Galapagos Bidco S.A.R.L v Dr Frank Kebekus

Approved Judgment on Costs

This judgment was handed down remotely at 2pm on 22 September 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives

THE HONOURABLE Mr Justice Trower

This judgment is concerned with the costs of the proceedings in which I granted some but not all of the declaratory relief sought by Bidco and dismissed Signal's counterclaim for alternative declaratory relief. The reasons for the order I made are explained in a judgment I handed down on 28 July 2023 (neutral citation number [2023] EWHC 1931 (Ch)). In the order I made at the time of hand-down, I gave directions for the questions of costs and permission to appeal to be determined on paper and for written submissions to be filed by the parties. In this ruling I shall adopt the abbreviations used in my main judgment.

Bidco seeks an order that Signal be ordered to pay its costs of the proceedings on the standard basis. It submitted that it is plainly the successful party and that Signal is plainly the unsuccessful party for the purposes of CPR 44.2(2)(a). It said that the general rule should be applied. It also seeks 25% of its costs against Dr Kebekus.

Signal accepted that Bidco has been successful in obtaining the majority of the declarations sought and is therefore to be characterised as the successful party. It was right to adopt that line, because the declarations necessary to confirm the effectiveness of the restructuring were made, while the declarations sought by Signal to undermine its effectiveness were refused. Looking at the substance and reality of the result of the proceedings as a whole, common sense compels the conclusions that Bidco won and Signal lost.

The general rule is important. The consequence of a party being the successful party, has been explained in the following summary of the law in the White Book: Civil Procedure (2023 edn) at paragraph 44.2.13:

“On numerous occasions the Court of Appeal has emphasised that where a particular party is the successful party it is important that proper weight be attached to that and that judicial reasoning towards a costs order which justice requires should start with the general rule that the unsuccessful party should pay his or her costs”.

Furthermore, the Court of Appeal has made clear on a number of occasions that the mere fact that the winner fails on some issues is not sufficient to justify its disapplication. As Jackson LJ made clear in Fox v Foundation Piling Ltd [2011] EWCA Civ 790 at [62], one of the reasons for this is predictability. If alternative points are unreasonably taken that is one thing, but as Simon Brown LJ said in Budgen v Andrew Gardner Partnership [2002] EWCA Civ 1125 “in almost every case even the winner is likely to fail on some issues”. That is not of itself sufficient to justify a disapplication of the general rule: see also Sharp v Blank [2020] EWHC 1870 (Ch) at [7].

However, Signal submitted that, although it was the unsuccessful party, there are a number of reasons why as a matter of principle no order for costs should be made in Bidco's favour.

The first substantive point is that Bidco sought declaratory relief in order to confirm its position not just against Signal but against all the holders of the HYNs. It said that Bidco would have had to bring a claim for declaratory relief in any event, because there were a number of other holders who indicated that the restructuring did not comply with the terms of the ICA. It submitted that in those circumstances, the court would have required adversarial argument before granting the declaratory relief sought, which is something for which Bidco itself would have had to pay whatever the result. Signal submitted that Bidco should on any view only be entitled to its costs to the extent that its opposition to the relief sought increased the costs that Bidco would otherwise have incurred.

I do not consider that it is possible to conclude that these proceedings would have been necessary even if Signal had not taken the attitude that it did. The evidence showed that the dispute was driven by Signal. I think the probabilities are that, absent Signal, they would not have been considered necessary and would not have been brought.

Furthermore, I do not accept Signal's characterisation of the nature of the dispute and I agree with Bidco's submission to the effect that this was hard-fought adversarial litigation in which Signal was engaged in a hostile root and branch attack on the restructuring. In my view it was clear from the outset that Signal was determined to mount a challenge, which it sought to do not just in England but also by initiating or standing behind proceedings initiated in New York, Luxembourg and Germany. I accept that Bidco had no option but to seek the declaratory relief it sought.

In short, I am satisfied that the primary cause of Bidco's decision to litigate (and of the GLAS Defendants' decision to support Bidco's position in the litigation) was the nature and extent of Signal's challenge to the restructuring, which it was reasonable for Bidco to regard as oppressive and relentless and in respect of which English legal proceedings to confirm its validity were required. There is no basis for not applying the general rule on this ground.

Signal also relied on the fact that it made many offers to mediate the dispute well in advance of the trial, which were not accepted by Bidco, with the result that no mediation between the parties ever took place. Bidco submitted that a mediation was inappropriate and would be unlikely to have achieved anything because it was designed to do no more than extract a ransom payment. It also said that in any event it made an offer to discuss a commercial deal at principal level which was never taken up and made an offer to settle which was rejected without a counter-offer being made.

I was not shown any details of Signal's repeated requests to mediate, nor was my attention drawn to any specific settlement correspondence which ought to be taken into account when determining the just order as to costs. In all the circumstances, Signal has not demonstrated that a failure to mediate should form any basis for not applying the general rule, but nor is there any properly evidenced reason to conclude that such discussions as there may have been between the parties should provide further reason for its application.

More significantly, Signal submitted that a material part of the costs of the proceedings were incurred in relation to the out of the money express or implied term (the additional construction point), introduced belatedly by Bidco, which was an argument without any real merit. It was said that this argument should be treated as a different issue on which it succeeded and that, notwithstanding the principles I summarised at the beginning of this judgment, the order for costs should reflect that fact. It submitted that this meant that Bidco should pay its costs of this part of the proceedings, which it estimated as being all of its disclosure costs, all of the factual evidence, all of the experts reports and 65% of the trial costs.

Although Signal based this argument on the court's jurisdiction to make an order relating only to a distinct part of the proceedings ( CPR 44.2(6)(f)), the relief it in fact sought was an order for payment of a proportion of the costs ( CPR 44.2(6)(a)), recognising the provisions of CPR 44.2(7). This line of authority is exemplified by Budgen v Andrew Gardner Partnership [2002] EWCA Civ 1125 at [27], which makes clear that this may be an appropriate course where it is alleged that the successful party has lost on a distinct issue.

In support of its argument, Signal said that the additional construction point raised a series of wholly discrete issues in respect of which there was no cross-over with any of the issues arising out of the main construction arguments on which Bidco won. It said that the point was raised late and dominated the actual hearing. It relied on my description of the effect of the argument as being to expand the ambit of the trial into the investigation of a factual dispute of some complexity on which detailed expert evidence of valuation was adduced, which would not otherwise have been necessary.

Bidco said that this was the wrong approach. First, it said that the argument was a reasonable one for it to have run, a submission with which (so far as it goes) I agree. While I found the construction aspect of the point to be unconvincing and reached the conclusion that Bidco was wrong by some margin, it was not unarguable. I do not consider that, in the context of this particular restructuring and, given the nature of the challenge which was mounted by Signal, it was unreasonable for Bidco to seek to have the point tested.

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