F&C Alternative Investments (Holdings) Ltd v Barthelemy & Anor

The court resolved contested costs and interest issues arising from its earlier liability judgment. It applied CPR Part 44 discretion, taking a broad-brush approach to allocate costs rather than undertaking a highly detailed issue-by-issue apportionment. The judge treated the Part 7 proceedings, the Petition under section 994 and the Cross-Petition as a composite whole and ordered F&C to pay 70% of the Defendants’ costs, disallowing 30% to reflect distinct parts of the Defendants’ case (principally the liquidation and mis-selling strands) on which they failed.

The costs award is on the standard basis up to and including 15 January 2010 and on the indemnity basis from 16 January 2010, the transition driven by the Defendants’ settlement offers and the court’s view that it is appropriate to apply CPR Part 36 by analogy. Interest under section 35A of the Senior Courts Act 1981 on the principal sums is ordered from 26 February 2009 to 7 October 2011, at 3% above base rate until 15 January 2010 and at 10% above base rate thereafter. No deduction was made from that interest to reflect advanced drawings paid to the Defendants. The court also ordered interest on costs, with rates varying by period to reflect the Defendants’ actual borrowing in the later stages of the litigation.

This is the judge’s costs and consequential relief ruling following the earlier liability judgment. The parties did not appeal. The dispute arose from the Defendants’ service of Put Option Notices on 25 February 2009 and related claims in Part 7 proceedings, a Petition under section 994 of the Companies Act 2006 and a Cross-Petition. The Defendants sought payment of the contractually prescribed price under the Put Option Notices; alternatively they sought relief under sections 994–996 (unfair prejudice). F&C disputed the validity of the notices and advanced counterclaims and the Cross-Petition.

• Nature of the applications and relief sought: declaration and damages in the Part 7 claim; purchase/buy-out of the Defendants’ LLP interests under the Put Option formula; unfair prejudice relief in the Petition (sections 994–996); costs and interest orders in this ruling.
• Issues framed by the court: (i) appropriate costs orders and basis (standard or indemnity); (ii) effect of the Defendants’ settlement offers (Part 36 analogy); (iii) interest on the principal sums payable under the First Put Option Notices (start date and rate); (iv) whether interest should be reduced to take account of advanced drawings paid after 25 February 2009; and (v) interest on costs, including whether particular borrowing rates should be reflected.

The court rejected a finely detailed issue-by-issue costs analysis as disproportionate and adopted a broad evaluative approach. It held the proceedings should be treated as a composite whole. The judge found the Defendants had reasonable grounds to advance the liquidation and mis-selling strands but had ultimately failed on those strands. That partial failure justified a 30% disallowance of their costs rather than a full costs award in their favour. The court analysed the history of the Defendants’ settlement offers, accepted that a Part 36 analogue should be applied, and concluded that costs should be awarded on the standard basis to 15 January 2010 and on the indemnity basis thereafter.

On interest the court held that the entitlement to the principal sums crystallised on service of the First Put Option Notices and that interest under section 35A runs from 26 February 2009 to 7 October 2011. For the principal, the court awarded 3% above base rate up to 15 January 2010 and 10% above base rate thereafter (applying CPR Part 36 by analogy for the second period). It refused to set off advanced drawings against interest on the principal, treating the drawings as earned remuneration given the circumstances created by F&C. Regarding interest on costs, the court ordered interest from the dates payments were made, with rates set at 3% above base rate to 15 January 2010, 10% above base rate from 16 January 2010 to 24 June 2010, 40% p.a. for the period up to and including 21 December 2010, and 22% p.a. thereafter, reflecting the Defendants’ actual bridging finance costs in the late period.

This first-instance ruling determined costs and interest. The court ordered that F&C pay 70% of the Defendants’ costs of the Part 7 proceedings, the Petition and the Cross-Petition (30% of the Defendants’ costs to be disallowed to reflect failed strands of the Defendants’ case). Costs are to be assessed on the standard basis up to and including 15 January 2010 and on the indemnity basis from 16 January 2010. Interest under section 35A of the Senior Courts Act 1981 is payable on the principal sums from 26 February 2009 to 7 October 2011, at 3% above base rate until 15 January 2010 and at 10% above base rate from 16 January 2010. No deduction was made for advanced drawings. Interest on costs was awarded from payment dates at specified rates, with higher rates in the later period to reflect actual bridging finance costs. The orders were justified by the court’s broad evaluative exercise, the history of settlement offers (applied by analogy with CPR Part 36), and the need to achieve a proportionate and practicable allocation of litigation costs and risks.