Pay as you go? Not quite

Christian Smith is a partner and Charles Goldblatt a solicitor at London firm Seddons Law

Christian Smith

The Court of Appeal recently reaffirmed the statement of the general rule in the White Book that the costs of an application for an interim injunction will, absent any special factors, be reserved.

The courtin Digby v Melford Capital Partners noted (as the trial judge had below) that the case in question – an application for an interim injunction restraining the use of confidential information, delivery up of a laptop and related relief – was “quite incapable of even prima facie evaluation to any satisfactory extent, in interim proceedings”.

In those circumstances, it would not be appropriate to make any finding as to who had been successful or unsuccessful within the meaning of CPR 44.2. In any event, “the quest… in such cases is usually fruitless”.

Lords Justice Lewison and McCombe considered that the editors’ commentary at paragraph 44.6.1 of the White Book 2020 – citing the authorities of Desquenne et Giral UK Ltd v Richardson [2001] FSR 1 and Picnic at Ascot v Kalus Derigis [2001] FSR 2 – accurately represents the law.

The cases provide for the normal approach to dealing with the costs of an application for an interim injunction which turns on the balance of convenience. In such cases, the court will normally reserve costs until determination of the substantive issue (Desquenne) unless there are special factors (Picnic at Ascot).

The decision is, perhaps, unsurprising given the nature of applications for interim relief. Interim orders are, as their name suggests, designed or at least intended to “hold the ring” pending trial.

In most cases, as in this one, pleadings have not been served, disclosure is incomplete, factual evidence will be limited and, naturally, the parties’ cases will be diametrically opposed. In essence, the substantive issues are incapable of substantive determination.

There is undoubtedly a conflict, as the respondents to the appeal sought to argue, and had successfully argued in the court below, between costs reserved and the ‘pay as you go’ principle adhered to in modern practice.

Charles Goldblatt

However, the court made it quite clear that the latter does not take precedence over the former in proceedings for interim injunctions.

In the absence of special factors, costs reserved will be the appropriate order, as it in no way hampers either party’s ability to recover the proper proportion of their costs, albeit at the proper time. Desquenne may now be slightly long in the tooth, but the authority still holds good.

The court concludes with a hope that the judgment will be “helpful to parties endeavouring to make sensible arrangements in cases such as this pending trial that they should know that costs are likely to be reserved”.

No indication was given as to what special factors might sway a judge in the exercise of their discretion and, as the panel noted at the outset of their judgment, “decisions in respect of costs lie in the discretion of the judge and this court will only interfere with an exercise of that discretion if, for example, the judge has made an error of principle or has made an order than no judge could reasonably have made”.

Thus, practitioners seeking a more favourable order than costs reserved must ensure they identify “special factors”, perhaps egregious conduct, to persuade the court to exercise its discretion.

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