(2)(b), emphasizing “inextricably linked” elements to advocate for limited costs enforcement, drawing on recent judicial interpretations.
• Continuous Monitoring of Evolving Case Law and Reforms: Commit to continuous professional development and vigilant monitoring of new judgments, particularly those addressing CPR 44.14 and 44.16(2)(b). Stay abreast of future government consultations or procedural pilot schemes like Simplified Costs Budgeting.
• Reviewing Funding Arrangements: Claimant solicitors should thoroughly review Conditional Fee Agreements (CFAs) and terms of business. These must adequately reflect new costs risks and potential for reduced client recovery due to defendant costs orders, ensuring transparency and compliance.

Conclusion

The April 2023 reforms to the Qualified One-Way Costs Shifting regime represent a fundamental rebalancing of the costs landscape in personal injury litigation across England and Wales. This shift has largely empowered defendants to recover adverse costs in previously protected scenarios and significantly enhanced the strategic potency of Part 36 offers. In 2025, legal practitioners must operate with heightened awareness of these changes, understanding their profound implications for enforcement against settlements and the renewed leverage held by defendants.

While courts retain vital discretion in mixed claims, the overarching trend points towards increased financial exposure for claimants. Mastering this post-April 2023 environment necessitates a proactive approach to case management, meticulous risk assessment, robust client advice, and an unwavering commitment to staying abreast of evolving legal interpretations and future procedural developments. The current era demands a more strategic and cautious approach from all parties involved in civil litigation, ensuring that access to justice remains a core principle while navigating the complex and often challenging costs consequences.

When a legal dispute ends, the question of who pays the legal costs is paramount. Typically, the losing party foots the bill for the winner’s reasonable costs. But what happens if the losing party can’t pay, perhaps due to insolvency? Or what if someone else was secretly pulling the strings or stood to gain the most from the litigation? This is where the powerful, and sometimes surprising, tool of a Non-Party Costs Order (NPCO) comes into play in UK civil litigation.

What Exactly is a Non-Party Costs Order (NPCO)?

An NPCO is an order made by a court in England and Wales that requires someone not formally a claimant or defendant in a lawsuit to pay some or all of the legal costs incurred by one of the actual parties. This power is a significant exception to the general rule that only the named parties are responsible for costs. 

• • • The losing party is a “man of straw” (unable to pay), and another individual or entity was the true instigator or beneficiary of the failed litigation. 
    • Individuals might try to use a company’s separate legal personality (the “corporate veil”) to engage in litigation without personal risk, especially if the company is under-resourced. 

The possibility of an NPCO also acts as a deterrent against frivolous claims or the improper use of corporate structures to avoid costs.

The Legal Foundations: Where Does This Power Come From?

The court’s authority to make NPCOs isn’t arbitrary. It’s primarily derived from:

1. Section 51 of the Senior Courts Act 1981: This is the main statutory source, granting courts broad discretion over who pays legal costs and to what extent. The crucial part, Section 51(3), states the court has “full power to determine by whom and to what extent the costs are to be paid.“
2. Civil Procedure Rule (CPR) 46.2: This rule sets out the essential procedural steps. It ensures fairness by requiring that the non-party:

• •  Is formally added to the proceedings for costs purposes only. 
  • Is given a reasonable opportunity to attend a hearing and make their case.

When Can a Court Make an NPCO? Key Principles

The court’s decision to issue an NPCO is highly discretionary and fact-specific. However, several core principles, largely developed through case law, guide this discretion:

• • • The Overarching Test: Is it “Just”? This is the single most important principle. The court will only make an NPCO if it is “just” to do so in all the circumstances of the case. What is considered just can evolve and depends heavily on the specific facts. 
    • “Exceptional” Circumstances: NPCOs are described as “exceptional.” This doesn’t mean they are incredibly rare, but rather that the case falls “outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense.” This was clarified in the influential case of Dymocks Franchise Systems (NSW) Pty Ltd v Todd.
    • Identifying the “Real Party”: A crucial factor is whether the non-party was, in substance, the “real party” to the litigation – the one truly controlling it, funding it for their own ends, or standing to be the main beneficiary.
    • The Triad: Funding, Control, and Benefit: Courts closely examine the extent to which the non-party:
      • Funded the litigation.
      • Controlled its conduct.
      • Stood to benefit from its outcome. “Pure funders” (those with no personal interest, control, or benefit beyond perhaps a standard commercial loan return) are generally protected, as affirmed in Dymocks. However, if funding is combined with significant control or benefit, an NPCO becomes more likely. 
    • Causation: There generally needs to be a link between the non-party’s actions and the costs being claimed. The case of Jobanputra v Modi highlighted causation as a “vital factor.” 
    • Impropriety or Bad Faith: While not always essential, if a non-party has acted improperly or in bad faith (e.g., pursuing a knowingly false claim), this can heavily influence the court’s decision to make an NPCO.

Who Can Be Targeted by an NPCO?

Several categories of non-parties frequently find themselves facing NPCO applications:

• • • Company Directors (especially of insolvent companies): This is a common scenario. If a director uses an insolvent company to litigate for their personal benefit (rather than the company’s genuine benefit), or acts with serious impropriety, they risk an NPCO. The Court of Appeal in Goknur Gida v Aytacli provided key guidance, stating that “something more” than just being a director is needed if the litigation was for the company’s benefit. This “something more” is often personal gain or serious misconduct. 
    • Litigation Funders: The landscape for commercial litigation funders has evolved significantly. The “Arkin cap” (which suggested a funder’s liability was limited to their investment amount) is no longer a strict rule, following cases like Davey v Money. Courts now have broader discretion, and funders who actively control or stand to gain substantially from litigation may face uncapped NPCOs. The recent Supreme Court decision in PACCAR has also introduced new complexities regarding the enforceability of some litigation funding agreements, though its direct impact on NPCO principles is still unfolding.
    • Insurers: The Supreme Court in Travelers Insurance Company Ltd v XYZ clarified the position for insurers. An insurer won’t typically face an NPCO just for funding its insured’s defence. Liability usually arises if the insurer becomes the “real defendant” or “unjustifiably intermeddles” in the litigation, causing costs. 
    • Credit Hire Organisations (CHOs): Insurers increasingly seek NPCOs against CHOs, especially where the claimant has Qualified One-Way Costs Shifting (QOCS) protection. The courts will look at the CHO’s financial benefit and control over the claim. 
    • Liquidators: A high threshold of impropriety or bad faith is generally required for an NPCO against a liquidator acting in their official capacity, as established in Metalloy Supplies Ltd v MA (UK) Ltd. 

The NPCO Application Process: A Brief Overview

Applying for an NPCO involves distinct procedural steps:

• • • Who and When: Usually, the successful party applies after it becomes clear the losing party can’t pay. Applications are ideally heard by the trial judge. Early warning to the non-party is advisable. 
    • Joinder and Hearing: The non-party must be formally joined to the proceedings for costs purposes and given a chance to be heard at a dedicated hearing (CPR 46.2).
    • Evidence: The applicant must provide evidence to support the grounds for the NPCO, demonstrating factors like control, benefit, and causation. This might include funding agreements, correspondence, or financial records. Disclosure orders can sometimes be sought to obtain necessary information. 

Key Risks for Non-Parties

The NPCO regime presents significant risks:

• • • Financial Liability: The most obvious risk is being ordered to pay substantial legal costs, potentially exceeding any initial investment.
    • Additional Legal Costs: Defending an NPCO application incurs further expense.
    • Reputational Damage: A finding of improper conduct can harm a non-party’s reputation.
    • Uncertainty: The discretionary nature of NPCOs means outcomes can be hard to predict.