THERE ARE DANGERS IF YOU ARE LEAVING THE ISSUE OF COSTS TO THE JUDGE: IN ANY EVENT BE QUICK AND BE CHEAP!

There are limited number of cases where the parties can agree everything except who should pay the costs.  There are dangers in leaving the question of costs to the judge, as the case of  Spiller -v- Derhalli [2014] 2548 (EWHC) (TCC) shows an applicant for costs can come unstuck.  Further if this procedure is adopted there is a duty on the parties to keep the costs of the application itself to a bare minimum.

THE ISSUES IN SPILLER

The parties had substantially agreed terms between themselves an filed a consent order stating:

“It is ordered that –

(1) The defendant shall not make any call, demand or other claim on the bond issued by National Westminster Bank;

(2) The defendant shall by 4p.m. on 1 August 2014 write to the National Westminster Bank confirming that the defendants place no further reliance upon the said bond or by that time and date take such other step as is necessary in order to surrender irretrievably any rights that they may have under the bond as against the bank;

(3) The costs of these pleadings are reserved subject to the terms of the next paragraph;

(4) Liberty to the parties to apply to the court on 4 days’ notice in order to dispose of the issue of costs in the event that they are unable to agree costs. Absent any such application made by 4p.m. on 11 July 2014 there will be no order for costs”.

The claimant then applied for the costs of the action.

THE DECISION

The judge had to consider the merits of the action without actually hearing the case.

BE WARY OF RUNNING OF A MAJOR BILL OF COSTS JUST TO CLAIM COSTS

1. I am told, and have no reason to doubt, that the claimant had spent tens of thousands of pounds on its application for an injunction. I am not surprised that it is that figure because of the wide-ranging but detailed scope of the evidence put before Mr. Justice Stuart-Smith. But the parties have then thought it necessary to canvass all those matters with the court and to instruct leading counsel to argue the issue of costs; I have no doubt that thousands more pounds’ worth of costs have been spent on this application as to costs. I am very conscious of remarks that have been commonly made by judges that where costs are left to be determined by the court, and I quote from Lord Justice Stanley Burnton in his concurring judgment in the case of M v The London Borough of Croydon [2012] EWCA Civ. 595 at para.77:

“Where the parties are unable to agree costs, and they are left to be determined by the Court, it is important that both the work and costs involved in preparing the parties’ submissions on costs, and the material the judge is asked to consider, are proportionate to the amount at stake. No order for costs will be the default order when the judge cannot without disproportionate expenditure of judicial time, if at all, fairly and sensibly make an order in favour of either party. This is not to say that there are not cases where the merits can be determined and no order for costs can be seen to be the appropriate order; but in such cases that order is not a default order, but an order made on the merits.”

THE DECISION ON THE FACTS OF SPILLER: NO ORDER IN RELATION TO THE COSTS OF THE ACTION

The judge considered that an injunction had been been applied for prematurely, some notice should have been given. The court could take into account the behaviour of the parties and the appropriate order was no order for costs.

HOWEVER THE CLAIMANT WAS ORDERED TO PAY THE COSTS OF THE APPLICATION FOR COSTS

The claimant, who had applied for costs, was however ordered to pay the costs of the application it had make seeking an order for costs. The judge observed:

1. I think the usual order should apply here. The claimant took the risk of making a specific application for its costs and, in those circumstances, it lost. There are no particular extenuating circumstances. The fact that I have been somewhat critical of both parties in terms of what happened in the period leading up to the dispute is beside the point. This is a disputed application and it does seem to me that it is appropriate and fair to order that the claimant should pay the defendants’ costs of and occasioned by the application dated 1^st July 2014. It should be on the standard basis because it was certainly not unreasonable for the claimant to argue as it did.

1. I would also want to say this. I am by no means satisfied, delightful though it has been to have leading counsel, that this was a case in which it was appropriate for either party to instruct leading counsel in circumstances where I cannot believe that the original costs of the injunction application were more than £20,000 or £30,000. To instruct leading counsel, although they have each done an extremely good job, is, in my view, disproportionate. That is not a criticism of either party, who by instructing leading counsel may have been immensely helped by leading counsel, but it is just that given what was at stake I cannot see that reasonable middle-standing juniors could not have done an adequate job, though possibly not as eloquently as both the leading counsel have done in this case. Although the costs assessment will need to be referred to a cost judge, I hope that the solicitors will be able to agree the costs since I cannot think that it would be proportionate to proceed to a costs assessment, but I will make the order for costs to be assessed in the usual way.

SO THE CLAIMANT SUFFERS A “DOUBLE WHAMMY”

The claimant did not get the costs of the action and was ordered to pay the costs of the application.

MAKE THESE APPLICATIONS WITH CARE: A FOUR POINT CHECKLIST

• There are major dangers in leaving the issue of costs to the judge when the parties have resolved the substantive issues.
• The default position is no order for costs.
• The procedure for applying for a determination of who should pay costs should be “proportionate”
• An unsuccessful applicant is at risk of being ordered to pay the costs of the application even if there is no order for costs in relation to the substantive action.