In Deutshe Bank AG London -v- Comune Di Busto Arisizio [2022] EWHC 219 (Comm), the Court was asked to consider as to whether there should be a “proportionate” costs order award in an action whereby the successful party had not been 100% successful.

In 2007, Busto and Deutsche Bank entered into two interest rate swap transactions; these transactions were determined as valid following judgment in October 2021 and therefor binding and enforceable against Busto.

In this judgment, Miss Justice Cockerill was asked to decide on four issues based on the conventional basis that they reflected the issues in dispute between the parties rather than by way of contractual estoppel.

  1. What declarations should be made in favor of the Claimant;
  2. Should proceedings be stayed to enable the Claimant to seek further relief in these or future proceedings;
  • Determination of a costs order, and
  1. Should the Defendant be granted permission to appeal.

Having considered and ruled on 14 separate decelerations, the majority of which Mrs Justice Cockerill found in favor of the Claimant, the judge was then asked to deal with the remaining issue of costs.

Whilst Busto accepted that Deutsche Bank was the overall winner of the proceedings and therefore, as a general rule, should be entitled to an order for costs pursuant to CPR 44.2 (2), the Defendant submitted that the order should only provide recovery for 75% of their costs on the basis that they had only been “partially successful”. Not surprisingly this was disputed.

Bustos argument was further supported as summarised:

  1. The Claimant in these proceedings had been successful overall, however significant issues in the case resulted in the Defendant succeeding on certain points and there should be reflection of this in the order.
  2. Deutsche Bank was unsuccessful on an alternative claim brought in its’ entirety
  • The alternative claim brough, did not form part of the original case but was added as an amendment; this claim required the Defendant to engage a second expert which, had this amendment not been added, would not have been otherwise instructed.
  1. Other additional costs would have been incurred by both parties due to the alternative claim
  2. Two other arguments lost by the Claimant would have incurred significant cost;
    1. Contractual estoppel
    2. Restitution/Change of position

In response to Bustos’s submissions, the judge stated the following:

“Attractively as this argument was put, I am not persuaded by it. There is a danger, noted in some of the authorities, that proportionate orders end up undermining the general rule that costs follow the event. As noted in many of the authorities, in any litigation – especially complex commercial litigation such as the present case – any winning party is likely to fail on some issues – HLB Kidsons [2007] EWHC 2699 (Comm) at [11]; and see also Sycamore Bidco Ltd v Breslin [2013] EWHC 583 (Ch) at [11]-[12].

In 2011 the Court of Appeal reminded puisne judges that respect has to be had for the “follow the event” starting point. In Fox v Foundation Piling Ltd [2011] EWCA Civ 790, the Court of Appeal observed that there had been “a growing and unwelcome tendency … to depart from the starting point set out in rule [44.2(2)(a)] too far and too often”. There has been no sign in subsequent authorities that they have changed their view on this.

That is reflected in the dicta that:

  1. The Court should “avoid an unduly finely detailed division of issues and sub-issues when deciding what costs order to make” – F&C Alternative Investments v Barthelemy [2011] EWHC 2807 (Ch)at [19].
  2. The Court must always be astute to exercise its discretion on costs to reflect the “overall justice of the case” and to give “real weight” to the fact that one party has been successful overall – HLB Kidsons v Lloyds Underwritersat [10].

It was the position of Mrs Justice Cockerill that the central issue to the case, which proportionally took up the ‘overwhelming majority of the parties’ time and costs related to the issue of the Transactions which was won by the Claimant in these proceedings.

“The issues on which Deutsche Bank succeeded were by far and away the most important issues in the case. The only issues on which Deutsche Bank was not successful were a very small number of subsidiary and contingent matters that would only ever have arisen if Busto had been correct that the Transactions were not within its capacity.

Even the points on which Deutsche Bank lost are in essence ones which it would not have needed to raise if Busto had not resisted Deutsche Bank’s claim; they were “backstop” arguments in response to that defence (and in particular in considerable measure to a late and fairly extensive change of case by Busto) and it was not unreasonable for Deutsche Bank to raise them in response to the defence. I also accept Deutsche Bank’s submission that they were narrow in scope and took up little time in preparation or in the evidence. Yet further any attempt to assign a cash value to them could only be a very vague and approximate exercise”.

Mrs Justice Cockerill therefore ordered that there should be no departure from the general rule and that Busto should be ordered to pay Deutsche Bank’s costs with 50% of those costs incurred to be paid as an interim payment.

It is clear in this judgement that the Courts will be hard pressed to go against the accepted edit that the successful party should be entitled to their costs. That is not to say that Courts are bound to blindly award a successful party their full costs as there will of course be situations whereby a “successful” party only succeeds on maybe one out of ten issues. The Court’s wider powers will therefore be applied.

 

Paul Tidman – paul.tidman@rcostings.co.uk

Senior Costs Draftsman

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