Sahota & Anor v Sohi

In a partnership winding-up action, costs remain subject to a broad judicial discretion guided by CPR 44.3 and the overriding objective. The court may assess costs issue by issue, consider settlement conduct and proportionality, and treat work required for the winding-up as subject to the partnership-costs principle or an analogy with it. No universal rule identifies the unsuccessful party solely by asking who ultimately pays money. An appellate court should not interfere unless the first-instance judge went plainly wrong or outside the generous ambit of discretion. Peculiar facts and disproportionate costs do not, without more, establish a general principle for wider application.

The appellants had been involved in a property investment partnership with the respondent. Following the partnership’s end, proceedings were brought for the sale of partnership assets or an account. After the substantive dispute was resolved, the High Court made a detailed costs order, including limited recovery of the appellants’ costs and a separate award for the costs hearing.

The High Court refused permission to appeal, and permission was also refused on paper by Jonathan Parker LJ. The appellants renewed their application in the Court of Appeal, challenging the application of the partnership-costs principle, the assessment of issue-based success, the treatment of settlement conduct, the overall percentage awarded, and the costs of the costs hearing. The central question was whether any ground had a real prospect of success or raised another compelling reason for the appeal to be heard.

1. Application refused. The appellants showed no real prospect of success and no other compelling reason for the appeal to proceed.
2. CPR 44.3 confers a wide discretion in determining costs. The court must consider all the circumstances and take proper account of the overriding objective. An appellate court should not interfere unless the judge has gone plainly wrong. A trial judge is especially well placed to assess the conduct of the litigation and the weight of relevant factors.
3. The first-instance judge was entitled to use the principle in Hamer v Giles by analogy. The judge could identify the proportion of costs incurred on matters required for winding up the partnership regardless of the contentious background, and order that each side bear its own costs for that proportion. The assessment of 40 per cent fell within the generous ambit of discretion.
4. The judge was entitled to assess success issue by issue. Day v Day did not establish a universal rule that the party who writes the final cheque is necessarily the unsuccessful party. Its approach was not determinative in a partnership case where the relevant conclusions pointed in different directions.
5. The judge was entitled to reduce the award to reflect the parties’ settlement conduct and their responsibility for disproportionate escalation of the litigation. He had recognised that the respondent bore some responsibility, but was entitled to conclude that the appellants bore by far the greater responsibility.
6. The 15 per cent award for the substantive proceedings and the 20 per cent award for the costs hearing were within the permissible range. The judge was entitled to treat the costs hearing separately because the costs had substantially dwarfed the substantive dispute, while recognising that the appellants had achieved greater success on that hearing.
7. The unusual facts did not establish a general costs principle of wider application. The order appealed from therefore stood.

• Court of Appeal (Civil Division): Permission to appeal was refused on the renewed application. [2006] EWCA Civ 1194
• High Court of Justice, Chancery Division: Park J gave judgment on the substantive proceedings on 17 June 2002 and made the costs order under challenge on 1 March 2006. The citation given in the judgment is [2006] EWHC 344 (Ch).
• Permission stage: Permission was refused by Park J and subsequently by Jonathan Parker LJ on paper.