Dexia Crediop S.P.A v Comune Di Prato

The general rule is that the unsuccessful party pays the successful party’s costs, but the court has a broad discretion to make a different order where justice requires. It must consider all the circumstances, including success on distinct issues, the parties’ conduct and the resources consumed by unsuccessful issues. An issue-based approach is permissible, but the court must stand back from any mathematical calculation and decide whether the result is right overall. A party need not have acted unreasonably before the court may recognise the substantial costs caused by issues on which that party failed.

This was a consequential costs judgment following earlier judgments concerning interest-rate swaps between Dexia Crediop S.p.A and Comune di Prato. Prato succeeded overall because Dexia’s claim for a declaration that the swaps were valid failed, and Prato obtained restitution. However, Prato failed on most of its defences and counterclaims, and the court had criticised evidence given by its principal witness.

Dexia sought a substantial costs recovery, while Prato argued that its overall success entitled it to recover most of its costs. The central issue was the appropriate primary costs order under CPR 44.2.

1. The court held that Prato was the successful party overall. The general rule therefore pointed towards an order that Dexia pay Prato’s costs. However, CPR 44.2 gave the court a discretion to depart from that rule where required by justice, having regard to all the circumstances, including partial success, conduct and the possibility of ordering payment of a proportion of costs.
2. An issue-based approach was permissible. The court was not required to find that Prato had adopted an unreasonable or improper litigation strategy. CPR 44.2 permitted recognition of the substantial time and resources devoted to defences and counterclaims on which Prato failed.
3. The expression “kitchen sink approach” was inappropriate. Prato had advanced difficult arguments on Italian law, supported by substantial authority, and its unsuccessful points could not properly be characterised as obviously meritless. Nevertheless, the court could take account of the extent to which those points enlarged the proceedings.
4. The guidance in Kastor Navigation Co Ltd v AGF Mat required the court to stand back from the mathematical result of an issue-by-issue analysis and ask whether, in all the circumstances, it was the right result. The present case did not justify requiring Prato to pay any part of Dexia’s costs, because proper weight had to be given to Prato’s overall success.
5. The contrived evidence of Prato’s principal witness was a further relevant circumstance. Taking that factor together with the costs and resources consumed by unsuccessful issues, the proper order was to deprive Prato of its costs entirely, while stopping short of ordering Prato to pay any part of Dexia’s costs. Each party was therefore ordered to bear its own costs.

The judgment was a consequential costs determination following the court’s earlier judgments dated 25 June 2015 and 10 November 2016. The judgment itself does not state any appeal from those decisions.