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England and Wales High Court (Commercial Court) Decisions

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Cite as: [2018] EWHC 614 (Comm)

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Neutral Citation Number: [2018] EWHC 614 (Comm)
Case No: CL-2016-000265


Royal Courts of Justice
Strand, London, WC2A 2LL

B e f o r e :


- and -



Hefin Rees QC and Samar Abbas (instructed by Denning Legal) for the Claimant
David Lewis and Jack Dillon (instructed by Simons Muirhead & Burton) for the Defendant



Crown Copyright ©

    Lord Justice Leggatt:

  1. This judgment deals with questions of costs and permission to appeal consequential on the judgment handed down on 22 February 2018. It is given after considering written submissions from the parties, in circumstances where both parties have agreed that it is unnecessary to have an oral hearing.
  2. Costs

  3. I think it clear that Mr Kent is overall the successful party in the proceedings. The action was initiated by Sheikh Tahnoon who, as described in the main judgment, claimed sums allegedly due under a Framework Agreement and promissory note, both dated 23 April 2012, in a total amount of approximately 15m. There were four heads of claim. All were rejected and the claim failed in its entirety. Mr Kent advanced a counterclaim which had two aspects. One aspect was a claim to recover as damages for breach of contract and/or in tort any sums which Mr Kent would otherwise have been liable to pay under the Framework Agreement and promissory note. This claim succeeded. The other aspect of the counterclaim was a claim for an account of profits based on alleged breaches of fiduciary duties said to have been owed by Sheikh Tahnoon to Mr Kent. That claim failed.
  4. The upshot is that Mr Kent was wholly successful in defeating the claim but his counterclaim was only partly successful, in particular because he did not succeed in obtaining a money judgment in his favour.
  5. In these circumstances, one possible approach in exercising the court's discretion under CPR 44.2(2) would be to order Sheikh Tahnoon to pay Mr Kent's costs of the proceedings, save for the costs of those issues on which Mr Kent failed, and to order Mr Kent to pay Sheikh Tahnoon's costs of those issues. Such an issue-based order would, however, make the process of assessing costs unduly complicated. In this case as in most cases where it is appropriate to reflect the fact that a party who is successful overall has lost on part of his case, the simpler and better approach is instead to reduce the proportion of Mr Kent's costs which he is entitled to recover by a percentage which reflects my broad assessment as the trial judge of the significance of the issues on which Mr Kent lost and the costs likely to be attributable to those issues.
  6. As mentioned, the main issue on which Mr Kent lost was the issue of whether Sheikh Tahnoon owed fiduciary duties to Mr Kent (by reason of a partnership between them or otherwise). The costs referable to that issue included the costs of evidence and argument about what profits Sheikh Tahnoon made for which, had he owed fiduciary duties to Mr Kent, he could have been ordered to account. Certain other contentions advanced by Mr Kent were ultimately abandoned by him, such as allegations of misrepresentation and undue influence. Almost all the evidence relating to those abandoned issues, however, was relevant in any event and I do not consider that they added much to the costs of the proceedings. Nevertheless, I make some allowance for costs incurred, specifically in relation to those issues and also for the fact that the grounds on which Mr Kent successfully resisted the claim under the promissory note were not advanced at the outset of the proceedings but only after his defence was amended in March 2014. I do not regard the fact that Mr Kent's defence was amended more than once (as for that matter were Sheikh Tahnoon's particulars of claim) as justifying the imposition of any additional liability for costs over and above the costs caused by the amendments (which Mr Kent has already been ordered to pay to Sheikh Tahnoon). Nor do I accept the further argument made by counsel for Sheikh Tahnoon that Mr Kent's conduct in relation to disclosure merits penalising him in costs, particularly when Teare J considered that the costs of Sheikh Tahnoon's application for specific disclosure should be costs in the case.
  7. Counsel for Sheikh Tahnoon have submitted that, if Mr Kent had not claimed an account of profits, then no expert accounting evidence would have been required. It is true that the court's permission to adduce expert accounting evidence was given in connection with Mr Kent's counterclaim for an account of profits. However, as noted at paragraph 193 of the main judgment, the accounting evidence was in fact of broader relevance because establishing the financial condition of the Aquis and YouTravel companies was critical to the issue of economic duress, the associated claim in tort and the claim for breach of a contractual duty of good faith. In the circumstances I consider that the costs of obtaining expert evidence should be dealt with separately from other costs and that the fair order to make in that regard is that each party should bear its own costs of obtaining such evidence.
  8. Counsel for Sheikh Tahnoon also submitted that, if Mr Kent had not alleged a partnership and/or that Sheikh Tahnoon owed him fiduciary duties, it would have been unnecessary to investigate in detail the history of the relationship between the parties over the whole period between 2008 and April 2012. The legal relationship between the parties and the duties which they owed to each other were established when the contract between them was made in October 2008. It would have been necessary to examine the circumstances in which the contract was made in order to identify its terms and whether any implied obligation of good faith was owed, even if no case had been made that there was a partnership or other form of fiduciary relationship. It would also have been necessary to consider the history of the parties' dealings with each other from then until April 2012 in any event in order to understand the background to the discussions which led to the execution of the Framework Agreement and promissory note and the financial situation of the parties and of the Aquis and YouTravel companies at that time. Nonetheless, I accept that the scope of the factual evidence and of the parties' submissions would have been reduced somewhat if the contention that Sheikh Tahnoon owed fiduciary duties to Mr Kent had not been made.
  9. Doing the best I can based on what is largely a matter of impression, I consider that it is appropriate to reduce the costs which Mr Kent is entitled to recover by 30% on account of the factors I have mentioned. Accordingly, Sheikh Tahnoon will be ordered to pay 70% of Mr Kent's costs of the proceedings (excluding his costs of obtaining expert evidence).
  10. Counsel for Mr Kent have submitted that his costs should be assessed on the indemnity basis in circumstances where the court has made findings of misconduct including intimidation by physical threats and other illegitimate pressure amounting to blackmail exerted in order to induce Mr Kent to execute the Framework Agreement and promissory note. Despite those findings, I am not persuaded that it would be right to make such an order. I am influenced, in particular, by the fact that, although I have found that Sheikh Tahnoon is vicariously liable for the conduct of his representatives, I have also found that he did not authorise and would not have countenanced the threats which they made when acting as his agents (see paragraph 216 of the judgment). Although it may be said that Sheikh Tahnoon sought to take advantage of the misconduct of his representatives by pursuing his claim in these proceedings, I am not convinced that he was aware of what was done in his name before the full facts emerged at the trial.
  11. Permission to appeal

  12. Sheikh Tahnoon has applied for permission to appeal on four grounds. I understand from the nature of these grounds that Sheikh Tahnoon is only seeking to maintain for the purpose of an appeal his claim for the amount of the promissory note and is not seeking to appeal against the rejection of the remainder of his claim. The claim under the promissory note failed for circuity of action because I found that any sum paid by Mr Kent pursuant to the promissory note would have been recoverable by him as damages for three separate reasons. Those were that Mr Kent was induced to execute the promissory note by conduct amounting to (i) breach of a contractual duty of good faith, (ii) intimidation in the form of blackmail, and (iii) intimidation consisting of threats of violence.
  13. The first ground of appeal seeks to challenge the finding that Sheikh Tahnoon owed a contractual duty to Mr Kent to act in good faith. I accept that this raises an arguable point of law and, if the point had been one which had affected the outcome of the case, I would have given permission to appeal. However, unless Sheikh Tahnoon also has a real prospect of successfully challenging the findings that the promissory note was obtained by blackmail and duress, the point is academic.
  14. Sheikh Tahnoon is not seeking to challenge the finding that his representatives made physical threats to Mr Kent nor the finding that they engaged in conduct which amounted to blackmail. As his second ground of appeal, however, he seeks to argue that the court was wrong to find that the threats of violence made by his representatives were a cause of Mr Kent executing the promissory note. That finding of fact was based on an assessment of the witnesses and of the evidence about the course of the negotiations which led to the execution of the Framework Agreement and promissory note. I see no real prospect that the Court of Appeal might interfere with that finding. Nor do I accept the submission that there is a need for the Court of Appeal to clarify the test of causation applicable in cases of physical intimidation. The test of causation in cases of physical duress is already established by the decision of the House of Lords in Barton v Armstrong [1976] AC 104 and counsel for Sheikh Tahnoon have not advanced any argument as to why, in principle, the test should be different when the same acts are relied on to establish a claim in the tort of intimidation.
  15. In any event, the second ground of appeal is also academic in the absence of any challenge by Sheikh Tahnoon to the finding that, irrespective of the physical threats made, Mr Kent was induced to execute the promissory note by conduct amounting to blackmail. In these circumstances, even if the conclusions reached in the judgment on both (a) the existence of a contractual duty of good faith and (b) the test of causation applicable in cases of physical intimidation were wrong, it would make no difference to the result of the case.
  16. The only ground of appeal which, if successful, would lead to a different outcome on liability is the third ground of appeal, by which Sheikh Tahnoon seeks to argue that he is not vicariously liable for the tortious acts of his representatives committed in the course of negotiating an agreement with Mr Kent on his behalf and for his benefit. This argument depends on seeking to apply the principles applicable to claims for misrepresentation and other reliance based torts to the tort of intimidation. However, it is not a requirement of the tort of intimidation that the claimant has relied on the apparent authority of the agent. The position is similar to other forms of wrongdoing where vicarious liability is based not on questions of authority but on whether the act was done in the course of the agent's employment: see e.g. Dubai Aluminium Ltd v Salaam [2003] 2 AC 366, where the distinction is clearly explained by Lord Nicholls at paras 27-33. In my view, this ground of appeal is hopeless.
  17. The fourth ground of appeal is that the court erred in assessing damages by failing to give credit for benefits obtained by Mr Kent as a result of entering into the Framework Agreement. These are said to comprise (i) the release of personal guarantees that he had given and (ii) profits made from continuing to manage the Bella and Silva hotels. There was no evidence of what, if any, profit was made from the continued management of the Bella and Silva hotels until that arrangement was terminated; moreover, any such profit was made by Aquis and not by Mr Kent personally. In any event Sheikh Tahnoon has not pleaded any case and did not seek to argue or adduce evidence at the trial that Mr Kent received a benefit in any quantified amount from either of these matters for which credit should be given in calculating damages. Accordingly, this ground of appeal is not open to Sheikh Tahnoon.
  18. Sheikh Tahnoon's application for permission to appeal is therefore refused.

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