Filatona Trading Limited & Anor v Quinn Emanuel Urquhart & Sullivan UK LLP

In a successful Norwich Pharmacal application, the applicant will normally pay the innocent respondent’s reasonable costs of the application and disclosure. The respondent’s active opposition, even if unsuccessful, does not by itself justify departing from that rule. The court must consider all the circumstances, including whether the respondent had a genuine basis for resisting disclosure and whether disclosure might affect legitimate interests.

The rule may be displaced where the respondent takes an unreasonable course which unnecessarily increases costs. A respondent may retain costs protection for properly considering the application, taking instructions and obtaining advice, but may lose part of its costs attributable to unnecessary resistance. A proportionate reduction may therefore be appropriate.

The Claimants obtained Norwich Pharmacal relief requiring Quinn Emanuel Urquhart & Sullivan UK LLP to identify the business intelligence consultancy and individuals involved in obtaining and supplying a Russian-language copy of the Glavstroy Report.

The court had already ordered the Claimants to pay the Defendant’s reasonable costs of complying with the disclosure order. The remaining issue was the costs of the application itself. The Claimants alleged that the Defendant had conducted the matter unreasonably and had increased the costs by failing to investigate serious allegations that the report was forged. The Defendant relied on the ordinary costs rule for innocent respondents.

1. General rule. The ordinary starting point in a successful Norwich Pharmacal application is that the applicant pays the reasonable costs of the innocent party ordered to disclose information, including the costs of the application and compliance. This reflects the principle that costs should generally be recovered from the wrongdoer rather than an innocent third party. The court retains a discretion to make a different order in appropriate circumstances: [2001] EWCA Civ 1897; [2023] 1 WLR 2457.
2. Active opposition by an innocent respondent is not, without more, unreasonable conduct and does not remove costs protection. A respondent may choose the grounds and evidence on which to resist disclosure, provided it does not take an unreasonable course which unnecessarily increases costs.
3. It was reasonable for the Defendant to resist disclosure in principle. Its genuine belief that the information was privileged and confidential was mistaken, but genuine. The Defendant therefore retained protection for the costs of considering the application, taking instructions and obtaining legal advice.
4. The Defendant had nevertheless failed to make urgent enquiries into the authenticity of the Glavstroy Report after serious forgery allegations were raised. That failure unnecessarily increased the scope and cost of the application. The costs attributable to that resistance were distinct from the costs of properly considering the application.
5. Balancing the general rule, the Defendant’s concern to protect client privacy, its genuine belief, and the unnecessary costs caused by its failure to investigate, the court ordered a 30% reduction in the Defendant’s costs of resisting the disclosure application. The Claimants were to pay the balance, assessed on the standard basis if not agreed. The parties were invited to draw up an order concerning sanctions licences.

First-instance costs judgment following the court’s earlier order granting Norwich Pharmacal relief. No appellate history was stated.