England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		7 Rolls Building Fetter Lane London EC4A 1NL
		9 October 2012

MR JUSTICE MORGAN:

1. I will now deal with the costs of the various parties incurred in connection with this litigation. Although a formal order has not yet been drawn up following the judgments which have been given, dealing with the substance of the litigation, I think I can describe quite briefly the outcome of this dispute. I have held that the claimants are entitled to be paid a sum of £1,043,926 by WCL pursuant to the joint venture agreement and the side agreement. I have also held in relation to the claim which the claimants brought against Mr Barnett personally, that there should be no order that he should pay equitable compensation to the claimants.
2. I was given some information about the costs incurred by both sides to date. On the claimants' side, they have incurred legal costs of £2.1 million. On the defendants' side (treating WCL and Mr Barnett together for this purpose), they have incurred costs of £1.25 million. The total expenditure on legal fees in relation to this dispute has been £3.35 million. In other words, the claimants spent £2.1 million chasing a figure which turns out to be £1 million and was probably never going to be very much more than £1 million, and the defendants spent £1.25 million defending a claim which has ended up with a recovery of £1 million.
3. I mention these matters because the question of proportionality of this expenditure may well be a very important topic and I am asked, to some extent, to deal with the proportionality of the expenditure, in that, as I will explain, I am being asked to award costs on the indemnity basis rather than on the standard basis.
4. The positions taken by the parties can be summarised as follows. Turning, first, to the claimants' position, the claimants say that WCL should pay 100 per cent of the claimants' costs, that is for the entirety of the proceedings, and that they should be paid on the indemnity basis. That order, in practical terms, would not lead to the claimants recovering very much from WCL. WCL is in liquidation. It is insolvent. I have referred in an earlier judgment to the very partial information I have as to the extent of the insolvency and the amount of any dividend.
5. Turning to the claim against Mr Barnett, the claimants say that the right order here is that Mr Barnett should pay 100 per cent of the claimants' costs, that is throughout the entire period of the litigation, and that they should be assessed on the indemnity basis.
6. The position put forward on behalf of the defendants can be summarised as follows. WCL says that the claims to which it was a party or where it was involved, can really be divided into three categories. There are costs relating to the determination of net profit. There are then costs in relation to the side agreement arguments and, apart from those two categories, everything else is in a residual category, i.e. the rest of the issues. It is then submitted on behalf of WCL that, if one looked at the amount of the expenditure on WCL's part in relation to these three areas of dispute, 10 per cent of the expenditure could be safely allocated to the taking of the account, the determination of net profits, 10 per cent could be allocated to the side agreement issues, and 80 per cent to the rest.
7. As to who should bear these percentages, it is said on behalf of WCL that there should be no order as to the 10 per cent of the costs referable to the taking of the account. As to the 10 per cent spent on the side agreement, it is accepted that WCL has lost the issue about the side agreement and should pay the claimants' costs. As to the rest, the 80 per cent taken up by the remainder of the issues, WCL says that in this case the claimants essentially lost all those points and so the claimant should pay WCL's costs in that respect. So if there is no order as to costs as to 10 per cent, WCL pays 10 per cent for the side agreement and receives 80 per cent for the rest, the net result, WCL submits, should be that WCL receives from the claimants 70 per cent of its costs and these costs should not be on the standard basis, but should be on the indemnity basis.
8. Turning to Mr Barnett's stance in the submissions made on his behalf, he submits that he should have his costs, 100 per cent of them, for the entire period of the litigation and they should be on the indemnity basis. So there is no meeting of minds at all in relation to these submissions made to me about the outcome of costs. The arguments on costs have ranged widely. This has been lengthy litigation; it has been hard-fought; it has given rise to many issues. It has also given rise to many interlocutory steps. The costs, as I have described, are very substantial. In the course of submissions many points have been made, not all of which it is appropriate for me to deal with separately. Indeed, apart from the range of the argument, the argument went to places where arguments on costs have not previously gone and submissions of an entirely novel character have been made which, it will be seen, will not find favour.
9. It seems to me that the most constructive thing to do is to deal with the claimants' claims against WCL, say one or two general things about that, and then indicate the conclusion I have reached, giving my essential reasons and dealing thereby with the substantial points which have been raised. I will then deal with the claimants' claims against Mr Barnett and follow a similar course.
10. Starting then with the position between the claimants and WCL, the claimants have looked at costs throughout the litigation in a single way. They have not divided up the litigation as to one period and then another period, whereas WCL in its submissions have divided the period of the litigation by reference to the various pleadings at various stages. This has meant that I have had to do some legal archaeology in looking at the pleading which was the relevant pleading at the trial, and the pleading on which I gave my first judgment. That pleading was amended four times, and therefore there are various periods in the life of the litigation when the case was put one way and then put another way. I think I ought to describe how matters started and then how matters developed, but I will do this as briefly as I can.
11. The original Particulars of Claim were served in around April 2009. There was a lengthy pleading of the relationship between the parties, the agreements made, the history of the development and many matters of detail. Eventually, at paragraph 57, we come to the pleading as to claims against WCL and/or Mr Barnett, and indeed Mr Harney, but I do not deal with his position.
12. Paragraph 57 extended to some two and a half pages of pleading (perhaps a little less) but none of that was investigated at the trial because, by the stage of the purple amendments to which I will refer, these allegations were no longer pursued.
13. Turning to paragraph 58 under the heading "Breach of trust and/or breach of fiduciary duty", significant parts of paragraph 58 fell away and were not the subject of argument at the trial, and certainly not the subject of judgment following the trial. Some parts of paragraph 58 did not fall away, but speaking generally, there are places in paragraph 58 where the pleading survived, but it was not appropriate for the judgment to deal with the matter. An example is paragraph 58(1)(i). That was never withdrawn by a later amendment, but there is no ruling upon it. The same can be said about one or two other places in paragraph 58.
14. Starting with paragraph 59, the case about the claim under the side agreement is pleaded. In paragraph 63 there is a claim to recover a sum of money which is £325,000 plus £470,000. The next bit of the pleading starts at paragraph 64, claims against the fourth defendant, Westbury Properties Limited. These were all removed, paragraphs 64 to 71, so they were not dealt with at the trial and were not the subject of the judgment. Following on between paragraphs 72 and 73, there is a claim in conspiracy against all defendants, therefore, including WCL and Mr Barnett. Some of this was removed by amendment but there was, in the end, no ruling on the matter as against either WCL or Mr Barnett. As to loss and damage starting at paragraph 74, the original pleading was significantly altered and parts were removed.
15. That was how matters started. The next development was that on 8 September 2009, the pleadings were amended in red. The essential point being made in the red amendment was that there had been a misrepresentation made by one or more of the defendants as to the likely profitability of the development and that had caused a loss to the claimant. This was essentially in the alternative to the claimants' principal case, although not at that time pleaded, which was they were entitled to more than the base figure. But if it should turn out that they were not entitled to more than the base figure, they said they had been tricked, effectively, into electing for a net profit which was less favourable than the base figure.
16. Those red amendments were made, as I say, in September 2009. They were not subsequently withdrawn. They came forward for trial. There were extensive submissions made on the subject of the red amendments. There was evidence given on both sides about the alleged trick or misrepresentation, but in the course of closing submissions, it was clear that it would not be appropriate for the court to give a judgment on this alternative case unless it emerged that the alternative had to be addressed. In the event, that did not emerge. The judgment does not deal with the subject matter of the red amendments.
17. The next stage in the life of the pleadings takes one to the green amendments. The green amendments were made on 18 February 2011. There are many tidying up amendments to which it is not necessary to refer. At paragraph 53A, there is a set of paragraphs under the heading "Financial irregularities". Then from paragraph 56I onwards, there are paragraphs under the heading "Determination of the net profit". That was a subject that went to trial, took a very considerable time at trial, involved a considerable expense for both parties and was dealt with comprehensively, I hope, in the judgment which I gave. That was the state of the pleading pursuant to the green amendments, as I say, on 18 February 2011.
18. The process of amending continued. Not very long before the trial itself there were drafted the purple amendments. The purple amendments did add some new text, but the thrust of the purple amendments was to remove allegations that had previously been made. It was certainly the claimants' stance that the reason was, not that the earlier pleading would fail, but that the earlier pleading had been overtaken by subsequent events, or subsequent disclosure of information that had earlier been undisclosed, and the claimants' desire was to focus the claim, they said, on what really mattered.
19. As to the position at the trial, following those purple amendments, the many issues were summarised at paragraph 54 of my judgment of 25 January 2012 and I then dealt with the various issues arising. Looking at the table of contents to that first judgment, there were issues about the calculation of net profits and many, many sub-issues going to that topic. There were issues as to the position under the side agreement. It was said by the defendants that the side agreement was a sham and could not be given legal effect. I held otherwise and, holding otherwise, there were then difficult points of interpretation of the side agreement which had to be resolved.
20. There were then issues as to the existence of implied terms in the joint venture agreement but I held that there were no such implied terms as alleged.
21. The next topic which was discussed in the judgment was the possibility that WCL and Mr Barnett owed extensive fiduciary obligations to the claimant. For the reasons I gave, I did not accept the claimants' case as to the breadth of such fiduciary obligations, but I did not accept the defendants' case that there were no such fiduciary obligations. I identified, as best I could, the extent of the fiduciary obligation which I considered to be appropriate. That left over issues as to the possibility of a breach of fiduciary obligation and the assessment of equitable compensation. Those matters were argued over two days, leading to a judgment I gave on 6 September 2012.
22. The matters dealt with in that second judgment are, I fear, complex and it may be unhelpful to attempt to summarise the detailed reasoning for fear that, by summarising it, one will distort the reasoning. But with that qualification I would indicate that the main reason that the ultimate answer was that Mr Barnett did not have to pay equitable compensation, was that the process of this litigation had led to WCL expending very substantial sums on its legal defence, which I held it was entitled to do, and that meant that the company was significantly insolvent in any event, quite apart from the matters of which complaint had been made. Further, the matters complained of against Mr Barnett were essentially that he had taken money out of WCL, but by the time of my judgment in January 2012, and by the time of my judgment in September 2012, Mr Barnett had returned money to the company, in the way in which I analysed the position.
23. That was the result and those are the steps on the way to that result being produced.
24. There is a major issue, as I understand it, between the parties as to what I am to do with issues that were raised but not pursued. Mr Hill on behalf of WCL and Mr Barnett says if issues were not pursued they were abandoned, so the claimant must bear the costs of abandoning those issues. Mr Caplan on behalf of the claimants says they were not abandoned because they were weak or liable to fail; they were abandoned because the action took its course, further events occurred, further disclosures were made.
25. My assessment is that it is not right to approach these undecided questions on the basis that they have been abandoned and the claimants should bear the costs. My assessment is that, what I have here is a whole series of allegations which have been raised but not decided, not decided for reasons that do not justify orders for costs against the claimants, not decided because things moved on and further disclosure was given by the defendants. I should say that the defendants were uncooperative at many stages during the litigation in providing information that was essential to the resolution of the matter. Indeed, I have already commented on the fact that Mr Barnett said a number of completely inconsistent things about what the facts were. So I think it would be quite unjust to treat this case as one where the claimants have brought forward cases and then abandoned them, leading to an order for costs against them.
26. Although the case was not cited, I have reminded myself of what was said very recently in the Court of Appeal in the case of R (on the application of M) v Croydon LBC [2012] 1 WLR 2607. That case was a claim for judicial review where perhaps different considerations apply, not least arising out of the judicial review protocol. But in the course of a detailed judgment, the then Master of the Rolls dealt with costs in ordinary civil litigation. He dealt with that starting at paragraph 44 and then at paragraph 47 he dealt with costs after settlement before a trial in ordinary civil litigation. Some of the remarks made in those places can apply, I find, to a situation like the present where, by reason of supervening events or supervening disclosure of information, issues that were once raised were not in the end determined
27. What is the message from these passages? I consider that if I felt that I could form a confident view as to what the outcome would have been of issues I have not determined, I could act upon that confident view in dealing with the costs of those issues. However, if I am not able to form a confident view about those matters then I am not able to decide how the costs of those matters should be dealt with . I do not know the event and the fundamental rule, perhaps not an exhaustive rule but certainly an important starting point, is that costs should follow the event. In such a case, therefore, one should consider whether no order as to costs is the most just order to make in the circumstances.
28. Having described the history of the pleadings and having described the principles which it seems to me I ought to apply, I can then go to the different periods covered by the different pleadings.
29. From the start of the action until 8 September 2009, the matter was governed by the original, that is unamended, pleading. I have referred to the various issues which were raised and which were not in the end determined. One of those was the claim under the side agreement. Other matters did not come forward for ultimate decision. However, in that period from the start of the action until 8 September 2009, it would, I think, be wrong to say that any costs expended on matters not relating to the side agreement, were effectively unproductive. What has happened in this case is that the original pleading was a very extensive pleading, setting out the background. Most of that pleading was relevant to the issues at the trial and, without any detailed information one way or the other, it seems to me highly likely that the work which was done in the period up to 8 September 2009, at least in part, continued to be beneficial.
30. My provisional view, and I will explain in a moment why it is only provisional at this stage, is that, if I were to say that WCL should pay 50 per cent of the claimants' costs during that period, that would not be ungenerous to the claimants.
31. Turning then to the period governed by the red amendment, from 8 September 2009 to 18 February 2011, what happened which was different during that period was that there was now in the case a very significant plea of misrepresentation. That plea was put forward by reference to many detailed and particularised matters. It is likely that the conduct of the action involving that plea will have resulted in significant costs dealing with the red amendments. However, I have not determined who was right and who was wrong in relation to those red amendments. It might be said that, if I thought 50 per cent of the claimants' costs in the initial period should be recovered, I should drop the percentage below 50 per cent, because the red amendments have extended the scope of the claims and therefore the nature of the work on which monies have to be spent.
32. However, as against that there is the point that the red amendments were made because the claimants were seeking to guard against an outcome whereby the figure they recovered for net profits was lower than the base figure provided for in the agreement. The reason they were guarding against that possibility, was that the defendants were contending that was indeed going to be the outcome. That contention by the defendants was wholly unjustified. If they had never made it, if they had always accepted that the net profits were higher than the base figure or the claimants' share of net profits were higher than the base figure, it would not have been necessary to go into the red amendment territory at all.
33. My provisional view again is that a figure of the order of 50 per cent of the claimants' costs should be recoverable from WCL during that period.
34. Then we come to the green amendments to which I have referred. By this stage, there is in the claim, not only the issues about the side agreement, because they were there at the outset, but also the issues as to net profits. I have referred to the judgment I gave. I have referred to the time which was taken up with issues as to net profits. I should then I think form some sort of assessment as to the degree of success and failure of the parties from the time of the green amendments onwards.
35. There was some degree of success and some degree of failure each way as regards the computation of net profit. However the claimants were overwhelmingly more successful than the defendants in relation to the computation of net profits. I also bear in mind the various offers which were made by each party, whereby the matter could have been disposed of with the claimants being entitled to receive smaller sums than I have in the event held they were entitled to receive. I will return to these offers later when I deal with the submissions made to me by Mr Hill.
36. So far as the side agreement was concerned, that was a major bone of contention, both as regards the evidence in support of the defence of sham and as regards the questions of construction. The claimants succeeded I think on every point in relation to the side agreement. So far as the implied terms were concerned, the defendants won on that, in particular WCL won on that. Insofar as the fiduciary duties were concerned, there was some degree of success and failure but more significantly the claimant established a fiduciary duty on the part of WCL and, so far as relevant at this stage in the judgment, Mr Barnett. The questions of breach and damages were not really relevant against WCL because the claim against WCL in the end was a money claim under the joint venture agreement and the side agreement.
37. Mr Caplan on behalf of the claimants would say, quite apart from what he would say about the earlier periods, that there can be no argument but that the claimants should have their costs from the time of the green amendments onwards. He submits that the fact that there were some points on which the claimants did not prevail, should not deflect me from giving the claimants their costs. He cited the decision of Gloster J in Kidsons v Lloyds Underwriters [2007] EWHC 2699 Comm, in particular what she said at paragraphs 10 and 11, citing earlier authorities that dealt with that subject matter.
38. In my judgment, from the time of the green amendments onwards, as between the claimants and WCL, the claimants were the winners and should have 100 per cent of their costs against WCL.
39. I have indicated, therefore, a provisional view that the costs up to the green amendments should be such that the claimant gets a figure of the order of 50 per cent and after the green amendments 100 per cent. Before turning a provisional finding into something more final, I ought to factor in the suggestion made by the claimants that the costs should be on the indemnity basis.
40. The parties did not disagree about the legal principle I should apply, but they were very far apart as to its application to the facts of this case. I note, however, that both sides ended up saying that costs in their favour should be on in the indemnity basis. Indeed, it is becoming really rather common for applications for costs on the indemnity basis to be made, although as the authorities show, a judge should only award costs on the indemnity basis when there is something significant to take the case out of the norm.
41. The standard basis, as the name suggests, is intended to be the normal result. As regards guidance as to when one does and when one does not award costs on the indemnity basis, the decisions of the Court of Appeal to date stress that it is not appropriate for there to be firm guidelines. Insofar as there is anything to guide the judge at first instance it is this, that the case must be truly out of the norm before one makes an award of costs out of the norm. I am familiar with the many decisions in the books dealing with awards of costs on one basis or another.
42. As I have said on earlier occasions, when asking myself the question: is the conduct of the paying party at such a level of unreasonableness or inappropriateness to justify an order for indemnity costs? I have found it useful to remind myself as to why I am asking the question. The differences between standard and indemnity costs involve two points, one the burden of proof, the other the question of proportionality, so one must surely ask the question: is the conduct bad enough to justify a decision to remove from the paying party the benefit of an order on a standard basis, in particular, the benefit of proportionality. Proportionality is a very important principle in relation to costs under the Civil Procedure Rules. The likely changes to the Civil Procedure Rules are not in any way going to diminish the significance or proportionality. The policy considerations behind the requirement of proportionality and the weight to be attached to proportionality, have been emphasised more than once, in particular in the case of Lownds v Home Office [2002] 1 WLR 2450, in particular at paragraphs 8 to 10. This question of proportionality, it seems to me, should loom very large in this case where I have described the outcome of the litigation and the level of the legal costs which have been expended.
43. Mr Caplan on behalf of the claimants has taken me with care and detail through the criticisms he makes of the conduct of the defendants. In the case of WCL it is the conduct of Mr Barnett as a director of WCL that he points to. I was justifiably critical of Mr Barnett's behaviour, his honesty and his truthfulness when I gave my judgment. I do not withdraw any part of the criticism I then felt and still feel was justified. However, my conclusion is that I should not award costs against WCL on the indemnity basis. I have indicated that, if I were to give the claimants their costs at 50 per cent up to the date of the green amendments, I am not being ungenerous, having regard to the number of points they then raised which have not been determined. Further, if I give the claimants their costs at 100 per cent after the date of the green amendments, they are benefitting, perhaps very significantly, from the somewhat pro-claimant rule which I have applied following the earlier decisions.
44. My assessment is that, if I were to add to the 50 per cent and the 100 per cent, an assessment on the indemnity basis, I would fail to respect the principle of proportionality and I would go too far in terms of producing an even-handed, balanced response to all the circumstances of this case. Thus it is that my provisional view that there should be 50 per cent of the claimants' costs up to the date of green amendments and 100 per cent thereafter becomes my final conclusion and those costs are to be assessed on the standard basis.
45. I ought to deal with one or two points made to me by Mr Hill. As I have indicated, he submits that WCL should receive 70 per cent of its costs and on the indemnity basis from the claimants. I am not minded, for the reasons I have already given, to take that view of the case. However, I should deal with some of the particular points he makes.
46. The first point he made was that the costs incurred in relation to the determination of net profits should not be a matter for court determination. They are contractually provided for by the joint venture agreement. Indeed, he goes further. He says that those costs should be deducted from profits to produce a net profit figure. That point was not argued at the trial and Mr Hill has not drawn my attention to any provision in the joint venture agreement which has that effect. Mr Caplan yesterday showed me the relevant provisions. They did not seem to me to have that effect. It seems to me it is a thoroughly bad point. My view as regards the net profits is it is absolutely clear that the claimants should recover their costs of all of the litigation in that respect by way of an order for costs. Further, the suggestion that 10 per cent of the litigation costs related to the assessment of net profits and 10 per cent related to the side agreement, I regard as wildly inaccurate figures. I could not possibly agree with those allocations.
47. The other general submission Mr Hill made was that, although the claimants are to have a judgment entitling them to more than £1 million from WCL, and although WCL never offered to pay anything like £1 million in an open letter or in a without prejudice save as to costs letter, I should take the view that the claimants have failed and WCL has succeeded in this litigation. That imaginative submission was developed this way. It was submitted that the claimants will see very little of the £1 million from WCL because WCL is insolvent, and they will see nothing from Mr Barnett, because Mr Barnett has not been ordered to make any payment. Therefore, the claimants have nothing out of this litigation or next to nothing, whereas modest sums were offered by the defendants globally.Tthe claimants would have been better off taking that money and therefore they should bear the costs of this litigation following their refusal of that offer.
48. It seems to me that is wholly unorthodox. When one considers whether a claimant has done better than an offer, one looks at the amount of the judgment the claimant has secured and compares it with the amount of the offer. One does not take the offer at full 100 per cent face value, but yet scale down the claimants' judgment by reference to the likely recovery in practice. Indeed, I do not know how it could be done. Mr Hill submits that the claimants are going to get very little from WCL, but how much will they get and is it very little? That is going to depend upon the dividend which will be paid by WCL in liquidation, on which I have not been given any evidence and on which I could not make any reliable findings. Even if the dividend was relevant, is it the dividend today or is it the dividend at the time the offers were made, which is going to be significantly different? Further, is it the dividend before I make the order for costs against WCL or afterwards? Having decided I will make an order for costs against WCL, will that affect the amount of the dividend? I have to say that that submission is entirely unfounded.
49. Accordingly, I adhere to the views I have now expressed as to what should happen the costs as between the claimants and WCL.
50. Turning then to a matter which, in terms of actual recovery in practice may be a more important matter, the dispute between WCL and Mr Barnett, Mr Barnett's case is very straightforward. He says that at the end of this very lengthy and expensive litigation, there has been no effective order against him. He is the winner. Costs follow the event, which means that he should recover his costs and then it is said that those costs should be assessed on the indemnity basis.
51. The case for the claimants is that, on the way to the court reaching its ultimate decision against Mr Barnett, the court had to work its way through a whole series of questions and issues, many of which Mr Barnett fought and many of which he lost, and to give Mr Barnett his costs in those circumstances, would be wholly inappropriate, because his mode of defending the claim has put the claimants to much greater expense than would otherwise be justified. The claimants refer in particular to the fact that the issues as to the net profits were not just an issue between the claimants and WCL but affected Mr Barnett's position also. As to the side agreement, the same can be said. I have held that Mr Barnett owed a fiduciary duty in a case where the claimants said he owed a wider one and Mr Barnett said he owed none.
52. Then there is the question of breach. In my second judgment, I did not make a finding that Mr Barnett was then in breach, and indeed, I drew back from making findings about whether he would have been considered to have been in breach at an earlier point in time. I do not intend, for the purposes of deciding the costs, now to make a finding as to whether Mr Barnett was in breach at an earlier point in time, but it must be recognised that the ultimate result where I was persuaded to hold there should be no order against Mr Barnett, depended on a whole combination of circumstances, in particular, the very heavy expenditure on the costs of defending this claim, which properly fell on the company, which rendered the company not worth suing and which, in terms of causation, gave Mr Barnett the argument that, whatever he had done at an earlier point, had been overtaken by the expenditure on costs, and in particular the fact that he had provided funds himself which went into the company.
53. In my judgment, this is not a case where Mr Barnett should receive his costs. He has escaped liability in the way in which I have attempted to describe, but on the way to that ultimate result, the claimants have been put to very considerable expense in establishing matters against Mr Barnett which Mr Barnett contested.
54. There are a number of possible approaches one might adopt to the claim between WCL and Mr Barnett. I could give WCL the costs of the matters on which it succeeded and Mr Barnett the costs of the matters on which he succeeded. I could make no order as to costs on the grounds that that is overall a fair reflection of the way in which this claim was fought out and expense was incurred, reflecting the ultimate outcome, as well as the outcome on the individual issues.
55. Mr Barnett says he should have his costs. I am not persuaded that that is the right result. The claimants say they should have their costs. I am equally not persuaded that that is the right result. It is a very strong thing indeed to give the claimant its costs against a litigant, Mr Barnett, when the claim has, in the end, at the end of the whole affair, failed.
56. My overall assessment is that there should be no order as to costs between the claimant and Mr Barnett.
57. In the course of reply submissions, Mr Caplan referred me to the note in the White Book at page 1300, referring to a decision Quadrant Holdings Cambridge Limited v Quadrant Research Foundation (Costs) [1999] FSR 918, and that citation led to a consideration of whether something would be gained by analysing the cases about third party costs orders. For example, if I approached this case on the basis that Mr Barnett had not been a party but that WCL had been a party and had failed, would I consider that Mr Barnett should pay the costs which WCL is ordered to pay to the claimants.
58. My assessment of that point is that I have really given proper effect to considerations of that kind when I took the view that, although Mr Barnett had prevailed and no order was made against him for equitable compensation, on his way to that result, he had put the claimants to the expense in relation to net profits and the side agreement, essentially the expense which they incurred against WCL and the expense they are entitled to expect WCL to pay., But placing responsibility for those costs at Mr Barnett's door also, I have had to put on the other side of the scale the fact that Mr Barnett has emerged without an order for equitable compensation being made against him. Even if one brings in those other considerations, it produces the same overall answer.
59. So far as costs which were reserved are concerned, I am told there was one order for costs reserved which was when Sales J accepted undertakings from WCL in particular in relation to the transaction with Westbury. It seems to me that the fairest result is to turn the costs reserved into costs in the case and, since that order was made in a period where I have given the claimants 50 per cent of their costs against WCL, that they should have 50 per cent of those costs also, together with the others. There was also an order made where the defendants, WCL and Mr Barnett, were given their costs in the case. That related to quite a substantial interlocutory matter where a freezing injunction was sought, but the application was not persisted in. Counsel have agreed that costs in the case or defendants' costs in the case has the meaning which is in fact set out in the Costs Practice Direction, and what that means in the circumstances which I have now earlier determined, is that WCL, who is liable to pay 50 per cent of the costs or 100 per cent of the costs, should not recover its costs in relation to the freezing application and Mr Barnett, who is a defendant who has his costs in the case, I have ordered that there be no order as to his costs. That will apply, therefore, to the previous costs in the case order also.
60. I have been asked to make interim payments in relation to the position between the claimants and Mr Barnett. I think it is obvious that, if there is no order for costs between the claimants and Mr Barnett, there will be no interim payment either.
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