Costs News

06 February 2019
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High Court refuses to delay payment of costs of security application

A party has failed in a bid to delay payment of the costs of a security for costs application until after a later hearing at which it may be able to set off those costs, on the ground that it would amount to partial security for costs.

In JSC VTB Bank v Skurikhin and Ors [2019] EWHC 69 (Comm), Mr Andrew Henshaw QC, sitting as a High Court judge, had dismissed an application by the claimant for security for its costs in respect of an application by the fourth respondent (Berenger) to discharge an order appointing receivers by way of equitable execution over the membership shares and interests in the second defendant.

Berenger submitted that costs of the security application should follow the event in the ordinary way and that it should recover its costs of £35,029, together with its subsequent costs of resisting VTB's submissions that costs should be reserved and/or payment of costs deferred (the judge made the decision on the papers). Berenger's total costs claim was £41,204.

VTB argued that the costs of the security application should be reserved to the judge hearing the discharge application or, alternatively, if the court was minded to make an order for costs in favour of Berenger at this stage, the time for payment of any costs award should be deferred until after the determination of the discharge application.

VTB said either of these would ensure that it was not required to pay to Berenger the costs of the security application until after the determination of the discharge application, preserving the possibility of a set-off between the costs of the two applications.

The claimant invited the court to exercise either: its general case management power to adjourn the issue to a later hearing; its power under CPR 83.7(4)(a) to stay the execution of a judgment or order for the payment of money "if the court is satisfied that… there are special circumstances which render it inexpedient to enforce the judgment or order”; or its general discretion under CPR 44.2(1)(c) as to when costs are to be paid.

However, Mr Henshaw said that, “tempting as it may be to postpone the issue in this way”, particularly given that the hearing of the discharge application was imminent, he did not consider that it would be correct.

Among his reasons were that the security application was advanced, and had to be determined, on the basis of the evidence and arguments presented on the application. “The possibility that it might subsequently be held, following the hearing of the discharge application itself, that VTB would with hindsight have had good grounds on which to obtain an order for security is not, in my view, a reason for postponing the determination of the costs arising from the security application.”

While the costs of the directions hearing for the discharge application had been reserved, Mr Henshaw viewed the security application as “a discrete matter, the costs of which should follow the event”.

As to the power to stay execution under CPR 83.7(4), he cited the ruling of Andrew Smith J in Dar Al Arkan Real Estate Company and Another v Al Refai [2015] EWHC 1793, which in turn applied the guidance given by Bingham LJ in Burnet v Francis Industries Plc [1987] 1 WLR 802. Special circumstances were required, the latter said.

Mr Henshaw accepted for the purposes of his decision that the contingent claim, if it arose, would be likely to be larger than Berenger's current claim for costs, and that VTB had at least an arguable case on the merits on the discharge application.

He continued: “There is potential prejudice to VTB if it has to pay Berenger's costs now, because there are reasonable grounds for doubt about whether any subsequent costs order in VTB's favour would be recoverable absent an ability to offset. That is, though, in essence the same category of prejudice in respect of which I concluded the court did not have power to order security.”

Though many of the consideration identified by Bingham LJ in Burnet applied, Mr Henshaw concluded that it was not appropriate to make an order which, by delaying payment to Berenger of the costs of its successful defence of the security application, “would in substance provide VTB with partial security for its costs of the discharge application”.

The same considerations also made it inappropriate to direct a later date for payment of Berenger's costs pursuant to CPR 44.2. “To do so would in substance amount to a grant of security for costs against a non-claimant in circumstances where such an order would be unjustifiable.”

In relation to the amount of costs claimed, the judge noted that VTB – whose costs were about 20% lower – was represented by junior counsel with one solicitor in attendance, whereas Berenger used both leading and junior counsel with two solicitors present.

Given that the legal issues were more complex than usual for a security application and the hearing took almost a full day, Mr Henshaw decided that it was not inappropriate for Berenger to use leading counsel, though it was “perhaps borderline given the amount of security [£120,000] in dispute”.

However, whether instructing both leading and junior counsel was justifiable was “more debatable”, and the judge said some discount was justifiable.

“Similarly, I do not think it reasonable for Berenger to recover the costs of two solicitors in attendance at the hearing, but would accept that it can reasonably recover the costs corresponding to the more senior solicitor's attendance.”

The judge summarily assessed Berenger's costs at £31,000.

 

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