Southern Counties Fresh Foods Ltd, Re

Costs in an unfair prejudice petition are governed by the ordinary statutory and procedural discretion. There are no special costs principles merely because the claim is an unfair prejudice petition. The starting point is that costs follow the event, but the court must consider all the circumstances, including partial success, conduct, offers and negotiations. A party need not act improperly or unreasonably before losing costs on a distinct issue. Issue-based orders should generally be avoided where a broad percentage or period-based order can achieve a fair and proportionate result. Common costs should ordinarily remain recoverable by the overall successful party rather than being apportioned mechanically between issues.

Cobden Investments Ltd petitioned under the Companies Act 1985 in relation to the affairs of Southern Counties Fresh Foods Ltd. The substantive litigation had resulted in an order requiring the RWM group to purchase Cobden’s shares. The court was required to determine the costs of the petition, including reserved costs of an unsuccessful summary judgment or strike-out application, and the costs attributable to successive periods of the litigation.

The principal questions were whether Cobden or RWM was the successful party, how the parties’ partial success and conduct should affect costs, what significance should be given to offers and failures to mediate or negotiate, and whether costs should be assessed by reference to individual issues or by percentage and period.

1. Applicable principles. Section 51 of the Senior Courts Act 1981 and CPR 44.3 conferred a wide, although not unlimited, discretion. The starting point was the general rule that costs follow the event. That rule did not impose an onus on the unsuccessful party to show that adherence to it would be unjust. The court had to consider all the circumstances, including conduct, partial success and admissible offers.
2. There were no special costs principles applicable to unfair prejudice petitions. Their factual context could, however, affect the application of ordinary principles because the court may need a full understanding of the company’s background before deciding whether unfair prejudice and relief have been established. Establishing facts which did not themselves amount to unfair prejudice did not necessarily make the petitioner unsuccessful on a separate issue.
3. Although issue-based costs orders were generally discouraged by CPR 44.3(7), the court could make a percentage or period-based order where that was the fair, just and proportionate response. A party need not have acted improperly or unreasonably before being deprived of costs on a distinct issue. In this case, the factual overlap and difficulty of allocating common costs made a detailed issue analysis inappropriate.
4. Offers and negotiations were relevant to the overall discretion. A respondent’s offer in an unfair prejudice case need not invariably include costs, but a late offer which left costs unresolved and required substantial contentious litigation was not one which the petitioner acted unreasonably in refusing. The refusal or failure to mediate was also to be assessed in context. RWM’s approach to mediation before the petition was a grudging and conditional acceptance, but the court was sceptical that mediation would have settled the dispute. Its later refusal to mediate was not unreasonable.
5. Cobden was the successful party overall, but its success was qualified by its failure on significant allegations and by weaknesses in its valuation case. Conversely, RWM’s proposed percentage based on an artificial allocation of trial time was rejected. RWM was ordered to pay 50% of Cobden’s costs for Period 1, including 50% of the reserved costs of the summary judgment or strike-out application, and 100% of Cobden’s costs for Periods 2 and 3. Indemnity costs were refused. RWM was also ordered to pay simple interest from 19 June 2007 on one half of the costs paid by Cobden before that date, at 1% above the prevailing Bank of England base rate.

The judgment concerned costs following earlier substantive proceedings in the same litigation. No separate appellate history is stated for this costs judgment.