DEG-Deutsche Investitions- und Entwicklungsgesellschaft mbH v Koshy and Others
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR. JUSTICE HART,Mr. Justice Hart |
| Judgment Date | 13 December 2004 |
| Neutral Citation | [2004] EWHC 2896 (Ch) |
| Docket Number | Case No: HC 1996 07015 |
| Court | Chancery Division |
| Date | 13 December 2004 |
[2004] EWHC 2896 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr. Justice Hart
Case No: HC 1996 07015
Mr. Andrew Thompson (instructed by CMS Cameron McKenna) for the Claimant.
Mr Thomas Koshy, the first defendant represented himself.
Hearing dates: 8/9 th December 2004
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
I am concerned to determine two preliminary issues which arise in an application made by the first defendant ("Mr Koshy"). By his application notice dated 7 th June 2004, Mr Koshy seeks to set aside an order made by Harman J on 20 th March 1998. That order ("the Harman Order") which, inter alia, dismissed an application by Mr Koshy to discharge an earlier interlocutory freezing order made against him in this action, and ordered him to pay the costs of that application. That action was in due course tried by Rimer J, who handed down a judgment on 26 th October 2001 (which is reported at [2002] 1 BCLC 478) dismissing the claimant's claim. The freezing order accordingly ceased to have effect. Mr Koshy's liability for costs under the Harman Order remained. It is a very substantial liability, asserted by the claimant ("Deg") to amount to some £360,000.
A freezing order was first made against Mr Koshy by Harman J on 8 th November 1996 on Deg's without notice application until a return date on 20 th November 1996. On that occasion the order was continued by consent until trial, but with specific right reserved to Mr Koshy to move to discharge it without showing any change of circumstance. On 4 th December 1996 Mr Koshy applied by notice of motion so to discharge the freezing order, and subsequently (on 18 th December 1996) applied to strike out the action. The latter application was not in the event proceeded with but the application to discharge the freezing order was heard by Harman J for 12 days in March and April 1997, and determined by him in a judgment dated 6 th February 1998. The Harman Order was then made on 20 th March 1998 dismissing the application and making the order for costs which Mr Koshy now seeks to set aside.
The application to discharge the freezing order had been made on the ground of an allegation of material non-disclosure by Deg on the original without notice application. Following his success at trial, Mr Koshy applied to the Court of Appeal for permission to appeal the Harman Order out of time. He did so on the basis that certain findings made by Rimer J in his judgment of 26 th October 2001 revealed that there had been material non-disclosure by Deg in connection with its original application for a freezing order. One of Deg's arguments in opposition to the grant of permission was that application ought to have been made to the trial judge to discharge the relevant freezing order and any associated orders for costs. However, Chadwick LJ pointed out in a judgment dated 11 th March 2002 (with which Charles J agreed) that one of the problems with this submission was that:
"… Harman J's order in March 1998 was not the order by which he granted the freezing order. It was an order made on an application to discharge the freezing order; and so Harman J thought it right to make an order for costs which can be described as an 'in any event' order; that is to say, his order for costs was not dependent upon the outcome of the litigation (as would normally be the case in relation to the costs of obtaining a freezing order). Nor is it an order which can be set aside by the trial judge. The only way of disturbing the order of March 1998 is on an appeal. .." (see paragraph 29 of his judgment).
The Court of Appeal granted the permission sought.
The appeal was heard and argument concluded in July 2002. During the course of opening, exchanges took place between counsel for Mr Koshy and members of the Court of Appeal in the course of which, to put it as neutrally as I can at this stage, Mr Koshy by his counsel declined a suggestion made by the Court of Appeal that they should remit an appropriate issue as to material non-disclosure to a judge of the Chancery Division for determination after a proper forensic process. That invitation having been declined, the Court of Appeal proceeded to hear the appeal and in due course dismissed it on 24 th November 2003. Its approach to the matter appears from paragraphs 17 to 23 of the judgment of Mummery LJ (with whom Carnwath LJ and Hale LJ agreed):
"17. During the hearing of the appeal Mr Thompson appearing for DEG indicated that DEG would agree to the suggestion that the application to set aside the Harman Order should be remitted to Rimer J. Mr Koshy indicated, however, that he would not agree to that course. He wished to pursue the appeal. It was made clear that he would rather take the risk that the appeal might be dismissed than have the matter of costs in the Harman Order referred back to the judge at first instance. In those circumstances DEG contended that, as he had not taken that course, his appeal should be dismissed as misconceived and he should be ordered to pay the costs of the appeal.
18. I have reached the conclusion that the appeal should be dismissed, though with some hesitation as I do not regard the result is [sic] entirely fair or satisfactory.
19. I start from the position that this is in substance an attempt, after the trial is over and in the light of the result of the trial and the findings made at it, to re-litigate an interlocutory costs order. No court, whether on an application to set aside at first instance or by way of an appeal, is receptive to such an application. It is bound to be a difficult exercise for the court to review the exercise of a discretion made at an early stage when not all the evidence is available or all the facts known or even all the issues identified. As for the parties, more time will be taken up and additional costs incurred.
20. After a 12 day hearing of the applications to discharge the freezing orders, Harman J had exercised his discretion to make an order that the costs of the application should be paid by Mr Koshy and by Lasco in any event. So far as the costs were concerned it was a final order in the action. Neither his substantive decisions on the applications nor his orders as to costs were appealed at the time.
21. On this appeal it is important, as Carnwath LJ observed during the hearing, to focus on what precisely the Court of Appeal is now being asked to do. Harman J had exercised his discretion on the costs of the hearing to set aside the freezing orders by taking into account all the circumstances of the applications. The court would not normally interfere with his discretion on costs unless it could be demonstrated that he had taken a wrong approach to the exercise of his discretion or had made an order which was plainly wrong.
22. This court is being asked to interfere with the exercise of his discretion on a very different basis. It is not being asked to look at all the circumstances in which he exercised his discretion or at his approach or at the result at the time of the order, but at one circumstance only: namely a comparison between (a) the affidavit evidence placed before Harman J on the ex parte application for the freezing orders and the applications to set them aside on the issue of DEG obtaining knowledge about the profits made by Lasco and Mr Koshy: and (b) the findings of Rimer J on that issue at the trial. No other material is relied on either as to the course of the proceedings before Harman J or by way of other evidence from Mr Koshy or anyone else. The point is argued on the sole basis that Mr Koshy is entitled as of right to have the freezing orders set aside on the ground of material non-disclosure and that it necessarily follows from that that the order for costs should also be set aside.
23. In my judgment, Mr Page's approach to this appeal oversimplifies the situation. Without doubting for a moment the power of the court to set aside an ex parte order on the ground of material non disclosure, I do not think that it necessarily follows that the ultimate liability for all the costs incurred on the application to set the order aside should follow that event. What this court is being asked to do is to cancel an order for costs, which was made in the exercise of a discretion by having regard to all the circumstances at that time, solely on the basis of what has transpired at the trial on an issue of disputed fact. When Rimer J made his findings of fact the issue of non-disclosure by DEG to Harman J was not before him. He was not addressing that issue. I do not think that it is satisfactory simply to lift findings of material fact out of his judgment and use them without more to set aside the Harman Order. In my judgment, it would be wrong and potentially unfair to DEG in these circumstances for the court to set aside the costs order made by Harman J. If the exercise of discretion is to be reviewed in circumstances of alleged material non-disclosure with a view to making a different order for costs, it can only be fairly and satisfactorily done in this case by an application at first instance, in which the issues of fact are defined and on which evidence can be adduced by both sides about the circumstances in which the orders were made, including the orders for...
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