Court of Appeal overturns costs award made after interim injunction

Computer: Litigant ordered to return it

There is no “pay as you go” principle which overrides the general rule that the court should reserve the costs where an interim injunction is granted, appeal judges have ruled.

While special factors could mean that an immediate order for costs is appropriate, Lord Justice Lewison said that Mr Justice Birss – since elevated to the Court of Appeal – did not identify any in this case, apart from his ruling on who had been the successful party.

‘Success’ in being granted an interim injunction to prevent a party from doing something was only “provisional”, he said.

“On the other hand, a ‘costs reserved’ order does not mean that claimants generally, or these respondents in particular, will never recover the proper proportion (if not all) of their claimed costs: the matter is open and the costs have been neither won nor lost by either side at this stage.”

Digby v Melford Capital Partners and others [2020] EWCA Civ 1647 concerns a dispute about the ownership of the Melford Group, a property investment business made up of several companies.

Last April, Birss J issued an interim injunction against one of Melford’s founders, Frederick Wingfield Digby, restraining his use of what Melford claimed was confidential information, delivery up of a laptop computer and related relief.

He also ordered Mr Wingfield Digby to make an interim payment on account of costs of £166,400, saying he was making what he regarded as the usual order, “which is that the successful party’s costs are paid by the unsuccessful party”.

Melford produced a costs schedule claiming total costs of £277,300, not including the costs of lawyers used in Guernsey.

Birss J said it had not been “possible or necessary to resolve the underlying merits of what is clearly a hotly disputed case” and there was clearly “bad blood” between the parties.

Delivering the judgment of the Court of Appeal with Lord Justice McCombe, Lewison LJ said the White Book accurately reflected the law by saying: “Where an interim injunction is granted the court will normally reserve the cost of the application until the determination of the substantive issue (Desquenne).

“However, the court’s hands are not tied and if special factors are present an order for costs may be made and those costs summarily assessed (Picnic at Ascot).”

The court rejected Melford’s submission that this no longer represented the modern practice in the High Court, which now required adherence to the “pay as you go” principle.

Lewison LJ said: “We do not accept that the so-called ‘pay as you go’ principle has precedence over the decision in the Desquenne case in proceedings for interim injunctions.”

While noting that Birss J had faced “very difficult circumstances”, the court ruled that he erred in failing to have proper regard to Desquenne “as authoritative in a case where he was expressly deciding that he could not resolve the underlying disputes between the parties”.

It went on: “We find that it was wrong to try to identify a winner or loser in these interim proceedings.

“We consider that he should have regarded the pragmatic approach adopted by the appellant [to the injunction application] as very strong grounds on which to reserve the costs…

“We would add that it is likely to 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.”

Lewison LJ observed that the quest for the successful and unsuccessful party in such cases was “usually fruitless”.

Applying the appeal court’s discretion instead, Lewison LJ said: “We are clearly of the view, as Morritt LJ and Morison J were in Desquenne, that the decision here was unjust in all the circumstances.

“In this hotly disputed case, in which the underlying issues were impossible to determine at the interim stage, it is right to follow the normal rule emerging from Desquenne. We find no special factors indicating a contrary decision.”

Lewison and McCombe LJ allowed the appeal and ordered that Mr Wingfield Digby’s interim costs payment should be returned to him.

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