COURT DID NOT EXERCISE ITS DISCRETION TO POSTPONE THE PAYMENT OF COSTS: THE CLAIMANT COULD NOT OBTAIN SECURITY FOR COSTS BY OBTAINING AN ORDER DEFERRING PAYMENT OF COSTS

There is an interesting decision today in JSC VTB Bank v Skurikhin & Ors [2019] EWHC 69 (Comm), Andrew Henshaw QC, sitting as a Judge of the High Court. The court refused to delay payment of costs to a defendant who had been successful in defending a security for costs application.

THE CASE

The fourth respondent in a case was making an application to to discharge an order appointing receivers.  The claimant in the action made an application for security for costs against the fourth respondent. That application was refused.  The claimant was ordered to pay the costs of that application.

THE ISSUE

The issue before the court was whether the claimant should pay the costs immediately or whether those costs should be deferred until after the substantive hearing.

THE OUTCOME

The claimant was ordered to pay the costs immediately.  Delaying payment would essentially give the claimant a degree of security for costs. This was something that the court, in the substantive application, had refused to give. It was inappropriate to give the claimant this by way of deferred payment of costs.

THE JUDGMENT

    1. Turning to the power to stay execution under CPR 83.7(4), Andrew Smith J in Dar Al Arkan Real Estate Company and Another v Al Refai [2015] EWHC 1793, [2016] 6 Costs LO 865 applied the guidance given by Bingham LJ in Burnet v Francis Industries Plc [1987] 1 WLR 802. Andrew Smith J noted that Bingham LJ had described an order for a stay as being “unusual” and had said the requirement of special circumstances is strictly insisted upon (at p811C).
    2. Andrew Smith J set out the considerations identified by Bingham LJ in Burnet (at 811D-H) that were relevant to the decision whether or not a stay should be ordered on the basis of a cross-claim, including:
i) the nature of the claim giving rise to the judgment in respect of which a stay is sought;
ii) the relationship (if any) between the claim giving rise to the judgment and the cross-claim;
iii) the strength of the cross-claim;
iv) the size of the cross-claim (a consideration which Bingham LJ thought would be rarely, if ever, decisive);
v) the likely delay before the cross-claim is determined;
vi) the prejudice to the judgment creditor if a stay is granted; and
vii) the risk of prejudice to the party making the cross-claim if a stay is refused.
  1. In the present case, there is at present (unlike in Dar Al Arkan) no actual cross-claim, but only VTB’s contingent claim against Berenger for costs in the event that Berenger is unsuccessful in the Discharge Application. For present purposes I would be willing to accept VTB’s contentions that that contingent claim, if it arises, would be likely to be larger than Berenger’s current claim for costs; and that VTB has at least an arguable case on the merits on the Discharge Application. The cross-claim would be linked to Berenger’s current costs claim in the sense of arising from the same proceedings. As to delay and prejudice to Berenger, there would be some likely delay since it seems probable that the judgment on the Discharge Application will be reserved, therefore Berenger would suffer some delay in recovering its costs.
  2. There is potential prejudice to VTB if it has to pay Berenger’s costs now, because there are reasonable grounds for doubt about whether any subsequent costs order in VTB’s favour would be recoverable absent an ability to offset. That is, though, in essence the same category of prejudice in respect of which I concluded the court did not have power to order security. It is arguable that the position now is different, in that the court does have power to stay execution of its costs order (or to direct a later payment date under CPR 44.2) and to that extent in effect to provide some security to VTB for its contingent costs claim. However, the same broader considerations as underlay my judgment on the security application still apply. Berenger is not, in relation to the Discharge Application, properly to be regarded as being in the position of a claimant, and has not (at least so far) been shown to be abusing the court’s process by making that application. In those circumstances, I do not consider it appropriate to make an order which, by delaying payment to Berenger of the costs of its successful defence of the security application, would in substance provide VTB with partial security for its costs of the Discharge Application.
  3. For those reasons, I do not consider it appropriate to stay execution under CPR 83.7(4). In my view, the same considerations also make it inappropriate to direct a later date for payment of Berenger’s costs pursuant to CPR 44.2. To do so would in substance amount to a grant of security for costs against a non-claimant in circumstances where such an order would be unjustifiable.
  4. Finally, I have considered carefully the parties’ submissions about the amount of costs claimed. Berenger originally claimed £35,029 for the costs of the security application, compared to VTB’s claimed costs of £27,861. VTB appeared by junior counsel with one solicitor in attendance, whereas Berenger used both leading and junior counsel with two solicitors present. Berenger now seeks a total of £41,204.50 including its costs of the current issues about costs.
  5. VTB makes the point that as the amount of security sought was £120,000, it was unjustifiable for Berenger to instruct leading counsel, or at least to seek to recover the costs of doing so inter partes. As will be evident from my 13 November 2018 judgment, the legal issues were more complex than is usual for a security application, and the hearing took almost a full day. In the circumstances I do not consider it was inappropriate for Berenger to use leading counsel, though it was perhaps borderline given the amount of security in dispute. Whether instructing both leading and junior counsel was justifiable is more debatable, and I consider some discount on the overall figure to be justifiable. Similarly, I do not think it reasonable for Berenger to recover the costs of two solicitors in attendance at the hearing, but would accept that it can reasonably recover the costs corresponding to the more senior solicitor’s attendance. Further, I consider Berenger’s subsequent costs in dealing with the current issues to be disproportionately high. I do not, on the other hand, see any real force in VTB’s complaints about solicitors’ hourly rates or the costs of preparing bundles and the statement of costs.
  6. Taking all matters into account, I summarily assess Berenger’s costs of the security application (including the subsequent costs issues) at £31,000, to be paid within 21 days.