Injunctions and Costs Orders

The court has refused to make a costs order in circumstances in which all other matters had been disposed of by consent. 

The parties entered into a standard form contract for a building project valued in excess of £4 million. It was a term of the contract that the claimant (Spiller), would procure an on-demand bond (an uncommon feature for a domestic contract), which it did. Subsequently, issues arose about the release of the bond, which centred on whether practical completion had been achieved and whether, at the end of the defects liability period, a certificate of making good was issued, followed by the final certificate. Spiller issued proceedings, seeking an injunction to restrain a call on the bond and a mandatory order that the defendants write to the bank saying they would place no further reliance on it.

After Spiller had obtained a limited injunction, the parties settled the dispute. The consent order included a provision giving the parties liberty to apply if they were unable to agree costs. No agreement was reached and Spiller applied for its costs of the proceedings, arguing that, as it was the successful party, the usual costs order under CPR 44.2(2) should follow.

Noting that, if parties settle all issues except costs, they take the risk that the court will not be prepared to make any determination other than that there be no order as to costs (M v LB Croydon [2012] EWCA Civ 595), Akenhead J did precisely that. He was not satisfied that it had been reasonable to seek the injunction without giving the defendants a short time frame to confirm that they were not going to call on the bond. He suggested 24 hours notice or less to minimise the risk that it might trigger the defendants to call on the bond. Further, although alarm bells were ringing, the claimant had taken two months to make the without notice application for an injunction.

Case: R G Spiller Ltd v Derhalli and another [2014] EWHC 2458 (TCC) (8 July 2014) (Bailii).

Written by James Naylor

Partner, CG Naylor LLP.