Dufoo v Tolaini & Ors

A costs order under rule 44.2 of the Civil Procedure Rules 1998 involves a broad discretion based on success, conduct and all the circumstances. An appellate court should intervene only for an error of law, a failure to consider relevant matters, reliance on irrelevant matters, or an order which cannot properly stand.

Where several parties advance the same unsuccessful case against a common adversary, the normal starting point is that each should contribute to the adversary’s recoverable costs. A settlement protecting some parties from a direct costs claim does not, without more, bar a contribution claim by another party. It remains one circumstance in the discretionary assessment.

Three applicants began Chancery proceedings jointly against a common respondent, initially advancing the same claims concerning their interests in a company. They subsequently fell out. Two applicants settled shortly before trial on terms that the respondent would seek no costs against them, while the remaining applicant continued and was largely unsuccessful.

The deputy High Court judge ordered the continuing applicant to pay 80% of the respondent’s costs but refused to require the settling applicants to contribute. He also made no order between the applicants concerning a separately contested loan-terms issue.

The continuing applicant appealed. The issues were whether he should have recovered costs on the loan-terms issue and whether the settling applicants should contribute to his liability for the common adversary’s costs.

1. Appeal allowed in part. The Court unanimously dismissed the challenge concerning the loan-terms issue but allowed the challenge concerning contribution. The contribution question was remitted to the trial judge.

2. A judge determining costs under rule 44.2 of the Civil Procedure Rules 1998 exercises a broad discretion. The judge considers not only success on individual issues but also conduct and all the circumstances. An appellate court should intervene only where the judge made an error of law, omitted a relevant factor, considered an irrelevant factor, or made an order which could not properly be right despite the trial judge’s superior knowledge of the case.

3. The judge was entitled to make no order on the loan-terms issue. Both sides had achieved a measure of success, and neither had won outright. The judge had heard the evidence and possessed a detailed understanding of the trial which the appellate court could not replicate.

4. The judge erred by treating the settlement between the respondent and two applicants as a sufficient answer to the continuing applicant’s contribution claim. The continuing applicant was not a party to that agreement. Although the settlement was relevant to the discretion, it did not prevent a contribution order.

5. Where different parties advance the same unsuccessful case against a common adversary, the normal starting point is that they should all contribute to that adversary’s recoverable costs. Stumm v Dixon & Co (1889) 22 QBD 529 illustrated this sensible application of rule 44.2(2), rather than establishing an independent legal principle. The court may depart from that starting point where the circumstances justify doing so.

6. Rule 44.2 permits the court in a multi-party action to order one party to contribute to costs payable by another party to their mutual adversary. A contribution was appropriate for the period during which all three applicants advanced the same largely unsuccessful case. It should not include any additional liability arising from assessment on the indemnity basis because of the continuing applicant’s misconduct.

7. The Court could not fairly quantify the contribution. The matter was therefore remitted for the trial judge to reconsider the proportion, the parties’ conduct and the appropriate basis of assessment in accordance with the Court’s guidance.

1. Court of Appeal (Civil Division): The appeal was allowed only as to the refusal to order a contribution. The contribution issue was remitted to the trial judge. The challenge to the order on the loan-terms issue was dismissed: [2014] EWCA Civ 1536.

2. High Court, Chancery Division: Mr Stephen Jourdan QC, sitting as a deputy judge, ordered the appellant to pay 80% of the common respondent’s costs, made no order on the loan-terms issue and declined to order the other applicants to contribute. No neutral citation is stated in the judgment.