Costs News

10 February 2022
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Proportionate orders can undermine general costs rules, warns High Court

A High Court judge has warned that proportionate orders can “end up undermining the general rule that costs follow the event”.

This was particularly relevant in complex commercial litigation, where any winning party was likely to fail on some issues, said Mrs Justice Cockerill.

She was ruling in Deutsche Bank AG London v Comune Di Busto Arsizio [2022] EWHC 219 (Comm), a case involving two interest rate swap transactions.

The defendant accepted that the claimant was the overall winner but suggested it should only recover 75% of its claimed £2.8m costs on the basis that it was only partially successful, particularly because Deutsche Bank failed in its alternative argument and on “other significant and costly issues”.

Cockerill J said: “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.”

She recalled that, 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 noted "a growing and unwelcome tendency… to depart from the starting point set out in rule [44.2(2)(a)] too far and too often".

Cockerill J said: “There has been no sign in subsequent authorities that they have changed their view on this.”

The present case was “close to a paradigm case for the application of the ‘follow the event’ rule”, she continued.

“The central issue at trial, which took up the overwhelming majority of the parties' time and costs, both in preparation for and at trial, was whether the transactions were within Busto's capacity and valid and enforceable.

“Deutsche Bank won on that overarching issue and also on almost all of the numerous issues and sub-issues of fact and law (Italian and English) that were raised or disputed by Busto.

“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, the judge went on, were ones which it would not have needed to raise if Busto had not resisted the claim.

Ordering costs to follow the event was “at the least coherent” with a Calderbank offer Deutsche Bank made in October 2020, which would in fact have been more favourable to Busto than the trial outcome.

Cockerill J ordered that Busto should make an interim payment of £1.4m.

Rupert Allen (instructed by Allen & Overy) for the claimant. Kevin Pettican (instructed by Pietro Gatto) for the defendant.

Comments

Philip Daval-Bowden   10/02/2022 at 12:34

The headline should read “proportional” not “proportionate” …

Anonymous   30/04/2022 at 00:52

The general rule is that costs must be proportionate in addition to following the event.

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