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

In complex commercial litigation, costs should ordinarily be determined by a broad evaluative assessment rather than a finely subdivided issue-by-issue analysis. The overall winner will often receive its costs despite losing some issues, particularly where claims were reasonably formulated and issues overlapped. However, distinct issues which materially increased the length and cost of proceedings may justify a proportionate reduction. Non-Part 36 settlement offers may attract analogous costs consequences where the analogy is strong. Interest is conventionally awarded at standardised rates, but the court may depart from them where exceptional evidence shows substantial actual funding losses, especially when indemnity costs have been ordered.

The ruling followed a lengthy trial concerning put-option notices, contractual obligations, unfair prejudice in the management of an LLP, and a cross-petition. The defendants succeeded on the validity of their first put-option notices and on aspects of their unfair-prejudice claim, but failed on other substantial claims, including alleged liquidation and mis-selling cases.

The court had to determine the appropriate costs orders, the basis of assessment, and interest on the sums payable under the put-option notices and on litigation costs. The parties had made several settlement offers, none of which had been accepted.

1. Costs. The court should avoid disproportionate and finely detailed analysis of every issue. The appropriate approach was a broad assessment reflecting the overall justice of the litigation. The Part 7 proceedings, the unfair-prejudice petition and the cross-petition were treated as one composite whole.
2. The defendants were the overall successful parties, but their failure on the liquidation and mis-selling cases materially increased the scope and cost of the proceedings and underpinned substantial monetary claims on which they failed. F&C was therefore ordered to pay 70% of the defendants’ costs.
3. Settlement offers. The defendants’ offers, although not formal Part 36 offers, were properly framed to address a procedural difficulty and were sufficiently analogous to Part 36 offers. They were relevant under CPR Part 44.3 and justified indemnity costs from 16 January 2010, following the expiry of a reasonable period after the first offer.
4. Interest on principal. Interest on the put-option sums ran from 26 February 2009 until payment. The appropriate rate was 3% above base rate until 15 January 2010 and 10% above base rate thereafter, by analogy with CPR Part 36.14. The defendants’ advanced drawings were not deducted, since they represented remuneration for continuing to work for the LLP while F&C disputed the notices.
5. Interest on costs. Interest was payable on litigation costs from the dates of payment. The conventional rates applied initially. After 25 June 2010, the defendants’ proven borrowing at exceptionally high rates, the complexity of the litigation, the purpose of the borrowing and the indemnity-costs order justified rates reflecting their actual effective funding costs, assessed broadly at 40% until 21 December 2010 and 22% thereafter.

The ruling concerned costs and other consequential matters following the liability judgment dated 14 July 2011, [2011] EWHC 1731 (Ch). The parties decided not to appeal.