EUROPEAN REAL ESTATE DEBT FUND (CAYMAN) LIMITED (In Liquidation) v ANOUP TREON

In exercising the costs discretion, the court must begin with the general rule that the unsuccessful party pays the successful party’s costs, while giving real weight to overall success. The court may depart from that rule where the parties’ conduct, partial success, settlement offers and the issues litigated make a different order just. Dishonesty is not a trump card. The court must evaluate the nature and degree of the misconduct, its relevance to and effect upon the issues, and its tendency to increase costs unnecessarily. An overall proportionate order may be preferable to a detailed issues-based assessment. A limitation defence remains a substantive defence, even where liability would otherwise have been established. In applying the fraud exception to limitation, the court may consider the full history and information available before loss or before the relevant representation was made.

After a 13-day trial, the court held that the claims were statute-barred and dismissed them, although it found that they would otherwise have succeeded on the merits. The defendants had deceived the claimant in connection with loan notes, and some defence evidence had been invented or embellished. The claimant sought 80 per cent of its costs on the indemnity basis; the defendants sought their costs as the successful parties, subject to any reduction for conduct and issues lost.

The judgment determined the appropriate costs order and the claimant’s application for permission to appeal the limitation conclusions in the main judgment, [2021] EWHC 2866 (Ch). The central issues were how dishonesty, partial success, limitation, delay, settlement conduct and the allocation of costs should affect the orders, and whether the proposed appeal had a real prospect of success.

1. Costs. The claims had been entirely dismissed, so the defendants were the successful parties and the general rule under CPR 44.2 applied as the starting point. That rule did not prevent departure from the event where the parties’ conduct and relative success made a different order just, but the defendants’ overall success required substantial weight.
2. Fraud by the defendants justified a departure from the general rule, but dishonesty was not determinative. The court applied the approach in Hutchinson v Neale: it evaluated the nature and degree of the misconduct, its relevance to and effect upon the issues, and its tendency to cause an unwarranted increase in costs. The defendants’ evidence included significant lies and inventions, but their entire defence was not a cynical abuse of process.
3. The claimant had succeeded on most liability issues, while losing on limitation and some other matters. The limitation issue occupied about 15 per cent of the proceedings on a broad-brush assessment, and the other unsuccessful issues about 5 per cent. The limitation defence was a real defence, not a mere technicality. The court allowed for costs incurred in exposing false evidence, but not for all costs of proving liability, inducement, causation, loss or mitigation.
4. An overall order was preferable to an issues-based order under CPR 44.2(6)(f). Common costs, the late drop-hands offer, the claimant’s unexplained delay, and the practical difficulty of allocating costs by issue were relevant. The final order was no order as to costs.
5. Permission to appeal. The proposed challenges to section 32 of the Limitation Act and the factual findings had no real prospect of success. Section 32 required consideration of the full history, including conduct, events and information before loss or before the relevant representation, and knowledge sufficient to plead fraud rather than certainty of success. Permission to appeal was refused.

The judgment followed the court’s main trial judgment, [2021] EWHC 2866 (Ch), which dismissed the claims as statute-barred while finding that they would otherwise have succeeded. The High Court refused permission to appeal.