National Westminster Bank Plc v Kotonou & Anor

The usual rule that the unsuccessful party pays the successful party’s costs may be displaced where the successful party pursued substantial issues unsuccessfully or acted unreasonably. An issue-based costs order may be expressed as broad percentages where separate issue costs cannot be assessed accurately. A litigant in person’s difficulties, late disclosure and the late formulation of a successful defence may justify a generous assessment, but do not necessarily outweigh the unnecessary costs caused by unsuccessful allegations. The court may also order costs for separate interlocutory hearings according to the conduct and outcome of each hearing.

The judgment determined costs following earlier judgments in mortgage and guarantee proceedings between the Bank and the Kotonous. The Kotonous succeeded in the mortgage proceedings, and Mr Kotonou succeeded in the guarantee proceedings, where the guarantee was set aside for misrepresentation. The court had to determine the costs of the substantive proceedings and several earlier hearings, including hearings concerning procedural defaults, relief from sanctions, adjournment, funding and the priority of security.

The central issue was whether the normal rule on costs should apply, and if not, what orders fairly reflected the parties’ success, failures and conduct.

1. The Bank was ordered to pay the Kotonous’ costs of the mortgage proceedings. The court rejected indemnity costs because the Bank’s approach to the likely duration and factual context of those proceedings had been reasonable. The claim for indemnity costs was described as hopeless.

2. For the February 2005 hearing concerning relief from sanctions, the Bank was awarded its costs. For the April 2005 hearing concerning witness statements and related applications, Mr Kotonou was ordered to pay the Bank’s costs. The costs of the four later hearings concerning adjournment, funding and agreed directions were ordered to lie where they fell because neither side had won and the hearings resulted in agreement.

3. Although Mr Kotonou succeeded in the guarantee proceedings, the normal rule in CPR 44.3(2) was displaced. He had pursued several distinct allegations, including fraud and claims concerning the standby letter of credit, on which he failed. Those allegations were extravagant, untrue or unnecessary, materially lengthened the trial and caused considerable additional expense.

4. The court applied the modern approach recognised in Summit Property Limited v Pitmans [2001] Civ EWCA 2020: it was no longer necessary for a successful party to have acted unreasonably or improperly before being required to pay the costs of an issue on which it failed.

5. Because the costs attributable to individual issues could not be assessed reliably, the court made a broad percentage assessment. It took account of Mr Kotonou’s status as a litigant in person, funding difficulties, late disclosure and the fact that the successful representation issue emerged late. The final order was that the Bank pay 50% of Mr Kotonou’s costs and Mr Kotonou pay 50% of the Bank’s costs.

Not an appeal. The judgment determined costs following earlier judgments in the mortgage and guarantee proceedings.