Koshy v Deg-Deutsche Investitions-Und Entwicklungs Gesellschaft GmbH

An appellate court will not normally interfere with a discretionary costs order unless the judge adopted a wrong approach or made an order which was plainly wrong. A later finding of fact at trial does not, without more, justify reopening an interlocutory costs order made on different material.

Although an ex parte order may be set aside for material non-disclosure, it does not necessarily follow that every cost incurred in seeking its discharge must follow that result. Where alleged non-disclosure requires factual investigation and evidence from both sides, review of the costs discretion should ordinarily occur by an application at first instance.

Harman J made worldwide freezing orders against Mr Koshy and his company, Lasco, on DEG’s ex parte application. He later dismissed their applications to discharge the orders and directed them to pay DEG’s costs on the standard basis forthwith.

After trial, Rimer J dismissed DEG’s action and made findings concerning when DEG knew that Lasco intended to profit from the relevant transactions. Mr Koshy obtained permission to appeal Harman J’s costs order out of time. He argued that the later findings demonstrated material non-disclosure on DEG’s original application and therefore required the costs order to be set aside.

The central issues were whether those later findings alone justified appellate interference with the earlier costs discretion and whether the alleged non-disclosure instead required determination on an application at first instance.

1. Appeal dismissed unanimously. Mummery LJ delivered the judgment, with which Hale LJ and Carnwath LJ agreed. The appeal was, in substance, an attempt after trial to relitigate an interlocutory costs order by relying on a later finding concerning one disputed fact.

2. An appellate court would not normally interfere with Harman J’s discretion on costs unless he had adopted a wrong approach or made an order which was plainly wrong. The appeal did not challenge his approach in light of the circumstances before him. It instead sought to compare the affidavit evidence used for the freezing orders with findings subsequently made at trial.

3. The power to set aside an ex parte order for material non-disclosure was undoubted. It did not follow, however, that liability for all the costs of an application to discharge that order must necessarily follow the setting aside. Harman J had determined costs after a 12-day hearing and by reference to all the circumstances then before him.

4. Rimer J had not been asked at trial to decide whether DEG had failed to disclose material to Harman J. It was therefore unsatisfactory to extract his findings from their trial context and use them, without further evidence, to reverse the costs order. Any review based on the alleged non-disclosure required a first-instance application defining the factual issues and allowing both parties to adduce evidence about the circumstances in which the freezing and costs orders were made.

5. DEG’s separate application for permission to adduce fresh evidence had been withdrawn and proved unnecessary. DEG was ordered to pay Mr Koshy’s costs of that application.

• Court of Appeal (Civil Division): The court dismissed unanimously the appeal against Harman J’s costs order. It ordered DEG to pay Mr Koshy’s costs of DEG’s withdrawn application to adduce fresh evidence: [2003] EWCA Civ 1718.

• High Court, Chancery Division (Rimer J): Following trial in 2001, the judge dismissed DEG’s action, discharged the freezing orders and ordered DEG to pay 50% of Mr Koshy’s costs. Mr Koshy relied on findings made at that trial when later challenging Harman J’s order.

• High Court, Chancery Division (Harman J): The judge made worldwide freezing orders ex parte in November 1996. He subsequently dismissed applications to discharge them and ordered Mr Koshy and Lasco to pay DEG’s costs on the standard basis forthwith. Permission to appeal that order out of time was granted by the Court of Appeal in March 2002.