Grupo Hotelero Urvasco SA v Carey Value Added SL

The general rule is that the unsuccessful party pays the successful party’s costs, but the court retains a broad discretion under the Civil Procedure Rules. A percentage order will generally be preferable to an issue-based order where issues overlap or detailed attribution would create substantial assessment difficulties. An issue-based order remains appropriate where the issues are genuinely distinct and their costs can be identified. The court should reflect a successful party’s failure on significant issues, while assessing the overall result and the interrelationship between issues. Under the amended payment-on-account rule, a reasonable payment should ordinarily be ordered unless there is good reason not to do so. The amount must remain conservative and fair to both parties.

These were consequential costs proceedings following the determination of two substantial, interrelated actions between Grupo Hotelero Urvasco S.A. and Carey Value Added S.L. The earlier judgment, [2013] EWHC 1039 (Comm), gave Carey judgment for approximately €65.9 million on its claims for repayment of advances and under a guarantee, while GHU’s claims failed.

GHU sought costs for three issues on which it had succeeded, or alternatively a substantial percentage reduction in Carey’s costs. It also sought no order as to costs thrown away by an adjourned trial. Carey sought its costs and a payment on account. The issues were how the discretion under CPR 44.2 should be exercised and what reasonable interim payment should be made.

1. Costs discretion and issue-based orders. The court has discretion as to whether costs are payable, their amount and when they are to be paid. The general rule is that the unsuccessful party pays the successful party’s costs, subject to all the circumstances, including partial success. Although the amended rule is neutral between percentage and issue-based orders, a percentage order should generally be preferred where an issue-based order would cause practical difficulty at assessment. The authorities, including Verrechia v Metropolitan Police Commissioner [2002] 1 WLR 2409 and Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2280 (TCC), illustrate that approach.
2. Application to the case. Carey was the overall successful party and succeeded on both its own claim and GHU’s claim. The Long Stop Date, material adverse change and Actos Propios issues were not sufficiently distinct from issues on which Carey succeeded. Their costs substantially overlapped, so an issue-based order would be impracticable. Nevertheless, Carey’s failure on the Long Stop Date issue, together with the outcomes on the other issues, required a substantial reduction. A 25 per cent reduction in Carey’s recoverable costs was ordered. The costs of the adjourned trial were costs in the cause because both parties bore responsibility and Carey’s conduct did not justify a separate departure from the general rule.
3. Payment on account. CPR 44.2(8) creates an effective presumption in favour of ordering a reasonable payment on account where costs are subject to detailed assessment, subject to good reason. Large sums and assessment disputes do not themselves displace that principle. The payment must protect the paying party against overpayment and should be fixed conservatively. GHU was ordered to pay Carey £4 million on account of costs.

not stated in the judgment.