COST BITES 148: THE JUDGE WAS RIGHT TO ORDER COSTS TO BE PAID IMMEDIATELY AFTER A TRIAL ON LIABILITY

In Lorimer-Wing v Hashmi [2024] EWHC 931 (Ch) Mr Justice Edwin Johnson upheld a decision that a defendant should pay costs forthwith following a trial of a preliminary issue at which the claimant was successful.

 

“The difficulty which confronts the Costs Appeal is however that the Judge had a discretion as to what order he should make in relation to the Costs. I can only interfere with the decision of the Judge in relation to the Costs if the Judge went wrong in law or in the exercise of his discretion. In relation to the exercise by the Judge of his discretion as to costs it is not sufficient that I might happen to disagree with the Judge’s decision. It must be demonstrated that the Judge went wrong in such a way that his decision fell outside the broad margin of his discretion. It has to be demonstrated that the Judge went wrong in law, or left out of account something which he should have taken into account (in such a way as to vitiate the exercise of his discretion), or took into account something which he should have left out of account (in such a way as to vitiate the exercise of his discretion), or simply arrived at a decision as to the Costs which no reasonable judge, properly directing themselves, could have made.

In the present case there is no evidence that anything of this kind occurred. To the contrary, there was support in authority for the Judge’s decision that the Appellant should pay the Costs.”

THE CASE

The claimant had been a shareholder and director in a company. He brought an action against the defendant  asserting that he had been unfair prejudice in the management of that company.  A split trial was ordered in relation to the unfair prejudice, referred to as “the liability trial”.  Unfair prejudice was established at the trial.  The trial judge held a consequentials hearing and ordered the defendant to pay the claimant’s costs of the liability trial.

THE DEFENDANT’S UNSUCCESSFUL APPLICATION FOR PERMISSION TO APPEAL

The defendants sought permission to appeal.  The application for permission to appeal against the substantive judgment was dismissed. The judge then considered, and rejected, the application for permission to appeal against the order that costs be paid forthwith.

THE JUDGMENT ON THIS ISSUE

 

    1. The starting point is the costs order made by the Judge. Paragraphs 9 and 10 of the July 2023 Order provided as follows:

 

“9. The First Respondent shall pay the Petitioner’s costs of the proceedings up to and including the handing down of judgment on liability. Such costs shall be the subject of detailed assessment, if not agreed. However, the detailed assessment may not be commenced until the determination of the value of the Petitioner’s shares either by the Court or by agreement between the parties.

10. Consideration of whether to order the First Respondent to pay a reasonable sum on account of the costs ordered at paragraph 9 above, as required by CPR rule 44.2(8), is adjourned until the determination of the value of the Petitioner’s shares either by the Court or by agreement between the parties.”

 

    1. The Appellant was therefore ordered to pay the Respondent’s costs of the Petition, up to and including the handing down of the Judgment. As I have noted earlier in this judgment, the Judge deferred detailed assessment of these costs (“the Costs”) and also deferred the question of whether the Appellant should make an interim payment on account of the Costs. The Judge also ordered that the costs of the Consequential Hearing itself should be costs in the remainder of the Petition.

 

 

    1. Ground 14 contains the Appellant’s arguments in support of the Costs Appeal. The essential argument of the Appellant in support of the Costs Appeal is that the Judge failed to take account of an offer to buy the Respondent’s shares in the Company. In his oral submissions, the Appellant confirmed that he was relying upon the letter from the Company’s solicitors, dated 1st April 2021, as supplemented by the letter dated 5th August 2021, written by the solicitors on the Appellant’s behalf. I have explained the terms of each of these letters in my analysis of Ground 2, earlier in this judgment. In dealing with the Costs Appeal I will refer to the letter of 1st April 2021 as “the April Letter”.

 

 

    1. For ease of reference, I set out again Paragraphs 157 and 158 of the Judgment, where the Judge made reference to what he characterised as “the offer”. As I have said, I understood it to be common ground between the parties that the Judge was referring to the April Letter:

 

“157. I have used the term “on the face of it” as unfairness does not lie in exclusion alone but in exclusion without a reasonable offer. In closing Mr Lorimer-Wing took me to an offer made to Mr Hashmi for his shares at what he says was “fair value” as assessed by auditors acting for the Company.

158. At this stage I do not know if the offer was reasonable. It can be said that it was not made in a timely manner or on 2 March 2021.”

 

    1. The Judge then returned to this offer, as he characterised it, at Paragraph 161. For ease of reference, I also repeat my earlier quotation of this Paragraph:

 

“161. In my judgment the purported resolution to remove Mr Hashmi, his defacto loss of office and the e-mail dated 2 March 2021 that expressly referred to Mr Hashmi as a “bad leaver” answers the issue raised following trial. It was the intention of Mr Lorimer-Wing to receive the shares owned by Mr Hashmi at a value referrable to the “bad leaver” provisions. That was unfair. If he at a later stage made an offer for Mr Hashmi’s shares that was for a “reasonable offer” and Mr Hashmi failed to accept the offer there may well be cost consequences but that does not alter the earlier unfair event.”

 

    1. The Appellant submitted that the April Letter constituted a more than fair figure for the Respondent’s shares, in circumstances where Price Bailey subsequently advised that the shares had no value. Valuation of the shares was also a matter to be determined by the Articles, which the Appellant was following. In these circumstances there was no justification for the Respondent presenting the Petition so hastily, and without engaging with the process of valuing the shares. If the Respondent had engaged with the valuation process, the Petition could have been avoided.

 

 

    1. The ultimate position of the Appellant on the Costs Appeal, as set out in his oral submissions, was that the Judge should have reserved the Costs to the determination of the quantum hearing, at which point there would be a decision of the court on the value of the Respondent’s shares, and it would be apparent whether the Petition had been worth pursuing. The Appellant’s essential point was that if the value of the Respondent’s shares turned out to be nil, or a sum less than the £50,000 odd referred to in the April Letter, then the Petition would not have been worth pursuing. The expense of proceedings could have been avoided if the Respondent had accepted the figure in the April Letter, or co-operated with the valuation process which the Appellant sought to initiate prior to the presentation of the Petition.

 

 

    1. Where I refer to the reservation of the Costs in this judgment, I should make it clear that this means the costs of both parties to the date of the handing down of the Judgment. If the Judge had reserved these costs, they would have been the costs of both parties, with a decision on the question of who should pay whose costs deferred to the quantum trial.

 

 

    1. In granting permission to appeal in relation to the Costs Appeal, Miles J gave the following reasons:

 

“16. Ground 14 concerns costs and the impact of the offer to buy-out Mr Hashmi. Mr Lorimer-Wing argues that if Mr Hashmi fails to do better than the offer that should be relevant at least to costs. The judge ordered that Mr Lorimer-Wing should pay the full costs of the trial on liability. This is arguably inconsistent with para 161 of the Main Judgment where the judge said “If [Mr Lorimer-Wing] at a later stage made an offer for Mr Hashmi’s shares that was … a “reasonable offer” and Mr Hashmi failed to accept the offer there may well be costs consequences but that does not alter the earlier unfair event.” It is realistically arguable that in the light of this part of the judgment the judge should have reserved the costs of the first trial to the second one.”

 

    1. I do not have a transcript of the Consequential Hearing, so that I have no record of the oral submissions made in respect of costs at the Consequential Hearing. I also do not have a transcript of the judgment given by the Judge on the question of costs at the Consequential Hearing. I was told by Mr Reed that there was no recording of the Consequential Hearing. This was later clarified by the Respondent’s solicitors to mean that there was a recording of the Consequential Hearing, but that the quality of the recording was so poor that the transcribers (Opus 2) advised that this was a rare occasion where the recording was deemed to be incapable of transcription. In referring to this clarification I should make it clear, for the avoidance of any doubt, that I am not suggesting that I was in any way misled by what I was told by Mr Reed at the hearing. The net result of all this is that there is no transcript available, either of the Consequential Hearing or of the judgment given by the Judge on costs.

 

 

    1. At the hearing of the Costs Appeal I was not invited by either party to consider any note of the Consequential Hearing, agreed or otherwise. In addition to this, it was not suggested by either party that these matters constituted an impediment to my dealing with the Costs Appeal. Neither party suggested that I could not deal with the Costs Appeal, in the absence of knowledge of the actual reasons for the Judge’s decision in relation to the Costs. Both parties proceeded with the Costs Appeal, at the hearing, on the basis that I could decide the Costs Appeal without actual knowledge of the Judge’s reasoning.

 

 

    1. Following the hearing, and after reflecting on the matter, I concluded that I should see any note which either party had of the judgment on costs delivered by the Judge at the Consequential Hearing. I therefore requested the parties to provide me with any such note that they had. Both parties responded to this request with notes, neither of which was agreed by the other party. The provision of these notes did confirm what I had assumed to be the case at the hearing; namely that the Judge did deliver a judgment on the question of costs at the Consequential Hearing, the outcome of which was the order that the Appellant should pay the Costs to the Respondent. I will refer to this judgment as “the Costs Judgment”.

 

 

    1. The note provided by the Appellant, which was dated 11th April 2024, was not a contemporaneous note of the Costs Judgment. The note was described as constituting the Appellant’s recollection of “the gist of what was said by Chief ICC Judge Briggs at the consequential hearing”. I assume from this that the Appellant has no note of his own of the Costs Judgment or the Consequential Hearing, but was reconstructing, from his memory, what the Judge said at the Consequential Hearing. It was also apparent from the note that the Appellant was setting out his recollection, in very summarised form, of what he submitted to the Judge on the question of costs and what the Judge said. Given the lapse of time since the Consequential Hearing, and given the brevity of the Appellant’s note, I do not consider that the Appellant’s note can be considered a reliable record of the Costs Judgment.

 

 

    1. The note of the Costs Judgment provided by the Respondent’s solicitors was described as an amalgamation of the notes taken contemporaneously by the Respondent’s counsel and the Respondent’s solicitor at the Consequential Hearing. As this note has been produced from notes which were taken at the Consequential Hearing, I treat this note as a more reliable record of the Costs Judgment, albeit one which is, necessarily, not a verbatim transcript of the Costs Judgment.

 

 

    1. What I have also been provided with, pursuant to a request which I made at the hearing itself, are the written submissions of the parties for the Consequential Hearing.

 

 

    1. Mr Reed submitted a skeleton argument for the Consequential Hearing, in which he contended that the court could and should make an award of costs there and then, notwithstanding the split trial. Mr Reed’s submission was that the Respondent had won on every point in the liability trial, and that this victory should be reflected in a costs order in favour of the Respondent. Mr Reed also made express reference to what he referred to as “the purported offer”, but advanced arguments as to why this offer should not affect the position in relation to costs. In terms of what fell to be taken into account, in relation to “the purported offer”, Mr Reed made reference to the email of 2nd March 2021, the April Letter and the Price Bailey valuation. In support of his argument on costs, Mr Reed relied upon the decision of Nicholas Thompsell (sitting as a Deputy Judge of the High Court) in Langer v McKeown [2021] EWHC 451 (Ch), as upheld by the Court of Appeal ([2022] 1 WLR 1255 [2021] EWCA Civ 1792).

 

 

    1. For his part the Appellant submitted two sets of written submissions for the Consequential Hearing. The first of these submissions dealt with the Appellant’s application for permission to appeal. The grounds of appeal identified in these submissions included reference to the April Letter, albeit not specifically in the context of costs. The submissions concluded with the point that if the value of the Respondent’s shares was determined to be nil, there would have been no unfair prejudice. The second set of submissions took up in more detail the argument that a reasonable offer had been made for the Respondent’s shares. It is not entirely clear to me what the primary purpose was of this second set of submissions, in terms of what the Judge had to decide at the Consequential Hearing. The submissions did however address the question of costs in clear terms. The submissions concluded with an argument that the costs of the liability trial should be stayed until the establishment of the value of the Company. This argument was based on the April Letter. The argument was put in the following terms, at paragraphs 19-23 of these submissions:

 

“19. In the Final Judgement it is stated that “there may well be cost consequences” if Mr Hashmi failed to accept a “reasonable offer”.

20. Given that the offer was made on 1 April 2021, pre-action, that a further offer made to participate in a valuation exercise, again pre-action on 5 August 2021, that any costs of the liability trial be stayed until the establishment of the valuation of the Company.

21. It would be unfair, unreasonable and unconscionable to make one party incur substantial costs where it was all avoidable had the “reasonable offer” being accepted by the Petitioner.

22. The court should not be used to simply prove a point without regard for the court’s time and disproportionate quantum of resources involved.

23. As stated above I would like to rely on the Price Bailey valuation report and Fair Value Certificate but have no objection to any firm Mr Hashmi selects for the Valuation Trial, provided it is a top 30 firm by revenue. The costs however must be borne by Mr Hashmi who is the party that distrust the findings of Price Bailey.”

 

    1. This second set of submissions, filed by the Appellant for the Consequential Hearing, concluded in the following terms, at paragraphs 26 and 27:

 

“26. Mr Hashmi has always known the true value of the Company because he is an intelligent man. He voluntarily left the Company as he could see the writing on the wall, but it would appear that he took offence at his removal by Mr Gilbert and myself. Given that he comes from a family of extreme wealth, he has wanted to and has so far succeeded in showing his financial power in hurting me and my young family, knowing full well that I have very little.

27. I urge the court to see through this whole charade, to wait until we have the additional expert valuation (in addition to the Price Bailey report), and only then, to determine the consequences of what should, if justice is served, be at best, a pyrrhic victory for Mr Hashmi.”

 

    1. It is clear from the written submissions filed for the Consequential Hearing that both parties advanced arguments on costs which made reference to the April Letter. On the Appellant’s side the argument was put to the Judge that a reasonable offer had been made, and that the costs of the liability trial should await the outcome of the quantum trial. This is in fact confirmed by the Appellant’s note of his recollection of the Consequential Hearing, which does record that the Appellant put the argument to the Judge that an offer had been made for the Respondent’s shares in circumstances where Price Bailey had valued at the shares as having no value. On the Respondent’s side the argument was put to the Judge, on various grounds, that the April Letter and associated documents should not affect the fact that the Respondent had won on all points at the liability trial, and that the costs order should reflect that victory. Accordingly, I infer that the Judge had well in mind, in making his decision on costs, what he had said at Paragraph 161. I also infer that the Judge had well in mind the arguments over the effect on costs or otherwise of the email of 2nd March 2021, the April letter, the letter of 5th August 2021 and the Price Bailey valuation.

 

 

    1. All this is confirmed by the note of the Costs Judgment produced by the Respondent’s solicitors. The note shows that the reasoning of the Judge in relation to the Costs was, essentially, as follows:

 

(1) The Judge made brief reference to the terms and outcome of the Judgment.

(2) The Judge then directed himself by reference to CPR 44.2, which provides as follows:

“(2) If the court decides to make an order about costs—

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b) the court may make a different order.”

(3) The Judge then considered the question of who was the successful party, and considered Langer v McKeown.

(4) The Judge then stated that CPR 44.2 was intended to do justice and that, at that stage, it was not possible to say whether an offer would be beaten.

(5) The Judge then went on to reason as follows, using the note provided by the Respondent’s solicitors:

“Seems to me that unfair because the Petitioner has been put to cost in making claim. I accept Langer that regardless of offer costs of the trial should go to the successful party. But not persuaded costs should be paid immediately – that would be an error. It would create disproportionate unfairness to PLW because at least arguable that offer made.

PLW shall pay the Petitioner’s costs of proceedings but not payable until after determination of split trial.”

(1) The Appellant is recorded as then having queried how this decision on costs could sit with Paragraph 161. The Judge’s response to this query is recorded to have been that the Appellant was being ordered to pay the costs to date. The Respondent might have to pay the costs of the quantum trial. I take this to mean that the Judge accepted that the existence of an offer for the Respondent’s shares might affect the costs of the quantum trial, but was not persuaded that the same reasoning should apply to the liability trial.

 

    1. I now turn to my decision on the Costs Appeal.

 

 

    1. There was clearly an argument to be made, in relation to the Costs, that the question of who should pay those costs should abide the outcome of the quantum trial. The Appellant’s case was, and indeed remains, that the Respondent’s shares in the Company had and have no value. In addition to this it is the case that a sum of around £50,000 was effectively being offered for the Respondent’s shares by the April Letter. While I have already concluded that the April Letter was not capable of constituting a reasonable offer, within the terms of O’Neill, this did not necessarily mean that the April Letter could not have an effect on costs, if the Appellant was ultimately required to buy the Respondent’s shareholding for a figure less than that referred to in the April Letter. In these circumstances there was clearly an argument to be made that the question of who should pay the Costs, that is to say the costs of the Petition up to and including the liability trial, should await the determination of the quantum trial, at which point it would be possible to compare the price at which the Appellant would be required to buy the Respondent’s shares with what the Respondent could or might have achieved, if he had accepted the proposal in the April Letter.

 

 

    1. I stress, for the avoidance of doubt, that I am not making any decision of my own on the merits of the argument set out in my previous paragraph. I am simply recording that, in my view, there was an argument to this effect which was available to be put to the Judge at the Consequential Hearing and, it is clear, was put to the Judge at the Consequential Hearing. Indeed, the Judge had himself foreshadowed an argument of this kind, at Paragraph 161. In granting permission to appeal Miles J considered it realistically arguable that the Judge should have reserved the Costs to the quantum trial. I respectfully agree that there was a realistic argument to this effect, which was put to the Judge at the Consequential Hearing.

 

 

    1. The difficulty which confronts the Costs Appeal is however that the Judge had a discretion as to what order he should make in relation to the Costs. I can only interfere with the decision of the Judge in relation to the Costs if the Judge went wrong in law or in the exercise of his discretion. In relation to the exercise by the Judge of his discretion as to costs it is not sufficient that I might happen to disagree with the Judge’s decision. It must be demonstrated that the Judge went wrong in such a way that his decision fell outside the broad margin of his discretion. It has to be demonstrated that the Judge went wrong in law, or left out of account something which he should have taken into account (in such a way as to vitiate the exercise of his discretion), or took into account something which he should have left out of account (in such a way as to vitiate the exercise of his discretion), or simply arrived at a decision as to the Costs which no reasonable judge, properly directing themselves, could have made.

 

 

    1. In the present case there is no evidence that anything of this kind occurred. To the contrary, there was support in authority for the Judge’s decision that the Appellant should pay the Costs. Mr Reed drew my attention to Langer v McKeown, which he also relied upon before the Judge. This case was also concerned with an unfair prejudice petition, in respect of which a split trial had been ordered. The directions for the split trial provided that the purpose of the first stage of the trial was to determine whether the respondent had engaged in unfairly prejudicial conduct and, if so, the basis of the relief to be granted. At the first stage of the split trial the judge decided that there had been unfairly prejudicial conduct and that the principal relief to be granted was an order for the respondent to buy out the petitioner’s shares in the relevant company, on the basis of a valuation to be determined in accordance with the principles set out in the judgment given by the judge on the first stage of the split trial. The reported judgment in Langer at first instance, to which I have been referred, was a judgment dealing with matters consequential upon the first stage trial; specifically the directions to be given for the second stage trial and costs.

 

 

    1. The petitioner sought an order that all her costs of the petition up to and including the first stage trial should be paid by the respondent. This required the judge to consider whether he should make an order at that stage of the petition, when it remained to be seen what the valuation of the shares would be. The judge commenced by making the point that the petitioner had been the successful party at the first stage and that, absent any other considerations, he would have had no hesitation in awarding costs at that stage to the petitioner, notwithstanding the split trial and the fact that valuation was still to come. As the judge explained, at [12]:

 

“12. In the December Judgment I found, in relation to the matters determined in that judgment, fairly comprehensively in favour of the Petitioner and there can be no doubt that the Petitioner is the successful party at this stage. Absent any other considerations, I would have no hesitation in awarding costs at this stage to the Petitioner, notwithstanding the split stage trial and that we have another part of this to come, relating to valuation. This reflects the modern emphasis of the CPR rules on using costs to encourage parties not to take unmeritorious points by being ready to award costs according to who has won at different stages in the action, rather than taking a “winner-take-all” approach at the end of the action. The desirability of this approach was summed up by Lord Woolf, Master of the Rolls, in Phonographic Performance Ltd v AEI Redifussion Music Ltd [1999] 1WLR 1507 (Phonographic) when he said:

“It is now clear that a too robust application of the ‘follow the event principle’ encourages litigants to increase the costs of litigation, since it discourages litigants from being selective as to the points they take. If you recover all your costs as long as you win, you are encouraged to leave no stone unturned in your effort to do so.”

 

    1. After reviewing certain authorities, the judge came to what he described as the one other consideration which could be important; namely whether there had been any offer to settle. It was argued for the respondent that there was such an offer to purchase the petitioner’s shares, which had been made in open correspondence and repeated in the respondent’s points of defence to the petition. It was also argued for the respondent that once the shares had been valued in the second stage trial, they might turn out to be worthless, or less than the sum offered for the shares. The judge, after hearing the arguments on this question, came to the conclusion that the existence of this offer should not affect what would normally be the position in a split trial, which was that if the petitioner won at the first stage the petitioner should get her costs of the first stage; see the judgment at [18]-[23].

 

 

    1. It is right to point out that there were reasons in Langer, as recorded in the judgment, for the judge to think that the offer which had been made for the shares would turn out to have been insufficient. The judge considered it highly unlikely that the petitioner’s ultimate recovery at the second stage would leave her in a lesser position than she would have been in if she had accepted the offer; see the judgment at [24]. This is a point of distinction with the present case, where the only valuation which I have seen, and I assume the Judge saw, is the Price Bailey valuation, which advised that the Respondent’s shares had no value. Nevertheless, the judge in Langer, in common with the Judge in the present case, did not know what valuation of the shares would emerge from the second stage of the split trial. The judge summarised the position, where an open offer has been made, in the following terms at [32] and the first part of [33] (underlining also added):

 

“32. If this Respondent, or indeed any litigant, wishes to protect himself in costs they are free to do so by making an offer under Part 36. There are also other possibilities in an action of this type (an unfair prejudice action) to make an O’Neill offer. Had the Respondent wanted to protect himself in costs at this stage, knowing that this was going to be a split trial, he could have protected himself by one of those routes, so I do not accept the principle that because Part 36 offers are considered to be a good idea, that costs principles applicable to those offers should be read across to other more informal types of offers.

33. Where an offer of this type is made, unlike a Part 36 offer which has set costs consequences, the existence of an admissible offer is one that need to be taken account of in the judge’s discretion. The judge may look at the offer and may decide that despite the offer being there it will not affect his decision to award costs at all or at this stage.”

 

    1. The case then went to appeal, although the point on the appeal related to a Calderbank offer which the judge had declined to take into account on the basis that it had not been shown to him. The respondent argued that the existence of this offer had the effect that costs should not have been dealt with until the conclusion of all stages of the litigation. The Court of Appeal dismissed the appeal, essentially on the basis that the judge had been acting within the broad scope of his discretion in deciding to make an award of costs the first stage of the split trial and in deciding not to take the Calderbank offer into account. The issue before the Court of Appeal was not therefore quite the same as the issue in the present case. The Court of Appeal were considering the respondent’s argument that the judge should have treated the Calderbank offer as the equivalent of a Part 36 offer and, on that basis, should have deferred a ruling on costs until the second stage of the split trial.

 

 

    1. For present purposes, the significance of the decision of the Court of Appeal in Langer lies in what was said about the consideration of admissible offers to settle following the first stage of a split trial. The judgment in the Court of Appeal was given by Green LJ, with whom Nugee and Lewison LJJ agreed. As Green LJ explained, at [31]-[35] in his judgment, the judge was not dealing with a Part 36 offer, but with a Calderbank offer. As such, the judge had been exercising his discretion as to costs contained in CPR 44.2. In the exercise of that discretion an admissible offer to settle was a relevant matter which the court was required to take into consideration, but the court was not compelled to give effect to an admissible offer to settle. The weight, if any, to be given to such an offer was a matter for the court. The prescribed consequences of a Part 36 offer did not apply. This was consistent with what the judge had said, in particular in the section of his judgment, at [33], which I have underlined above.

 

 

    1. Green LJ then turned, in his judgment, to issues of policy which, in his view, had justified the approach taken by the judge. At [37] Green LJ stressed the advantages of costs following the issue rather than the event:

 

“37 First, there is a general “salutary” rule that costs follow the issue rather than the “event”. This is because an overly robust application of a principle that costs should follow the final event discourages litigants from being selective as to the points they take in litigation and encourages an approach whereby no stone or pebble, howsoever insignificant or unmeritorious, remains unturned: Phonographic Performance [1999] 1 WLR 1507, 1523A; Mean Fiddler Holdings Ltd [2003] EWCA Civ 1058 at [30]; and Merck KGaA v Merck Sharp & Dohme Corpn [2014] EWHC 3920 (Ch) (“Merck”) where Nugee J (as he then was) stated (at para 6) that it was “in general a salutary principle that those who lose discrete aspects of complex litigation should pay for the discrete applications or hearings which they lose, and should do so when they lose them rather than leaving the costs to be swept up at trial”. In the present case the merits were overwhelmingly in favour of the respondent and the judge recorded his displeasure at the taking of unmeritorious points by the appellant.”

 

    1. At [39] Green LJ made the following comments specific to unfair prejudice petitions:

 

“39 Thirdly, the principle of equality of arms plays a part as was recognised by Lord Hoffman in O’Neill [1999] 1 WLR 1092, 1107H. This is also reflected in the overriding objective at CPR r 1.1(2)(a) which instructs courts, when exercising any of the powers in the CPR, to have regard to the object of “ensuring that the parties are on an equal footing and can participate fully in proceedings . . .” This applies to the exercise of a discretion to order costs: See e g Attwood v Maidment [2011] EWHC 3180 (Ch) at [40]. An inequality of arms can be manifested in a variety of different ways, such as in an asymmetry of information as between the parties (as recognised by Lord Hoffman in O’Neill). In some types of litigation, of which minority shareholders’ suits might be an illustration, a claimant may be poorly placed to assess the reasonableness of an offer to settle not being in possession of the internal financial documents of the company. A similar scenario may confront a successful litigant in an intellectual property case who seeks an account of profits but who may have no knowledge of what profits the defendant has earned. Such situations may be contrasted with a successful claimant in, for example, a personal or clinical injury case or a routine case for breach of contract, where the relevant facts needed to determine quantum may be largely in the possession or under the control of the claimant. It is consistent with the above considerations that costs rules should encourage the making of reasonable offers to settle such that a refusal by a litigant to accept a reasonable offer can militate against the making of a costs order in the successful party’s favour. However, a refusal on the part of a petitioner to accept what might turn out subsequently to be a reasonable offer might weigh less heavily against that party where there is asymmetry of access to information and this obviously includes where there has been inadequate disclosure by the party in possession of the relevant information.”

 

    1. This has obvious resonance in the present case. In the present case the April Letter was not couched as an offer. The common theme of the email of 2nd March 2021, the April Letter, the letter of 5th August 2021 and the Price Bailey valuation was that the Respondent was being told that he was a Bad Leaver and that his departure from the Company was being determined by the Articles. In these circumstances it seems to me that there is a substantial question mark over whether any of these documents, taken individually or collectively, should properly be treated as the equivalent of a Calderbank offer.

 

 

    1. The overriding point which seems to me however to emerge from Langer, both at first instance and in the Court of Appeal, is that the Judge, in deciding what order to make in relation to the Costs, was not bound to treat the case as one where the costs had to be reserved. If, which I regard as questionable, the April Letter and/or the associated documents were properly to be treated as an admissible offer to settle or admissible offers to settle, the judge was not bound, in the exercise of his discretion, to conclude that the Costs must be reserved to the quantum trial. It seems to me that the Judge was entitled, in the exercise of his discretion, to take the view that an issues based approach was justified, and that the Appellant should pay the Costs.

 

 

    1. Following the hearing of the Costs Appeal the Appellant produced a yet further written submission, which was described as case law in support of the grounds of appeal. The further written submission comprised extracts from a number of cases. The Appellant also provided, with this further submission, copies of the relevant cases. I understood this further submission and the specified case law to be directed to the Costs Appeal rather than the Permission Application. In his email to my clerk, under cover of which these documents were sent to me by the Appellant, the Appellant stated that I had requested that the Appellant provide case law in support of his case in the Costs Appeal. I am bound to say that I do not recall authorising the Appellant to make further submissions on the case law, following the hearing of the Costs Appeal. I have looked at my notes of the hearing, which do not record any such authorisation. I have not however seen a transcript of the hearing of the Costs Appeal and my memory may be at fault in this respect. In any event I have considered the further case law provided by the Appellant, in particular by reference to the extracts from that case law highlighted in the Appellant’s further submission.

 

 

    1. As I recall pointing out to the Appellant in the course of argument, his principal difficulty in the Costs Appeal was that I had not been shown any authority which established that the Judge was obliged, in the circumstances of this case and by reason of the existence of what was described as the offer, to reserve the Costs to the quantum trial. None of the further six cases produced by the Appellant seems to me to fill this gap in the Appellant’s case. I have read all six cases, but I cannot see that any of them establish that the Judge went wrong in the exercise of his discretion or was obliged to reserve the Costs. It is not necessary to go through all six cases individually, but I should make specific reference to the second case referred to by the Appellant, which is HSS Hire Services Group plc v BMB Builders Merchants Limited [2005] EWCA Civ 626. I do so because this case, of the six cases, seemed to me to come closest to what the Appellant needed to establish, in order to get the Costs Appeal off the ground.

 

 

    1. The Court of Appeal were, in this case, dealing with an application for permission to appeal, including permission to appeal against a decision on costs. The first defendant in the action, BMB, was the unsuccessful party on the first part of a split trial, which dealt with liability. The judge ordered BMB to pay the costs of the trial on liability. BMB argued, in support of its application for permission to appeal, that the judge at first instance had been wrong to treat as irrelevant a Part 36 payment which BMB had made. The Court of Appeal considered that there was great force in this point and granted permission to appeal. The Court of Appeal reversed the exercise of the judge’s discretion on costs, leaving the Court of Appeal free to consider the question of what was the right approach to the question of costs, at the conclusion of a preliminary issue hearing, if there had been a Part 36 payment covering the trial as a whole. The Court of Appeal concluded that the judge had been wrong to deal with costs in the way in which he had done. The judge should have reserved the costs of the liability trial to the subsequent quantum trial. In his judgment in the Court of Appeal, at [35], Waller LJ (with whom Mance LJ and Sir William Aldous agreed) said that where a judge was told of the existence of a payment in, when dealing with the costs of a preliminary issue which left the quantum of damages unresolved, the court should, in any but perhaps the most exceptional circumstances, reserve the costs of the preliminary issue until after determination of the damages.

 

 

    1. So far as I am aware there has been no Part 36 offer in the present case. This is clearly an important difference between the present case and the BMB case, where the provisions of Part 36 were engaged. Nevertheless, in BMB the Court of Appeal did consider the question identified above both in relation to Part 36 payments and in relation to offers to settle within the terms of CPR 44.2(4)(c). The core of the relevant reasoning of Waller LJ can be found in his judgment, at [28]-[30]:

 

“28. In defending the judge’s approach and in answer to the question as to what apart from paying into court the defendants could do to protect themselves against an order for costs on the liability issue, Mr Dunning QC robustly argued, it was open to them to concede liability, and if they chose not to do so then liability for costs followed if they lost the issue. If that approach is right it seems to discourage the arguing of preliminary points.

29. The contrary approach is that parties should be encouraged to make Part 36 payments in and/or offers; they should also be encouraged to try preliminary points if that could lead to the saving of costs overall. If payments in are to be totally ignored at the conclusion of the trial of a preliminary issue, that will discourage applying for the trial of the same, and may even discourage part 36 offers where preliminary issues have been ordered. The proper approach at the conclusion of a trial of a preliminary issue where there has been a part 36 payment in or a part 36 offer, should therefore normally be to adjourn the question of costs pending the resolution of all the issues including damages, at which stage the quantum of the Part 36 offer can be revealed and the discretion in relation to costs exercised in the knowledge of it.

30. I have no doubt that the provisions of Part 36 and of Part 44 encourage the latter approach. Mr Dunning strove manfully to argue that the provisions allowed the judge to take the view he did. He argued (1) even where there had been a payment in, there was no rule which expressly prevented the judge dealing with the costs of the trial of the issue of liability or which required him to reserve the question of costs until after the issue of damages had been resolved; (2) the modern approach was to encourage stage based orders; (3) it was the defendants who wanted a split trial and the claimants resisted it; (4) the defendants could have admitted liability but chose to fight it; (5) the claimants were entirely successful; (6) it was a case where the dispute was about what was said, and the evidence of HSS had been entirely accepted, and the witnesses of the defendants had been severely criticised – Mr Harrison was described as “disingenuous” and Mr Sowton as “totally unreliable”, and reference was made to CPR 44.3(4) under which it was material to take into account the conduct of the parties; (7) it is the judge who has heard the issue who is based placed to deal with the costs. Thus he argued that the judge having been correctly informed of the fact that there had been a payment in as he was entitled to be under CPR 36.19 (3)(c), was equally entitled to hold that it was immaterial.”

 

    1. I can see that this reasoning provides strong support for the argument that when a court comes to consider costs, at the conclusion of a trial on liability which the defendant has lost, the existence of an admissible offer to settle should cause the court to reserve the costs of the liability trial until the quantum trial, at which point it can be seen whether the recovery exceeds what was offered. I do not think however that it is possible to extract any rule of law to this effect from the judgment of Waller LJ. The point remains that, in their actual decision in this case, the Court of Appeal were considering the impact of a Part 36 payment upon the costs of a preliminary issue, where damages remained to be determined. In my view therefore, BMB does not go so far as the Appellant needs it to go, in order to provide the required platform for his argument based on what was characterised as the offer in the present case. The same is true of the other five cases relied upon by the Appellant in this context.

 

 

    1. I can see that the position might have been different in the present case if the Judge had taken a different course. If, which I regard as a questionable assumption, one is prepared to treat the April Letter as the equivalent of an offer of settlement, it could have been said that the Judge had gone wrong in the exercise of his discretion if the Judge had forgotten about the April Letter and the associated documents when he came to make his decision on costs. The same would be the case if the Judge had decided that he was bound to leave the April Letter and associated documents out of account, in exercising his discretion as to costs. By CPR 44.3(4)(c) the Judge was required to have regard to what was characterised as the offer in exercising his discretion as to costs.

 

 

    1. It is however clear that an omission or failure of the kind referred to in my previous paragraph did not happen. The offer, as it was characterised, was fairly and squarely before the Judge when he came to make his decision on costs at the Consequential Hearing. There was therefore no question of the Judge having forgotten the offer. The note of the Costs Judgment produced by the Respondent’s solicitors confirms, as one would expect, that the Judge did not treat himself as bound to disregard the offer. The Judge took the offer into account. Unfortunately for the Appellant, the Judge, who heard the liability trial and produced the Judgment, came to conclusion, in the exercise of his discretion as to costs and in all the circumstances, that the existence of the offer was not sufficient to persuade him to reserve the Costs to the quantum trial.

 

 

    1. Drawing together all of the above analysis, I cannot see any basis on which I can interfere with the Judge’s decision on costs. It is true that the Judge contemplated the possibility, in Paragraph 161, of a reasonable offer having costs consequences, but if it is assumed that there was such a reasonable offer to be considered at the Consequential Hearing this did not compel the Judge to reserve the Costs, as opposed to awarding the Costs to the Respondent. Indeed, as the Judge appears to have explained, when dealing with the query from the Appellant on the Costs Judgment, the Judge considered that an offer might affect the costs of the quantum trial, but should not affect the costs of the liability trial. The most that the Judge was willing to do for the Appellant, on the basis of the offer, was to provide that the Appellant should not have to pay the Costs until the conclusion of the quantum trial, either by way of interim payment or following a detailed assessment of the Costs. I cannot see why, in the exercise of his discretion, the Judge was not entitled to take this particular course, so far as his decision on costs was concerned.

 

 

    1. There is the potential difficulty in the present case that I do not have an actual transcript of the Costs Judgment. It seems to me however that this is not a reason for allowing the Costs Appeal. I have what I regard as an adequate record of the reasoning of the Judge in the note provided by the Respondent’s solicitors. I also highlight the following two points, in this context.

 

 

    1. First, as I have already noted, neither party suggested that I could not deal with the Costs Appeal, in the absence of knowledge of the actual reasons for the Judge’s decision in relation to the Costs. As it happens, I do now have what I regard as a reliable record of the Judge’s reasoning in the Costs Judgment. Both parties did however proceed with their arguments in the Costs Appeal, at the hearing, on the basis that I could decide the Costs Appeal without actual knowledge of the Judge’s reasoning.

 

 

    1. Second, and as I have also already noted, the Judge had the arguments before him at the Consequential Hearing concerning the effect or otherwise of the April Letter and the associated documents. Langer was also cited to the Judge. In these circumstances I would have regarded myself as entitled to assume, even without knowledge of the Judge’s reasoning, that the Judge, in the exercise of his discretion, decided that an issues based approach to the Costs was justified, notwithstanding the April Letter and the associated documents. I would also have regarded myself as entitled to assume that the Judge noted the potential points of difference between the present case and Langer, but did not consider them sufficient to displace an issues based approach. As it turns out, the note of the Costs Judgment provided by the Respondent’s solicitors provides confirmation that these assumptions, if I had had to make them, would have been correct.

 

 

    1. As I have said, I cannot see any basis on which I can interfere with the Judge’s decision on costs. I should however also add this point.

 

 

    1. If I had come to the conclusion that the decision of the Judge on costs should be set aside, on the basis of some flaw in the exercise by the Judge of his discretion as to costs, this would have given rise to the question of what should then happen. On that hypothesis, it seems to me that the sensible course would have been for me to exercise my own discretion in relation to the costs, and to re-make the decision on costs.

 

 

    1. If however I had taken that course, assuming that the Judge’s decision fell to be set aside, my own decision would not have been any different to that made by the Judge. My own view is that the Judge was right to make the decision as to the Costs which he made. Taking into account all the relevant circumstances it seems to me that the Respondent was entitled to be awarded the Costs. In particular, given the comprehensive victory which the Respondent achieved at the liability trial, it seems to me that the present case was one where, when it came to the Costs, this victory trumped the argument that, following the quantum trial, it might turn out that the Respondent would have done better to accept the figure stated in the April Letter. It follows that if I had a discretion of my own to exercise in relation to the Costs, I would have reached the same decision as the Judge. I would not have been prepared to reserve the Costs to the quantum trial.

 

 

  1. In a powerfully expressed submission in reply to Mr Reed’s submissions on the Costs Appeal, both the Appellant and Mrs De Stefano argued that the Judge had stepped outside the legitimate scope of his discretion. They argued that it made no sense to give the Respondent all of the Costs, in circumstances where “the game was not worth the candle”. They argued that the Respondent’s shares might turn out to be worthless and the Petition pointless. I see the argument, but it does not persuade me that the Judge went outside the broad scope of his discretion in the decision which he made. Equally, if the decision on the Costs was one for me to make I would, taking into account all the relevant circumstances, have come to the same decision as the Judge.