Galazi & Anor v Christoforou & Ors

Factual and Procedural Background

This judgment concerns two related claims, referred to as "the Galazi Proceedings" and "the Companies Proceedings," involving a dispute between siblings identified as the Plaintiff and the Defendant. The central issue is the costs consequences arising from an order made on 12 October 2018, which granted permission to substantially amend the particulars of claim in the Galazi Proceedings. The court must also determine whether the Plaintiffs in the Galazi Proceedings have discontinued the whole or parts of that claim. Additionally, there are four prior instances where costs were reserved, and the court is asked to determine those costs between the parties.

The Galazi Proceedings were initiated on 19 April 2016 by the Plaintiff and her daughter against the Defendant and others, including a property management company owned by the Defendant. The dispute originated from three main matters: monies entrusted by the Plaintiff to the Defendant for investment in three London properties, management arrangements over one property, and a dispute over sale proceeds of another property. Two companies incorporated in the British Virgin Islands (BVI), Wellsford Securities Limited ("Wellsford") and Abbee Limited ("Abbee"), were involved, with shares held by the Plaintiffs and others. At the claim's commencement, both companies had been struck off the BVI register but remained legal entities, incapacitated from acting.

The Galazi Proceedings included claims concerning beneficial ownership, fiduciary duties, breach of trust, and conspiracy, with the Defendant counterclaiming for beneficial interest and management fees. The pleadings were extensive and criticized for their disproportionate length and complexity.

The Companies Proceedings were issued on 17 August 2018 after Wellsford and Abbee were restored to the BVI register. These claims involved declarations regarding agency authority termination, proprietary and personal claims concerning property proceeds, and claims against the Defendant and others for breaches of duty related to property charges and proceeds.

Procedurally, the Galazi Claimants initially sought a freezing order in April 2016, which was limited by the court. Subsequent applications addressed issues such as the capacity of one claimant who was removed as a claimant and reconstituted as a defendant by court order in August 2018. Mediation was attempted but failed. The claims were case managed to be tried together in a trial window starting March 2020. The Plaintiffs sought permission to amend their particulars of claim and to partially discontinue parts of the original claim, with costs reserved to the trial judge.

Legal Issues Presented

1. Whether the Plaintiffs in the Galazi Proceedings have discontinued the whole or parts of their claim by amending the particulars of claim, and the legal effect of such discontinuance under CPR Part 38.
2. The costs consequences arising from the amendment and any discontinuance of parts of the claim, including the application of the default rule under CPR 38.6 regarding costs liability upon discontinuance.
3. The appropriate exercise of the court's discretion in relation to costs, considering the conduct of the parties and the circumstances of the claims.
4. The determination of costs reserved from four previous applications related to the proceedings.

Arguments of the Parties

Plaintiffs' Arguments

• The Plaintiffs contend that the amendments to the particulars of claim effectively constitute a partial discontinuance of the original claim, but they argue that the term "claim" in CPR 38 means the entire action, so no discontinuance has occurred.
• They submit that the costs of the amendments should be decided by the trial judge in the context of the overall case, citing the benefits of the trial judge's familiarity with the issues and evidence.
• The Plaintiffs assert that the reinstatement of the companies Wellsford and Abbee constitutes a material change of circumstances justifying the amendments and partial discontinuance.
• They argue that it would be unfair for them to pay for factual investigations undertaken in the Galazi Proceedings that benefit the Companies Proceedings.

Defendants' Arguments

• The Defendants submit that the Plaintiffs have partially discontinued claims against some defendants and certain causes of action, which amounts to a discontinuance under CPR 38.
• They argue that the original pleadings were overblown and disproportionate, and that the claim was weak in parts, suggesting that some claims should not have been brought.
• The Defendants rely on the default rule that the discontinuing party is liable for costs and contend that the Plaintiffs have not demonstrated a good reason to depart from this rule.
• They assert that the Plaintiffs contributed to delays and complications, particularly in failing to maintain the companies' good standing, and that the amendments and discontinuances reflect the Plaintiffs' choices rather than changes caused by the Defendants.
• The Defendants also contend that the notion of "transfer" of claims between proceedings is a misuse of language, as causes of action are not ambulatory.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by carefully outlining the factual and procedural complexity of the two related claims, emphasizing the disproportionate length and density of the pleadings, which were uncharacteristic for the nature of the dispute. It noted the unusual removal of one claimant for lack of capacity and the involvement of multiple parties and companies, some of which had been struck off and later restored.

In addressing the key issue of whether the Plaintiffs had discontinued parts of the claim by amending the particulars, the court examined CPR Part 38 in detail. It highlighted the ambiguity in the term "claim" within the rules and analyzed relevant authority, particularly the obiter comments in Kazakhstan Kagazy Plc v Zhunus. The court concluded that a "claim" may refer to all causes of action against a defendant and that partial discontinuance can occur against one or more defendants or causes of action.

The court found that the Plaintiffs had wholly discontinued their claims against two defendants and partially discontinued claims against others by removing causes of action. It also noted that no notice of discontinuance had been served but accepted that this requirement had been waived implicitly by the court's order.

Regarding costs, the court applied the default rule under CPR 38.6 that the claimant who discontinues is liable for the defendant's costs unless there is a good reason to depart. It reviewed the Plaintiffs' arguments for postponing the costs decision until trial but rejected these, reasoning that the trial judge would only consider the claims as they stand at trial and that early resolution of costs issues aids settlement and case management.

The court found that the Plaintiffs had not demonstrated a good reason to depart from the default costs rule, noting that the Plaintiffs had contributed to the complexity and delay, particularly by choosing to issue the claim in the form it took and by failing to maintain the companies' good standing. The reinstatement of the companies was not a change of circumstances beyond the Plaintiffs' control justifying departure from the costs rule.

The court further considered the costs of amendments and rejected the Plaintiffs' submission that costs relating to factual investigations carried over to the Companies Proceedings should not be borne by them. It held that the two claims were separate, and no entitlement to carry over costs existed.

Finally, the court exercised its discretion to order that costs arising from the discontinuance and amendments be paid on the indemnity basis, given the conduct and circumstances of the claim. It also addressed costs reserved from previous applications, ordering costs on the standard basis or in the case as appropriate, noting the unsatisfactory delay in resolving these issues.

Holding and Implications

The court's final decision was to ORDER that:

• The Plaintiffs have partially discontinued their claims against certain defendants and causes of action in the Galazi Proceedings, with full discontinuance against others.
• The default rule under CPR 38.6 applies, making the Plaintiffs liable for the costs of the Defendants incurred due to the discontinuance and amendments.
• Costs relating to the discontinued claims are to be assessed immediately rather than postponed until trial.
• The costs of the amendments are to be paid by the Plaintiffs on an indemnity basis.
• Costs reserved from four previous applications are to be determined as set out, with some awarded on the standard basis and others as costs in the case.

The implications for the parties are that the Plaintiffs will bear the financial consequences of their decision to amend and discontinue parts of their claims, including indemnity costs, reflecting the court's disapproval of the original pleadings' disproportionate nature and the conduct of the proceedings. No new legal precedent was established; rather, the court applied established principles to the complex procedural context of this case.