Even in hard-fought commercial litigation, it is common for elements of an interlocutory application to be resolved by consent in advance of the hearing, leaving the points that remain in dispute to be determined by the Court. This can give rise to complexity in making a costs order because the Court will not have made any determination as to the points resolved by consent. In its recent judgment in Invest Bank PSC v El-Husseini [2024] EWHC 1055 (Comm), the Commercial Court has given guidance about the principles to be applied in this context.
The issue arose out of a wide-ranging disclosure application issued by the Bank. Shortly after the application was issued, some elements of the relief sought by the Bank were offered to it voluntarily by the disclosure respondents (including an offer to reperform their disclosure exercise). The terms of the offer stated that it was made as a pragmatic measure to narrow the issues that required determination at the hearing and without any concession that the Bank was in fact entitled to such relief. At the hearing of the (remainder of) the application, the Bank lost on every point bar one: see here.
Following judgment on the disclosure application, D2 and D6 applied for 100% of their costs, while the Bank applied for 25% of its costs. The Bank’s primary argument was that it was entitled to be regarded as the successful party because it was the application which had prompted the disclosure respondents to offer the relief that it had sought, which constituted ‘success’. It relied for this proposition on the judgment of Andrew Baker J in Fiesta Hotels v Deutsche Bank [2024] EWHC 557 (Comm).
The disclosure respondents argued that the Bank’s approach was founded on a false premise as to the law, namely the assumption that an applicant who obtains by consent the relief that it seeks is by virtue of that fact alone the successful party. The Judge accepted this submission, holding that it is wrong in principle where an application is settled ‘absent an acceptance of responsibility’ to proceed for costs purposes on the basis that ‘the applicant had achieved that which it had sought and therefore for that reason alone should be considered the successful party’: para 9. It is, instead, necessary to ask what the outcome would have been if the points resolved by consent had been fought out, but it is, particularly in the disclosure context, appropriate to do so ‘by reference to the threshold of obviousness’ and at a relatively high level.
Accordingly, if it is obvious that the points resolved by consent would have been resolved in favour of one party or the other had those matters been fought out, that party is to be regarded as the successful party in respect of those points; but if the threshold of obviousness is not reached (either way), ‘no order for costs would follow on those matters’: para 11.
The Judge was not satisfied that it was obvious that the disclosure respondents would have succeeded on all the points which were the subject of the concessions, although it ‘may well be likely that they would have done so’. The appropriate order in respect of those matters was therefore no order as to costs (and not an order in the Bank’s favour). As to the matters actually determined by the Court, the disclosure respondents were found to be the successful parties; and this justified, overall, an order that the Bank pay 25% of their total costs of the application.
Niranjan Venkatesan acted for the successful defendants, instructed by Debenhams Ottaway LLP.
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