Hosking & Anor v Apax Partners LLP & Ors

On discontinuance, standard costs remain the norm. Indemnity costs may nevertheless be ordered where the paying party’s conduct, or the circumstances as a whole, take the case “out of the norm”. The court will ordinarily not decide the merits of an untried claim. It may, however, examine the documentary record, the conduct of the litigation and an unexplained discontinuance to assess whether the claim was pursued mainly to obtain a settlement through expense, uncertainty or publicity. The standard-cost consequence of discontinuance under CPR 38.6 does not impose a higher hurdle for indemnity costs. Serious allegations, a shifting and weakly supported case, settlement pressure and abrupt abandonment may cumulatively justify an indemnity order.

The joint liquidators of Hellas Telecommunications (Luxembourg) II SCA brought an approximately €1 billion claim against entities and individuals associated with Apax and TPG. The only claim to trial was under section 423 of the Insolvency Act 1986, challenging a recapitalisation and redemption of debt instruments.

After four days of a six-week trial, and following unsuccessful settlement negotiations, the liquidators discontinued without explanation. The respondents sought costs on the indemnity basis rather than the standard basis applicable on discontinuance. The court also determined payments on account, interest on costs, and an unopposed application concerning disclosure of third-party funding.

1. The court ordered the liquidators to pay the respondents’ costs on the indemnity basis. Standard assessment is the norm, but the discretion must be exercised in all the circumstances. An indemnity award requires conduct or circumstances which take the case outside that norm; moral blame or dishonesty is not required. The court applied the approach stated by the Court of Appeal in Excalibur Ventures v Texas Keystone & Others (No.2) [2017] 1 WLR 2221.

2. Ordinarily, a court considering discontinuance should not decide whether the abandoned claim would have succeeded. The statement of Chadwick LJ in In re Walker Wingsail Systems plc [2006] 1 WLR 2194 did not, however, preclude examination of the contemporaneous material and litigation conduct. In an appropriate case, an abrupt and unexplained discontinuance may support an inference that a claim had little real vitality or was continued to extract a settlement.

3. The court held that this case was well outside the norm. It was high-risk and costly litigation pursued after setbacks elsewhere. The claim was difficult to fit within section 423, lacked material documentary support, changed in significant respects, and involved serious allegations of commercial impropriety which were abandoned after settlement discussions failed. Its presentation had generated damaging publicity, while discontinuance denied the respondents vindication and left them exposed to an unrecovered costs shortfall. The court declined, however, to make a summary declaration that allegations against six TPG individuals were unwarranted.

4. Under CPR 44.2(8), the court ordered reasonable payments on account of £4.75 million to the Apax respondents and £2.65 million to the TPG respondents, payable within 21 days. The assessment was necessarily approximate. Interest was ordered at 2% above base rate, at least up to the costs hearing, pursuant to CPR 44.2(6)(g).

High Court (Chancery Division): This was a first-instance consequential costs decision following discontinuance of the English proceedings. The judgment describes related Luxembourg and New York proceedings, but records no appeal route for the English claim.