Costs in the Court of Appeal: Knight v Goulandris

Dealing with costs before the Court of Appeal can take practitioners outside their comfort zone. The court sometimes has to decide complicated issues, in terms of both appellate costs and costs below. In light of the recent case of Knight v Goulandris (in which I was led by Michael Wheater, and instructed by Fox Williams) and where the appellant obtained an order for 100% of the appeal costs sought on summary assessment, this blog will review the principles and common issues.

Costs jurisdiction

The applicable rules are CPR 52.20(1) and (2), under which the Court of Appeal has the power to deal with the costs before the lower court, as well as the costs of the appeal:

52.20

1. In relation to an appeal the appeal court has all the powers of the lower court.

2. The appeal court has power to —
   (a) affirm, set aside or vary any order or judgment made or given by the lower court;
   (b) refer any claim or issue for determination by the lower court;
   (c) order a new trial or hearing;
   (d) make orders for the payment of interest;
   (e) make a costs order.

Procedure

Costs submissions are either made orally at the end of an ex tempore judgment, or, more likely, following the release of a written judgment in draft, the parties will be asked to agree a form of order including costs. If the parties are unable to agree a form of order, the court will generally expect to deal with any applications on the basis of written submissions in accordance with paragraph 4.5 of Practice Direction 40E.

Liability for costs

In terms of appellate costs, CPR 44.2(2) sets out the general rule in respect of appellate costs:

44.2(2)

If the court decides to make an order about costs –

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party…

Nevertheless, costs remain in the discretion of the court in the usual way. The court can decline to order costs or make an issue based costs order in appropriate circumstances.

It will usually follow, on a successful appeal, that the costs order below will be reversed (assuming that costs followed the event below). However, there may be reasons to argue for a departure from this usual rule.

Assessment of costs

The Court of Appeal can summarily assess the appeal costs, even if this is contrary to the wishes of both parties. This is particularly likely to be the case with a short appeal on a discrete point of law. However, it may be arguable that summary assessment is inappropriate if a case lasts more than half a day or involves leading counsel, since, in those circumstances, the case is likely to be complex and weighty.

The proper approach of the court on summary assessment was set out in Lownds, where Lord Woolf CJ said at paragraph 31:

“In other words what is required is a two-stage approach. There has to be a global approach and an item by item approach. The global approach will indicate whether the total sum claimed is or appears to be disproportionate having particular regard to the considerations which CPR r 44.5(3) states are relevant. If the costs as a whole are not disproportionate according to that test then all that is normally required is that each item should have been reasonably incurred and the cost for that item should be reasonable. If on the other hand the costs as a whole appear disproportionate then the court will want to be satisfied that the work in relation to each item was necessary and, if necessary, that the cost of the item is reasonable. If, because of lack of planning or due to other causes, the global costs are disproportionately high, then the requirement that the costs should be proportionate means that no more should be payable than would have been payable if the litigation had been conducted in a proportionate manner. This [in] turn means that reasonable costs will only be recovered for the items which were necessary if the litigation had been conducted in a proportionate manner.”

Accordingly, if the costs as a whole appear disproportionate, then the court will want to be satisfied that the work in relation to each item was necessary and, if necessary, that the cost of the item is reasonable.

To prepare for summary assessment of costs, it can assist the court for the applicant to prepare a short and clear explanatory note setting out how the various components of costs are made up (so far as it is not apparent from the pro forma schedule).

Guidance on summary assessment of appeal costs can be found in the General Principles And Guidance On Costs: The Summary Assessment of Costs at paragraphs 65-70 in The White Book at CPR 48x.

The alternative is that the appeal costs are to go to detailed assessment if not agreed. Where the order for costs arises from an interlocutory appeal, rather than a final appeal, the order needs to be termed as a “forthwith” order if it is to assessed before the underlying proceedings are concluded: Khaira v Shergill.

In contrast, it is most common for the costs of the lower court (if the costs order is to be set aside as part of the order on appeal) to go to detailed assessment.

The receiving party will want to consider applying for a payment on account of any costs going to detailed assessment (CPR 44.2(8)).

Repayment of costs paid pursuant to the order of the lower court

Where a costs order of the lower court is to be set aside as part of the order on appeal, costs will often have been paid pursuant to that order (either on account or in full) which will need to be repaid.

In those circumstances, the Court of Appeal has the power to order interest on the sums repaid. In Multiplex Construction Ltd v Cleveland Bridge Ltd, the Court of Appeal, having allowed in part the defendant’s appeal in respect of one of a number of preliminary issues, ordered that the payment on account of costs previously made by the partially successful appellant be repaid with interest. May LJ (with whom Smith LJ agreed) held that the Court of Appeal’s power to award interest in those circumstances arose under CPR 52.10(2)(d), alternatively under CPR 52.20(1) read in conjunction with CPR 44.2(6)(g) and 44.2(8).

This article was first published for Practical Law Dispute Resolution Blog.