When a company loses a lawsuit and cannot, or will not, pay the winning side’s legal costs, the winning party is not always left empty handed. Singapore’s courts have the power to look past the corporate shell and order costs directly against a person who was never a party to the litigation at all: a director who orchestrated and funded the claim, a controlling shareholder who stood to gain from it, or a commercial funder who bankrolled it in return for a cut of the proceeds. This is the non-party costs order, and it is one of the sharpest tools available to a party left holding an unpaid costs bill against an empty or judgment-proof company.
This article explains how non-party costs order applications work in Singapore, who can be targeted, the procedure involved, and what business owners and directors should know before they fund or control litigation through a corporate vehicle.
1. What the Application Is
A non-party costs order is an order of court requiring someone who was not a formal party to a lawsuit to pay some or all of the costs that would otherwise be recoverable only from the losing party. It is the exception to the ordinary rule that costs follow the event only as between the litigants named on the court papers.
The classic scenario involves a company that brings or defends a claim, loses, and is then unable to satisfy the costs order made against it, often because the company is a shell, is insolvent, or was deliberately kept thinly capitalised. If a director or majority shareholder stood behind the litigation, funding it and directing its conduct for personal benefit, the winning party can apply to have that individual made personally liable for the costs instead of, or in addition to, the company.
The same mechanism applies to commercial litigation funders. Where a funder finances a claim in exchange for a share of any recovery, and the funded party loses, the funder can be exposed to a non-party costs order covering the winning side’s costs. This is distinct from the disclosure obligations that apply to funders during the course of litigation or arbitration, which are covered separately on this site: see our article on third-party funding in Singapore litigation and arbitration. This article deals specifically with the costs-order mechanics that apply once the underlying claim has failed, and it applies just as readily to directors and shareholders as it does to professional funders.
2. Legal Basis
The power to order costs against a non-party is now set out expressly in the Rules of Court 2021. Order 21, Rule 5 of the Rules of Court 2021, headed “Adverse costs orders against non-party”, provides that where it is just to do so, the court may order costs against a non-party if the non-party has:
- assigned the non-party’s right in the action to a party in return for a share of any money or property which that party may recover in the action;
- contributed or agreed to contribute to a party’s costs in return for a share of any money or property which that party may recover in the action; or
- contributed or agreed to contribute to a party’s costs and actively instigates or encourages that party to continue with the action.
Order 21, Rule 5(2) further requires that before making such an order, the court must give the non-party a reasonable opportunity to be heard, whether by way of an oral hearing or written submissions. This procedural safeguard exists because a person who has never been a party to the action is otherwise at risk of an adverse order being made without ever having had the chance to put forward a defence.
The term “non-party” is itself defined in Order 1, Rule 3 of the Rules of Court 2021 as any person who is not a party in the action, including a person who participates in the action because of a statutory duty or because they may be affected by the court’s decision. This is a deliberately broad definition, and it is what allows the courts to reach directors and controlling shareholders who never appeared on the court papers but who were, in substance, running the litigation.
Before the Rules of Court 2021 codified this power, Singapore courts had already developed the same jurisdiction at common law, most notably applying what is often called the “close connection” test: considerable weight is placed on whether there is a close connection between the non-party and the proceedings, for example because the non-party funded or controlled the litigation with a view to benefiting from it, or because the non-party caused the costs to be incurred in the first place. This line of authority, developed in cases such as TMT Asia Ltd v BHP Billiton Marketing AG (Singapore Branch), continues to inform how the courts exercise the discretion under Order 21, Rule 5 today. The Singapore International Commercial Court has since confirmed, in cases such as Kiri Industries Ltd v Senda International Capital Ltd, that courts remain slow to make non-party costs orders and will require cogent evidence of exceptional circumstances before doing so. The full text of Order 21 can be verified at the Rules of Court 2021 on Singapore Statutes Online, made under section 80 of the Supreme Court of Judicature Act 1969.
3. Who Can Apply
A non-party costs order application is typically brought by the party who has already obtained a costs order against the losing litigant but has been unable to recover payment. The most common applicants are:
- a successful defendant in a claim brought by an insolvent or thinly capitalised company, seeking to recover costs from the director or shareholder who funded and controlled the litigation;
- a successful claimant or defendant seeking costs from a commercial litigation funder who financed the losing party’s case;
- a party who has obtained judgment for costs but finds the corporate judgment debtor has no assets, prompting an application to pierce through to the individual who stood behind the company.
The non-party who may be targeted is not limited to directors and shareholders. It can include any person with a sufficiently close connection to the proceedings, such as a parent company directing the litigation of a subsidiary, a beneficial owner operating through a nominee company, or an individual who is not formally a director but who exercises de facto control. Where the underlying dispute itself concerned minority shareholder rights, for example, a claim brought under the oppression remedy under section 216 of the Companies Act, the same funding and control questions often resurface when costs come to be settled.
4. Step-by-Step Process
Step 1: Obtain and attempt to enforce the underlying costs order
A non-party costs order application is almost always made after the underlying litigation has concluded and a costs order has already been made against the losing party. The applicant should first take reasonable steps to enforce that order against the company, including a judgment debtor search, before moving against a non-party.
Step 2: Identify the non-party and the basis for liability
The applicant must identify the specific individual or entity who funded, controlled, or stood to benefit from the litigation, and gather evidence of that connection. This typically involves the company’s corporate structure, board minutes, correspondence showing who instructed solicitors, and any funding or profit-sharing arrangement. A company’s ACRA business profile is often the starting point for identifying the directors and shareholders behind the corporate litigant.
Step 3: File the application by summons with a supporting affidavit
Under Order 3, Rule 5 of the Rules of Court 2021, applications to court in an action must generally be made by summons supported by affidavit. The affidavit must set out the facts establishing the non-party’s close connection to the proceedings and why it would be just to make the order. The same procedural framework governs many other applications under the Rules of Court 2021, including applications to strike out a claim or defence and applications for production of documents under Order 11, both of which we have covered in earlier articles.
Step 4: Serve the non-party and allow a reasonable opportunity to be heard
Because Order 21, Rule 5(2) requires the non-party be given a reasonable opportunity to be heard, the application and supporting affidavit must be served on the non-party personally, who may then file an affidavit in reply setting out their opposition.
Step 5: Hearing and decision
The court hears the application, weighs the closeness of the connection between the non-party and the litigation, the extent of funding and control exercised, and whether it is just in all the circumstances to depart from the general rule that costs are recoverable only from parties to the action.
Step 6: Enforcement against the non-party
If the order is granted, the applicant may enforce it against the non-party in the same way as any other costs order, including by way of a statutory demand if the non-party is a company, or bankruptcy proceedings if the non-party is an individual.
5. Documents Required
| Document | Purpose |
|---|---|
| Summons for non-party costs order (Form 1, Rules of Court 2021) | Formally commences the application and identifies the relief sought |
| Supporting affidavit | Sets out the factual basis for the close connection between the non-party and the litigation |
| Copy of the underlying judgment and costs order | Establishes that costs have already been ordered against the losing party |
| Evidence of unsuccessful enforcement (judgment debtor search, statutory demand, winding up records) | Demonstrates that the company cannot or will not satisfy the costs order |
| Corporate records (ACRA business profile, board minutes, shareholder register) | Establishes the non-party’s relationship to the company and control over the litigation |
| Correspondence, funding agreements or instructions to solicitors | Shows the extent of the non-party’s funding, instigation or control of the proceedings |
| Affidavit in reply from the non-party (if contested) | Sets out the non-party’s response and any defence to the application |
6. Timeline and Costs
| Stage | Estimated Timeline | Estimated Cost (SGD, excluding disbursements) |
|---|---|---|
| Enforcement attempts against the company before filing | 2 to 8 weeks | S$2,000 to S$6,000 |
| Preparing and filing the summons and affidavit | 2 to 4 weeks | S$5,000 to S$15,000 |
| Service and affidavit in reply (if contested) | 4 to 8 weeks | S$5,000 to S$15,000 |
| Hearing and decision | 1 to 3 months from filing, depending on the court’s list | S$8,000 to S$25,000 for a contested hearing |
| Enforcement against the non-party (if order granted) | Varies; typically 1 to 6 months | Additional enforcement costs apply |
These figures are indicative only. Costs depend heavily on how strongly the non-party contests the application, the complexity of the underlying litigation, and how much documentary evidence is required to establish the connection.
7. What Happens After the Order
Once a non-party costs order is granted, the non-party becomes personally liable for the costs specified in the order, in the same way as if they had been a party to the original proceedings. The order can be enforced through the usual methods available under the Rules of Court 2021, including a writ of seizure and sale, a garnishee order, or, in appropriate cases, insolvency proceedings against the non-party.
Where the non-party who is ordered to pay costs is itself a company, for example a corporate funder or a related company that financed the litigation, the successful party may need to consider a further application if that entity also proves unable or unwilling to pay. Where the non-party disputes the debt arising from the order, similar considerations apply as in any other disputed debt situation, and readers may wish to review our related article on security for costs against a company in Singapore for the flip side of the same costs-protection landscape.
A non-party against whom an order is made may appeal in the same way as any other party affected by a court order, subject to the usual rules on permission to appeal.
8. FAQ
Can a director be personally liable for a company’s litigation costs?
Yes. If a director funded and controlled litigation brought or defended in the company’s name, and the company is unable to pay the resulting costs order, the winning party can apply for a non-party costs order against that director personally under Order 21, Rule 5 of the Rules of Court 2021.
Does the non-party have to be a shareholder or director to be at risk?
No. Anyone with a sufficiently close connection to the proceedings can be targeted, including a beneficial owner operating through a nominee, a related company, or a commercial funder, provided they funded, controlled or stood to benefit from the litigation.
Is a non-party costs order automatic once a company cannot pay?
No. It is a discretionary remedy. The court must be satisfied that it is just to do so, having regard to factors such as the closeness of the connection between the non-party and the proceedings, and the extent of that person’s funding, control or benefit. Singapore courts have made clear that they will not make such an order lightly and require cogent evidence.
Does the non-party get a chance to respond before an order is made?
Yes. Order 21, Rule 5(2) of the Rules of Court 2021 requires the court to give the non-party a reasonable opportunity to be heard, either at an oral hearing or through written submissions, before any order is made against them.
Can a non-party costs order be made against a foreign parent company?
In principle yes, provided the Singapore court has or can establish jurisdiction over the non-party and the evidence establishes the requisite close connection to the Singapore proceedings. Enforcement against a foreign non-party can, however, raise additional practical and cross-border considerations.
How can a company protect its directors and shareholders from this exposure?
Directors and shareholders who fund litigation through a company should keep clear documentation showing the company’s own decision-making, obtain independent legal advice before financing claims through a thinly capitalised vehicle, and consider whether security for costs or after-the-event insurance is appropriate before commencing proceedings that carry real litigation risk. Business owners who want a plain-English primer on Singapore civil procedure before speaking to a solicitor may find justfollowlaw.com a useful starting point.
Need Help With This Matter?
If your company is facing this situation, Raffles Corporate Services can assist with the groundwork, ACRA filings, compliance documentation, and coordinating with experienced Singapore law firms. For matters requiring court proceedings, we work with a panel of experienced Singapore law firms who offer cost-effective and efficient legal service and advice.
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This article is for general information only and does not constitute legal advice. For advice specific to your situation, please consult a qualified Singapore Advocate and Solicitor.
The Editorial Team, Raffles Corporate Services