COSTS REDUCED BY 25% : SEPARATE COSTS OF CLAIM AND COUNTERCLAIM: INCREASED COSTS WHEN LITIGATING AGAINST A LITIGANT IN PERSON

In Bank St Petersburg PJSC & Anor v Arkhangelsky & Ors [2018] EWHC 2817 (Ch) Mr  Justice Hildyard considered the appropriate costs order after a lengthy trial.

THE CASE

There has been a lengthy trial (between February – July 2016) where the claimant was represented by two Leading Counsel and a junior. The defendants (who pleaded a substantial counterclaim) were represented by a McKenzie friend. The claimants succeeded in their main claims on guarantees and the counterclaim was dismissed. The judge was critical, in part of the claimant’s conduct.  (The interim orders for costs, incidentally, were £7.6 million on the claim plus £6 million on the counterclaim).

THE APPROPRIATE ORDER FOR COSTS

The judge considered whether there was any reason to depart from the normal order as to costs.

    1. Mr Lord QC for the Claimants/Defendants by Counterclaim submitted that there was no sufficient reason for departing from the general rule that the successful party should have its costs.
    2. The issue which has most troubled me is that relating to Renord-Invest. That issue did occupy a considerable amount of time, and I consider that the Claimants had no real basis to contest it, and should not have done so. The dispute tended to confuse and obscure the real issues; and it may even be that this was part of the intention of the Defendants by Counterclaim.
    3. I was also concerned about the “chorus of false evidence”, and what in my Main Judgment I described (at paragraph [1136]) as my perception of
a thoroughly disturbing tendency on the part of the Claimants and their associates to put forward sworn evidence which they consider advances their case and a propensity to require their subordinates to subscribe to and support the version of events thus put forward regardless of its truth“,
although in the end I concluded that this did not establish or give rise to an inference of conspiracy (see especially paragraphs [1136] to [1138] of my Main Judgment).
  1. The other matters identified by Mr Stroilov as justifying a further discount seem to me of much lesser weight, especially given the general predisposition against an issue-based approach. Having sought to reflect on the time those other matters took, and having considered the rough estimates of the costs with reference to them provided by the Claimants by their Note dated 6 July 2018, I do not think those other matters would justify a departure from the general rule; at most they incline me to be a little more receptive to a discount in the round.
  2. In my judgment, some discount is required. The “dishonest chorus”, the unreliability of some of the Bank’s evidence which it illustrated, and the further issues to which it gave rise were not only unsettling in themselves: they led to further difficulty in unravelling the true facts, especially in relation to Morskoy Bank (and thus an issue which was of some importance), and provided a readily understandable basis for the Counterclaimants’ general concerns.
  3. Most concerning of all, to my mind, the Renord-Invest issue was a central one in terms of the time devoted to it and the importance which became attached to it by all parties. A considerable part of the cross-examination of the witnesses for the Claimants/Defendants to Counterclaim revolved around it; and the issue spawned a weight of documentation.
  4. Of course, I must take into account (and it is an important factor) that none of the above consideration ultimately persuaded me of the conspiracy which such issues were designed to demonstrate. Nevertheless, some material discount seems to me to be warranted.
  5. Both sides encouraged a broad-brush approach to any issue or conduct-based discount. In the round, I consider that the Claimants/Defendants by Counterclaim should be entitled to be paid 75% of their costs in the Counterclaim, assessed on a standard basis.

THE COURT DID NOT MAKE A SINGLE COMPOSITE COST ORDER TO COVER THE CLAIM AND COUNTERCLAIM

The judge considered whether a single costs order should be made which covered both the claim and the counterclaim.   Ultimately it was found that this was not preferable.

Might a single composite costs order across both proceedings be preferable?
    1. As I indicated in paragraph [5] above, Mr Lord advocated a single composite order across the proceedings as being both more likely to promote the objective of overall simplicity and consistent with enabling protection for Mrs Arkhangelskaya against any liability for costs of claims against her which had failed. Mr Stroilov appeared minded to agree.
    2. When I asked Mr Lord to be a little more specific as to what form of order he had in mind he replied as follows:

“Your Lordship would order that Dr Arkhangelsky would pay the bank’s costs of the proceedings, claim and counterclaim, on a standard basis, to be assessed if not agreed.

Your Lordship would order that OMG Ports would pay the bank’s costs of the counterclaim, to be subject to detailed assessment if not agreed. And in relation to Mrs Arkhangelskaya, there would be, I think, no order for costs — I think — yes, sorry. The order would be that’s Mrs Arkhangelskaya pay a proportion of the bank’s costs of the claim and counterclaim, but you would reduce that by a sufficient percentage to be satisfied that that would protect her in terms of any costs entitlement that she may be entitled to, at the same time as denying the bank their costs of pursuing those aspects. And I’ve got in mind their marriage contracts, freezing injunction and, arguably, the debate about the declaratory relief. But if one looks at the figures, one could see that even a 10% reduction would be likely to have a £1 million adjustment in practice. If your Lordship made it 15%, it would be 1.5 million. 20% would be £2 million. If you think about Mrs Arkhangelskaya’ s position on her assets, it’s impossible to see how costs of anything like that could have been incurred by her, even taking into account denying the bank the costs that they would otherwise be claiming in that regard. So that’s the order that we would ask your Lordship to make, to do it that way: to work from the figures, bearing in mind that any absence of greater specificity is not really fault of us today…”

  1. I was much tempted by this approach, especially given what I accept is a measure of factual overlap in the two sets of proceedings (Debt Claim and Counterclaim). In the end, however, I think it would be difficult to fix on a percentage reduction across the board which sufficiently fairly reflected the conclusions I have reached. Further, with provision for the protection of Mrs Arkhangelskaya such as I propose as set out below, I sense that in the longer run, and given the remaining possibility of an appeal in the Counterclaim but none in the Main Proceedings, I think that the slightly less elegant solution of two costs orders may be preferable; and that is what I propose to direct.

 

BEING AGAINST A LITIGANT IN PERSON CAN LEAD TO INCREASED COSTS

There is some recognition in the judgment that a party facing a litigant in person will have increased costs. When the judge considered the interim payment of costs.
    1. Turning to the amount of any payment on account, as stated in the Claimants’ skeleton argument, Christopher Clarke LJ reviewed the relevant authorities in Excalibur Ventures v. Texas Keystone [2015] EWHC 566 (Comm) and noted at [23] that a reasonable sum would often be one that was an estimate of the likely level of recovery subject to an appropriate margin to allow for error in the estimation.
    2. The Claimants submit that upon assessment on the standard basis, the Claimants would likely expect to recover about 70% of their costs. In all the circumstances, an interim payment equivalent to 50% of their costs would be an appropriate sum to reflect any reduction in their likely overall percentage costs recovery. Accordingly, Mr Lord submitted, the Court should order an overall interim payment in the sum of £10,863,172.76.
    3. Such an exact figure is in any event to my mind somewhat unrealistic. It is so precise as to suggest calculation, whereas in reality a broad-brush approach is required. I also think the assessment of a likely 70% recovery is higher than usually suggested having regard to the need for caution. That is so even though I accept that:
(1) the proceedings were on any view very complex;
(2) the very substantial costs may, at first blush, be arresting; but the costs incurred to defend the Counterclaim must be viewed in the context where the Defendants and OMGP sought sums of US$500 million, so that the costs may well be proportionate to the value of the sums at stake in the proceedings; and
(3) the more so given the additional difficulties of a case in which one side was professionally represented and the other was not, and the former had the very increased burden accordingly to enable the case to be tried fairly.
    1. Further, and as explained above, I prefer to deal separately with the Debt Claims and the Counterclaim, which also seems to me to offer the better means of ensuring that Mrs Arkhangelskaya is not unfairly exposed and the amounts due to her by way of costs in respect of the Debt Claims are properly taken into account.
    2. Again, adopting a pragmatic approach, in my judgment, the following payments on account should be made:
(1) In the Debt Proceedings: against Dr Arkhangelsky (but not Mrs Arkhangelskaya) in an amount equal (rounding up to the nearest £500,000) to 55% of the costs estimated to be payable by him in the Debt Proceedings (such costs being, according to the Note provided by the Claimants on 6 July 2018, approximately £7.6 million (from which must however be deducted the previous costs order amounts as explained in paragraph [13] above)): the lower percentage being intended to reflect the fact that some of the costs relate to claims against Mrs Arkhangelskaya;
(2) In the Counterclaim: the Counterclaimants should make a payment on account in the sum of £6 million; but so that the liability of Mrs Arkhangelskaya shall be credited with an amount equal to the costs payable to her in the Debt Claim, and no payment on account shall be sought from or enforceable against her unless and until the quantum of such costs has been agreed or assessed.