SIGNIA WEALTH LIMITED v VECTOR TRUSTEES LIMITED & Ors

In commercial litigation involving interrelated issues and mixed success, the court should ordinarily identify the overall winner and start from the rule that costs follow the event. It should then make a proportionate adjustment for the parties’ relative success, rather than impose an issue-based order where the issues are factually intertwined and contain mixed outcomes. An issue-based order remains appropriate for a distinct issue which can be separately identified and costed. Costs on the indemnity basis require conduct taking the case outside the norm. A properly pleaded but unsuccessful case, pursued aggressively yet properly, ordinarily attracts standard-basis costs.

This was a consequential costs ruling following the court’s merits judgment of 8 May 2018 in proceedings concerning Ms Dauriac’s departure from Signia, the classification of her departure, and the valuation and transfer of her shares. The merits judgment produced mixed results: Ms Dauriac established constructive dismissal and that the share valuation process was defective, while Signia established misconduct and that she was a Bad Leaver.

The parties disputed whether costs should follow the event subject to a proportionate deduction, or be allocated by issue. They also disputed whether costs of a discrete similar-fact issue should be payable on the standard or indemnity basis.

1. General approach to costs. The court adopted the principles stated in Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd (No. 7) [2008] EWHC 2280 (TCC). In commercial litigation, the party receiving payment will generally be the overall winner. The court starts from the rule that the successful party is entitled to costs, then considers all circumstances, including relative success, Part 36 offers, negotiations and conduct.
2. Issue-based orders and proportionality. An issue-based order should be approached with hesitation because of practical difficulties. Where issues are interconnected and each side has achieved significant success on them, the better course is ordinarily a proportionate order reflecting overall success and common costs. Ms Dauriac was the overall winner because the shares were worth substantially more than the nominal transfer price. A 45% deduction properly reflected her substantial loss on the Bad Leaver issue and her failure to succeed by reliance on her expert evidence.
3. Distinct issue. The similar-fact issue was sufficiently separate, had been introduced by amendment, and had its own costs budget. It was therefore appropriate to make a separate issue-based order for that issue.
4. Basis of assessment. The similar-fact case had been properly pleaded and pursued, although unsuccessfully and with unreliable witnesses. Applying the approach in Excelsior Commercial and Industrial Holdings v Salisbury Ham Johnson [2002] EWCA Civ 879, with reference also to Three Rivers DC v The Governor and Company of the Bank of England [2006] EWHC 816 (Comm), the conduct remained within the norm. Costs were therefore payable on the standard basis.
5. Orders. Ms Dauriac was ordered to pay Mr Caudwell’s costs of the similar-fact issue on the standard basis. Mr Caudwell was ordered to pay 55% of Ms Dauriac’s remaining costs on the standard basis, subject to detailed assessment if not agreed. The amounts were to be set off, with an interim payment to be agreed or, failing agreement, determined by the court.

The ruling concerned consequential costs following the merits judgment in the same proceedings, handed down on 8 May 2018. No appeal history was stated.