A costs conundrum – successful defendant recovers nothing

The General Rule

Under the Civil Procedure Rules (“CPR”) Part 44.2(2)(a) the general rule, where the court makes an order as to costs, is that the unsuccessful party will be ordered to pay the costs of the successful party. It is of course open to the court to depart from this general rule should it consider that there is sufficient reason for it to do so.

Departure from the General Rule

The judgment in the recent of European Real Estate Debt Fund (Cayman) Ltd v Treon & Ors [2021] has revisited this point with the Judge, Mr Justice Miles, departing from the general rule and making no order as to costs.

In this case, the claimant brought an action alleging fraudulent misrepresentation by the defendants. At trial, the Judge found that although the case would have succeeded on its facts, the claim was statute barred and as a result the claim failed.

Although the claim was unsuccessful, the claimant’s position was that it should be entitled to recover the majority of its costs on the basis that the claim would have succeeded, had it not been statute barred. The defendants’ position was that they were entitled to their costs, in accordance with the general rule as the claimant’s claim had been unsuccessful.

Judgment on Costs

In his judgment, Mr Justice Miles gave significant weight to the parties’ conduct to justify a departure from the general rule in relation to costs under CPR 44.2. In particular, he found that there had been misconduct on the part of the defendants and that there were serious issues with their witness evidence. Whilst Mr Justice Miles did not consider that the entire defence was an abuse of process, he made findings that the defendants’ witness evidence contained a number of significant untruths that were made in an effort to bolster their defence.

Mr Justice Miles also gave weight to the delay on the part of the claimant in bringing the claim, for which no reasonable explanation was provided, as well as concerns in relation to the reliability of the claimant’s witness evidence. Further, Mr Justice Miles emphasised the importance that even where the court departs from the general rule as to costs, it should still give weight to the fact that although the defendants had lost on a number of issues, overall, they were the successful party.

Following his consideration of all the facts, Mr Justice Miles ultimately concluded that the just order in this case, was that there should be no order as to costs.

Mr Justice Miles’ comments in this case, provide a useful insight into the matters that the court will consider and take into account when assessing costs. These factors are important to bear in mind throughout the life of any litigation, as in some cases, they may lead the court to depart from the general rule when making a costs order.

Beth Kelly is a trainee in the Commercial Dispute Resolution Department.