Skatteforvaltningen (The Danish Customs and Tax Administration) (“SKAT”) v Solo Capital Partners LLP (in special administration) & Ors.

Where a party abandons a discrete and significant part of its case without a determination on the merits, the court may make an immediate costs order. The court need not find that the abandoned allegation was unreasonably advanced. The relevant assessment is fact-sensitive and should account for overlap between the abandoned issue and issues that remain. A focused payment on account may be preferable to immediate assessment where only a distinct category of costs can be identified. Doubt about whether costs fall within the order should ordinarily be resolved conservatively at that stage.

The claimant had originally advanced an allegation concerning the defendants’ beneficial ownership of companies for the purposes of international taxation treaties. The allegation generated substantial pleading, expert work and legal issues. It was later abandoned at a case management conference.

The DWF defendants sought an immediate costs order or payment on account for costs attributable to the abandoned issue. The claimant argued that the allegation had been reasonably advanced, that related factual issues remained live, and that costs should await the trial. The court considered the principles governing costs following abandonment, the possible limitation significance of adding a distinct allegation of falsity, and the appropriate scope and form of relief.

1. Immediate costs order. The court had discretion to make a costs order where part of a case was abandoned without a decision on its merits. The beneficial ownership allegation was sufficiently discrete and significant to justify an order, even though the underlying factual investigation overlapped substantially with issues remaining for trial.
2. Reasonableness not required. It was unnecessary to find that the claimant had acted unreasonably in advancing the allegation. A party’s decision to abandon an issue may result from a multifactorial assessment and may nevertheless justify costs consequences where substantial costs have been wasted.
3. Assessment of overlap. The order had to avoid awarding costs incurred for factual investigations that remained relevant to actual ownership, sham transactions and related matters. The order was therefore confined to expert costs concerning the legal and technical issues of beneficial ownership, including instructing experts, reviewing their reports and attending conferences with them.
4. Cause of action issue. Whether a new particular of falsity constitutes a new cause of action depends on the significance and distinctness of the allegation and the essential facts relied upon. The question is one of degree. The court did not need to decide whether abandonment of the beneficial ownership allegation had abandoned a cause of action, because that factor formed part of the overall costs assessment.
5. Form of order. Payment on account was preferable to a separate assessment at that stage. The defendants were directed to identify the costs said to fall within the ruling, with written responses and resolution on paper. Any doubt about inclusion was to be resolved in favour of limiting the payment on account.