Successful defendants deprived of 25% of their costs due to dishonesty.

Ahuja Investments Ltd v Victorygame Ltd & Ors [2021] EWHC 2730 (Ch)

The claimant’s claim was dismissed, and judgment awarded in favour of the first defendant’s counterclaim in the sum of £2,175,257. The first defendant also beat their own Part 36 offer dated 27 January 2021 in the sum of £800,000.

The first defendant sought £31m by way of a counterclaim and therefore failed to the extent of almost £29m.

The defendants submitted that they were the successful parties in the litigation so the starting point was that the claimant should pay their costs. Whilst the defendants acknowledged that the court made various findings of dishonesty against them, they also highlighted the dishonest claim brought by the claimant and the rejection of key aspects of his evidence.

The defendants’ primary assertion was that being deprived of their costs on the indemnity basis would be a sufficient penalty for the false elements of their case or at worse a 20% reduction.

The claimant asserted that a significant element of the counterclaim failed and that there were separate and parallel elements of dishonesty. The claimant submitted that on every crucial factual detail, the defendants’ case was false.

The claimant asserted that there should be no order as to costs and described the defendants’ conduct as such as to amount to an abuse of process.

As far as the Part 36 offer was concerned, the claimant asserted that it would be unjust to impose the sanctions at CPR 36.17.

The court stood back and looked at matters holistically. An £8m claim was dismissed and a £31m counterclaim was reduced to £2.175m. The core allegation was that the claimant had been induced to enter a purchase by fraudulent misrepresentations on the part of the defendants. The court found that there were fraudulent misrepresentations, but that there had been no inducement or reliance. The court was critical of all the key witnesses. Whilst the first defendant was in breach of contract, there was no resulting loss. The claim was brought to avoid repayment of an £800,000 loan and the basis upon which it was brought was fundamentally false.

The defendants were the successful parties and it would be wrong to ignore that success by making no order as to costs. But for the Part 36 offer, the Court would have ordered the claimant to pay a proportion of the defendants’ costs, to reflect the fact that the defendants should not recover any more than would have been incurred in advancing an entirely honest case. The court concluded that, setting aside the Part 36 offer, an appropriate award of costs would be 75% of the defendants’ costs. This would not have been affected by the contractual provision as to costs.

Considering the Part 36 offer, the consequences of CPR 36.17(4) should apply. The court was not persuaded that this would be unjust, and indeed found that it would be unjust not to apply the consequences. The claimant could and should have accepted the offer. Notwithstanding the dishonesty of the defendants, which was spawned by the dishonesty of the claim itself, it would be unjust not to apply the consequences set out at CPR 36.17(4). Accordingly, those costs to be assessed after the expiry of the relevant period would be payable on the indemnity basis with interest at 10.1%. There would also be an additional amount payable of £75,000.