Discontinuance, indemnity costs and payments on account

STATI & ORS v THE REPUBLIC OF KAZAKHSTAN

This was a decision of Jacobs J as to the entitlement of the defendant following discontinuance to an award of indemnity costs and a payment on account pursuant to CPR 44.2(8).

The Court held that there was nothing “out of the norm” in the claimant’s conduct of the proceedings (in which they sought enforcement of a Swedish arbitration award) up until a hearing of the defendant’s application to set aside in June 2017 when Robin Knowles J found that the defendant’s three original grounds of challenge were no longer maintainable, but that they had established a prima facie case that the award was obtained by fraud.

Jacobs J held that the claimant knew that the court considered from that time that, potentially at least, there was a very real answer to their case for enforcement in England. Accordingly, he determined that the pursuit of the proceedings after that time was “unreasonable and outside the norm” and awarded the defendant costs on the indemnity basis from that point onwards.

“Had they reflected on the position and discontinued shortly afterwards, it seems to me that an order for indemnity costs would not have been appropriate: the Statis would have been entitled to say that they had properly reflected on the position in the light of the judgment, and had decided that they no longer wished to pursue the case… If a decision was going to be made that the risk of pursuing the litigation was too great, it could and should have been made far earlier.”

He went on to consider an application for a payment on account against total costs of £5m.

“There can be little doubt that costs amounting to nearly £5 million is extraordinarily high for a case which (prior to the notice of discontinuance) involved only two hearings… I consider that there are likely to be very substantial arguments on a detailed assessment as to the reasonableness of the costs incurred, wherever the burden of proof lies… I consider on the present materials that it is reasonable to take a figure of £1.5 million as representing the likely level of recovery, prior to credit for costs payable to the Statis, but after allowance for an appropriate margin of error. I therefore order a payment on account of £1.3 million.”

STATI & ORS v THE REPUBLIC OF KAZAKHSTAN [2019] EWHC 1715 (COMM)