Costs: the “Yo-Yo Effect”
Author – Frances Coulson, Senior Partner, Head of Insolvency & Litigation
On 23 March 2020 Roger ter Haar QC, sitting as a deputy High Court Judge, gave judgment on what he described as “an interesting and, so far as I am aware, novel submission” on a question of costs (Benyatov v Credit Suisse Securities (Europe) Ltd [2020] EWHC 682 (QB)) arising out of what he described in his judgment as the “yo-yo effect” (where at one stage X owes costs to Y and then Y owes costs to X). The deputy judge described it as his third judgment in the matter. In his first he had dealt with a strike out/summary judgment application made by the defendant and applications for other relief; his second judgment dealt with costs; the third concerned an application for an interim payment.
On the hearing of the substantive application the defendant had succeeded in striking out parts of the claimant’s claim but had failed in two other applications. The judge ordered that the defendant should pay the claimant a third his costs, but the overall position in the end was that there were costs orders between the parties going in both directions. Summary assessment was considered inappropriate: it would be a difficult exercise to undertake in relation to those of the defendant, and the amount sought by the claimant was significant.
The claimant asked the court to make an order for an interim payment under CPR 44.2(8). The defendant did not apply for an interim payment but opposed the claimant’s application for one. A number of grounds were advanced by the defendant, but what it amounted to was this: that it would be unfair to order a payment in favour of the claimant when the defendant would inevitably, in due course, recover substantial costs thrown away in respect of the parts of the particulars of claim it had succeeded in striking out. This was particularly so, it was said, when the competing costs orders were made at, and as a result of, the hearing of the same application. The defendant also contended that if it paid the claimant, it would be difficult to recover if he was later ordered to repay. The fact that the judge’s first judgment was to be the subject of an appeal was an additional complicating factor.
After considering written submissions on the point, the judge rejected the defendant’s submission and ordered a payment on account to be made to the claimant, holding that the intention behind the CPR was that, as a general rule, where the costs of an interlocutory application could not be summarily assessed so that detailed assessment was called for, “the effect of delay in payment…is mitigated by the requirement in CPR rule 44.2(8) [so] that an interim payment generally should be ordered”; and, he observed, “[W]ere I to adopt the approach suggested by the defendant it would make considerable inroads into the impact of [the rule]”. He went on, however, to order that the time for making the payment should not start to run until the determination of the application for permission to appeal his substantive judgment.