European Reinsurance Consultants & Run-Off Consultants Ltd v Pearce

Permission to appeal a costs order may be refused where alleged procedural defects caused no material prejudice and could not have affected the result. A potential conflict between solicitors acting for a company and one shareholder does not, without more, confer a personal right to relief on another shareholder. Repeated informal indications that an undertaking would be given do not make a hearing unnecessary where no formal undertaking was provided until shortly before the hearing, and the proposed terms differed from the order ultimately made. In those circumstances, the successful party may properly recover the costs of obtaining the order.

European Reinsurance Consultants & Run-Off Consultants Ltd v Pearce concerned an application by Mr Pearce for permission to appeal costs orders made by His Honour Judge Levy QC. The orders required him to pay the costs of two sets of proceedings, costs on account and £11,000 for the hearing.

The underlying dispute arose from a breakdown in the relationship between the two equal shareholder-directors of a reinsurance company. Mr Pearce had petitioned for winding up and had discontinued that petition. The company continued proceedings concerning an injunction restraining disclosure of its internal affairs, but abandoned its claim for damages and obtained judgment concerning the injunction. The central issues were alleged procedural unfairness, a conflict of interest affecting the company’s solicitors, and whether Mr Pearce’s willingness to give an undertaking made the hearing and resulting costs unnecessary.

Lord Justice Latham refused both permission to appeal and a stay of execution.

1. Procedural complaints. Mr Pearce complained that his documents had been reorganised, additional material had been served shortly before the hearing, and he had received a skeleton argument immediately beforehand. Although such matters could cause concern, the material before the court did not show any prejudice capable of affecting the result. Even if further time had been allowed, the judge would inevitably have reached the same conclusion. The complaints therefore provided no basis for challenging the costs orders.
2. Solicitors’ conflict. There was undoubtedly potential for a conflict between the company and Mr Palmer, whose personal solicitors were acting for the company. Any complaint arising from that conflict was a matter for the company or Mr Palmer. It did not give Mr Pearce a personal right to relief, particularly on an appeal against the orders. The company’s interests were represented, and no error justifying intervention was established.
3. Undertaking and necessity of the hearing. Mr Pearce had repeatedly indicated that he was prepared to give an undertaking, but no formal undertaking was submitted until 11 October. His proposed terms included an effective cross-undertaking by Mr Palmer and did not correspond with the form of the order ultimately made. The company was therefore entitled to contend that it had been necessary to attend court to obtain the appropriate order, and the costs were properly recoverable.
4. Final order. Mr Pearce remained liable for the litigation costs resulting from his inability to resolve the shareholder dispute. The application was refused.

• Court of Appeal (Civil Division): Lord Justice Latham refused permission to appeal the costs orders and refused a stay of execution. The order was recorded as: “Application refused”.
• Lower court: His Honour Judge Levy QC had made the challenged costs orders, including payment of costs on account and £11,000 for the hearing. No citation for that decision is stated in the judgment.