Cost shifting at an interim stage – can a claimant obtain a Bullock or Sanderson order on discontinuance?

Charles Law, pupil barrister, provides a commentary on the recent costs judgment of Mr Justice Picken in the “Russian Aircraft Operator Policy” group litigation before the Commercial Court.

Introduction

Where a claimant has sued two defendants in the alternative, and has discontinued against one of them, in what circumstances should the remaining defendant be ordered to pay the discontinued-against defendant’s costs?

This was the question faced by Mr Justice Picken in a recent costs hearing in the Russian Aircraft “Operator Policy Claims” litigation.   His judgment is instructive regarding the merits of obtaining cost-shifting orders where there has been a discontinuance against some but not all defendants: Re The Russian Aircraft Litigation – Operator Policy Claims [2025] EWHC 3378 (Comm).

Christopher Loxton acted as the sole Counsel for the Deep Sky Claimants, instructed by Fieldfisher LLP.

Background

The Claimants are owners and lessors of aircraft and aircraft engines (“the aircraft”). The litigation was precipitated by the February 2022 invasion of Ukraine, after which the Claimants issued default and termination notices under the leases. The Russian airlines failed to return the aircraft to the Claimants, which still remain in Russia. The Claimants made claims pursuant to insurance and reinsurance policies taken out by the operators of the aircraft (“the Operator Policy Claims”). This distinguishes them from the related proceedings in which the lessors brought claims under policies which they themselves had directly taken out (“the Lessor Policy Claims”).

In both the Lessor Policy and the Operator Policy Claims the claims were brought against hull all risks (“AR”) insurers and war risks (“WR”) insurers.  By his judgment in the Lessor Policy Claims, Mr Justice Butcher determined that the proximate cause of the loss of the aircraft was a war risk peril[1]. The WR Defendants subsequently conceded this point within the Operator Policy Claims, prompting the Claimants to discontinue against the AR Defendants. The Claimants thereafter sought cost shifting orders whereby the WR Defendants would be ordered to cover the AR Defendants’ costs, either directly by way of a Sanderson Order or indirectly by way of a Bullock Order.  The Claimants contended that the AR Defendants were only sued because the WR Defendants had refused to admit that the relevant loss was constituted by a war risk peril. On this basis it was argued that the WR Defendants ultimately bore responsibility for the incurrence of the AR Defendants’ costs.

Courts possess a broad jurisdiction to order the unsuccessful defendant to pay the successful defendant’s costs either directly (a Sanderson Order) or indirectly by way of indemnity (a Bullock Order). Such orders are typically sought at the culmination of proceedings where there is definite knowledge of the success (or lack of it) of all parties involved.   What the Claimants sought at the hearing was for the WR Defendants to be ordered to pay the AR Defendants’ costs either via a Sanderson Order, or alternative a Bullock Order.

Judgment

Mr Justice Picken (“the Judge”) declined to make the orders sought by the Claimants. He applied the default rule pursuant to CPR 38.6, which states that a claimant will ordinarily be liable for the costs of a defendant against whom the claimant discontinues.  Notwithstanding the default position, the Judge determined that he did have the jurisdiction, by virtue of both CPR 38.6 and CPR 44.2, to make the order the Claimants sought, following in this respect dicta of Jefford J in BAE Systems Pension Funds v Bowmer and Kirkland[2]. However, he declined to exercise his discretion to do so. A powerful factor influencing this decision was the fact that the Claimants had not been successful against the WR Defendants.  The WR Defendants still raised substantive defences which ultimately fell to be determined at trial, and the Judge decided that making a cost shifting order at the interlocutory stage would deprive the Court of the power to look at matters in the round once the question of liability had been decided:

‘In those circumstances [were the WR Defendants to succeed at trial] I consider it inappropriate, indeed, potentially grossly unjust, to make a determination now that deprives the Court later from proceeding, with full knowledge, to make a determination as to the ultimate costs outcome of the proceedings.

This is a powerful factor, in my assessment, when considering the matter of discretion, which weighs against the Claimants on their application for a Sanderson or Bullock order. It is only at the conclusion of the proceedings, not only that it will be known whether the claim against the War Risk Defendants has been successful, but that it will also be known, in the round, what factors appropriately fall into the costs determination.’[3]

The Judge acknowledged that a hypothetically successful WR Defendant could well raise the argument that the proceedings should not have been brought at all, and in such circumstances the Court would have to consider liability for the AR Defendants’ costs in light of this. The mere fact that the AR Defendants were sued as a consequence of the WR Defendants contesting that the loss of the aircraft was constituted by a war risks peril was insufficient to merit an interlocutory cost shifting order.  Interestingly, the Judge did not close off the possibility of the Claimants recovering monies paid to the AR Defendants’ after trial, specifying that the Claimants may at that stage apply to clawback the AR Defendants’ costs from the WR Defendants through a Bullock type order.

Key takeaways

The judgment indicates reluctance to grant cost shifting orders at the interlocutory stage where a claimant has not succeeded against at least one defendant. It demonstrates a preference to wait until a final determination of liability so that a court can make a holistic assessment in light of the relative success of the parties. As the judgment makes clear, a court is not precluded from making a cost shifting order before the final determination of liability. However, such orders are likely to be rare. Although the judgment does not indicate what conduct might persuade a court to exercise its discretion to do so, at the very least it is suggested that pointing the finger at an alternative defendant will not ordinarily be enough.

[1] The Russian Aircraft Lessor Policy Claims [2025] EWHC 1430 (Comm).

[2] [2018] EWHC 1222 TCC at [30].

[3] Re The Russian Aircraft Litigation – Operator Policy Claims [2025] EWHC 3378 (Comm) at [24] and [25].