28.10.2011British Telecommunications PLC v Office of Communications (Partial Private Circuits)  CAT 35
Key areas: costs in Competition Appeal Tribunal; Competition Appeal Tribunal
This was a decision to determine costs resulting from the Appellant’s failed appeal on two preliminary issues.
The Appellant submitted that the general rule was that costs should not be awarded unless there was “good reason” to do so or where the losing party’s conduct had been “manifestly unreasonable”. This was rejected, and the Tribunal held that the general rule was that the losing party paid costs.
The Appellant went on to give reasons why no order to costs should be made, namely that the matter was complex; it concerned a substantial sum of money; that the Respondent’s costs were funded by an industry-wide levy; and that the Respondent had made unfounded allegations as to its conduct.
The Tribunal held that neither complexity, value of the claim nor the levy was relevant. The Tribunal also held that the claims over conduct were not sufficient to not award costs.
28.10.2011F&C Alternative Investments (Holdings) Ltd. v Barthelemy & Culligan  EWHC 2807 (Ch)
Key areas: basis of assessment; CPR 36.10; both parties win some issues; Indemnity Basis; interest on costs; High Court
The main action was concerning the option of a sale of shares and claim of an unfair prejudice. The Defendants were members in a LLP. The Claimants sought a declaration that the Defendants’ attempted exercise of the option was invalid; the Defendants sought relief under s. 994 Companies Act 2006 that their right as shareholders had been prejudiced; and the LLP sought relief under s. 994 that its affairs had been prejudiced by the Defendants.
At the main hearing, the Court ordered that the Notices were valid; that the Defendants’ Application succeeded, while that of the LLP failed.
The Claimants submitted that the costs should be separated into 34 individual areas, 10 of which they suggested had been lost by the Defendants. This was rejected as the “time and expense [would have been] out of all proportion to what was required to produce a just outcome”.
The Claimants also suggested that the costs should only be limited to what it said were needed to resolve their claim. This too was rejected given what was at stake.
The Court held that issuing proceedings was intended to force the Defendants to agree to their actions and that the Defendants’ further Notices to purchase shares were necessary given the events, as was the Defendants’ s. 994 Petition. As a result, the Court stated that “it is not sensible or feasible to treat the Part 7 proceedings and the Petition as anything other than a composite whole”.
The Claimants also submitted that the Defendants should have accepted their offer to buy them out instead of rejecting it. Again, this was rejected, on the basis that the offer was valued at a time when the share value was very low and by the time the offer was made the valuation had increased substantially.
The LLP’s own s. 994 Petition was also held to be part of the main proceedings because it covered the same ground as the main proceedings and Defendants’ Application.
The Court held that the proceedings dealt with 5 areas (which it labelled “A – E”); they won A, C and E and lost B and D, but that there was an overlap between all 5 areas. However, the Court held that it was appropriate to make an Order costs which reflected the outcome for the Defendant in all 5 areas.
The Claimant submitted that it was unreasonable for the Defendant to claim for B and D. The Court rejected this stating that at the time there were sufficient grounds for the Defendants to claim. However, it noted that those issues “significantly increased” the amount of work required overall.
The Defendants submitted that because they made and offer which the Claimant should have accepted, they should be liable for all of the costs, including those for B and D. However, this was rejected because the Defendants maintained issues which they could have conceded, and ultimately lost on, and such continuance should be taken into account.
The Court held that the Defendants’ should be awarded 70% of their costs in the main action and both s. 994 Petitions.
The Court then moved on to whether costs should be assessed on the Standard or Indemnity Basis.
The Defendants submitted that their repeated offers to settle entitled them to Indemnity costs; that the Claimants should have accepted that they had no defence to the Petition; and the Claimants were unreasonable by disputing the s. 994 Petition. This was rejected because the Petition overlapped with the areas which the Defendants lost, and that it was not unreasonable for the Claimants to dispute the Petition.
However, the Court was willing to consider the impact of the Defendants’ offer overall.
On 24th December 2009, the Defendants made an offer to settle, but it was not a formal Part 36 offer. The Defendant stated in their offer letter that to do so would lead to the Defendants being liable for the Claimant’s costs due to the wording of CPR 36.10, even though the effect of acceptance would be that the Defendants had succeeded.
The Court accepted this and so it was “sensible” for the offer to be worded differently and that they had “properly identified a glitch” in the workings of CPR 36.
The offer was not accepted, and the Claimant made its own counter-offer. The Defendants subsequently withdrew their offer and replaced it with a further offer shortly before trial on 14th June 2010, which included the Claimant agreeing to write to the FSA stating that the complaints against the Defendants were settled, with the wording of such letter to be agreed. This was also rejected.
The Claimants submitted that this meant that it was not truly open for acceptance. The Court rejected this on the basis that the “gist” of the offer could be determined, and so it was valid.
The Claimant also submitted that they could not agree to the term relating to the FSA. This was also rejected because s. 994 gives the Court the power to order such letters to be written, and there is no reason why the parties could not agree to do so outside of Court.
The trial was held and then adjourned part-way through and was due to re-start in late October 2010. While it was adjourned, the Defendants withdrew their further offer and replaced with an offer which the Court considered to be a “fair commercial offer” and was open until the trial re-started. The Claimants also rejected this offer.
The trial resumed and the Defendants won overall.
The Court held that the Defendants’ offers were open for acceptance for a long time, which would need to be taken into account when determining costs, even though they were withdrawn.
The Court held that because the offers were made at an early stage and were still open during the trial, and by the Claimant not making any reasonable counter-offers they took the risk of costs should they lose.
Overall, the Court ordered that the Defendant’s costs up to 15th January 2010 were to be assessed on the Standard Basis, with costs thereafter assessed on the Indemnity Basis.
The Court awarded interest on damages payable under the Notices from when they were served.
In relation to the actual rate of interest, the Defendants submitted that it should be more than the standard 1% above base rate because small businessmen would generally be charged higher rates than this should they need to borrow sums; with interest at 16-20% due to them having to make unsecure4d borrowings to fund the proceedings. The Court instead awarded interest 3% above base rate until 15th January 2010 and 10% above thereafter.
As for the interest on costs, the Defendants submitted witness statements showing the rate at which they had to borrow in order to pay legal fees, before resorting to a CFA. The interest rate they paid varied between 20% and 25%, but the Court awarded interest as per damages until 24th June 2010.
From 25th June 2010, the Court noted that the Defendants had incurred substantial losses by way of bridging loans. The Court, based on the facts of the case, awarded interest from 25th June 2010 to 21st December 2010 at 40% with a rate of 22% afterwards.
28.10.2011Ali v Stagecoach  EWCA Civ 1494
Key areas: interim payment; parties’ offers; Court of Appeal
This was an appeal against an order for costs, in an RTA which settled for £1,750.00.
After judgment was made, the Defendant showed a letter which they sent after the letter of claim was sent for an interim payment of £3,200.00.
The Judge held that this was an offer, which the Claimant failed to beat. As a result, no order was costs was made up to the date that the offer expired, with the Claimant to pay two-thirds of the Defendant’s costs thereafter.
The Claimant appealed on the grounds that an interim payment cannot be “accepted” and thereby settle litigation.
They also appealed on the grounds that the only formal offer made by the Defendant was for £200.00 plus costs, which they had obviously beaten.
The Court held that the Judge had given too much weight to the interim payment, but in the circumstances, held that there should be no order as to costs throughout.
27.10.2011Hunt v Harb & Aziz  EWCA Civ 1239
Key areas: Trustee’s costs; Court of Appeal
This was an Appeal concerning the impact of bankruptcy and whether assigning a claim to a third party on the grounds that the estate will receive a share of the proceeds, can the trustee be liable for costs.
The First Appellant claimed to have married the Second Appellant; subsequently divorced him and made a claim under s. 27 Matrimonial Causes Act 1973.
The First Appellant claimed that the Second Appellant had agreed to transfer £12 million plus two properties to her should she withdraw the claim against him and to discharge any liable he had towards her. The First Appellant claimed she did but the Second Appellant did not comply.
The First Appellant then became bankrupt.
The Trustee issued a claim against the Second Appellant which was served out-of-jurisdiction. The Second Appellant attempted to get the claim set aside under the State Immunity Act 1978 on the grounds that he had diplomatic immunity.
The Trustee knew that he would need third party funding to continue a claim, but was unable to do so, and then discontinued.
The First Appellant did not agree with this and applied for the Notice of Discontinuance to be set aside, which was granted.
The Order made stated at para. 9 (i) “The [trustee] may reject any offer … on terms that all or any part of the net proceeds of a successful claim will be paid to him or applied for the benefit of the creditors on the grounds that the purchaser would in pursuing the claim after sale be acting as the mere nominee or delegate of the [trustee] who would accordingly continue to be at risk of liability for costs.”
This was what the First Appellant appealed against.
The Court noted that should a case involve a liquidator or administrator, the assets remain those of the company, but this did not apply to a trustee in bankruptcy in whom the assets vested personally. As a result, liquidators or administrator are never parties to a claim, but trustees in bankruptcy are and would be liable for costs.
The First Appellant submitted that should a claim be transferred by a trustee in bankruptcy, then the trustee should never be liable for costs. The Court rejected this, stating that it would be unfair to a third party if the property was transferred to a party who was impecunious, but did not say that this should always be the case, it accepted that there were situations in which could be justifiable.
However, the Court did accept that it was wrong for the court at first instance to make an order limiting the trial judge’s discretion as to costs before any offers had been made to the trustee. As a result, the Court struck-out para. 9 (i), while dismissing the appeal overall.
26.10.2011JSC BTA Bank v Ablyazov & Ors  EWHC 2664 (Comm)
Key areas: costs indemnified by a third party; High Court
This was an Application by the Claimant for the First Defendant to state how he was funding his defence to a claim for fraud of $4.5 billion.
The Defendant owned a property near Hampstead Heath and the Claimant stated that he owned many others both within England and worldwide.
On 18th March 2011, the Defendant’s then-solicitors wrote to the Claimant’s solicitors stating that a company known as “Fitcherly Holdings Ltd.” was funding the defence. This company had also funded the defence of some of the co-Defendants.
The First Defendant had also received funding from two other companies: one based in Belize (“Green Life International SA”) and one owned by a Mr. Shalabayev who is based in Kazakhstan (“Wintop Services Ltd.”).
The First Defendant submitted that funding was by way of arm’s length loans: two separate ones from Wintop dated 1st September 2009 and 1st April 2010, and two from Fitcherly dated 17th August 2010 and 1st December 2010, totalling £40 million. He stated that he did not know from where the funds for the first loan from Wintop originated, but that the loans from Fitcherly and the second Wintop loan originated from companies based in Ukraine, in whom the First Defendant had interests.
The Claimant submitted that these loans actually resulted from companies owned by the First Defendant and so they were a facade, as were the funds from Green Life. The Claimant therefore sought an order to disclose the identity of the owner of Green Life.
The Claimant submitted that en existing Freezing Order on the First Defendant meant that there was jurisdiction to issue this application.
At the Hearing they also submitted that obtaining funds from a bona fide third party was a breach of the Freezing Order. The First Defendant objected on the basis that this was not in the Skeleton Argument or Application Notice. The Court said it would take submissions on this second point.
The Court noted that there was no information as to the source of Mr. Shalabayev’s wealth and that it was surprising that the loan agreements between the First Defendant and Wintop and Fitcherly did not contain any security.
The Claimant submitted that First Defendant’s actions regarding his inaccurate information regarding the ownership of Wintop and Fitcherly and so the Freezing Order would be circumvented should the Court not grant the disclosure order.
The First Defendant submitted that he was a victim of political persecution, including actions by the Bank. The Court noted that a previous ruling suggested that this was arguable and so this application should be viewed as an attempt to stifle a defence.
The First Defendant submitted that the solicitors’ compliance with money laundering legislation meant that there was no prima facie case that Green Life was using the First Defendant’s own assets nor is it the First Defendant in disguise. It also submitted that if it was to order the disclosure the identity of Green Life, then they would be subject to “harass him with allegations of illegality or tax evasion” in order to stop him funding the First Defendant’s defence.
The Court stated that held that was “strong ground” for the claim that Wintop and Fitcherly are the First Defendant, as may Green Life, especially given that the First Defendants’ evidence gave him “no confidence”.
Overall, the Court held that the Order for disclosure should be granted and that the First Defendant was to serve a statement giving details about Green Life’s Directors, the nature of its business, the source of its funds, and the agreement between them and the First Defendant.
26.10.2011MIOM 1 Ltd. & Isle of Man Steampacket Co. Ltd. v Sea Echo E. N. E. (No. 2)  EWHC 2715 (Admlty)
Key areas: Part 61; High Court
The Defendant stated that on 5th February 2010 they made an offer under CPR 61 to split liability on a 50:50 basis and so they should be entitled to their costs from 26th February 2010; with costs before that date split equally or there should be no order as to costs.
The Claimant submitted that the Defendant should pay their costs up to 26th February 2010 because it obtained judgment for 50% and because there was no effective counter-claim due to limitation. The Claimant submitted that the Defendant’s offer didn’t comply with CPR 61 and so the Defendant should not be awarded costs from 26th February 2010.
In response the Defendant submitted that the Claimant is only entitled to judgment by the sum that its award exceeds the Defendant’s.
The Court held that the offer was valid and so the Defendant was entitled to their costs from 26th February 2010.
The Court noted that the Claimant did not raise limitation as an issue until after the main judgment had been handed down, which was against the practice in the Admiralty Court, and that they raised the issue too late. Therefore, the Defendants made an effective counter-claim and so costs were to be borne in relation to liability.
Given that the Claimant’s costs were much greater than those of the Defendant, the Court ordered that each party should pay 50% of the other’s costs.
25.10.2011Mortgage Agency Services Number Four Ltd. v Alomo Solicitors (a firm)  EWHC B22 (Mercantile)
Key areas: Part 36 offer; party’s conduct; Indemnity Basis; High Court
The parties in this claim had agreed to settle a claim two days into a trial.
On 11th August 2011, the Claimant made a Part 36 offer which was open for 28 days and stated that should it be accepted after it expired, then would be sought costs on the Indemnity Basis.
The Court had to determine whether Indemnity costs should be awarded.
The Court held that the Defendant’s conduct – by only admitting certain facts in the witness box – was “deplorable”. The Court also stated that their Defence was “prolix” and “did not so much as respond but went on a lengthy undisciplined ramble of irrelevancies of its own volition”
It also held that their conduct by making the case seem much more complex than it was caused extra work, and would on their own justify an Order for Wasted Costs.
During the proceedings, the Parties submitted costs budgets. The Claimant’s was £120,000.00, but was increased to £175,000.00 due to the amount of extra work which was required. The Claimant stated that it is likely that a Bill of Costs would exceed £200,000.00.
The Court held that the Defendant’s conduct justified Indemnity costs being awarded against it throughout.
24.10.2011Musion Systems Ltd. v Activ8-3D Ltd.; C2R Ltd.; Dutton and Humphreys  EWPCC 33
Key areas: costs thrown away; Patents Court
This was a hearing regarding the costs of adjourning a trial, and the impact of a previously-awarded interim payment which was made in the Claimant’s favour.
The trial started, but due to the late submission of further evidence by the Defendants, it was agreed to adjourn.
The interim payment was awarded in the sum of £70,000.00 of which £30,000.00 was to be paid within 28 days and the remainder adjourned top the main trial.
The Claimant submitted that the Defendants should pay their costs thrown away.
The Defendants submitted that the adjournment wasn’t their fault because they had been waiting for documentation to be received. The Claimant submitted that the documentation was known in 2008 and the parties had been preparing since August 2009. As a result, it should have been disclosed long ago.
The Court agreed with the Claimant and awarded them their costs thrown away. However, the balance of the original interim payment did not have to be paid until the main trial.
21.10.2011G F Tomlinson Building Ltd. G F Tomlinson Group Ltd. & Others v Office of Fair Trading  CAT 32
Key areas: both parties win some issues; costs in Competition Appeal Tribunal; Competition Appeal Tribunal
This was a decision to determine costs resulting from the five Appellants’ successful appeals over penalties which they faced.
The Respondent submitted that there should be no order as to costs as there were no conduct issues. The Respondent also submitted that it should not be penalised for decision taken in good faith. The Tribunal stated that to do so would impact its ability to enforce competition laws. This was rejected as the Tribunal held that the general rule was that the winning party should be entitled to their costs.
The Tribunal noted that the Appellant had lost come issues, and that some penalties were reduced as a result of the other Appellants being successful in their case.
The Tribunal held that in the circumstances it was justified to cap each Appellant’s costs at £200,000, with a percentage reduction to take into account any unsuccessful arguments.
The First Appellant was awarded 80% of their costs; the Second theirs in full because they were below the cap; the Third and Fifth Appellants had a 15% reduction; while the Fourth Appellant had a 20% reduction.
21.10.2011Kier Group plc; Kier Regional Ltd. & Others v Office of Fair Trading  CAT 33
Key areas: costs in Competition Appeal Tribunal; Competition Appeal Tribunal
This was a decision to determine costs resulting from the six Appellants’ successful appeals over penalties which they faced.
The respondent submitted that there should be no order as to costs “both as a matter of principle and in view of what the [Respondent] submits was the Appellants’ lack of success on significant issues” or if one was to be awarded, it should not exceed £30,000.00.
The Respondent submitted that it should not be penalised for decision taken in good faith. The Tribunal stated that to do so “would not be conducive to the effective enforcement of the competition rules”
The Respondent also submitted that the Appellants were still liable, given that the penalty was accepted in principle. This was rejected as it would be wrong to penalise a party to limiting an appeal to areas on which they ultimately won.
The Respondent raised issues with how the case was handled, but this was rejected on the grounds that a previous Tribunal had approved of the handling.
The Respondent also stated that there was an overlap between the appeals and did not justify the disparity in the costs claimed, which varied from £142,129 to £559,014.
The Tribunal held that in the circumstances it was justified to cap each Appellant’s costs at £200,000.
As a result, given the amount of the reductions achieved, the First, Second and Sixth Appellants’ costs were capped at £200,000; the costs of the Third Appellant were reduced to £150,000; the Fourth Appellant was awarded £170,000; and the Fifth Appellant was awarded its costs as claimed, because they were below the cap.
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