RJ & Anor v HB, Court of Appeal - Commercial Court, November 05, 2018, [2018] EWHC 2958 (Comm)

Resolution Date:November 05, 2018
Issuing Organization:Commercial Court
Actores:RJ & Anor v HB

Case No: CL-2017-000282

Neutral Citation Number: [2018] EWHC 2958 (Comm)





Royal Courts of Justice

Rolls Building, Fetter Lane, London EC4A 1NL

Date: 5 November 2018

Before :


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Between :

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David Joseph QC and Iain Quirk (instructed by Baker & McKenzie LLP) for the Claimants

Charles Kimmins QC and Belinda McRae (instructed by Freshfields Bruckhaus Deringer LLP) for the Defendant

Hearing date: 26 October 2018

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JudgmentMr Justice Andrew Baker:


  1. This was a claim under s.68 of the Arbitration Act 1996 that succeeded. Pursuant to my substantive judgment, the Award (as defined in the judgment) was set aside in part, as sought by the claimants: [2018] EWHC 2833 (Comm). I was not persuaded there was a case to answer for the removal of the Arbitrator, and would have concluded that a claim under s.24 of the 1996 Act would have been required for that purpose: ibid.

  2. This further judgment deals with the costs of the claim, following argument when the main judgment was handed down. It raises points that may be of interest other than just to the instant parties. As with the main judgment, therefore, this judgment is handed down in public, but with the parties anonymised since the matter arises out of their confidential arbitration and the hearing in private of the s.68 claim.

    Sums at Stake

  3. I start where I might ordinarily end, in a costs judgment, with the amounts involved. The s.68 claim was not very complex, factually or legally. The substantive hearing occupied 1½ days. The hearing bundle was contained within 5 lever arch files, plus bundles of authorities.

  4. The total costs are a staggering £1.2 million, split very close to 50:50. In defending that total, Mr Quirk for the claimants emphasised the importance of the claim to the parties, the sums at stake in the underlying arbitration, the fact that s.68 claims rarely succeed and are often hard fought, and the fact that indeed (as I shall come on to, below) the defendant contested every aspect of the claim. Even allowing fully for those fair points, I regard the level of costs incurred as quite extraordinary. It seems to me explicable only by a willingness, as it happens on both sides, to incur cost effectively without limit, and certainly without any regard for what might be a reasonably sufficient and proportionate work effort for advising upon, preparing and presenting the case.

  5. In the circumstances, I declined to attempt a summary assessment of the costs claimed. The costs to be recovered under the order I make below are to be the subject of detailed assessment on the standard basis (if not agreed), but with a payment on account to be made now.

  6. As regards the amount to be paid on account, I do not pretend to have the expertise, or breadth or depth of experience, of a costs judge, and I do not tie the hands of any costs judge conducting a detailed assessment in the case, but:

    i) I regard it as prima facie surprising that the costs claimed should be more than c.30% of the actual totals (say, £180,000 on each side);

    ii) had the costs been of that order, most probably I would have assessed them summarily in an amount equal to a high percentage, perhaps 75%, of the sum claimed;

    iii) if the order were for either side to recover costs in full (subject to detailed assessment), the payment on account I would order would therefore be £135,000.

    Costs Order

  7. I was asked by each side to order costs in their favour. On the claimants' side, it was said that the claim succeeded, that the degree to which their request for the removal of the Arbitrator added to the costs of the claim was very limited, so I should either award them their costs in full or make only a very modest deduction (say, 5-10%). On the defendant's side, it was said that:

    i) in reality, the claim was about removing the Arbitrator, as to which the claimants lost, so the defendant should be regarded as the successful party entitled prima facie to his costs;

    ii) alternatively, any costs order in the claimants' favour should be very substantially discounted to reflect their failure to succeed in full.

  8. A substantial factor underlying a number of the defendant's submissions was that by his solicitor's first statement responding to the s.68 claim the defendant offered, on specified terms, to agree to a remission to the Arbitrator. That statement was served, so that offer was made, after Addendum 1 had been issued by the Arbitrator, the claimants had served their solicitor's second witness statement, updating and amending their claim in the light of that Addendum, and the Annex to the Claim Form had been amended likewise.

    Who Won?

  9. The general rule that at the conclusion of a claim the unsuccessful party is ordered to pay the costs of the successful party is now enshrined in CPR 44.2(2)(a). The court may make a different order (CPR 44.2(2)(b)), but the court should depart from the general rule, i.e. make a different order, ``only where the needs of justice and the circumstances of the particular case require, and a measure of caution is required'', per Norris J, London Borough of Tower Hamlets v London Borough of Bromley [2015] EWHC 2271 (Ch) at [9].

  10. The first question, therefore, is: who won? An identification of either the claimants or the defendant as the successful party sets the scene for CPR 44.2(2)(b). The question will then be how far, if at all, to move from a full costs award in that party's favour.

    (i) The Basic Position

  11. In the present case, the claimants obtained the partial setting aside of the Award, having established that it was affected by procedural irregularity causing substantial injustice and that it was inappropriate to remit. Since the defendant contested every element (procedural irregularity, substantial injustice and inappropriateness of remission), it is both startling and unrealistic for the defendant to contend, as he did, that he was the successful party.

  12. The defendant's argument, manfully pressed by Mr Kimmins QC, was that ``In the present case, there was, in substance, only one issue in dispute between the parties: whether the [Arbitrator] or a fresh tribunal should hear and determine the issues that the parties had agreed should be sent back ...''. But there was no agreement. The suggestion that there was echoed a basic error of analysis in the defendant's skeleton argument for the substantive hearing. There, it was submitted that if the court rejected the claimants' claims under s.67 and s.68, which were said to be ``without foundation'', then ``the question of what relief to grant becomes straightforward'', namely that the court should ``adopt [the defendant's] proposal for the remission of certain issues to the [Arbitrator]''. On the stated premise, indeed the relief to be granted would have been straightforward; but it would have been the dismissal of the claimants' claims.

  13. In their skeleton argument for the substantive hearing, the claimants for their part also took the line that ``the key issue ... is whether it is right that the existing or a new tribunal should be undertaking that examination'', i.e. a re-examination of the relief to be awarded in the arbitration. However, I regarded that as something of a forensic device, seeking to elevate the defendant's offered remission to, in effect, a concession of serious irregularity. The claimants' skeleton argument was lodged a day before the defendant's, in the normal way, and to my mind reflected what was likely to have been a tactical decision to present the case as one where surely the defendant was not really disputing the basic soundness of the s.68 claim.

  14. The true position is that the defendant did not concede anything at any stage; and his skeleton argument...

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