COST BITES 38: THE COSTS OF AN APPEAL SHOULD BE PAID BY THE LOSING PARTIES

In Frasers Group Plc v The Official Receiver & Ors [2022] EWHC 3184 (Ch)  Sir Paul Morgan (sitting as a judge of the Chancery Division) held that the appropriate order, following a successful appeal, was for the respondents to the appeal to pay the costs. Those costs would not be deferred until after the trial and were to be subject to a detailed assessment.  The judge expressed concerns about the amount of costs involved. The interim payment on account of costs was less than a third of the sum being claimed.

 

“The appeal was a distinct interlocutory step in the proceedings. The appeal has had a clear outcome; Frasers has succeeded and Silver and GLAS have failed. It is usual for the court to deal with the costs of distinct interlocutory steps as it goes along rather than reserving those costs. It is not unfair to decide the question as to the costs of the appeal irrespective of knowing the outcome of Frasers’ contentions following a trial.”

THE CASE

The appellant, Frasers Group Plc, had been successful in an appeal where it was allowed to amend its pleadings.  The judge was considering the question of who should pay the costs of the appeal, when they should be assessed and how they should be assessed.

THE JUDGMENT ON COSTS

    1. The next disputed matter which I need to consider relates to the costs of the appeal. Frasers submits that I should order Silver and GLAS to pay its costs on the basis that Frasers has succeeded on its appeal and that costs should follow the event.
    1. In response to Frasers’ application for costs, Silver and by GLAS make points which I can summarise as follows:
i) the costs of the appeal should be reserved, on the basis that a fair decision as to the costs of the appeal can only be made at the end of the trial when it will be known if Frasers has been successful or unsuccessful in relation to the contentions it puts forward in its amended pleading;
ii) it is said by GLAS that since Frasers will have to pay the costs of GLAS serving its defence to respond to the amended claim and since GLAS’s costs will only be assessed at the end of the trial, then the costs of the appeal should not be assessed at this point but should be reserved;
iii) Frasers succeeded on a narrow point because the court thought that a point made by Silver and GLAS was “not obviously right”;
iv) an appeal was necessary in any event because the ICC Judge had decided the case on the basis of a point not taken by Silver or GLAS;
v) Frasers was acting in breach of the Claims Release Deed and if Frasers lost at trial this would be established and Frasers would be ordered to pay the costs of the claim on an indemnity basis.
    1. I consider that the right order for costs is that Silver and GLAS should pay Frasers’s costs of the appeal. The appeal was a distinct interlocutory step in the proceedings. The appeal has had a clear outcome; Frasers has succeeded and Silver and GLAS have failed. It is usual for the court to deal with the costs of distinct interlocutory steps as it goes along rather than reserving those costs. It is not unfair to decide the question as to the costs of the appeal irrespective of knowing the outcome of Frasers’ contentions following a trial. The present case is not comparable to the case of a split trial where, following a trial on liability and before a trial on quantum, it is sometimes right to reserve the costs of the trial on liability. Nor am I assisted by being shown one example of a case where summary judgment was refused and the judge reserved the costs. Instead, I will follow the completely usual practice of dealing with the costs of interlocutory applications or interlocutory appeals by reference to success and failure on the application or the appeal.
    1. The fact that Silver and GLAS will wait to have an assessment of their costs of pleading to Frasers’ amended case is not a sufficient reason to depart from the above approach.
    1. As to the suggestion that Frasers only succeeded on the appeal because the court felt that a point raised by Silver was not obviously right, this involves a misreading of the judgment. Silver and GLAS lost on all the points raised in the Respondent’s Notices. Silver raised a point at the hearing which had not been made in its Respondent’s Notice which, strictly, I did not have to deal with although I did comment that it was not obviously right. The reason that Frasers succeeded on its appeal was that I held that it had a real prospect of success in relation to the draft amendments.
    1. It was not inevitable that Frasers would have incurred the costs of the appeal in any event. There is disagreement as to whether Silver and GLAS supported the ground on which the ICC Judge had decided to refuse permission to amend. But even if they did not initially support that ground at the hearing before the ICC Judge, when there was an appeal, they could have, and should have, promptly conceded the point; that may have involved Frasers in some modest costs but a small fraction of the costs incurred by Frasers in dealing with the appeal and the points raised by the Respondent’s Notices. I see no sufficient reason to disallow any part of Frasers’ costs, and certainly no reason to reserve the costs, on account of the point made by Silver and GLAS.
    1. As to the contention that Frasers is acting in breach of the Claims Release Deed, that has not been established and depends on the outcome of the proceedings. This point adds nothing to the suggestion that it would be fair to reserve the costs until the outcome of the proceedings is known, a suggestion which I have already not accepted. Whether Silver and GLAS will ultimately establish that Frasers has acted in breach of the Deed and, if so, what order for costs will then be made against Frasers, is not material to my present decision as to the costs of the appeal.
    1. Frasers has applied for a summary assessment of its costs of the appeal. It has submitted a schedule of costs and then a revised schedule of costs. The sums in the revised schedule total some £324,000 although that figure includes VAT of some £54,000 which Frasers now accepts should not be included. Frasers submits that its costs should be recovered in full on the basis that they are reasonable and proportionate.
    1. Silver and GLAS submit that I should decline to carry out a summary assessment on the basis that the sum claimed is so high. They also take issue with the hourly rates used, the number of fee earners, in particular, at Grade A, and the time spent on documents. I also have considerable concerns of my own as to the level of fees being charged.
    1. The considerable amount claimed by Frasers does not, in itself, preclude me from carrying out a fair summary assessment. However, the amount involved is such that Frasers would have a considerable uphill struggle to persuade me that anything like their figure would be a reasonable and, above all, a proportionate sum. This was a one-day appeal which required the parties to address the court in relation to a draft pleading where the issue was whether Frasers had a real prospect of success in relation to section 164 of the Insolvency Act 1986. There was no issue as to the legal principles to be applied to an application for permission to amend. The underlying documents were not particularly complex and the bundle of documents for the court was not particularly large. The bundle of authorities was excessive and to the extent that Frasers had required authorities to be in the bundle, the costs of their doing so would probably not be allowed. If I had been asked to carry out a summary assessment with oral submissions, where I could put some obvious difficulties to counsel for Frasers, I would have been prepared to do so. However, not only have I been asked to carry out a summary assessment, but I have also been asked to do so on written submissions where the parties have agreed that there would be a single round of submissions. It seems to me that there would be some risk of injustice to Frasers if I were to carry out a summary assessment in those circumstances and thereby to reduce its bill very significantly. I could take the view that Frasers had brought that state of affairs on itself by asking for a summary assessment on one round of written submissions. However, given that Silver and GLAS have asked me to direct a detailed assessment of Frasers’ costs, I think it is fair to all parties for me to do so.
    1. In the alternative to a summary assessment of its costs, Frasers has asked for an order that Silver and GLAS do pay a sum on account of costs. I will make such an order. I consider that the right sum to order on account of costs, given my real concerns about the size of the bill presented by Frasers, is £75,000, to be paid within 21 days.
    1. The parties are agreed as to the orders to be made as regards the costs before the ICC Judge and the costs of and occasioned by the amendments to the pleadings. The ICC Judge had made an order that Frasers was to pay certain costs to Silver and GLAS in relation to Frasers’ application for permission to appeal and Frasers did pay the required sum to Silver. The ICC Judge’s order will now be set aside and it is agreed that Silver will repay the relevant sum to Frasers. Frasers submits that that sum should be repaid with interest and Silver says that interest should not be awarded. Frasers says that interest should be added at 8% and Silver objects to that rate. I consider that the relevant sum should be repaid with interest at an ordinary commercial rate of 2% above base rate from time to time.