Kaneria v Kaneria & Ors

In an application concerning unpaid interim costs, the court may stay enforcement where circumstances have materially changed since the order was made. A material change may arise from developments in the underlying facts, even if the applicant relies on the same broad grounds. The court must assess the circumstances rather than the description of the grounds. Where a delayed share valuation and buyout make a forthcoming set-off clear, the court may stay payment until completion is ready, particularly where enforcement would impose needless economic pressure and frustrate the orderly progress of the valuation.

The petitioner brought applications in an unfair prejudice petition under Companies Act 2006, section 994. After a preliminary issue concerning his entitlement to further shares was decided against him, he accepted a buyout of his existing shares. Interim costs orders were made against him, but the valuation and buyout process was substantially delayed.

The respondents sought an order debarring him from participating in detailed costs assessment unless he paid the outstanding costs. The petitioner sought a stay of enforcement pending valuation and completion of the buyout. The central issues were whether there had been a material change of circumstances and whether the court had jurisdiction to grant the stay.

1. The respondents’ applications were refused. An order debarring the petitioner from participating in detailed assessment could increase his liability beyond the amount a costs judge might award with submissions from the paying party. There was no detailed assessment on foot because the petition had been stayed by consent.
2. The court rejected the submission that a material change of circumstances required reliance on grounds different from those previously advanced. If the underlying facts change or develop, there may be a material change even where the ground is described in the same way. It is the circumstances, not the description of the grounds, that matter.
3. There had been a material change since the interim costs orders. The valuation and buyout, expected to be completed within months, remained incomplete more than a year later. It was also now clear that the eventual set-off would produce a net payment to the petitioner, whereas that outcome had previously been no more than a likelihood.
4. The respondents had ample free cash and had rejected proposals for a substantial payment on account. The court considered that they were using the unpaid costs to impose needless economic pressure. The valuation should proceed with all practicable speed, and no party should have an incentive to delay it.
5. Following Thevarajah v Riordan [2016] 1 WLR 76, citing Chanel Limited v FW Woolworth & Co Limited [1981] 1 WLR 485, the court held that it had jurisdiction in these circumstances to stay enforcement. The stay would continue until the valuation and buyout had been agreed and were ready for completion, when the parties’ obligations could be lawfully set off. The court was also guided by the overriding objective.
6. The petitioner’s application was granted. The obligation to pay the remaining sums under the interim costs order was stayed pending completion of the valuation and buyout. The court noted that any sums due to the fifth respondent, for which no set-off was available, could be paid from sums otherwise payable to the petitioner.