Cost consequences following findings of contempt

bernardoosullivan

What is the appropriate costs order when some allegations of contempt have been proved, but not all? In PJSC Vseukrainskyi Aktsionernyi Bank v Maksimov, Hamblen J was faced with a finding of contempt that had been admitted from the outset and another finding of contempt which he thought proven but “technical”, but several other allegations held not to be proven. Very serious costs had been incurred since the admitted contempt, amounting to well over £1 million for both parties.

This was a case where the claimant (a CIS bank) had aggressively pursued seemingly every angle open to it but, for the most part, ultimately failed. Instead of pursuing less stringent options, the claimant bank immediately alleged dishonesty and issued contempt proceedings. In the end, however, the defendant was the substantially successful party.

Hamblen J pointed out that there were other reasons to support the idea that the defendant should receive a costs order. Typically, a claimant in this type of case is concerned to identify a pool of assets that has not been disclosed and uses the vehicle of contempt proceedings to assist with that process. In this case, however, the judge noted a striking absence of any real identified prejudice to the bank.

The judge then went on to examine the well-established principle that the disproportionate pursuit of pointless litigation is an abuse of the process of the court. He said that such abuse took on added force in connection with committal applications. Noting that an increasing amount of the court’s time was being taken with contempt applications, the judge said that:

  • claimants should give careful consideration to proportionality before issuing contempt proceedings; and
  • respondents, in appropriate cases, should give consideration to striking out such applications for abuse of process.

Well respected as Hamblen J undoubtedly is, it will probably be a brave respondent who brings a strike out application on the basis of this comment, unless the situation is very clear cut. A more likely outcome is what happened in this case, where the bank was ordered to pay 80% of the defendant’s costs.

For a detailed consideration of the alternatives to bringing an application for contempt, see The use of contempt and other sanctions in modern commercial fraud cases by Paul McGrath QC of Essex Court Chambers and Bernard O’Sullivan of Olswang LLP.

PJSC Vseukrainskyi Aktsionernyi Bank v Maksimov and others [2014] EWHC 4370 (Comm)

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