Masri v Khoury

The receiving party in this case was at one stage a director of a Lebanese company against which the paying party had obtained a judgment for a sum exceeding US$ 64 million. As a preliminary to the enforcement of that judgment the paying party obtained a without notice order under CPR 71 for the oral examination of the receiving party in his capacity as a director. A similar order was also obtained against the receiving party’s brother, who was a director of a company which was itself the director of one of the judgment debtor companies. Both of the brothers applied to set aside those orders and were initially successful but the receiving party later failed in the Court of Appeal. The receiving party (but not his brother) then applied to the UK Supreme Court which allowed his appeal and awarded him his costs in that court and in the lower courts. The bill now before me claims the receiving party’s costs in the High Court and in the Court of Appeal.

The receiving party’s brother was successful in the High Court and in the Court of Appeal but, as a result of the appeals, there are no orders for costs either in his favour or against him.

This is my decision on the first of several preliminary issues. The receiving party and his brother were represented by the same legal team. The receiving party

Firstly, I accept that the line of cases, familiarly known as the “rule in Beaumont v Senior”, are separate from and different to the line of cases familiarly known as the “rule in Medway Oil”. Mr. Morgan QC (counsel for the paying party) has explained the origins of these rules and why they operate in different cases. In my judgment, I am bound by previous decisions on the rules in Beaumont v Senior, including the most recent which is the Meretz v ACP case. I do not accept that the Keen v Towler case is distinguishable as a case in which a special order was made. Although a special order was made, that was in fact a ruling as to the principles to be applied on an assessment of costs awarded to one of two jointly represented parties.

I do not accept the submissions made by Mr. Marven (the receiving party’s counsel) with reference to the citations he made from McGregor on Damages. If more than one party has been ordered to pay a receiving party’s costs, the receiving party does have the right to choose whichever party he wants to to pay those costs. However, that does not permit him to claim any more costs than he himself is liable to pay or has reasonably paid.

Next, I do not accept that my ruling amounts to an apportionment of costs by a costs judge. The modern philosophy is to reserve the word “apportionment” to the action of a court when it is awarding to a receiving party only a fraction or a percentage of his costs. It is the function of a costs judge to calculate, and allow the whole of the costs which the court has awarded. It is not these days regarded as the function of a costs judge to apportion. However, in working out the proper sum the costs judge has to divide up the costs claimed to make sure that they are costs falling within the order. There are many forms of division; some of them are extremely obvious. The first division is between what costs were and were not actually incurred. There may be claims for items upon which no money was actually spent. Another division is between costs which are reasonable and those which are unreasonable. A third division is to divide costs between those which fall within the scope of an order and those which fall outside the scope of an order. For example, general costs are regarded as falling outside the scope of an order for the costs of an interim application. I think the rule in Beaumont v Senior also requires the costs judge to undertake a division. It is a division taking into account the realities of the sum which the receiving party is actually liable to pay.

I think it would be unreal to leave out of account the fact that a recovery of all the common costs in this case would reduce the amount of costs borne by the other party who incurred them who has not been awarded his costs. It seems to me that it is reasonable only to allow the costs fairly attributable to the successful party in this joint representation.

If the unsuccessful party (in this case the receiving party’s brother) has already paid costs in advance it is not appropriate for him to be allowed to get that money back, he being left to bear his own costs by the orders in this case. If (in another case) an unsuccessful party who was jointly represented had not paid costs but later became insolvent, I think it would be unreasonable to put the burden of that insolvency on the paying party rather than on the receiving party.

There are two other points I want to make. One is the analogy which Mr. Morgan drew with claims for VAT. One does not look at what VAT was actually paid. If VAT has been recovered already from HMRC or is recoverable, it will not allowed on a detailed assessment.

The second point I want to make is what would have been the position had each of these brothers been separately represented and each had incurred costs similar in amount to the costs claimed in the bills before me. In that instance, it seems to me, when I came to assess the receiving party’s costs I would have regard to the fact that he was one of two people presenting a joint case and ought to have made the economies which are appropriate to people who can share that expense with others save where there is good reason not to do so (for example, a conflict of interest between him and his brother). In saying that, I make reference to an old case , In re Spurling’s Will Trusts [1966] 1 WLR 920, and to the authorities, including the textbooks, which it cites.