Qureshi v Association Of Conservative Clubs Ltd (On Costs)

Costs ordinarily follow the event. A departure may be justified where the losing party’s involvement was, in substance, sponsored by an estate administrator to facilitate a necessary judicial inquiry concerning distribution of the estate. The losing party must establish that justification from the facts of its involvement. The form of the proceedings and the general importance of the issue are insufficient. Where a party litigates adversarially to pursue its own private objective, its costs should not ordinarily be paid from the liquidation estate. Indemnities protecting liquidators or officers from personal liability do not determine whether one organisation’s litigation costs are payable from another estate.

The claimant liquidator sought declarations concerning distributions of the assets of a club in members’ voluntary liquidation. The defendant disputed the legality of the liquidation and claimed that surplus assets should instead be paid to it under the club’s rules.

The court rejected the defendant’s substantive arguments and ordered it to pay the claimant’s costs. This judgment gave reasons for refusing the defendant’s alternative request that both parties’ costs be treated as expenses of the liquidation and paid from the club’s assets, and for refusing a proposed reduction in the defendant’s liability.

1. Costs order. The defendant, as the losing party, was ordered to pay the claimant’s costs on the standard basis, subject to detailed assessment if not agreed, and to pay £60,000 on account.
2. General rule and exception. Costs follow the event. Courts should exercise real caution before departing from that rule. Departure may be justified where the losing party’s involvement is in substance sponsored by an estate administrator to facilitate a necessary judicial inquiry into the general distribution of the estate. In that situation, fairness may require the estate to bear both sides’ costs.
3. Application of the exception. The defendant’s role was adversarial. It developed and pursued issues to advance its own private objective, rather than to represent an identified interest shared by a substantial body of creditors or members. The form of the claimant’s application did not alter that conclusion. The defendant’s wider interest in the answer, including its possible relevance to similar clubs, was insufficient.
4. Indemnities and costs. The fact that a liquidator may recover properly incurred expenses from the liquidation estate protects the liquidator from personal liability. It does not establish that the opposing party’s costs, or the opposing party’s liability for the claimant’s costs, should be paid from that estate.
5. The court also rejected a proposed one-third reduction. Sparse evidence, procedural history and the failure to mediate did not justify altering the costs order on the facts presented.