Virdee v Virdi & Ors

Where an interlocutory application is settled by consent, the court deciding costs cannot ordinarily assess its full merits. It must adopt a broader, practical approach than would be appropriate after a fully contested hearing. Costs remain a matter for the court’s discretion. A judge may therefore make costs conditional on the outcome of the litigation, rather than order immediate payment, provided the discretion is exercised on relevant material and proper principles. An appellate court will not interfere merely because another costs order might have been preferable.

The claimant applied for permission to appeal against orders made by Peter Smith J on 5 October 2005 in two related Chancery Division actions. The substantive interlocutory applications had been resolved by consent in Tomlin-order terms, concerning the management and letting of disputed properties. The parties disagreed on costs. The judge ordered that the claimant’s costs be costs in the case, rather than directing immediate payment by the defendants.

The claimant argued that the judge had erred in principle by failing to order costs forthwith, particularly in light of the defendants’ alleged failure to respond to reasonable proposals. The central issue was whether the judge had acted within the discretion governing interlocutory costs.

1. Applications refused. Lord Justice Lloyd refused both renewed applications for permission to appeal. The proposed appeals had no realistic prospect of success.
2. Costs are very much a matter for the discretion of the court. The appellate court will not interfere where the judge acted within that discretion and no error of principle, irrelevant consideration or failure to consider relevant material is shown.
3. Where the substantive interlocutory application has been settled, the court cannot ordinarily investigate its full merits to determine whether an unqualified immediate costs order would have been justified. It must adopt a broader approach than in a fully contested case. This approach was recognised in Brawley v Marczynski [2002] EWCA Civ 756, [2003] 1 WLR 813.
4. The judge had been entitled, on the limited material before him, to regard the defendants’ failure to respond positively as blameworthy but insufficient to justify an immediate order against them. He was entitled to order the claimant’s costs in the case, leaving recovery contingent on the claimant ultimately succeeding, while protecting him from liability for the defendants’ costs.
5. Material arising after the judge’s order, including alleged continuing non-compliance, could not have been considered by him and was irrelevant to whether his discretion had been properly exercised.

• Court of Appeal (Civil Division): On 19 January 2006, Lord Justice Lloyd refused both renewed applications for permission to appeal.
• High Court, Chancery Division: Peter Smith J made orders on 5 October 2005 resolving the substantive interlocutory applications by consent and directing that the claimant’s costs be costs in the case.