Intrigue Shipping Inc & Ors v Nikitin & Ors

Under Part 44.3 of the Civil Procedure Rules 1998, the court has a discretion whether to make any order as to costs. It may depart substantially from the general rule that the unsuccessful party pays the successful party’s costs.

In exercising that discretion, the court may consider the extent of success, failure on the primary case, dishonest conduct by parties and witnesses, disclosure failures, offers and all the circumstances. A claimant’s recovery of substantial damages does not create an entitlement to costs. The Court of Appeal will not interfere with a costs order absent an error of principle, such as reliance on irrelevant matters.

The appeal concerned costs following a 76-day trial of four connected commercial actions in the Commercial Court. In the Intrigue action, the claimants succeeded on two of four heads and obtained substantial damages against Yuri Nikitin and associated companies, but failed on their primary collusion case and on two other heads.

Andrew Smith J treated the claimants as the successful party for the purposes of the general rule but made no order as to costs: [2011] EWHC 664 (Comm). The claimants appealed, alleging that the judge had improperly relied on matters arising from the related Fiona actions and had failed to give proper weight to their success. The central issue was whether the costs order involved an error of principle.

Lord Justice Rimer gave the lead judgment. Lord Justices Tomlinson and Longmore agreed.

1. Costs discretion. Part 44.3 of the Civil Procedure Rules 1998 gives the court a discretion whether to make any costs order. The court may depart from the general rule and make a different order. The judge correctly directed himself on that discretion and on the relevant considerations.
2. Successful party. The judge correctly identified the claimants as the successful party before considering whether to segregate the litigation into separate claims. That approach accorded with A.L. Barnes Ltd v Time Talk (UK) [2003] EWCA Civ 402.
3. Relevant factors. The judge was entitled to consider the claimants’ limited success, their failure on the primary case, dishonest conduct, misleading witness statements, late disclosure and dishonest evidence. Although conduct under Part 44.3(4)(a) refers to the parties, the requirement to consider all the circumstances made the conduct of relevant witnesses material.
4. Balancing both sides’ conduct. The judge was also entitled to take account of Mr Nikitin’s dishonesty. His conduct did not require the court to disregard the claimants’ conduct or to award them costs. A costs order involves a discretionary evaluation of all relevant circumstances.
5. Connected actions and appellate restraint. The judge did not improperly import Fiona considerations into the Intrigue costs decision. He considered matters separately or generally, but only as features relevant to the costs order in each action. Other judges might have reached a different result, but that did not establish an error of principle. The decision to make no order as to costs was within the judge’s discretion. The appeal was dismissed.

• Court of Appeal (Civil Division): The appeal against the costs order was dismissed.
• High Court of Justice, Queen’s Bench Division, Commercial Court: Andrew Smith J made no order as to costs in the Intrigue action in [2011] EWHC 664 (Comm).