Venture Finance Plc v Mead & Anor

Where substantive proceedings are compromised, the court may determine costs but should be slow to do so without agreed or determined facts showing who succeeded. A contractual costs obligation is a relevant circumstance under Civil Procedure Rules 1998, rule 44.3. The discretion should ordinarily reflect that obligation.

A several contractual promise to pay all costs arising from recovery against a guarantor may make each guarantor liable for the whole of the common costs. Several liability does not require the costs to be divided arithmetically between guarantors. Costs exclusively attributable to another guarantor remain outside the promise, and the receiving party cannot recover more than its total costs.

Venture Finance Plc claimed against two directors under separate guarantees and indemnities supporting an invoice-discounting facility. Each guarantee contained a promise to pay all costs and expenses, on a full indemnity basis, arising from recovery under that guarantee.

The substantive claims were compromised before the summary judgment hearing. The parties agreed that each guarantor would pay an agreed sum and contribute to indemnity costs, but disputed whether each should bear all or only half of the claimant’s costs. Beatson J ordered each guarantor to pay 50%.

The claimant appealed. The central issue was whether several liability under the guarantees required the common costs to be divided equally, or whether clause 9 made each guarantor liable for all costs attributable to recovery from that guarantor.

1. Appeal allowed unanimously. The order requiring each defendant to pay 50% of the claimant’s costs was set aside. Each defendant was ordered to pay the whole of those costs, while bearing one half as between themselves. The claimant could recover no more than 100% in total.

2. Per Chadwick LJ, with Auld LJ agreeing and Arden LJ agreeing with the order and principal guidance, a court has jurisdiction to determine costs after the substantive issues have been compromised. It should nevertheless be slow to do so where the facts necessary to identify the successful party have neither been agreed nor determined. In such circumstances, declining to make a costs order may be the proper exercise of the costs jurisdiction.

3. Rule 48.3 of the Civil Procedure Rules 1998 governs assessment of contractual costs. It does not confer the discretion to decide who must pay them. That discretion arises under rule 44.3 and section 51(3) of the Supreme Court Act 1981. A contractual costs obligation is, however, a circumstance which the court must consider, and the discretion should ordinarily reflect that right.

4. The relevant contractual question was what costs arose from recovering money from each defendant under that defendant’s guarantee. The overwhelming proportion of the costs concerned issues common to both defendants. Virtually the same costs would have been incurred had either defendant been sued alone. The several nature of the guarantees therefore did not require a 50:50 division. Only costs exclusively referable to recovery from the other defendant fell outside each promise.

5. The judge had proceeded on an erroneous principle, had not adequately addressed the claimant’s argument, and had reached a plainly wrong and materially unjust result. This was therefore one of the rare cases in which appellate interference with a costs order made following compromise was justified.

6. Arden LJ added that a judge who may have overlooked a material submission can clarify the reasons by supplementary judgment and may vary or reverse an order until it is drawn. Ordinarily, an approved transcript governs; reliance on an unapproved note of an oral judgment requires good reason.

1. Court of Appeal (Civil Division): The appeal was allowed unanimously. Beatson J’s costs order was set aside and replaced by an order making each defendant liable for the whole costs, subject to one-half responsibility between themselves and a maximum aggregate recovery of 100%.

2. High Court, Queen’s Bench Division: After the substantive claims had been compromised, Beatson J ordered each defendant to pay 50% of the claimant’s costs on the indemnity basis and awarded the defendants the costs of the costs hearing.