Costs News

14 October 2021
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Wasted costs application that had “hallmarks of satellite litigation” refused

A High Court judge has rejected a wasted costs application in a complex commercial case which he described as having “all the hallmarks of heavy satellite litigation, the furtherance of which is to be deprecated”.

Mr Justice Bryan said Hill Dickinson’s application raised “extremely serious” allegations, including of misconduct by Baker McKenzie which closely resembled professional negligence.

Bryan J said the reality was that the allegations raised by the wasted costs application would involve a hearing of at least two days, which could generate “costs of many hundreds of thousands of pounds” on each side.

“Even that could be an underestimate, both as to time and expense, given the number of issues raised and their seriousness”.

Ruling in Lakatamia Shipping v Su and others [2021] EWHC 2702 (Comm), Bryan J said that, after a 17-day trial in July this year, he ruled that Madame Su had unlawfully conspired with her son to dissipate proceeds of sale of two villas and a plane in Monaco in breach of a freezing order.

She was ordered to pay damages of more than €27m and $857,300 to the claimant, Lakatamia Shipping, represented by Hill Dickinson.

She was also ordered to pay £1.4m on account of costs, with Lakatamia recording its costs in a preliminary schedule as more than £2.4m. Bryan J said Madame Su was yet to make the payment.

Lakatamia applied for a wasted costs order in August, arguing among other things that if Baker McKenzie had “complied with their obligation to reveal the source of the monies that were being used to discharge their fees”, £1.6m in costs and disbursements incurred by the shipping company could have been avoided.

The judge said he was not satisfied that there was evidence which, if unanswered, would be likely to lead to a wasted costs order being made on the basis of the four specific instances of conduct cited by Lakatamia relied upon, or that the proceedings were justified notwithstanding the likely costs involved.

He added: “However, I consider that the same conclusion is reached standing back and looking at the wasted costs application as a whole. In this regard, I am satisfied that the application is inherently unsuited to summary determination under the wasted costs procedure at stage 2.”

Bryan J said the professional misconduct allegations raised by Hill Dickinson included “alleged breaches of freezing orders, the court being misled, funding issues (which could raise money laundering issues) and failure to comply with disclosure obligations and those concerning the preparation of witness statements”.

“Fairness would dictate that such matters would have to be addressed in detail, and they do not lend themselves well to summary determination.”

The judge described the wasted costs application as “worlds away” from seeking redress for an otherwise avoidable step in the proceedings or the prolongation of a hearing.

He said issues relating to legal professional privilege “would need to be fully aired” with “a determination as to whether privilege had been lost and, if so, to what extent”.

Bryan J said this was likely to require a “preliminary hearing before the final stage 2 hearing, further adding to the costs and spurring yet further satellite litigation”.

If Madame Su’s “iniquity” in breaching the freezing order “meant that she did not have the rights a client normally has to assert privilege” then “difficult and time-consuming value judgments would then have to be engaged in by Baker McKenzie as to what was or was not privileged”, further adding to the costs burden.

Bryan J said there were also “causation difficulties” and the wasted costs proceedings would not be justified “considering the likely costs incurred which would be disproportionate to any likely wasted costs found (if any)”.

The judge said the time taken to “read all the submissions and prepare this judgment” far exceeded Lakatamia’s estimate of the time that a stage 2 hearing would take.

“The length of the parties’ submissions to date, and the necessary judgment in response thereto, may themselves be thought to speak volumes.

“In future cases, I would hope that parties may recognise that the stage 1 exercise can usually be performed by the trial judge with little more than an identification of the instances of conduct relied upon given the trial judge's familiarity with the issues that arise in the trial.”

Hill Dickinson for the claimant and Clyde & Co for the respondent, Baker McKenzie


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