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Innovative Costs Order Granted in Foreign Currency

A recent decision of the High Court (Chancery Division) has provided confirmation for the first time that, in appropriate circumstances, where a party to litigation is domiciled outside of England & Wales and they have incurred and paid legal costs in a foreign currency in connection with that litigation, they are entitled to have a costs award made in that foreign currency.  Prior to the judgment in Cathay Pacific Airlines Ltd v Lufthansa Technik AG [2019] EWHC 715 (Ch) (25 March 2019) there were no previous authorities on which an order has been made for payment of costs in a foreign currency on a summary assessment of costs. 

The case concerned an application by the Claimant for summary judgment.  The Defendant successfully opposed the application and had paid his solicitors, US firm WilmerHale, and its Counsel in euros and therefore sought recovery of its costs in euros. 

Under section 51 of the Senior Courts Act 1981, the court has a wide discretion to award costs. Section 51(1)(b) provides that, subject to the provisions of the Senior Courts Act or any other enactments and to rules of court, the costs of and incidental to all proceedings in the High Court shall be in the discretion of the court. Section 51(3) provides that the court shall have full power to determine by whom and to what extent the costs are to be paid.

Under CPR 44.2(1), the court has discretion as to whether costs are payable by one party to another, the amount of those costs and when they are to be paid.   CPR 44.2(6) states: "The orders which the court may make under this rule include an order that a party must pay … (d) a stated amount in respect of another party's costs …".

Taking into account CPR 1.2, which requires the court to give effect to the overriding objective whenever it exercises any power under the CPR or interprets any rule, the judge refused to imply a restriction on the court's power under section 51 of the Senior Courts Act 1981 or CPR 44 as precluding costs awards being made in a foreign currency.  Instead he interpreted the word "amount" in CPR 44.2(1)(b) and CPR 44.2(6)(b) as including a sum expressed in a foreign currency.

Despite no previous authorities for a costs order being made in a foreign currency the issue has been discussed in a few previous decisions.  In Elkamet Kunststofftechnik GmbH v Saint-Gorbain France SA [2016] EWHC 3421 (Pat), the paying party was ordered to pay £20,000 to compensate the receiving party for the cost of converting euros to sterling, which had become progressively more expensive, to pay its solicitors bills. The order was made on the basis that:

"… in principle the successful party is entitled to be compensated for any additional expenditure it has to incur as a result of exchange rate losses in the same way as it is entitled to be compensated by way of interest for being kept out of the money".

In Elkamet, the court held that to interpret section 51 and CPR 44.2 as containing an implied restriction that costs judgments must be in sterling, would be contrary to the authorities on foreign currency judgments since Miliangos v George Frank (Textiles) Ltd [1976] AC 443, which removed the prohibition on judgments being given in a foreign currency.

The court was reminded that the overarching principle is that a costs judgment is the same as any other judgment and a court ought to give judgment in the currency which most accurately reflects the claimant’s loss. The Judge went on to say, “This approach is in accordance with principles set out The Folias [1979] AC 685 and The Dione [1980] 2 Lloyd’s Rep 577. It is also consistent with the indemnity principle which underlies awards of costs in England.”  In respect of WilmerHale’s costs, he said the euro was “self-evidently” the currency which most accurately expressed the defendant’s loss and the currency in which it ought to be compensated.  He also awarded Counsel’s fees in euros however, it seems that the judge reached that decision on the basis that counsel's fees were only a fraction of the total bill and so it would not be in keeping with the overriding objective to split the costs award into fragments on summary assessment.  On the facts, the Defendants costs were summarily assessed at EUR25,000.

The judgment also gives useful procedural guidance for parties seeking a costs award in a foreign currency.  As to procedure, the judge said that any party seeking a summary assessment of costs in a foreign currency ought to give proper notice of its intention to do so and expressly state, as part of the ordinary course of persuading the court to exercise its discretion, that the claim is for payment in a specified foreign currency whilst also explaining the factual basis as to why it is for payment in that currency.   To enable the court to assist the court in assessing the reasonableness of the sums claimed, it should also provide a sterling equivalent of the sum claimed, especially where the currency is an uncommon one.

Posted on 6 June, 2019 by Ortolan

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