Debarring A Party For Unpaid Costs Rests On Case Management Powers Under CPR 3.1(3)(b), Not The Hadkinson Jurisdiction

The High Court’s decision in Beech Hill Capital Limited v Lucas Duplan and Others [2026] EWHC 1390 (Comm) clarifies the jurisdictional basis for debarring orders where a party fails to pay interim costs orders.

Background

Beech Hill Capital Limited brought proceedings in the London Circuit Commercial Court against three defendants: Lucas Duplan (also known as Lucas Andrew Duplančić), Sea Marine Holding LLC (the Second Defendant), and Sea Marine Holding Ltd (the Third Defendant). The claim arose from financing agreements entered into between the Claimant and the Second Defendant, with the First Defendant alleged to be a personal guarantor. The Claimant also brought a claim for damages and/or specific performance against the Third Defendant, together with a conspiracy claim against all three Defendants. The First Defendant was, according to his own affidavit dated 29 January 2025, the director of both the Second and Third Defendants.

The proceedings had generated a series of court orders prior to the hearing before Sharif Shivji KC (sitting as a Deputy High Court Judge) on 5 March 2026. Three costs orders were of particular relevance. First, HHJ Pelling KC made an order dated 22 January 2025 for costs against the Defendants in the sum of £74,579. Second, David Quest KC (sitting as a Deputy High Court Judge) made an order dated 18 June 2025 requiring the Second Defendant to pay £2,200,000 plus interest, together with costs of £65,000. Third, Rosalind Phelps KC (sitting as a Judge of the High Court) made a costs order dated 17 November 2025 against the Defendants in the sum of £4,167. It was common ground that none of these orders had been paid, in whole or in part.

Two applications came before the court at the March 2026 hearing. The Defendants had issued an application on 30 October 2025 seeking, among other things, permission to amend the Defence, strike out and/or summary judgment, a declaration that the court lacked jurisdiction in respect of the Third Defendant, variation of HHJ Pelling KC’s order of 22 January 2025, and a stay of proceedings. The Claimant had issued its own application on 13 November 2025, seeking an order debarring the Defendants from advancing any applications before the court until they had rectified their breaches of the outstanding court orders.

There was an initial disagreement at the hearing as to whether the Claimant’s application had been properly listed. It had originally been listed for 23 January 2026 but was removed from the list shortly before that date due to judicial unavailability. The parties also disagreed as to the order in which the applications should be heard. The Defendants ultimately accepted that the Claimant’s application could be dealt with first, and that is the order in which the court proceeded.

An early point arose in relation to the costs orders themselves. Counsel for the Defendants, Mr Middleton, initially suggested that it was unclear whether the Defendants were in breach of the costs orders because no date for payment had been specified in the body of the orders. The court drew his attention to CPR r.44.7, which provides that it is not necessary for a costs order to specify a date for payment. Mr Middleton accepted the point and acknowledged that the Defendants were accordingly in breach of all three orders.

Costs Issues Before the Court

The central question before the court was whether, in circumstances where the Defendants had failed to comply with three costs orders totalling £143,746 (leaving aside the £2,200,000 judgment sum), the court should exercise its jurisdiction to debar the Defendants from pursuing or advancing any applications in the proceedings until those orders were discharged.

The Claimant’s application had been framed by reference to the jurisdiction established in Hadkinson v Hadkinson [1952] P. 285, under which a court may, in appropriate circumstances, refuse to hear a party who is in contempt of a court order where that contempt impedes the course of justice. However, the Claimant’s skeleton argument of 22 January 2026 also relied on a separate line of authority addressing the court’s case management powers where a party fails to pay a prior interim costs order. The cases cited in that regard included Crystal Decisions (UK) Ltd v Vedatech Corp [2006] EWHC 3500 (Ch), Michael Wilson and Partners Ltd v Sinclair and others [2017] EWHC 2424 (Comm), and Aramco Trading Fujairah FZE v Gulf Petrochem FZC [2021] EWHC 2650 (Comm).

A preliminary question therefore arose as to the appropriate jurisdictional basis for the order sought: whether it fell under the Hadkinson jurisdiction or under the court’s case management powers, and whether these represented two distinct lines of authority or manifestations of the same underlying jurisdiction. The court was also required to consider the appropriate form of any order made, including whether the debarring order should operate against each Defendant individually by reference to the orders made against that Defendant, or whether all Defendants should be prohibited from making applications until all outstanding orders had been discharged collectively.

A further practical question arose as to whether alternative enforcement mechanisms outside the proceedings were available to the Claimant. The First Defendant had provided a list of assets pursuant to the freezing order made by HHJ Pelling KC on 17 January 2025, and that list disclosed no assets within the jurisdiction for any of the Defendants.

The Parties’ Positions

The Claimant sought an order preventing the Defendants from pursuing any applications unless and until they had purged their contempt of the outstanding court orders. It relied on the Hadkinson jurisdiction and, in the alternative, on the court’s case management powers as articulated in the Michael Wilson v Sinclair line of cases. The Claimant’s position was that it was unjust to be required to incur further costs in responding to the Defendants’ applications while those orders remained unpaid. The Claimant also sought a formulation of the order that would prevent any applications by any of the Defendants until all Defendants had discharged all outstanding orders against them collectively.

The Defendants’ position, as set out in their written skeleton argument, was that the Hadkinson jurisdiction was engaged only where there was a deliberate and continuing contempt that materially impeded the administration of justice, where no other effective remedy was available, and where the making of the order sought was proportionate. They contended that the present case did not meet those criteria. They also argued that the Hadkinson jurisdiction should not operate so as to bar an application already properly before the court at the time the application was made. A further argument was advanced to the effect that, since the court’s previous freezing injunction contained an express liberty to apply to discharge or vary, it would be contrary to principle to bar a party subject to that order from exercising that right.

Notably, the Defendants did not advance any argument based on impecuniosity or stifling. No submission was made that paying the outstanding orders would prevent the Defendants from continuing to defend the proceedings, and no point was taken under Article 6 of the ECHR or by reference to access to civil justice. Mr Middleton accepted on behalf of the Defendants that the Second Defendant was in contempt of the court’s order and did not resist a debarring order against the Second Defendant in the terms sought. No evidence was filed by the Defendants in answer to the Claimant’s application.

The Court’s Decision

The court determined that the appropriate jurisdictional basis for the order was the court’s case management jurisdiction, as established in the Crystal Decisions and Michael Wilson v Sinclair line of authorities, rather than the Hadkinson jurisdiction. The judge noted that the Hadkinson jurisdiction, which is of considerable antiquity and derives originally from canon law, arises where there is an impediment to the course of justice and may result in the court entirely refusing to hear a party. The factual circumstances of the leading Hadkinson cases, which concerned a child removed from the jurisdiction in breach of a court order and the compelled disclosure of a journalistic source respectively, were of a different character to the present case. By contrast, the case management jurisdiction as developed in the Michael Wilson v Sinclair line of cases was much closer to the facts before the court.

The court set out a detailed summary of the applicable principles governing the exercise of the case management jurisdiction, drawing on Crystal Decisions (HC and CA), Michael Wilson v Sinclair, Musion Systems v Activ8-3D [2012] EWPCC 5, Siddiqi v Aidiniantz [2020] EWHC 699 (QB), and J Robbins Capital Partners Limited v Zamsort Limited [2024] EWHC 1990 (Comm).

The Applicable Principles

The judge identified the following principles applicable to the exercise of the court’s case management jurisdiction to impose conditions on a party for failing to pay prior costs orders:

First, the court can impose conditions on a party for failing to pay one or more prior costs orders in the same proceedings. This is a case management power which derives from the court’s inherent jurisdiction and its powers under CPR r.3.1(3)(b) and r.3.4(2)(c).

Second, this is the exercise of a judicial discretion and the court must consider all of the circumstances. In particular, the court will have regard to: (a) the policy behind the imposition of costs orders made payable within a specified period of time before the end of the litigation, namely that it applies discipline to the parties in terms of which issues they decide to contest before the court if they have to bear the cost consequences of unsuccessfully doing so, and it is on balance fairer that the reasonable and proportionate costs of an application should be met by whoever turns out to have been wrong; (b) the importance of ensuring that court orders are complied with and that it diminishes the court’s authority and standing if the court then overlooks non-compliance by a party in the same proceedings; (c) all of the available options including other enforcement mechanisms outside the proceedings and the full range of possible orders within the proceedings designed to secure compliance with the court’s previous order(s); (d) the procedural behaviour of the defaulting party (though it is not to be assumed that the mere existence of an adverse costs order accompanied by an obligation of immediate payment is itself indicative of any misconduct on the paying party); (e) the potential interference with a party’s right to a fair trial under Article 6 of the ECHR and the right to access civil justice, which will usually arise where a party contends that they lack the means to pay and that therefore the application of conditions would be a denial of justice and/or in breach of Article 6 (such a claim should be supported by detailed, cogent and proper evidence which gives full and frank disclosure of the party’s financial position including prospects of raising the necessary funds); and (f) the degree of connection between the unpaid costs in question and the claim or application in which the respondent wishes to participate.

Third, if the court decides to exercise its discretion, there are a range of options for orders within the proceedings. The court will be careful to ensure that its proposed order is proportionate. The options include striking out a claim or defence, debarring a defendant from defending, or staying a claim until costs are paid.

Fourth, there is no rigid rule that the court will necessarily impose conditions simply because there has been a non-payment of a costs order. This is because the court has a discretion which requires it to take into account all of the relevant circumstances. However, it can ordinarily be expected the balance will weigh in favour of imposing conditions where a party has failed to comply with a costs order and has no satisfactory reason for failing to do so (e.g. an inability to pay / stifling) such that the reasonable inference is that the failure to pay represents wilful disobedience of the court’s order.

Fifth, the court will usually make an order on an unless basis rather than simply ordering the immediate imposition of a sanction.

Application to the Facts

The judge considered all the relevant circumstances of the case. The Defendants were in breach of prior orders of the court which had been outstanding for some considerable time. The orders were all made at a time when the Defendants were legally represented, with solicitors on the record, and with submissions made by counsel or leading counsel on their behalf. No explanation had been offered for the Defendants’ failure to comply with those orders. The Defendants did not allege that they were impecunious and they did not allege that paying the orders would stifle their defence of the proceedings. They did not allege that the proposed order raised any concerns in relation to Article 6 or their access to civil justice.

The judge noted that the Defendants had not even sought to make a part payment of the sums due. Nothing had been paid at all. The Claimant had faced a series of applications from the Defendants which had not been pursued. As to the Defendants’ latest application of 30 October 2025, the judge noted that the Third Defendant’s application to challenge the court’s jurisdiction appeared unmeritorious, given that the Third Defendant had filed an acknowledgment of service dated 6 January 2025 but had made no application disputing the court’s jurisdiction within the period under CPR r.11, and under CPR r.11(5) was to be treated as having accepted that the court had jurisdiction to try the claim.

The Defendants had not identified any assets in the jurisdiction against which the Claimant could enforce. The judge considered whether there were alternative routes available to the Claimant in enforcing the outstanding orders outside of these proceedings but no viable options had been raised. It would be unfair to expect the Claimant to incur expenses dealing with the Defendants’ applications in circumstances where the Defendants had apparently deliberately chosen not to discharge costs orders payable to the Claimant.

There was a significant connection between the unpaid orders, which were made in relation to the worldwide freezing order, summary judgment and the application to adjourn the CMC, and the pending applications. The pending applications related to the same substantive subject matter and were part of the continuum of this litigation. The Defendants had been on notice since November 2025 that the Claimant was seeking an order in this form. They had had ample time to discharge the outstanding orders.

The judge considered that a limited form of debarring relief, preventing the progress of any applications, was reasonable and proportionate, considering the circumstances of the case, and was consistent with Article 6, ECHR. In support of that view, the judge took into account the Defendants’ conduct and noted that the proposed order did not prevent the Defendants participating in the litigation but merely prevented them from issuing or pursuing any applications. The Defendants would still be able to defend the claim substantively. Instead, the effect of the order would be that the Claimant would not face any applications issued by the Defendants unless the Defendants discharged the outstanding court orders.

The Form of the Order

An issue arose in the process of drawing up the order as to whether the court should prohibit each Defendant from making an application unless they paid the orders applicable to them or whether all the Defendants should be prohibited from making an application unless and until all Defendants have discharged all orders. This was not a point that was taken by the Defendants at the hearing (at least not in the way that it has since been articulated). It was one that the Defendants raised after the event. The Claimant contended that it sought a formulation of the order that prevents any applications by the Defendants until all Defendants have discharged all orders against them.

The judge was content to make an order of the former nature: that the prohibition operates against each Defendant individually unless and until that Defendant has discharged the orders made against it. The judge was prepared to hear argument from the parties on whether the order should be extended so as to apply in the way that the Claimant contended, and if so persuaded, could make a further order to that effect.

The judge had considered whether the order also ought to contain a liberty to apply in the event that there was a material change in circumstances. The parties agreed the following text: “The Defendants shall have liberty to apply in the event of a material change of circumstances, but (i) such circumstances must be directly relevant to the Defendants’ ability to comply with the outstanding orders, (ii) the Defendants must give no less than 14 days’ written notice to the Claimant before making such application, and (iii) the Defendants are not permitted to advance, under the guise of this liberty to apply, any application that is or was the subject of the debarring order made herein.”

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