Ashdown & Ors v Griffin & Ors

For costs purposes, the successful party is identified by an evaluative assessment of who has succeeded in the litigation as a matter of substance and reality. It is not a discretionary classification and does not turn merely on success upon individual issues.

A petitioner who proves unfair prejudice and obtains a share-purchase order is not necessarily successful where the commercial object of the petition was a valuable exit, the shares are found worthless, and no payment is made. Under Civil Procedure Rules r 44.2, admissible non-Part 36 offers must be considered. Offers substantially better than the result obtained can justify ordering the unsuccessful petitioners to pay all of the successful respondents’ costs, despite partial success on liability.

The appellants were respondents to a petition under section 994 of the Companies Act 2006 concerning the affairs of Addbins Ltd. The petitioners established that Mr Griffin had acted in breach of duty by permitting the company to provide advertising to Addison Lee plc for no payment. They obtained an order requiring him to purchase their shares.

On a later valuation, however, the shares were found to be worthless. Judge Matthews nevertheless ordered Mr Griffin to pay the petitioners’ costs and made no costs order between the petitioners and the other respondents: [2017] EWHC 2694 (Ch). The respondents appealed. The central question was which side had succeeded for the purposes of CPR r 44.2, and what effect should be given to the respondents’ earlier settlement offers.

1. Appeal allowed. The petitioners were ordered to pay the appellants’ costs of the proceedings, to be assessed on the standard basis if not agreed.

2. Costs are discretionary, but identifying the successful party under Civil Procedure Rules r 44.2 is an evaluative, rather than discretionary, exercise. The court must ask who won in substance and reality. Success ordinarily concerns the litigation as a whole, not success on particular issues. Payment by one party to another can be a useful indicator, subject to limits.

3. The petitioners were not the successful parties. Their object was to obtain a substantial sum for their shares. Although they proved unfairly prejudicial conduct and obtained a purchase order, their shares were worthless, no consideration was payable, and they retained the shares. The appellants therefore substantially denied them the prize for which the proceedings had been brought. In re Elgindata (No 2), [1992] 1 WLR 1207, did not govern the case because the petitioners there obtained a significant payment for their shares.

4. It was appropriate to assess the proceedings as a whole. The liability trial was a stage in the attempt to obtain financial relief, not a separate claim to vindicate a property right. Its findings also materially affected the subsequent valuation.

5. The judge should have given effect to the appellants’ offers. Each was substantially more favourable than the nil result achieved. Their non-Part 36 status did not remove the requirement under r 44.2(4)(c) to consider them. There was no established basis for treating alleged non-disclosure as a reason to disregard them.

6. Mr Griffin’s adverse attitude to the petitioners did not carry substantial weight on costs without a finding that it had caused the litigation to be conducted inappropriately. The petitioners’ partial success on liability might otherwise have justified some adjustment. Their rejection of the offers, however, justified an order for all of the appellants’ costs.

• Court of Appeal (Civil Division): allowed the respondents’ appeal against the costs order and ordered the petitioners to pay the appellants’ costs.

• High Court, Chancery Division: Judge Matthews held that the petitioners’ shares were worthless and then ordered Mr Griffin to pay the petitioners’ costs: [2017] EWHC 2694 (Ch).

• High Court, Chancery Division: a Deputy High Court Judge had found unfair prejudice and ordered Mr Griffin to purchase the petitioners’ shares, with valuation to be determined later.