Anthony James Broom v Maria Del Pilar Molina Aguilar (Costs)

Costs remain within the court’s discretion, but the general rule is that the unsuccessful party pays the successful party’s costs. A party’s failure to accept service before becoming subject to proceedings, or rejection of evidence without a finding of deliberate misleading, does not ordinarily justify departure from that rule. A trustee in bankruptcy conducting adversarial litigation in an official capacity is subject to the ordinary costs rules unless statute provides otherwise. A payment on account should be a reasonable estimate of likely recovery on assessment, with an appropriate margin for uncertainty; the same costs should not be discounted twice.

The appellant challenged an earlier order requiring her to pay substantial sums concerning alleged transactions at an undervalue or preferences. On the appeal and cross-appeal, the appeal was allowed and the cross-appeal dismissed: [2024] EWHC 1764 (Ch). Consequential matters were then dealt with on written submissions.

The appellant sought her costs of the appeal, cross-appeal and section 375 application, together with a payment on account. The respondent accepted costs liability in principle but argued for a percentage reduction and payment within 56 days. The issues were the appropriate costs order, the amount payable on account and the time for payment.

1. Disposition. The respondent was ordered to pay the appellant’s whole costs of the application, appeal and cross-appeal, subject to detailed assessment on the standard basis if not agreed, and £47,000 on account within 14 days of the order.
2. Costs liability. Under Senior Courts Act 1981, section 51(1), and CPR rule 44.2, costs are discretionary, with the unsuccessful party ordinarily paying the successful party. The appellant was successful overall because the jurisdictional issue was the decisive victory; the remaining grounds were subsidiary. Failure on some grounds did not justify a different order.
3. Conduct. A named defendant ordinarily becomes a party, and becomes subject to the court’s jurisdiction, on service of originating process. A potential defendant therefore has no general duty to volunteer for service. Rejection of evidence does not, without a finding of a deliberate scheme to mislead, establish reprehensible conduct for costs purposes. Pre-action protocols do not impose legally enforceable duties on potential defendants.
4. Office-holder. A trustee in bankruptcy pursuing adversarial litigation in an official capacity is subject to the ordinary costs rules, absent statutory sanction for a different approach.
5. Payment on account. Under CPR rule 44.2(8), the court should order a reasonable sum on account unless there is good reason not to do so. The estimate concerns the receiving party’s own reasonable and proportionate costs, not the paying party’s hypothetical costs. A discount may reflect likely reductions on assessment and uncertainty, but the same figures should not be discounted twice.
6. Timing. The default period under CPR rule 44.7 applied because no sufficient evidence justified extending payment to 56 days.

• District Judge Taylor. On 16 November 2023, the judge decided the appellant’s application under section 375 of the Insolvency Act 1986 concerning the earlier order of DJ Davis.
• High Court, Chancery Appeals List. The appeal was allowed and the cross-appeal dismissed: [2024] EWHC 1764 (Ch). This judgment determined consequential costs matters.