Generally, the loser of litigation is expected to pay (part of) the winner's costs. There are many exceptions to the rule, and ultimately the court has discretion about who pays what – but the general principle that the loser pays the winner's 'adverse costs' is a significant factor in dictating strategy, managing risk, and deciding when to fight and when to settle.
A director of a company that funds litigation on behalf of the company (either by paying the solicitors directly, by making a loan, or by injecting capital into the company) can end up being personally liable not only for the costs of fighting the company's case, but also for the opponents' adverse costs.
So when can an opponent look to a director to pay those costs, and what should directors be aware of before deciding to fund litigation?
Russell-Cooke senior associate Tom Bond explains in Solicitors Journal that there are obvious points to bear in mind when litigating with a company at risk of insolvency.
Occupational hazard?: Directors’ responsibilities for lost litigation is available to read on the Solicitors Journal website via subscription.
Thomas is a senior associate in the insolvency litigation team. He deals with corporate insolvency and personal bankruptcy matters. He acts for insolvency practitioners, company directors, shareholders and investors, creditors and those facing financial distress. His work for insolvency practitioners includes acting for trustees in bankruptcy, maximising the return to creditors by investigating the bankrupt’s financial affairs and pursuing and realising assets which belong to the bankruptcy estate.
Thomas advises liquidators and administrators of companies on asset realisations, trust issues and contested claims against directors and third parties. He also acts for individuals facing bankruptcy problems themselves, liaising with trustees, dealing with creditors and exploring alternatives.