Digby v Melford Capital Partners (Holdings) LLP & Ors

Where an interim injunction is granted or continued on the balance of convenience and the underlying merits remain unresolved, the normal costs order is that the costs of the application are reserved to the trial judge. The ordinary rule that the unsuccessful party pays costs does not directly identify a winner or loser in that setting.

The court may depart from that approach where special factors justify immediate costs. A defendant should not be penalised in costs merely for pragmatically consenting to interim relief while maintaining its challenge to the claim. Provisional restraint does not itself establish substantive success.

The respondents obtained interim injunctions restraining Mr Digby’s use of alleged confidential information, requiring delivery up of a laptop, and granting related relief. At the return date, Birss J continued the principal restraints until trial, with modifications, and ordered Mr Digby to pay the respondents’ costs immediately, including a substantial interim payment on account.

Mr Digby appealed only the costs order. He contended that the underlying disputes, including authority to bring the proceedings and the merits of the confidentiality claim, could not be resolved at the interim stage. He argued that costs should therefore have been reserved. The appeal arose from the High Court Business List decision of Birss J, BL-2020-000588.

1. Appeal allowed. The costs of the interim applications dated 6 and 17 April 2020 were reserved to the trial judge. The respondents were ordered to repay the interim sum paid on account of costs.

2. The court held that the editors’ formulation of the law was correct. Under Desquenne et Giral UK Ltd v Richardson [2001] FSR 1, where an interim injunction depends on the balance of convenience, costs will normally be reserved until the substantive issue is decided. The court’s discretion remains open: Picnic at Ascot v Kalus Derigis [2001] FSR 2 recognises that special factors may justify immediate payment of costs.

3. Birss J had erred in treating the ordinary costs rule in Civil Procedure Rules rule 44.2 as directly applicable and in attempting to identify a successful party. He had expressly been unable to resolve the disputed merits. In such circumstances, the benefit of provisional restraints is only provisional and does not establish that the claimants have won the relevant dispute.

4. The appellant’s pragmatic acceptance of continued relief, subject to modifications and without admissions, was a strong reason not to impose an adverse costs order. The judge also proceeded on a material factual mistake about the timing of the appellant’s communication with investors and his qualified undertaking. No special factor justified departure from the normal order. The Court of Appeal therefore re-exercised the discretion and reserved costs.

• Court of Appeal (Civil Division): Allowed the appeal and substituted an order reserving the costs of the interim applications to the trial judge.

• High Court, Business and Property Courts, Business List (ChD): Birss J ordered the appellant to pay the respondents’ interim-application costs, with immediate assessment and an interim payment on account: BL-2020-000588.