YOU’VE SPENT £625,000 IN COSTS AND GOT NO FURTHER FORWARD: COSTS AFTER UNSUCCESSFUL SUMMARY JUDGMENT APPLICATION
In Burnden Holdings (UK) Ltd & Anor v Fielding & Anor [2017] EWHC 2118 (Ch) His Honour Judge Hodge QC (sitting as a Judge of the High Court) considered the issue of costs after the claimants’ unsuccessful application for summary judgment.
“The costs of the present exercise for the claimants had been in the order of £275,000 and for the defendants some £380,000. That was all expenditure that could have gone towards the financing of the future conduct of the action. Instead, it was likely that it would all be wasted. That was something for which the claimants were wholly responsible. They had brought the summary judgment application. They had needlessly resisted the security for costs application. Unless an interim payment on account of costs was ordered now it was unlikely that the defendants would see any payment at all. It would be unjust to make a contingent one-way costs order with no guarantee that they would be met in the future.”
THE CASE
The claimants sought summary judgment against former directors of a company that was now insolvent. The judge observerved “This is yet another skirmish in what I fear will prove to be a long running battle between the parties to this litigation. ” The application for summary judgment was unsuccessful and the issue of costs was considered.
THE JUDGMENT ON COSTS
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Inevitably, I now have to address the incidence of the costs of the application by the first claimant for summary judgment and by the defendants for security for costs. For the defendants Mr Chivers’s position is simple. He says that he has succeeded both in resisting the application for summary judgment and in securing an order for security for costs. Even at the hearing on 8th June there was no acknowledgement of the entitlement to security for costs in principle, nor has there been any acknowledgement of such entitlement since then. The security for costs application has been resisted to the bitter end. As soon as an insurance policy was mooted, the defendants responded that they would accept one so long as its terms were satisfactory and, in default, there should be a consequential order for security for costs. On the summary judgment application, the defendants have been successful. The defendants have therefore comprehensively succeeded on both applications and should recover their costs.
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For the claimants, Mr Parker reminded me that the claimants had suggested adjourning the security for costs application until after 10th August when the position with an insurance policy or a contractual indemnity from a litigation funder would have been resolved so that they could put a proper offer of security forward. Despite that, the defendants had insisted on this hearing taking place. That was pertinent because one of the arguments raised in opposition to the application for security for costs was that the court should appreciate that the claimants had a good case and a strong case on the merits. That dovetailed in with the application for summary judgment. The hearing of the summary judgment application would, in Mr Parker’s submission, assist the parties on the way to trial. The defendants have now spent a lot of money but they will save that money in the course of trial preparations. Insofar as the argument on the security for costs and summary judgment application was about the merits of the case, the appropriate order should be that the defendants’ costs should be costs in the action. That is because the defendants will secure long-term benefits in the future conduct of this litigation from resisting the instant application. Mr Parker suggested that the defendants should be entitled to their costs up to the 4th May hearing but thereafter the defendants’ costs should be costs in the action. In addition, the defendants ought not to have any costs attributable to an attack in Mr Fielding’s evidence on the conduct of Mr Hunt. There was much material concerning other actions which were not material to the instant litigation. The costs of paras.8 to 55 of Mr Fielding’s third witness statement should therefore be disallowed, and Mr Parker pointed to the fact that those matters were also addressed at paras.11 to 15 of Mr Fielding’s fourth witness statement and paras.5 to 9 and 18 to 19 of Mr Fielding’s fifth witness statement, but Mr Parker did not seek any specific disallowance of those costs separate from the disallowance of the costs of paras.8 to 55 of Mr Fielding’s third witness statement.
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In his reply Mr Chivers submitted that whilst the pre-CPR practice had been to order the costs of a successful resistance to a summary judgment application to be defendants’ costs in the case, that was no longer the current practice. Costs now should follow the event as the case proceeded. The principle was one of “pay as you go”. One did not know the extent to which the work done to date might inform the further work on the case as preparations for trial proceeded. This was said to be an opportunistic application for summary judgment, made a matter of a mere couple of days before the hearing of the defendants’ application for security for costs. The summary judgment application had been wholly unsuccessful and had failed. It should never have been brought. It was made at a time when the defendants were wholly unsecured as to their costs. The defendants should be entitled to have those costs paid forthwith. The liquidator of the first claimant company should not be entitled to put the defendants at risk as to costs by bringing an application which failed at a time when the defendants were at risk as to costs. When one considered the circumstances in which the summary judgment application was made, the way it was conducted, by reference in part to wholly new material not present in the pleadings, and in certain respects also in ways not foreshadowed by the application notice, it was, Mr Chivers submitted, clear that the defendants should have their costs. The way the case had developed so far could give the court little comfort that the expenditure of costs in connection with either the summary judgment or security for costs applications would be of any value in the defence of the ongoing litigation. The claimants’ case was shifting all the time. The costs of the summary judgment application should follow the event of its lack of success. The court should not take the view that the costs incurred by the defendants in defending the summary judgment application were something for which they should thank the claimants. If the costs of the action going forward were less than they might otherwise be, that would be reflected in lower bills in the future. As to that, I point out that whether those bills fall to be paid by the claimants or the defendants will, of course, depend upon the ultimate outcome of that litigation, and it cannot be said that the claimants will necessarily have to pay the defendants’ costs in the future.
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Mr Chivers pointed out that the witness statements had been made without the benefit of any disclosure and they would all therefore have to be gone through again. The work will need to be revisited in the light of disclosure, the documents provided, and, in the case of the issue of the company’s solvency, the expert evidence. The general rule of the Civil Procedure Rules was that litigants should pay as they went and the claimants in this case have adopted a policy of not paying up on interim costs orders unless compelled to do so by the court.
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The costs of the present exercise for the claimants had been in the order of £275,000 and for the defendants some £380,000. That was all expenditure that could have gone towards the financing of the future conduct of the action. Instead, it was likely that it would all be wasted. That was something for which the claimants were wholly responsible. They had brought the summary judgment application. They had needlessly resisted the security for costs application. Unless an interim payment on account of costs was ordered now it was unlikely that the defendants would see any payment at all. It would be unjust to make a contingent one-way costs order with no guarantee that they would be met in the future.
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As to the suggested disallowance of part of the costs of Mr Fielding’s witness evidence, it was not Mr Fielding who had first raised the issue as to the liquidator’s conduct of other litigation. It was Mr Hunt who had first raised the issue at paras.44 to 45 of his second witness statement. Mr Fielding had merely responded to that, and the reason why no issue had been raised in oral submissions was that the defendants had “scotched the point”, in Mr Chivers’s words, “good and proper”. Mr Chivers made the point that without the defendants’ application for security for costs, there was no assurance that any insurance policy or equivalent would have been put in place.
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I accept Mr Chivers’s submissions. In my judgment, and in the exercise of the court’s discretion, costs should follow the event here and there should be no disallowance for the passages in Mr Fielding’s witness evidence relating to Mr Hunt’s conduct of other proceedings since that was something that Mr Hunt had raised himself in his evidence originally in support of the security for costs application. I cannot be satisfied that the expenditure of costs incurred by the defendants in connection with the summary judgment application will be expenditure of time and costs well spent, and, in any event, it has been incurred only because the summary judgment application was mounted. Having launched that application and failed, it is only just, as between the parties, that the claimants should bear the costs of that exercise. I also accept Mr Chivers’s submissions that the security for costs application could have been addressed by a more constructive response on the part of the claimants. Instead, it was fought tooth and nail, and to the bitter end, and, in those circumstances, the costs of that application should be borne by the claimants as well. So I will order, without any discount or disallowance, the claimants to pay the costs of both applications. They will be ordered to be assessed by way of detailed assessment on the standard basis and I will now entertain an application for an interim order for payment on account.
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LATER
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This is, I think, my fourth extemporary judgment today in this case. I have to undertake the quantification of a payment on account of the costs orders I have made. The total sum sought in respect of the extension of time and re-amendments applications is some £35,000 and the total sum sought in respect of the summary judgment and security for costs applications is some £350,000. The latter figure is to be contrasted with the claimants’ fee for the corresponding two applications of £275,000. On that basis, Mr Chivers asks for me to order an interim payment on account in the sum of £250,000 having regard to the £275,000 incurred by the claimants against an expenditure of £350,000 for the corresponding work by the defendants. He submits that if £275,000 is a reasonable and proportionate figure for the claimants’ costs, then £250,000 must be a reasonable figure for the defendants’ costs. He also draws attention to the lower hourly charging rates levied by the defendants’ solicitors by comparison with the solicitors acting for the claimants.
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Mr Parker has stigmatised these figures as utterly absurd and simply offensive. He has suggested £6,500 for the two minor applications and he submits that 50 per cent of the figure claimed would be overgenerous. He suggests £120,000 should be allowed by way of interim payment on the security for costs and summary judgment applications, making a total interim payment of £126,500.
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Mr Chivers, in response, submits that the expenditure by the defendants on counsel’s fees is far more reasonable than the expenditure on the claimants’ side. He submits that the purpose of an interim payment on account is to protect the receiving party pending a detailed assessment of costs at the end of the trial. That does not work unless the court makes a reasonably significant gesture towards the total costs figure at the present stage.
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Summary assessment is a rough and ready process, and the quantification of an interim payment on account is even more rough and ready than that. It does not affect ultimate entitlement as between the receiving and the paying parties. It merely regulates the position pending a detailed assessment. I do have to consider what is reasonable and proportionate. I bear in mind that apportionments of costs as between the different applications is likely to be arbitrary and that what one loses on the swings one tends to gain on the roundabouts and vice versa. At the end of the day I have to come up with an interim payment that is both reasonable and proportionate, that will protect the interests of the receiving and the paying parties pending a detailed assessment, and will not result in a payment in excess of the minimum which I am satisfied would be recoverable on a detailed assessment. Bearing those principles in mind, and bearing also in mind that it is a process that is really incapable, particularly at a few minutes after five o’clock on a Friday at the end of July, of admitting of any mathematical accuracy or explanation, the figure that I have come up with is that there should be an interim payment on account in the total sum of £175,000. For the reasons I have given, I consider it to be idle to attempt to apportion that between the four applications, so the interim payment on account will be £175,000. Normally, that would be payable in 14 days. I do not know whether Mr Parker is going to ask for longer.