Costs News

12 December 2019
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Court can order costs in foreign currency on summary assessment

The court has jurisdiction to make an order for costs in a foreign currency on a summary assessment, the High Court has ruled.

John Kimbell QC, sitting as a deputy High Court judge, said the court must determine which currency most truly reflected the claimant's loss and therefore the currency in which it was most appropriate to compensate the receiving party for the costs which it has incurred.

In Cathay Pacific Airlines Ltd v Lufthansa Technik AG [2019] EWHC 715 (Ch) – a decision from March only published recently – the defendant (LHT) sought a summarily assessed costs award of €37,633 following a preliminary hearing. Its solicitors, WilmerHale, accounted for its time and invoiced LHT directly in euros rather than converting the sum from another currency. Counsel's fees of £13,375 were accounted for in sterling and then converted for the N620 schedule.

The claimant submitted that any order in LHT's favour ought to be made in sterling and doubted whether it was possible for the court to make a costs award in a foreign currency even if it wished to.

Judge Kimbell said he was not aware of any case in which costs have been summarily assessed and an order for payment of those costs made in a foreign currency. “It is necessary, therefore, to approach the matter from first principle.”

Section 51 of the Senior Courts Act 1981 contained a very wide discretion, he pointed out, and there was no express limitation in either the statute or the rules which required the court to make a costs order only in sterling. The question then was whether it was implied.

“In the absence of any binding authority or guidance from the specialist practitioner texts, CPR 1.2 is a necessary point of reference. It requires the court to give effect to the overriding objective whenever it exercises any power under the CPR or interprets any rule.

“If a party domiciled outside of the jurisdiction has incurred substantial costs in a foreign currency in connection with proceedings in England and an order is made requiring a person to pay those costs, an order that those costs be paid in that foreign currency appears to be consistent with the overriding objective in three respects.”

These were that it would ensure the parties were on an equal footing – “because foreign parties would be able to claim costs in the same way that domestic parties have always done i.e. directly in the currency in which the costs were in fact incurred” – it would be expeditious and “it would appear to be fair”.

The judge also found only three previous decisions where the issue of whether an English court can make a costs order in a foreign currency was discussed. The most recent, Elkamet in 2009, concerned compensation for currency exchange losses. He said: “I do agree with Arnold J's observation [in that case] that to interpret section 51 and CPR 44.2 as containing an implied restriction to the effect that costs judgments can only be expressed in sterling would be contrary to the principle which found expression in Miliangos v George Frank (Textiles) Ltd [1976] AC 443 and subsequent cases.”

Miliangos removed the prohibition on judgments being given in a foreign currency. Judge Kimbell said: “To the extent that an overarching principle has emerged, it is that a court ought to give judgment in the currency which most truly expresses the claimant's loss. This is the phrase originally used by Lord Denning in The Folias [1979] QB 491 at 514. It was expressly approved of by Lord Wilberforce in the House of Lords in the same case and been repeated since then in many cases…

“Given that a cost award is intended to be compensatory and in the form of a statutory indemnity [i.e., the indemnity principle], there ought to be no difficulty in principle in the court applying The Folias in this context. The question is: in which currency is it most appropriate to compensate the receiving party for its expenditure on the litigation?”

The judge pointed to The Dione [1980] 2 Lloyd's Rep 577, in which a claim in US dollars was upheld. “Lloyd J held that, for claims for an indemnity (arising under a contract), the principle of The Folias ought to apply. The court should identify the currency in which the loss is actually felt or borne…

“In my judgment, there is no reason why the same approach as was taken in The Dione should not be taken in the context of a statutory indemnity for the award of costs. The fact that the source of the right to the indemnity in the one case is a contract and in the other statute makes no difference. In both cases, it is appropriate to enquire as to the currency which most truly reflects the loss which the claimant has suffered.

“The application of the The Folias and The Dione to the present case is straightforward. In respect of the solicitor's costs, the currency of account and the currency of payment were the euro. It is, therefore, the euro which is self-evidently the currency which most accurately expresses LHT's loss and the currency in which it ought to be compensated.”

Judge Kimbell said the counsel’s fees should also be paid in euros, using the date on which the overall costs schedule was filed as the date of conversion.

“It would of course be possible to divide the costs into two awards; one in sterling and one in euros. However, counsel's fees represent only fraction of a relatively modest total bill and, in my judgment, it would not be in keeping with the overriding objective to split the costs award into fragments on a summary assessment in those circumstances.”

Procedurally, Judge Kimber QC added, a party seeking a summary assessment of costs in a foreign currency ought to give notice and explain why. “There is no need to be prescriptive about the form in which the information ought to be provided but, in most cases, it will be by a combination of the form N620, submissions in writing and, in appropriate cases, a witness statement.”

Though setting out the sterling equivalent was not vital, it would nevertheless “usually be helpful” to provide it, particularly if the currency was an unusual one. “This information will assist the court in the assessment of reasonableness of the sums claimed.”

He ordered Cathay to pay LHT €25,000.

Steven Thompson QC (instructed by Bird and Bird) for the claimant, with Richard Blakeley (instructed by Wilmer Cutler Pickering Hale and Dorr) for the defendant.

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