RJ & Anor v HB

In assessing costs after a successful s.68 challenge to an arbitral award, the successful party is identified by the substance of the relief obtained and the issues genuinely contested. A party does not become the successful party merely because it defeated an additional claim for removal of the arbitrator. An offer of remission must be compared with the relief secured by judgment, including the legal and practical difference between remission and setting aside. The general rule under CPR 44.2(2)(a) remains the starting point. A departure under CPR 44.2(2)(b) must fairly reflect unsuccessful or unreasonable points that added materially to the costs, while preserving the overall result. There is no automatic requirement to discount costs by twice the percentage of costs attributed to failed issues.

The judgment concerned costs following the court’s substantive decision in [2018] EWHC 2833 (Comm), by which parts of an arbitral award were set aside under s.68 of the Arbitration Act 1996 because of serious irregularity causing substantial injustice. The court had declined to remove the arbitrator, observing that such relief would have required an application under s.24.

The defendant argued that he was the successful party because the claimants had failed in seeking removal, or because an earlier offer of remission was equivalent to the relief obtained. The claimants argued that they had plainly succeeded overall, subject to any modest deduction for issues on which they had failed. The central questions were who had won, what effect should be given to the offer, and what proportion of costs fairly reflected the unsuccessful or unreasonable points.

1. Outcome. The claimants were the successful party. The defendant was ordered to pay 80% of their costs, subject to detailed assessment on the standard basis if not agreed, with £110,000 payable on account within 14 days.
2. The claimants had secured partial setting aside of the award after establishing procedural irregularity, substantial injustice and the inappropriateness of remission. The defendant had contested each element. The unsuccessful claim for removal did not alter the overall result, because it was a distinct and additional claim.
3. The court rejected the argument that the case was in substance only about removal. If the defendant wished to establish that the claimants would accept the relief ultimately obtained, he could have made an appropriate offer. The court was not persuaded that the claimants would have continued the claim merely to pursue removal if serious irregularity and setting aside had been conceded.
4. The open offer of limited remission did not provide relief as advantageous as the judgment. It did not accept that procedural error had occurred and left the arbitrator to reconsider limited issues subject to conditions. Setting aside required the affected matters to be examined afresh, without reliance on the reasoning and dispositive solution that had been expunged.
5. The general rule in CPR 44.2(2)(a) applied initially. The court then considered the failed claims concerning the Addenda, the excessive claim for setting aside, the unpressed allegation of tacit collaboration and the unreasonable claim for removal. Those matters justified a discount, but the claimants remained clear winners overall.
6. Following the approach in Sycamore Bidco Ltd v Sean Breslin and another, the discount had to reflect the costs generated by the failed points and the overall justice of the case. Kastor Navigation v AGF MAT demonstrated that there was no automatic mathematical rule requiring a 2X% reduction where X% of costs related to unsuccessful issues. A reduction to 80% was fair.

The judgment was a further costs judgment following the court’s substantive decision in [2018] EWHC 2833 (Comm), in which parts of the arbitral award were set aside and the application to remove the arbitrator was not pursued successfully.