Grizzly Business Ltd v Stena Drilling Ltd & Anor

An appellate court's preference for a different factual conclusion does not justify reversing a trial judge. The relevant question is whether the decision was one that no reasonable judge could have reached. Critical findings unsupported by evidence may require intervention.

A defendant which succeeds in denying contractual liability may nevertheless bear substantial costs by analogy with the non-party costs jurisdiction. This may be justified where it controlled and funded unsuccessful defences for an associated company, knowing that company could not meet an adverse costs award. Dishonesty, parent-company status and direct financial benefit are unnecessary. The discretion requires a fact-sensitive assessment of justice. Costs adjustments may reflect the expense attributable to individual issues, rather than treating success on each issue as requiring a separate deduction.

Grizzly Business Ltd provided consultancy services through Mr James Devine under an agreement with Stena Drillmax 1 Ltd. The agreement permitted additional success fees. Mr Tom Welo, managing director of the associated company Stena Drilling Ltd, had authority to administer the consultancy arrangements. Grizzly alleged that Mr Devine and Mr Welo orally agreed a success fee of 0.25% of the revenue from a proposed drillship charter to Shell.

Grizzly initially sued Stena Drilling and subsequently joined Stena Drillmax. On 13 June 2014, Teare J found that the success fee had been agreed, but that Stena Drillmax was the contracting party. On 30 July 2014, he ordered both defendants to pay 90% of Grizzly's costs, subject to a temporal limitation for Stena Drillmax. Stena Drilling had controlled and funded the defence, while Stena Drillmax had insufficient assets to satisfy the claim.

With permission from Christopher Clarke LJ, the defendants appealed against the factual findings supporting the oral agreement and against the costs order. The central costs question was whether Stena Drilling's success on contractual liability prevented an order against it by analogy with non-party costs liability.

1. Both appeals were dismissed unanimously. The challenged factual findings were supported by evidence. The costs order was a proper exercise of discretion.

2. An appellate court's conviction that it would have reached a different factual conclusion was insufficient. Applying Henderson v Foxworth Investments Ltd, the question was whether the decision was one that no reasonable judge could have reached. Critical findings unsupported by evidence could require reversal. The trial judge's conclusions about the continuing negotiations, the character of the telephone conversation and the consultant's practice of confirming fees were all open to him on the evidence (paras 22–40).

3. The absence of a contemporaneous written confirmation did not require rejection of the alleged agreement. The judge had examined previous transactions and was entitled to accept the explanation that confirmations concerned fees translated into fixed sums with payment dates. The court additionally observed that the judge's criticism of both principal witnesses did not remove his advantage from observing their cross-examination. Their comparative persuasiveness, tested against the contemporaneous record, could still influence his assessment (paras 32–37).

4. The general costs rule in CPR 44.2(2) permitted a different order. The non-party costs jurisdiction under section 51 of the Senior Courts Act 1981 could inform an analogous order against a co-defendant, as in Threlfall v ECD Insight Ltd. The assessment was fact-sensitive and concerned the economic realities of the litigation. Such orders were exceptional in the sense that they fell outside ordinary litigation pursued or defended for a party's own benefit and expense (paras 55–57).

5. Stena Drilling had controlled and funded the principal unsuccessful defences for Stena Drillmax's benefit. Its funding enabled those defences to proceed and caused Grizzly to incur costs, despite Stena Drilling's knowledge that Stena Drillmax could not meet all adverse costs. Stena Drilling's lack of direct financial benefit and its status as an associated company rather than a parent did not prevent the order. Following the principle stated in Goodwood Recoveries Ltd v Breen, dishonesty or impropriety was unnecessary. The delayed joinder of Stena Drillmax did not excuse Stena Drilling's decision to pursue and fund those defences (paras 58–65).

6. The judge properly assessed how individual issues contributed to the overall expense. The contracting-party issue occupied only a small part of the trial, so a 10% reduction adequately recognised Stena Drilling's success. Further deductions for the unsuccessful allegations of an earlier agreement and perjury were unnecessary because the successful claim required essentially the same factual investigation (paras 66–69).

   The existing costs order was upheld. The stay was lifted, and the appellants were ordered to pay the respondent's appeal costs on the standard basis, to be assessed if not agreed.

• Court of Appeal (Civil Division): In [2017] EWCA Civ 94 , dismissed both appeals, upheld the factual determination and costs order, lifted the stay and awarded the respondent its appeal costs on the standard basis.
• High Court, Queen's Bench Division, Commercial Court: On 30 July 2014, Teare J ordered the defendants to pay 90% of the claimant's costs. Stena Drillmax's liability was confined to costs incurred after 25 October 2013. Costs were awarded on the standard basis up to 21 November 2013 and on the indemnity basis from 22 November 2013.
• High Court, Queen's Bench Division, Commercial Court: On 13 June 2014, Teare J found that an oral success fee agreement had been concluded with Stena Drillmax, rather than Stena Drilling. Christopher Clarke LJ subsequently granted permission to appeal against the merits and costs decisions.