MARCO MAXIMILIAN ELSER v MARK SANDS

The court’s costs discretion is wide, but it must first identify the successful party by considering the litigation as a whole. The general rule is that costs follow the event, subject to all the circumstances and the court’s obligation to achieve overall justice.

Where co-respondents have no dispute with one another and no Part 20 claim exists, the court should not ordinarily make a costs order between them. A chairman of a creditors’ meeting may properly assist the court and defend criticisms made against the chairman, but that does not make the chairman successful against other respondents. Costs incurred in that role should not be shifted to neutral co-respondents where doing so would be unjust.

The judgment concerned consequential costs following an earlier judgment dated 21 December 2021 in proceedings challenging a decision connected with approval of a voluntary arrangement.

The applicant had made allegations against the first respondent, who acted as chairman of the creditors’ meeting and in connection with the voluntary arrangement. The court had initially ordered the second and fifth respondents to pay the first respondent’s costs, but reconsidered that order after recognising that the first respondent had been neutral as to the outcome and had not made allegations against those respondents.

The issue was whether the court had jurisdiction, or should exercise its discretion, to order costs between respondents who had no dispute with one another.

1. Disposition. The order awarding the first respondent costs against the second and fifth respondents was not made. The court concluded that those respondents were not unsuccessful parties as against the first respondent.
2. General costs principles. Under Civil Procedure Rules 1998, r 44.2, the court has a wide discretion as to whether costs are payable, their amount and timing. The general rule is that the unsuccessful party pays the successful party’s costs, but the court may make a different order after considering all the circumstances. The proper sequence is first to identify the successful party by reference to the litigation as a whole, and then to consider whether the general rule should be departed from.
3. Meaning of successful party in this context. Reading r 44 as a whole, “parties” ordinarily means parties between whom there is a dispute. The first, second and fifth respondents were all respondents to the applicant’s challenge, but there was no dispute between them and no Part 20 claim. The first respondent therefore could not demonstrate meaningful success vis-à-vis the second and fifth respondents.
4. Chairman’s role. The court accepted that a chairman may have a special neutral role in insolvency proceedings and may assist the court, including by filing evidence and producing relevant documents. Attendance and representation are fact-sensitive and are not mandated in every case. Here, because the chairman had been criticised by the applicant, it was proper to provide evidence and be prepared for cross-examination. That made the first respondent successful against the applicant, from whom costs could be recovered, but not against the neutral co-respondents.
5. Discretion and fairness. Even if a discretion existed to make an order between the respondents, exercising it in favour of the first respondent would be contrary to the underlying objective of making an order that reflects the overall justice of the case. It would be unfair to impose those costs on respondents with whom the first respondent had no dispute. A warning letter could not create jurisdiction or justify the order.

First-instance consequential costs decision following the court’s earlier judgment dated 21 December 2021. No appellate decision is stated.