Berezovsky v Abramovich

An appellate court should respect the broad discretion of a first-instance judge in allocating costs, provided the judge applies a permissible approach and makes no error of principle. The general rule that a defendant obtains the costs incurred before a late amendment may be displaced where special circumstances show that the defendant would have pursued the proceedings even if the amendment had been made earlier. It is permissible to assess that issue hypothetically. The court may also consider the overall conduct and scope of interlocutory applications, rather than treating the state of the pleadings at one point as decisive.

The appeal concerned a substantial costs order made by Sir Anthony Colman in the Commercial Court after extensive applications to amend the pleadings and applications by the respondent for strike-out or summary judgment. The judge required the appellant to pay the costs of and occasioned by his amendment applications, while allocating other costs to the respondent or making them costs in the case.

The appellant challenged the order on the ground that the judge had applied the wrong principle and should have awarded the respondent its costs before the successful amendment. The central issue was whether the judge was entitled to consider what would have happened if the amendment had been sought earlier, and whether the resulting costs order fell within his discretion.

Lord Justice Longmore gave the leading reasons. Lord Justice Laws and Lord Justice Stanley Burnton agreed.

1. The appeal was dismissed. The judge had not erred in principle by considering the hypothetical position if an application to amend had been made after the strike-out or summary judgment applications were issued. That was a permissible question when assessing the appropriate costs order.
2. The general rule identified in Beoco v Alfa Laval Co Ltd [1995] QB 137 is that, where a late amendment substantially alters the case and is necessary to prevent failure, the defendant will generally receive the costs up to the amendment. The rule is subject to special reasons. The example from Kaines (U.K.) Ltd. v. Osterreichische [1993] 2 Lloyds Rep. 1, where the action would have been vigorously resisted even after an earlier amendment, was applicable.
3. The respondent had continued vigorously pursuing its strike-out applications after the pleadings were amended. The applications relied on ten grounds, most of which ultimately failed. The precise state of the pleadings was therefore only a moderately marginal consideration in the interlocutory disputes. The judge was entitled to take account of the wider conduct and duration of those applications and to make a calibrated order.
4. Once the judge had asked a correct or permissible question, there was no realistic basis for appellate interference with his clear conclusions. The order was within the ample discretion of a first-instance judge as to costs.

Permission to appeal was granted and the appeal was dismissed.

1. Court of Appeal (Civil Division): On 24 March 2011, permission to appeal was granted and the appeal against the Commercial Court costs order was dismissed: [2011] EWCA Civ 484.
2. High Court of Justice, Queen’s Bench Division, Commercial Court: Sir Anthony Colman made the challenged costs order following the amendment, strike-out and summary judgment applications.