UTB LLC v Sheffield United Ltd

The court applied the Civil Procedure Rules, in particular the general rule in r.44.2, to allocate costs after a multi‑part trial (original claim and counterclaim, additional claim for conspiracy and breach, and an unfair prejudice petition under s.994 Companies Act 2006). The judge found that the UTB parties were the successful parties overall but that a material change of position on 29 April 2019 materially affected entitlement to relief and costs. In respect of the original claim, counterclaim and additional claim, UTB was awarded all costs incurred after 29 April 2019 and 60% of its pre‑29 April 2019 costs; no costs order was made in favour of Sheffield United Limited. In respect of the s.994 petition, UTB succeeded in its defence and was awarded costs on the indemnity basis because serious bribery and related allegations pursued by Sheffield United Limited were found to be without proper foundation, disproportionate in focus and to have taken up a disproportionate amount of time. The court also treated the costs of certain interim applications as costs in the case.

This judgment concerns costs following a consolidated trial heard in May–June 2019 (judgment on the merits handed down 16 September 2019) of three related sets of proceedings between UTB and Sheffield United Limited: (i) UTB's original claim (seeking specific performance of a share sale and purchase agreement and declaratory relief) and SUL's counterclaim; (ii) an additional claim by SUL for damages for lawful and unlawful means conspiracy and for breach of the Investment and Shareholders Agreement; and (iii) an unfair prejudice petition under s.994 Companies Act 2006 brought by SUL. The costs judgment was given on 14 October 2019.

Nature of relief sought:

• specific performance and declaratory relief (original claim);
• damages for conspiracy and breach (additional claim);
• unfair prejudice relief under s.994 (petition).

Issues framed: whether UTB or SUL should be regarded as successful on the various parts of the consolidated proceedings; the effect of UTB's change of stance on 29 April 2019; whether UTB should recover its costs in full or subject to reduction for matters on which it did not succeed; and whether the successful defence to the petition should attract indemnity costs because of the conduct and the nature of allegations pursued by SUL (notably serious bribery allegations, a forgery allegation and alleged false evidence).

Court's reasoning: The court applied the CPR r.44.2 starting point that the unsuccessful party normally pays the successful party's costs, but must have regard to all the circumstances including conduct and offers to settle. The judge found that UTB were overall successful but that UTB had initially been wrong in refusing to trigger property call options and that the litigation was caused by that stance. The change of position on 29 April 2019 meant UTB would have succeeded on parts of its claim only because of that change; accordingly, the judge awarded UTB all costs after 29 April 2019 but reduced UTB's entitlement in respect of earlier costs to 60% to reflect SUL's legitimate successes. On the petition, having considered the relevant authorities and the Tomlinson/Three Rivers factors and NatWest v Rabobank guidance, the judge concluded that the bribery and other serious allegations were pursued without proper foundation, became a disproportionate focus and thereby took the case "out of the norm", justifying indemnity costs in respect of the petition. Certain interlocutory application costs were ordered to be costs in the case, and the Chancellor's earlier costs order in relation to an amendment application was not varied.

This is a first instance costs judgment. The court awarded UTB all costs of the original claim, counterclaim and additional claim incurred after 29 April 2019 and 60% of its pre‑29 April 2019 costs, with no order for costs in favour of Sheffield United Limited. The court ordered that UTB recover the costs of the s.994 petition on the indemnity basis because the bribery and other serious allegations pursued by Sheffield United Limited lacked proper foundation and assumed disproportionate prominence. Costs of specified interim applications were to be costs in the case. The judge’s reasoning rested on CPR r.44.2, the Tomlinson/Three Rivers factors and the authorities on indemnity costs, applied to the parties’ conduct and the effect of the change of position on 29 April 2019.