High Court refuses to set-off £47,500 costs award against $433m judgment debt

The High Court has refused to set-off a £47,500 costs award in favour of a claimant against a $433m judgment debt owing to the defendant.

Mrs Justice Moulder said that to effectively remove the risk of adverse costs orders would allow the defendant to make unmeritorious applications without penalty.

Ridley v Dubai Islamic Bank PJSC [2020] EWHC 2088 (Comm) concerns a long-running dispute over the development of a parcel of land in Dubai. In 2013, the defendant obtained the judgment debt after Mr Justice Flaux (as he then was) ruled there had been default under a restructuring agreement, which Charles Ridley and others had signed as guarantors.

Mr Ridley has been in prison in Dubai since 2011 for defrauding the bank and paying bribes to its employees. He should have been released in 2015, but his sentence was increased by a further 20 years after the bank made an application under a law relating to people who have been convicted of certain offences and fail to pay back “illegal money”.

Mr Ridley lodged the present claim in the English courts for an injunction in December 2018, contending that the bank had effectively agreed in the restructuring agreement not to take such a step.

In February 2019, Mr Ridley was granted permission to serve his claim from out of the jurisdiction and by an alternative method. In June this year, the defendant’s application to set aside that order was dismissed and it was ordered to pay costs of £47,500.

The bank said the judgment debt remained unsatisfied and the court should exercise its discretion to set-off the costs award against it.

Moulder J said that, “in any other circumstances”, the case for an order for set-off “may well be overwhelming”. But the application had to be considered in the context in which the costs award arose, namely that Mr Ridley was challenging his continued imprisonment, which on his case was the result of the wrongful actions of the judgment creditor.

Further, the costs award was caused by “a protracted challenge by the bank to an order for service out which has had the effect (if not the express intention) of delaying the substantive proceedings for over a year”.

The court also had to weigh the fact that an order for set-off may adversely affect the just conduct of the present proceedings, the judge said. “Although the bank submitted that any order for set-off now would not set a precedent for the future, in my view the bank is likely to rely on any order now made by this court to support any similar application which may arise in the future.”

She went on to note that the risk of an adverse costs order was “one of the few sanctions which the court can use to deter parties to litigation from bringing unmeritorious applications”.

Moulder J made clear her concerns that the bank may be seeking to delay the proceedings and that allowing a set-off would “not be in furtherance of the overriding objective”.

She explained: “It would mean that, should the bank be minded to take actions to delay or thwart substantive consideration of the issue in the proceedings, it would have the comfort that, however unmeritorious the application, it was unlikely to bear the risk of paying adverse costs orders.

The bank would suffer “no real prejudice” if set-off was refused, Moulder J added – it was “relatively modest” when compared to the outstanding judgment debt.

She concluded: “It is in furtherance of the overriding objective that the court ensures that the parties are on an equal footing so far as practicable and that litigation is dealt with expeditiously and fairly.

“In the highly unusual circumstances of this case and for the reasons discussed above, I do not consider that it would be just and equitable to order that the costs award should be set-off against the judgment debt.”

Matthew Morrison (instructed by Charles Ridley) for the claimant. Robert Anderson QC and William Edwards (instructed by Baker McKenzie) for the defendant.

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Costs News
Published date
19 Aug 2020

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