Kirill Ace Stein v Eugene Jaffe

Costs ordinarily follow the event, but the court may make a different order after considering all the circumstances. A party’s failure on individual arguments does not ordinarily justify an issue-based reduction. A modest reduction may be appropriate where an unsuccessful issue was significant, generated substantial preparation and could not reasonably have been anticipated by the successful party. Interest on costs is discretionary. It is fixed by a general appraisal of what is reasonable for both parties, having regard principally to the relevant class of borrower and the currency in which the costs were incurred.

The judgment determined costs following the dismissal of a claim for compensation for breach of trust in [2025] EWHC 3400 (Ch). The claimant sought a substantial reduction in the defendant’s recoverable costs, relying on the defendant’s unsuccessful arguments, conduct before and during the proceedings, late disclosure and two reserved-costs applications.

The court also had to determine the appropriate payment on account and interest on costs, including whether the rate should reflect sterling or euro borrowing. The central issues were whether the usual costs order should be varied and what rate of interest should apply.

1. Principal costs order. The claimant, having lost the claim, was ordered to pay the defendant’s costs on the standard basis, subject to a 10% reduction in the recoverable costs for trial preparation and trial. The reduction reflected the defendant’s failure on significant and unexpected arguments concerning the effect of the Trustee Act 2000 on constitution of the claimed trust.
2. The court rejected arguments based on rearguing factual findings made at trial. Costs submissions had to be determined by reference to the decision in the judgment, not by revisiting contemporaneous evidence or seeking to go behind findings already made. The defendant’s unsuccessful arguments on laches and the Trustee Act 2000 did not justify a general departure from the usual order, but the latter issue justified a modest phase-specific reduction.
3. Late disclosure did not warrant a reduction. Some further disclosure after the deadline was not unusual in the circumstances, and the claimant had not shown that it caused significant additional cost. The mere fact that a successful party had not succeeded on every point was insufficient to justify reducing its costs.
4. The amendment application was unsuccessful when argued, so its costs followed the principal order. The defendant’s application to rely on a late second witness statement was reasonably opposed by the claimant and was ultimately consented to only after a formal application and opportunity to respond. The defendant was ordered to pay the claimant’s costs of that application.
5. Payment on account and interest. Payment on account was ordered at 70% of budgeted costs incurred by the costs and case management conference and 90% of later budgeted costs, subject to the trial-stage reduction. Interest on costs was awarded at 1% above Bank of England base rate from 13 March 2024 until judgment. The appropriate approach was a general appraisal of what was reasonable for both parties, having regard to the general characteristics of the borrower. The defendant’s overseas residence did not make a euro-based rate appropriate where the costs were billed in sterling, and no sufficient evidence supported the proposed ECB-based rate.