SKATTEFORVALTNINGEN (The Danish Customs and Tax Divisions) (SKAT) is in a legal battle with Solo Capital Partners LLP and claim that a complex fraud led to lost revenue of about £1.4 billion.  Following a preliminary issue trial in April 2021, Mr Justice Baker dismissed the claim based on the rule against enforcing foreign revenue law in English courts (the Revenue Rule). SKAT appealed on two grounds.


In relation to Ground 1 of the appeal (the Revenue Rule), the Court of Appeal agreed with SKAT that the claim wasn't about unpaid tax, but money taken by fraud, the claim was reinstated and two joint and several costs orders were made in SKAT’s favour – six of the seven unsuccessful groups of respondents to the appeal were ordered to pay the costs of the hearing before Mr Justice Baker.  All seven unsuccessful groups were ordered to pay the costs of the appeal.  Interim payments of £600k and £1.6M respectively were ordered.  As it was entitled to, SKAT recovered the interim payments from only one of the groups, the ‘DWF defendants’.


The DWF defendants sought contributions from the other losing respondents to the payments they had made – 70% of the costs of the preliminary issue trial interim payment and 75% for the appeal costs interim payment.   It appears that, before the hearing, the DWF defendants reached an agreement with one group (the Sanjay Shah defendants) that they would contribute 20% of the interim costs awarded in relation to the preliminary issue trial and 25% of the interim costs of the appeal.


This was not an easy application to decide.  During the hearing Foxton J put two significant questions to the parties and allowed further written submissions after the hearing.


The judge considered three sources of the jurisdiction to order one party to a joint and several costs order to make a specific contribution to another party who had made a payment in respect of that order:


1.     The court’s general jurisdiction to make costs orders (s51 of the Senior Courts Act 1981/ CPR 44.2 and/or the inherent jurisdiction of the court)

2.     The common law

3.     The Civil Liability (Contribution) Act 1978


The third option was discounted immediately.


Mr Justice Foxton held that ‘… the issue of contribution as between parties to a joint and several costs order can be rescued from the choppy waters of [the common law], and moved to the safe harbour of the law of civil procedure’:


1.     Contribution can be determined through the court's costs jurisdiction.

2.     A party which has fully paid an interim costs liability is not restricted to a claim for contribution at common law.

3.     Parties cannot agree the levels of contribution beforehand.

4.     The costs jurisdiction is not simply compensatory, it gives effect to important policy considerations concerning the conduct of litigation and access to justice, many of which will be in play when deciding what costs order to make between opposing parties and again when deciding the respective contributions of more than one unsuccessful party.


The factors in CPR 44.2 (4)and (5) were all potentially relevant, subject to these limitations:


1.     A contribution order must align with the reasons for making the initial joint and several costs order.

2.     Costs determinations are made on a pragmatic basis, frequently before the outcome and the ‘ultimate economic significance’ to the parties of the success or failure of a particular point are known.

3.     A party's financial situation doesn't exempt them from a costs order.


At paragraph 26, the judge accepted that ‘in exercising its procedural costs jurisdiction, the court can have regard, in an appropriate case, to the fact that particular parties before it are litigating in the same economic interest and/or have instructed the same legal team, when determining what costs order to make. The court's costs jurisdiction permits a wide variety of factors to be taken into account. Parties who jointly instruct a solicitor are generally required to undertake joint responsibility for the solicitor's costs. Parties who act in litigation through one legal team will incur a single set of "own party" costs, and their co-ordinated actions in the litigation will not generally increase the level of costs incurred by the opposing party (or parties) merely because that common position is taken on behalf of a group of instructing parties, rather than a single party.  How far it is appropriate to make joint and several costs orders will depend on the circumstances of each particular case.’


The judge's decision was influenced by the potential impact of the Revenue Rule defence.  If it had succeeded, it would have provided a ‘complete answer’ to the claims against all the defendants.  He examined the roles of each defendant group in the litigation. The Sanjay Shah defendants explicitly acknowledged a ‘central role’ in their submissions to Mr Justice Baker. The DWF defendants also admitted to a prominent role and that they had shouldered a ‘disproportionate burden …. in defending [the] claims’.  Of note also was that four of the parties acted as one unit in the Court of Appeal.


For the interim payment towards the costs of the preliminary trial, these contributions were ordered:

Defendant allocation

Sanjay Shah group  -  45.10%

DWF group  -  30.00%

Reed  Smith group  -  15.00%

Godson  group  -  3.33%

Jain  group  -  3.33%

Mr  Fletcher  -  3.33%


In relation to the interim costs order for the appeal proceedings, the contributions were fixed at:


Defendant  group allocation

Sanjay Shah group  -  44.00%

DWF  group  -  28.33%

Reed  Smith group  -  14.33%

Godson/Jain/Mr Fletcher/Mr Murphy  -  13.33%


As an aside, after the preliminary issue trial, payments on account had been ordered in favour of the (then) successful defendants:


·       £9M to the Sanjay Shah defendants

·       £5M to the DWF defendants

·       £3.25M to the Reed Smith defendants

·       Amounts of between £950k and £1M to each of the Godson and Jain defendants and Mr Fletcher and Mr Murphy


Mr Justice Foxton refers to the level of these payments on account being ‘consistent’ with his conclusions as to which defendants had the most central role in the preliminary issues trial and the appeal.




It is uncommon in our experience to see satellite contribution proceedings in the context of interim costs orders – although it is less surprising in this case when one sees the significant amounts at stake.


What we found particularly interesting was how civil procedure offered more flexibility than the common law in affording discretion to the judge who decided the respective contributions.  The application of common law would have been a blunt instrument and required equal contributions from each individual party, and it is easy to see how that would seldom do justice to all the relevant circumstances.


Here we have seen that the costs jurisdiction enables the court to consider which issues attracted the most costs, to measure the effects of any shared representation and to identify which party may have been the main driving force.  All these factors can contribute to the apportionment and the financial result of the preliminary issue or eventual outcome at trial can be used as a crosscheck to ensure broad consistency.  So, on this occasion, three cheers for CPR 44!



Click here to read the full judgment.


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