CA-2025-000371 - [2025] EWCA Civ 1003

Mr Phillips KC submitted that Kington and TWL were in substance the successful parties, and so should have their costs paid by the plan company. That was primarily because, it is said, in addition to succeeding in obtaining a variation to the release provisions in the Plan, they were successful on the underlying legal issues. Specifically, they were successful on the questions of whether the judge was correct to conclude that the interests of creditors who would be out of the money in the relevant alternative ought not to be taken into account, and whether he was correct to conclude that there was no restructuring surplus in this case.

We do not accept this view of the result. The appeal was dismissed, and the sanction of the Plan was upheld. Although we disagreed with the judge as to the underlying legal principles, that had no impact on our decision, because the bases on which the appellants challenged the sanction of the Plan were rejected on the facts.

We have no doubt that the correct analysis in these circumstances is that the Plan Company was, overall, the successful party and is entitled to a costs order in its favour.

That is not to say that the Plan Company is entitled to all of its costs. As we have already noted, Mr Smith accepted that a discount of 20% should be applied, to cater for the facts that (1) part of its costs were incurred in addressing the arguments of Mr Maynard, against whom no costs order is sought, and (2) it partially lost on the release point.

Kington and TWL say that there should be a further reduction – a reduction to nil in fact – to take account of their success on the legal issues. We agree in principle that a further reduction in the Plan Company’s entitlement to costs is justified on this basis, but not a reduction to nil.

A further reduction is justified for two reasons in particular. First, because, whatever may have been the position adopted by the Plan Company on this point before the judge, they undoubtedly sought to uphold the judge’s conclusion that the opposing creditors were out of the money on appeal. The arguments on that point occupied a substantial part of the hearing. Second, although so far as this specific appeal is concerned, the victory on the legal issues could be described as pyrrhic, because the appellants lost on the facts anyway, this appeal ought to be seen in the context of the wider, and far more substantial, restructuring of which this Plan is intended to be only a part. While recognising that there is no certainty that any further restructuring plan will in fact be proposed, Mr Phillips was correct, in our view, to say that our conclusions on the legal issues are of potential benefit in that respect, if only in providing guidance as to the process to be adopted in relation to any such restructuring.

Taking into account the reductions to reflect the fact that no costs order is sought against Mr Maynard, the release point, and the appellants’ success on the legal issues, we consider that the Plan Company is entitled to recover 60% of its costs from TWL and Kington. We accept Ms Peters’ submission that it would be unfair to burden each of them with the costs caused by the presence of the other. We therefore order that they are severally liable for the Plan Company’s costs. In the absence of any better information as to the appropriate allocation, we order that they are each liable for 50% of the costs ordered in favour of the Plan Company (i.e. they are each liable for 30% of the Plan Company’s costs).