Bank St Petersburg PJSC & Anor v Arkhangelsky & Ors

Costs ordinarily follow the event, but the court may depart from that rule where conduct, failed issues or exaggerated claims justify it. Issue-based orders should be avoided where a proportionate broad-brush adjustment is practicable. Indemnity costs require circumstances taking the case out of the norm. Payments on account are generally appropriate, and the court should make a cautious estimate of likely recovery. A stay pending permission to appeal may be granted where the circumstances make enforcement liable to frustrate a practical appeal, despite the usual default against a stay.

This was a consequential judgment following the court’s main judgment, [2018] EWHC 1077 (Ch), in proceedings between Bank St Petersburg PJSC, Alexander Savelyev and the Arkhangelsky defendants. The court determined costs in the main debt claims and the counterclaim, payments on account, and whether enforcement should be stayed pending an application to the Court of Appeal for permission to appeal.

The central issues were the appropriate incidence and basis of costs, the extent of any conduct-based or issue-based discount, the amount of interim payments, and the balance to be struck on a stay application.

1. Costs generally followed the event under CPR 44.2(2), but the court could depart from that rule for conduct or unsuccessful issues under CPR 44.2(5). Although issue-based orders were available, a proportionate overall adjustment was ordinarily preferable where identifying issue-specific costs would be difficult and expensive.

2. Indemnity costs were appropriate only where circumstances took the case out of the norm. The defence advanced by the first defendant in the debt claims was sufficiently implausible, persistent and dishonest to satisfy that test. The court nevertheless made the practical adjustment that the first defendant should pay those costs on the standard basis, reflecting the claimants’ failure on declaratory relief and claims against the second defendant. The second defendant received her costs in respect of the failed debt claims.

3. In the counterclaim, the claimants were awarded 75% of their costs on the standard basis. The discount reflected the central Renord-Invest issue, unreliable evidence and the resulting difficulty in establishing the true facts. The court retained joint and several liability for the counterclaimants, subject to credit for costs payable to the second defendant.

4. There was a presumption in favour of a payment on account under CPR 44.2(8). A reasonable amount involved estimating likely recovery while allowing an appropriate margin for error. The court ordered approximately 55% of estimated debt-claim costs against the first defendant and £6 million on account for the counterclaim, with protective provisions for the second defendant.

5. Although a stay pending permission to appeal departed from the default position, enforcement was stayed pending determination of the defendants’ application for permission or further order of the Court of Appeal. The court also recorded agreed undertakings concerning double recovery and continuation of the freezing order.

The judgment followed the court’s main judgment, [2018] EWHC 1077 (Ch). Permission to appeal was refused by the High Court, but enforcement of the consequential orders was stayed pending determination of the defendants’ application to the Court of Appeal for permission.