Crowther v Crowther & Ors

In preliminary-issue litigation within financial remedy proceedings, the court may apply ordinary costs principles. A party who discontinues a discrete claim will generally be liable for the costs it caused, even though CPR r.38.6 does not directly apply through the Family Procedure Rules. The case for costs is particularly strong where serious allegations of fraud or conspiracy were pleaded and abandoned shortly before trial, depriving the opposing party of an opportunity for vindication. Financial remedy proceedings do not create an exceptional costs regime for such conduct. Costs may be determined immediately where the preliminary issues are discrete, with detailed assessment determining the recoverable amount. An indemnity order and payment on account may be appropriate.

The proceedings arose from acrimonious financial remedy litigation concerning the alleged beneficial ownership of shipping vessels and related charter income. Mrs Crowther had alleged that Mr Crowther and other respondents had engaged in sham arrangements, fraud and conspiracy. A preliminary trial was ordered after related Admiralty proceedings were transferred to the Family Division.

Five working days before trial, Mrs Crowther settled with the Castle respondents and discontinued the preliminary issues. The discontinuance also ended the allegations against Mr Crowther. Mr Crowther sought his costs on the indemnity basis and an £80,000 payment on account. The central issues were whether costs should be reserved to the conclusion of the financial remedy proceedings, whether ordinary discontinuance principles applied, and whether the allegations justified indemnity costs.

1. Mrs Crowther was ordered to pay Mr Crowther’s costs of and occasioned by the preliminary issues on the indemnity basis. She was also ordered to pay £80,000 on account. The court took no further action concerning a possible referral of the Court of Appeal judgment to HMRC.

2. Under FPR r.28.1, the court may make such costs order as it thinks just. FPR r.28.3 did not apply because the preliminary-issue trial was not financial remedy proceedings for the purposes of that rule. The costs position was therefore governed by ordinary principles, subject to the relevant application of the Civil Procedure Rules through FPR r.28.2.

3. Although CPR r.38.6 was not directly applicable, its principle was highly relevant: a party who discontinues an action or part of it should generally pay the costs thereby wasted. The ordinary presumption is strengthened where serious allegations of fraud and conspiracy have been pleaded and then withdrawn shortly before trial.

4. The court rejected the argument that financial remedy litigation required a holistic costs decision at the end of the proceedings. The preliminary issues concerned discrete assets and a separate dispute. Costs could be separated through the detailed assessment process. Alleged unreasonable conduct by Mr Crowther could be considered by the costs judge, but did not defeat the in-principle costs order.

5. The seriousness and reputational consequences of fraud allegations mean that such allegations should be pleaded only with proper evidential foundation. Where they are abandoned without an opportunity for vindication, indemnity costs are likely to be justified. The court also applied CPR r.44.2(8) and ordered a payment on account because there was no realistic prospect that the assessed costs would be below £80,000.

The judgment refers to an earlier Court of Appeal decision in the same litigation, [2020] EWCA Civ 762, concerning the freezing order. That decision is part of the same litigation and is not treated as a separate cited authority in the case graph.