Hoque v Ali

An appellate court should be slow to interfere with a procedural or costs order made in the exercise of discretion. A different judge might have reached a different result is insufficient; intervention is justified only where the judge has plainly erred in principle. A costs sanction should ordinarily relate to the application or default in question. Penalising a party in one application for late payment of costs arising from a separate application is generally impermissible, absent exceptional circumstances. Any such sanction must also be proportionate, and a potentially substantial deprivation of costs requires clear and cogent reasons.

The defendant appealed against orders made by HHJ Barker QC on 3 August 2011 in a partnership accounting dispute. The orders gave him a final opportunity to provide disclosure, provided for adverse inferences on further default, and allocated the claimant’s costs of the disclosure application to the case. A separate order made the defendant’s costs of an earlier hearing costs in the case because he had paid costs from another application six days late.

The Court of Appeal had to decide whether the disclosure direction and the two costs decisions fell within the judge’s discretion, and whether the cross-application costs sanction was principled and proportionate.

Appeal allowed in part. Lord Neuberger gave the judgment, with Lord Justice Carnwath and Lord Justice McFarlane agreeing.

1. The disclosure order was within the judge’s case-management discretion. Its appropriateness was supported by later disclosure and by findings at trial that the defendant had not fully complied with his disclosure obligations.
2. The costs order relating to the disclosure application was also within the judge’s discretion. Costs decisions involve balancing factors and forming a value judgment, and the judge hearing the application is usually better placed than an appellate court to understand the case and its procedural history. An appellate court should interfere only where the judge has plainly gone wrong in principle. The fact that another judge might have taken a more generous view is insufficient.
3. It was wrong in principle, save perhaps in the most exceptional circumstances, to penalise a party in costs on one application because that party had paid costs late in a separate application. The two matters had no real relationship.
4. Even if such a sanction could sometimes be justified, the order in this case was disproportionate. The potential loss of several thousand pounds’ costs was imposed because £1,150 had been paid six days late, causing only minimal interest loss. Such an order required special facts and clear, cogent reasons. The judge gave no adequate explanation, so the exercise of discretion was improper.

The first two grounds of appeal were dismissed. The appeal concerning the costs of the 28 April hearing was allowed, and the order was varied to that extent.

• Court of Appeal (Civil Division): [2012] EWCA Civ 274. Appeal from orders made by HHJ Barker QC, sitting in the Chancery Division at Birmingham District Registry, on 3 August 2011. Appeal allowed in part.