Kington SARL & Ors v Thames Water Utilities Holdings Ltd & Anor

Factual and Procedural Background

The Court had previously dismissed an appeal against an order sanctioning a restructuring plan concerning Company A. The current matter concerns the determination of costs arising from that appeal. No costs order was sought by or against one of the third appellants and one of the respondents. The Plan Company claimed to be the successful party on the appeal and sought recovery of a portion of its costs from the first and second appellants jointly and severally. The appellants contended that they were the successful parties and sought payment of their costs from the Plan Company. The appeal had been heard shortly after the initial judgment, and the Court was tasked with deciding the appropriate costs order, including any payments on account of costs.

Legal Issues Presented

1. Whether the general rule that costs follow the event applies to appeals concerning the sanction of schemes of arrangement or restructuring plans.
2. Whether a different approach to costs should apply on appeal compared to first instance proceedings in such cases.
3. Whether the appellants or the Plan Company should be regarded as the successful parties for the purposes of costs.
4. The appropriate quantum and apportionment of costs between the parties.
5. The appropriate amount to order on account of costs given the high costs incurred.

Arguments of the Parties

Plan Company's Arguments

• The Plan Company was the successful party on the appeal, as the appeals were dismissed and the sanction of the Plan upheld.
• Costs should follow the event, entitling the Plan Company to recover most of its costs.
• Recognizing partial success of appellants on one issue and no costs sought against a third party, it sought recovery of 80% of its costs.
• Requested a payment on account of 40% of the claimed costs.
• Argued that the general rule on costs applies on appeal, even if a different approach may apply at first instance.

Appellants' (Kington and TWL) Arguments

• Contended that the general rule on costs does not apply to appeals concerning schemes of arrangement or restructuring plans.
• Relied on the approach at first instance where costs orders are generally not made against objecting creditors, and costs may be paid by the company or no order made.
• Submitted that opposing creditors should not be deterred from raising genuine issues by fear of adverse costs orders.
• Argued that on the appeal, they were the successful parties as the Court agreed with them on key legal principles, despite dismissing the appeal.
• Sought payment of their own costs from the Plan Company, including payments on account.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court began by considering whether a different costs rule applies on appeal from that at first instance in scheme or restructuring plan cases. It acknowledged the first instance approach, where costs orders against objecting creditors are generally not made to encourage genuine opposition and assist the court's scrutiny. However, the Court distinguished the appeal context, reasoning that once the plan is sanctioned, the company requires no further court approval to implement it. An appeal reflects dissatisfaction with the sanction decision, and thus the general rule that costs follow the event should apply on appeal. This prevents encouraging unmeritorious appeals by opposing creditors expecting costs recovery regardless of outcome.

The Court rejected the appellants' submission that they were the successful parties despite the appeal dismissal, noting that although the Court disagreed with the judge on legal principles, this did not affect the factual basis on which the sanction was upheld. Overall, the Plan Company was the successful party entitled to a costs order in its favour.

The Court accepted a reduction in the Plan Company’s recoverable costs to 60%, reflecting partial success by appellants on one issue and no costs sought against a third party. It further ordered that the first and second appellants be severally liable for the Plan Company's costs, each responsible for 30%.

Regarding payment on account, the Court noted the very high costs incurred, including solicitors’ rates exceeding guideline levels without sufficient justification, and large Counsel fees. It emphasized the need for costs to be reasonable and proportionate, citing relevant precedent. Given the complexity and overlap of work, the Court found the requested 40% payment on account excessive and ordered a reduced payment on account of 35% of the reduced costs. This resulted in a payment on account of approximately £475,500, split equally between the two appellants.

Holding and Implications

The Court ORDERED that the Plan Company is entitled to recover 60% of its costs of the appeal from the first and second appellants, who are severally liable for 30% each. It further ORDERED that each appellant pay a payment on account of £237,750 towards the Plan Company's costs.

The decision confirms that the general rule that costs follow the event applies on appeal in restructuring plan sanction cases, distinguishing the approach at first instance. It reinforces the Court's discretion to ensure costs awards are reasonable and proportionate and discourages unmeritorious appeals by dissenting creditors expecting costs recovery irrespective of success. No new precedent was established beyond the application of existing principles to this context.