Hashem v Shayif & Anor

Costs ordinarily follow the event in litigation involving distinct legal entities, even where the unsuccessful party had a reasonable basis for bringing the claim. Litigation conduct must materially justify departing from that position. A party ordered to pay costs may recover those costs over against another party where that party’s conduct caused the litigation. Public funding affects enforcement, not the initial discretion to make a costs order. Set-off against a publicly funded party depends on an equitable connection between the reciprocal claims. A freezing injunction should not prevent a defendant from using assets subject to no proprietary claim to meet genuine and presently payable business or legal expenses.

The judgment determined costs arising from consolidated ancillary relief and Chancery proceedings and an application to vary an injunction restraining the charging of a property. The wife had succeeded against the husband in her ancillary relief claim but had largely failed in claims that company assets belonged beneficially to the husband and that the corporate veil should be pierced. The company and children sought their costs. The wife relied on the husband’s conduct, public funding under the Access to Justice Act 1999, and the possibility of set-off.

The company also sought permission to charge 17 Kensington Heights to raise £150,000 for ordinary business and legal expenses. The central issues were the incidence and enforceability of costs, the availability of set-off, and whether the injunction should be varied.

1. Costs. The husband was ordered to pay the wife’s costs of the litigation on the indemnity basis because she had been fully vindicated against him. The wife was ordered to pay the children’s costs and 90 per cent of the company’s costs on the standard basis. The children were wholly successful on the issues for which they were parties. The company was substantially successful, subject to a 10 per cent discount reflecting the wife’s limited success under section 24(1)(c) of the Matrimonial Causes Act 1973 (paras [18], [23]-[36], [80]).
2. The wife’s reasonable basis for pursuing her claims did not immunise her from the normal costs consequences of defeat. The company, children and husband were separate entities in fact and law, and there was no sufficient evidence that they acted in cahoots. The husband’s conduct and the satellite character of the Chancery proceedings did not justify relieving the wife of liability to the company and children (paras [25]-[32]).
3. The husband was ordered to pay the wife’s costs of the entirety of the litigation, including the costs payable by her to the company and children, because his conduct and representations had driven her into the unsuccessful disputes with them (paras [37]-[41]).
4. Section 11 of the Access to Justice Act 1999 did not affect the initial discretion to award costs. Read with section 22(4), it operated principally at the enforcement stage. The company and children could enforce their costs orders against the wife, subject to the statutory protection where applicable (paras [49]-[60]).
5. Set-off depended on the equitable criterion identified in Lockley v National Blood Transfusion Service. No sufficient nexus existed between the children’s costs claim and the consideration payable for the husband’s shares, so no set-off was ordered against the children. A sufficient nexus existed between the company’s costs claim and any liability on the loan account, so the company was permitted to set off its costs against that liability (paras [66]-[78]).
6. Injunction. The injunction was varied to permit the company to secure borrowings up to £150,000 against 17 Kensington Heights for normal business expenses and legal costs up to the listed hearing. A freezing injunction should not be used to prevent payment of genuine debts or reasonable legal expenses where the relevant assets were not subject to a proprietary claim. The injunction otherwise remained in force (paras [81]-[87]).

First-instance determination of costs and injunction applications arising from consolidated proceedings. The judgment records an earlier substantive judgment in Ben Hashem v Al Shayif, [2008] EWHC 2380 (Fam), but that decision was part of the same litigation.