Alan Ward & Ors v Anthony Donnellan & Ors

An appellate court should interfere with a trial judge’s costs decision only where it is wrong in principle, takes account of an irrelevant matter, omits a relevant matter, or is plainly unsustainable. The general rule that costs follow the event remains the proper starting point. Dishonesty may justify a substantial departure, but the court must evaluate its nature, degree and relevance to each claim. A successful party should not recover costs incurred in advancing a dishonest case, but may recover the costs of exposing the opponent’s dishonesty. Where both sides acted dishonestly, the order must avoid unduly penalising one of them. Claims tried together should not receive a global costs order where dishonesty affected them differently.

Three related actions concerning property interests in Creative House were tried together. The Partnership Claim, brought by Anthony Donnellan, alleged a partnership or joint venture with Alan Ward. Ebonair Investment SA brought a Part 20 claim for declarations that Ricky Keane and Bobi Howard held leases on trust for it. Keane also brought a possession claim.

The trial judge rejected the alleged partnership and joint venture, granted Ebonair’s trust declarations, and dismissed the possession claim. Despite the Ward parties’ success, she made no order for costs on the Partnership Claim and Part 20 claim, principally because of dishonesty by Alan Ward. The Ward parties appealed against that costs order.

1. Appeal allowed. The costs order could not stand because the judge departed too readily from the starting point that the unsuccessful party pays the successful party’s costs, failed to take proper account of Mr Donnellan’s dishonesty, and adopted a one-sided assessment of the parties’ conduct. The court therefore exercised the discretion afresh.
2. The power under CPR 44.2 is broad, but dishonesty must be evaluated by reference to its nature, degree, relevance to the issues and effect on costs. A successful party cannot recover costs reasonably attributable to advancing a dishonest case. The court may disallow those costs, award the opponent the costs of proving the dishonesty, and impose a proportionate further costs sanction.
3. The Partnership Claim failed in its entirety and was brought and supported by Mr Donnellan’s dishonest evidence. The Ward parties were entitled to recover the costs of exposing that dishonesty and should not be denied all costs merely because Mr Ward had acted dishonestly on the separate Ebonair issue. Mr Donnellan was ordered to pay 50% of the Ward parties’ costs of that claim, on the standard basis if not agreed. No further deduction was to be made solely or mainly because of the Ward parties’ dishonesty concerning Ebonair.
4. The Part 20 claim was legally distinct from the Ebonair ownership issue. The unsuccessful defences relied on bogus trust deeds, and the procedural position of Keane and Howard did not justify departure from the ordinary rule. They were ordered to pay Ebonair’s costs of the Part 20 claim on the standard basis if not agreed. The inconsistent treatment of the Part 20 and possession claims was an additional error.
5. Where several actions are tried together, the relevance of dishonesty must be assessed separately for each action. Lord Justice Arnold and Lady Justice Falk agreed.

• Court of Appeal (Civil Division): appeal against the costs order allowed. The court exercised its discretion afresh and substituted costs orders.
• High Court of Justice, Business and Property Courts (Chancery Division): after a 15-day trial, the Partnership Claim failed, Ebonair’s Part 20 claim succeeded, and the possession claim was dismissed. The judge made no order for costs on the Partnership Claim and Part 20 claim: [2024] EWHC 2304 (Ch).