Hawkes v Cuddy & Ors

Where a cross-petition is, in substance, a counterclaim, costs relating to it should ordinarily be dealt with separately from the costs of the petition. Where precise assessment would create disproportionate difficulty and expense, the court may make an approximate assessment of the relative costs and give effect to the result by setting off reciprocal liabilities. Costs may be apportioned to reflect the parties’ success on distinct issues. An interim payment on account may be ordered for appeal costs where appropriate, even though no equivalent order is made for costs below.

This was an appeal concerning costs arising from proceedings under Part 30 of the Companies Act 2006 involving Neath Rugby Ltd. The Court of Appeal had made substantive orders and gave these reasons for the costs orders that had not already been addressed in its judgment. The Cuddys’ cross-petition had been permitted to be amended, subject to the amendments not enlarging the factual scope of the trial. The central issues were how the cross-petition should be characterised for costs purposes, how the competing liabilities should be assessed and set off, and the appropriate allocation of the appeal costs.

1. The Court of Appeal ordered that the costs consequences should reflect the separate treatment of the petition and the Cuddys’ cross-petition. In substance, the cross-petition was a counterclaim. The usual practice applicable to counterclaims therefore applied, with the costs order in favour of Mr Hawkes following the counterclaim.

2. Although the judge had permitted amendment of the cross-petition, the amendments did not enlarge the factual scope of the trial. The court therefore treated the cross-petition as a distinct costs component rather than allowing the amendment to alter the overall costs analysis.

3. It would have caused difficulty and considerable additional expense for a costs judge to determine precisely which costs had been increased by the cross-petition. The Court of Appeal accordingly made a necessarily approximate assessment of the relative costs attributable to that issue and implemented it through an effective set-off. The order reflected both the Cuddys’ costs on the cross-petition and Mr Hawkes’ costs on it.

4. Subject to specific provisions in the order, there was no order as to costs on the petition up to 23 July 2007; Mr Hawkes was to pay 90 per cent of the Cuddys’ petition costs from that date to 23 October 2007; the Cuddys were to pay Mr Hawkes’ cross-petition costs to 23 October 2007; and the later reciprocal liabilities were adjusted by requiring Mr Hawkes to pay 70 per cent of the Cuddys’ aggregate costs after that date.

5. For the appeal, the Cuddys were substantially successful on the petition but unsuccessful on the cross-petition. Mr Hawkes was therefore ordered to pay 80 per cent of the Cuddys’ appeal costs, with an interim payment on account. No interim payment was ordered for the costs below.

• Court of Appeal (Civil Division): gave reasons for costs orders on appeals from the Chancery Division decisions reported at [2007] EWHC 2999 (Ch) and [2008] EWHC 210 (Ch). It treated the cross-petition as a counterclaim for costs purposes and made the consequential apportionment and set-off orders.