King's / Queen's Bench Division of the High Court

KB-2023-004010 - [2025] EWHC 2689 (KB)

Fecha: 17-Oct-2025

XVI The reserved costs in respect of the Contempt Application

XVI The reserved costs in respect of the Contempt Application

138.

The next question is about the reserved costs or the costs not ordered. In my judgment, there is reason to depart from the presumption under CPR 38.6 by reason of the finding of contempt. In that regard, the Court should have regard to the principle in relation to contempt proceedings that the question in the committal is whether the defendant has been in breach of the WFO rather than whether the WFO was properly sought or ordered. It is important in relation to the authority of the court order that a respondent must obey it until it is set aside. It is unreasonable conduct not to observe the order of the Court. In usual circumstances, as regards the contempt of court, that would entitle the applicant for a committal order to its costs.

139.

In my judgment, the circumstances of this case are different such as to justify a modified departure from those usual circumstances. That is to reflect the fact that it now appears the WFO should either not have been obtained or that it should have been withdrawn such that the initiation and/or continuation of the committal proceedings were not justified in the following respects, namely:

(1)

the action failed: the sudden and precipitous end of the Scottish proceedings casts considerable doubt over the original motive and intention of MGWL about the proceedings generally, and indeed whether the real purpose was to achieve a stay of the proceedings in the BVI so as to frustrate the fraud claim in the BVI;

(2)

there was material non-disclosure: the nature and extent of the non-disclosure, especially as observed by Coulson LJ in the Court of Appeal, including a “strong inference that that was a particular and therefore deliberate omission” to mention the proceedings in the Court of Appeal of the BVI, are grave indeed. They raise matters of conduct which affect the proceedings generally;

(3)

there is reason to believe that the action should never have been brought (the section 25 point);

(4)

there is no justification for the action continuing against Mr Smith and CSM despite the decision of Mr Tinkler on 15 December 2023 and/or the Court of Appeal on 8 August 2024 and/or after the subsequent issue of the application to set aside the WFO on 27 September 2024.

140.

There should nonetheless be a modified costs order in respect of the Contempt Application despite these features in order to mark the fact that Mr Smith and CSM were in breach of the court orders in failing and refusing to provide the information. They also raised points about service which were rejected.

141.

Despite this, I consider that there should be a modified departure from the usual order that the costs of the Contempt Application should all follow the event. This is a discretionary exercise having regard to the fact that on the one hand Mr Smith and CSM were in breach and contested the committal on grounds which were rejected and on the other hand the serious misgivings about the conduct of MGWL in seeking or continuing the WFO until the time when it finally withdrew. In order to reflect this, the Court will make the following orders, namely:

(1)

the existing orders made by Ellenbogen J and Morris J should stand for the reasons identified above;

(2)

whilst some of the reserved costs and costs not ordered of the Contempt Application will be ordered to be paid by Mr Smith and CSM to MGWL, the costs will be reduced to 50% of the costs of MGWL from the inception of the Contempt Application to 13 December 2024 when the judgment on liability was handed down to be paid on the standard basis and not the indemnity basis. This reflects the serious misgivings of the Court about the conduct of MGWL which were exacerbated by the decision of the Court of Appeal on 8 August 2024 and the application to set aside on 27 September 2024 without any change of course even at that stage on the part of MGWL;

(3)

Thereafter, that is after 13 December 2024 when the Court said that it would hear the question of penalty and the application to set aside the WFO at the same time, the costs of the Contempt Application and the application to set aside the WFO became inextricably linked. Having regard to the above concerns and the fact that the WFO and these proceedings would be conceded, the continuing costs of the contempt application will be treated as a part of the costs of the application to set aside the WFO and/or of the action, but not as part of the Contempt Application, until the time when the WFO was discharged. In short, there will be no further costs payable to MGWL in respect of the Contempt Application or at all from after 13 December 2024. Those costs will be treated as being payable by MGWL to Mr Smith and CSM subject to various exceptions below where there will be no order as to costs.

(4)

These exceptions where no order as to costs is made, namely:

(i)

the costs of the application for permission to appeal the findings of contempt (prima facie such costs were incurred by the applicant, but no assistance was required to deal with them);

(ii)

the costs of the application to cross-examine Mr Taher. This application was born out of an anxiety, in the end shown to be with substance, that the action as a whole was misconceived. Whilst the Court was unimpressed by the application not knowing that the action was about to be abandoned, no order for costs the other way will be ordered because of the concerns about the action as a whole.

(5)

There will be no exception in respect of the costs of the application for relief from sanctions. In the unusual circumstances of this case referred to above, MGWL ought to have acceded to the application to set aside the order and to relief from sanctions. Likewise, no exception will be made for the costs of the adjournment of 20 December 2024 involving illness. This was unfortunate: it was accepted that nobody was at fault; those costs therefore follow the event, and should not be an exception.

(6)

After the WFO had been discharged, although the question of the penalty remained hanging in the air, the effect of the setting aside of the WFO was that instead of seeking a substantial penalty, MGWL was in effect driven to say that it would not advocate a penalty. The submissions about a penalty had become overtaken by the collapse of the case of MGWL. In my judgment, the way to mark this is that the costs from the setting aside of the WFO should also be paid by the Claimant to Mr Smith and CSM.

(7)

Here too, there is an exception. In respect of the costs of the unsuccessful application to cross-examine Mr Kattoura and Ms Wright, although no order was made, this was not a totally unmeritorious application because of understandable concerns that the Court would accept that evidence absent cross-examination. The application to postpone adjudication until after determination of the action against Mr Duthie was a more speculative application which failed. Taking into account everything, the Court will order that there be no order for costs as regards those applications, and will not make an order the other way, bearing in mind the concerns about the action as a whole.

(8)

For the avoidance of doubt, the determination of costs will follow the event of the action, being costs to be ordered to be paid by MGWL to Mr Smith and CSM.

142.

The Court is fortified in these conclusions by the resolution of the latter stage of the costs in this way from the fact that a part of it relates to the application to enforce the cross undertaking as to damages where an inquiry has been ordered, and the submissions to contrary effect of MGWL have been rejected.

143.

Save as above set out, the costs of the action as a whole stand to be paid by MGWL to Mr Smith and CSM. That is because the action has ultimately been conceded in circumstances where MGWL has been unable to show that there was a basis for the action. The fact that it has contended that the action had become uneconomical is unconvincing, as recognised by Lord Sandison: it cannot be tested due to the election of MGWL. In those circumstances, the costs of the action ought to follow the event, namely that in the English proceedings (save for the contempt proceedings to the extent set out above), Mr Smith and CSM were the successful parties.

144.

The Court considered the possibility of ordering indemnity costs to reflect the basis of order of Lord Sandison in the Scottish proceedings, the order of Mr Tinkler which was on an indemnity basis and the way in which the Court frequently orders indemnity costs in fraud claims which fail or are discontinued. The Court does not make an order for indemnity costs in this case. The assessment remains discretionary in each case including in a fraud case which is dismissed or discontinued. In the instant case, although Mr Tinkler made an order on the indemnity basis, the costs of the appeal were a percentage of the costs of the successful appellants on the standard basis.

145.

The order as to costs in this case is multi-faceted bearing in mind that this is not a simple one way decision but involves orders going in different directions and follows applications where the Defendants failed. In that application, not all of the costs are ordered in favour of MGWL and such costs as are ordered are not on the indemnity basis and where costs after 13 December 2024 are awarded against MGWL. The decision to make a standard order as to costs should not be seen in abstract, but reflects the overall justice of the case as to costs in which costs are awarded in different directions and proportions.