England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HONOURABLE MR JUSTICE EDER

		Royal Courts of Justice Strand, London, WC2A 2LL
		13/11/2014

Costs Judgment

Lord Justice Vos:

Introduction

1. We handed down our judgments in the main appeal on Friday 31^st October 2014. I will use the same abbreviations as were used by Jackson LJ in his main judgment. At the hearing of the appeal, we agreed that, after judgment, we would deal in writing with RT's 12^th ground of appeal. Only the first part of that ground is now pursued. That relates to the order made by Eder J requiring RT to pay the SFO's costs of the application before Eder J on an indemnity basis.
2. The judge's reasons for awarding indemnity costs were as follows:-

"This is a difficult question that arises under CPR 31.22 as to the proper approach of the court with regard to an order for costs. As I said in my review team judgment, this kind of application was made at the request of Mr Robert Tchenguiz solely for his benefit in relation to extraneous proceedings. Therefore, looking at CPR 44, it seems to me this does take this application out of the ordinary run of things. In those circumstances, it seems to me that the general approach ought to be that, where an applicant makes an application under CPR 31.22, that in principle the other party should be entitled to a full indemnity in respect of his costs, of course only for that party's reasonable costs. Anything less than that would expose that other party to the risk of having to pay costs in those circumstances in relation to an application that had nothing to do with the existing proceedings, but was, as I say, for an extraneous purpose."

The parties' submissions

3. RT submits, in outline, that the principle expressed by the judge to the effect that the disclosing party in receipt of an application under CPR Part 31.22 should obtain indemnity costs is flawed for 3 reasons, which I have summarised in my own language:-

i) The respondent to an application under CPR Part 31.22 can always avoid court costs by consenting to the application as envisaged by CPR Part 31.22(1)(c), and the law should encourage such reasonable behaviour.

ii) The premise of an application under CPR Part 31.22(1)(b) is that it is in the interests of justice that relief should be granted. A principle that emasculated the court's discretion in applications that related to matters extraneous to the current proceedings would produce arbitrary results.

iii) Since the opponents to an application under CPR 31.22 are likely to be hostile to the applicant, the rule proposed would encourage unnecessary litigation. This is the obverse of the first point.

4. In support of the order that the judge made, the SFO points to an analogy with Norwich Pharmacal applications where the general rule is that the applicant should pay the costs of the disclosing party (see Totalise plc v. The Motley Fool Ltd [2002] 1 WLR 1233 at paragraphs 29-30 per Aldous LJ). The SFO submits that if a person is made a respondent solely to assist some private interest of the applicant in a different matter, then it would generally be wrong for the respondent to bear any costs whatever the outcome. This, the SFO submits, was just such a case, and one where it was entitled to oppose the application in the public interest.

The CPR

5. CPR Part 44.3 governs the basis of assessment of costs, and guidance is contained in relation to the former rule at note 44x.4 of the White Book 2014. That guidance remains relevant save insofar as it is altered by the changes to CPR Part 44.3 on 1^st April 2013, relating primarily to proportionality.
6. The passage that follows is taken from note 44x.4.3, and does not seem to me to have been materially affected by the 1^st April 2013 alterations to CPR Part 44.3:-

"The Court of Appeal declined to give guidance to judges intending to make orders for costs on the indemnity basis. There was an infinite variety of situations that might go before a court justifying the making of such an order. The court could do no more than draw the judge's attention to the extensive width of the discretion provided in CPR Pt 44 . Issues of costs ought to be left to a judge's discretion following the rules provided in the CPR. … The making of a costs order on the indemnity basis would be appropriate in circumstances where the facts of the case and/or the conduct of the parties was such as to take the situation away from the norm: Excelsior Commercial and Industrial Holdings Ltd v Salisbury Ham Johnson and Betesh & Co v Salisbury Hammer Aspden & Johnson [2002] EWCA Civ 879. … It is not always necessary to show deliberate misconduct, in some cases unreasonable conduct to a high degree would suffice. …

Where the court is considering whether a losing party's conduct is such as to justify an order for costs on the indemnity basis, the minimum nature of the conduct required is, except in very rare cases, that there has been a significant level of unreasonableness or otherwise inappropriate conduct in its wider sense in relation to that party's pre-litigation dealings with the winning party, or in relation to the commencement or conduct of the litigation itself."

Discussion

7. I would want to make it clear that there is and should be no general principle applicable to all applications under CPR Part 31.22 to the effect that indemnity costs will be awarded against an applicant. There are many different kinds of such applications, and the general rules as to costs ought to be applicable to them as much as they are to any other application before the courts. Insofar as the judge adumbrated such a special general principle applicable to applications under CPR Part 31.22, I think he was wrong.
8. That said, in my judgment, the judge had ample grounds for awarding indemnity costs in this case. I read the "general approach" to which he alluded as a superfluous statement of a perceived consequence of the decision that he had already made, rather than the reason for it. In this case, the application was indeed one that was extraneous to the extant proceedings, and required a huge amount of effort from the SFO in terms of liaison, checking and legal consideration. It was, as the SFO submitted, fully entitled to resist the application as it did successfully in the public interest, and these factors took the case outside the norm. The judge, as it seems to me, was entitled to exercise his wide discretion in the way that he did, and I would not be minded to interfere with that discretion. I rather think from the way he expressed his judgment that, in the result, he considered the application overblown and inappropriate. If that was his view, I agree with it.
9. I would dismiss RT's appeal against the award of indemnity costs.

Lady Justice Sharp:

10. I agree.

Lord Justice Jackson:

11. I also agree.