Sharp & Ors v Blank & Ors

Costs should generally follow the event, but the court retains a broad discretion to make an order reflecting the parties’ relative success and all the circumstances. Where an interlocutory application concerns distinct issues with different outcomes, costs may be allocated by issue rather than by treating the application as a whole. Costs of an unsuccessful issue may be reserved to trial where the application was reasonably brought but the underlying allegation remains to be tested. In such a case, the appropriate order may be that the costs stand or fall with that particular issue. Costs should be apportioned using a coherent and proportionate methodology, without implying mathematical precision. Where detailed assessment is directed, the court should ordinarily order a reasonable payment on account.

The judgment determined costs arising from several interlocutory matters in the shareholder litigation. The matters were the defendants’ summary judgment and strike-out application, the claimants’ specific disclosure application, the second case management conference, and the claimants’ application to amend the Particulars of Claim.

The summary judgment application achieved mixed results. The defendants succeeded on the prospectus, duties and tricky issues. The claimants succeeded on the valueless issue, while the recapitalisation and LIBOR allegations were allowed to proceed. The court had to determine the appropriate allocation of costs, including whether costs should be reserved to trial, how common costs should be apportioned, and whether an interim payment should be made.

1. The costs of the case management conference, specific disclosure application and amendment application were costs in the case. Neither party could fairly be characterised as the successful party on the amendment application, and the court could not reliably assess the relative success on the disclosure application without having heard it.

2. For the summary judgment application, the defendants were successful on the prospectus, duties and tricky issues, and the claimants were successful on the valueless issue. The general rule that costs follow the event therefore applied to those distinct issues. The defendants’ success on the duties issue was material because broad fiduciary and prevention-of-loss duties were struck out.

3. The recapitalisation and LIBOR allegations were reasonably challenged, but were allowed to proceed despite the limited supporting material then available. Their costs were therefore reserved to the trial judge, with the intention that the claimants’ costs should be costs in the particular issues and should be recoverable only if those allegations were ultimately made good.

4. The court adopted a proportionate apportionment of common costs. It treated hearing time and written material equally, allocated common costs proportionately, and concluded that the defendants and claimants should each recover approximately 30 per cent of their relevant costs, with 40 per cent of the claimants’ non-expert costs reserved to the trial judge.

5. Expert costs were allocated separately. The claimants recovered 50 per cent of Mr MacGregor’s fees, relating to the valueless issue. No part of the fees attributable to the recapitalisation issue was recoverable because permission to adduce the accountancy evidence had been limited to the valueless issue. The defendants did not recover Mr Deetz’s fees.

6. Under CPR r 44.2(8), the defendants were ordered to pay £35,000 on account of costs within 14 days. The specified costs were subject to detailed assessment on the standard basis if not agreed.