Summary

Although company shareholders who had sought relief under an unfair prejudice petition had established that there had been some unfairly prejudicial conduct and had obtained an order that the respondent should purchase their shares, the shares were valued as being worthless so the petitioners had been the unsuccessful parties for costs purposes. The point of establishing unfairly prejudicial conduct was not to establish the point for its own sake, but to enable petitioners to realise their shares for more than a nominal amount.

Facts

The appellants appealed against a decision to order that the first appellant pay the respondents' costs of an unfair prejudice petition and against a decision not to make any costs order between the other appellants and the respondents.

The appellants and respondents were all shareholders in the fifth appellant company. The respondents alleged that the company's affairs had been conducted in a manner that was unfairly prejudicial to their interests. At a trial concerned with liability, the judge found that there had been some unfairly prejudicial conduct and made an order requiring the first appellant to purchase the respondents' shares. The costs of that hearing were reserved. At a further hearing the judge assessed the shares as having no value. He concluded that the respondents had been the successful party and so in principle were entitled to recover their costs. He held that the respondents had had good reasons for rejecting several without prejudice offers made by the appellants and that there was no good reason not to apply the general rule.

Held

Approach to costs appeals - The identification of the successful party within the meaning of CPR r.44.2(a) was not a matter of discretion. The fact that a party had been successful was a matter to be taken into account in the exercise of the court's costs discretion, but deciding who the successful party was had to be an evaluative exercise rather than a discretionary one (see para.26 of judgment).

Whether the respondents were the successful parties - The judge was wrong in thinking that the respondents were the successful parties. They had brought the proceedings with a view to obtaining a substantial sum for their shares, and they had wholly failed. It was plain that as a matter of substance and reality the appellants had won and had substantially denied the respondents the prize that they had fought to win, Roache v News Group Newspapers Ltd [1998] E.M.L.R. 161 applied. The point of establishing unfairly prejudicial conduct was not to establish the point for its own sake, but to enable petitioners to realise their shares for more than a nominal amount. It was right to look at the proceedings as a whole rather than in stages. The trial was a staging post on the road to an order under which the respondents would receive financial relief. Moreover, the judge had declined to order costs in the respondents' favour when he gave the liability judgment, but rather reserved the costs up to that date. Further, the judge's findings were important for the valuation issue as well as those relating to unfair prejudice (paras 35, 38-39).

Effect of offers - The judge had been wrong to disregard the appellants' offers. The respondents would have been better off accepting any of the offers than pursuing the proceedings. The offers tended to confirm that the respondents should have been ordered to pay the appellant's costs (paras 44, 46).

Appeal allowed