Galapagos Bidco SARL v Dr Frank Kebekus & Ors

Costs ordinarily follow the successful party. Failure on some issues does not, without more, justify departing from that rule. An issue-based adjustment may be appropriate where a reasonable but unsuccessful issue was discrete, introduced late and materially changed the evidential complexion of the proceedings. The usual consequence is deprivation of the successful party’s costs of that issue, rather than an order requiring it to pay the unsuccessful party’s costs.

Separate costs may be awarded to co-defendants whose interests could diverge, even where they ultimately advance aligned positions. Any duplication can be addressed on detailed assessment. Payments on account should reflect a reasonable estimate of likely recovery, allowing a margin for error. Interest may be postponed where substantial proportionality issues make detailed assessment necessary.

The judgment determined the costs consequences of earlier proceedings in which Bidco obtained declarations confirming the effectiveness of a restructuring, while Signal’s counterclaim was dismissed. The court had previously given judgment on the substantive issues in [2023] EWHC 1931 (Ch).

Bidco sought its costs from Signal and a contribution from Dr Kebekus. The GLAS Defendants sought their costs from Signal. The parties disputed the effect of Bidco’s unsuccessful additional construction point, the entitlement to separate costs, payments on account, interest and permission to appeal.

1. Costs liability. Bidco was the successful party and Signal the unsuccessful party when the substance and reality of the proceedings were considered. The general rule in CPR 44.2(2)(a) therefore applied. Failure by the successful party on some issues was insufficient, particularly where the litigation was hard-fought and the unsuccessful party had mounted the principal challenge.
2. Additional construction point. The point was reasonable to run, but it was discrete, introduced late and changed the evidential complexion of the case. It justified an issue-based reduction under CPR 44.2(6), rather than an order requiring Bidco to pay Signal’s costs. The reduction had to reflect that Bidco succeeded on the factual question whether the HYNs were out of the money. Signal was ordered to pay 80% of Bidco’s costs.
3. GLAS Defendants. The GLAS Defendants were properly joined because they were bound by the declarations and their fiduciary interests could diverge from Bidco’s. Their aligned position did not preclude a separate costs order. Any unnecessary duplication was a matter for detailed assessment. Signal was ordered to pay 80% of their costs.
4. Dr Kebekus. Dr Kebekus was unsuccessful only on issues representing approximately 10% of the relevant work. He was ordered to pay 8% of Bidco’s costs. Rule 12.47 of the Insolvency (England and Wales) Rules 2016 did not apply to him, and in any event its protection was only presumptive.
5. Payments and interest. Under CPR 44.2(8), the appropriate payments on account were £1,780,000 by Signal to Bidco, £1,590,000 by Signal to the GLAS Defendants and £220,000 jointly and severally by Signal and Dr Kebekus to Bidco. Interest was awarded at 1% above base on paid costs. Judgment Act interest applied from the order date to the payments on account, while interest on the disputed balance was postponed for three months because of substantial proportionality and assessment issues.
6. Permission to appeal. Permission was refused because the proposed grounds had no real prospect of success. The parties were directed to agree a minute of order.

This was a first-instance costs ruling following the substantive judgment in [2023] EWHC 1931 (Ch). Permission to appeal from the substantive conclusions was refused in this judgment.