WHEN WILL INDEMNITY COSTS BE ORDERED? A HIGH COURT DECISION CONSIDERED
Indemnity costs now carry extra weight in that, on assessment, the court is not bound by the principle of proportionality. In Siegel -v- Pummell  EWHC 195 (QB) Mr Justice Wilkie reviewed the relevant principles in relation to indemnity costs.
The claimant was successful at trial. An order was made for payment of the claimant’s costs on the standard basis. There was a subsequent hearing to consider whether the defendant should pay costs on the indemnity basis.
RELATED POSTS ON INDEMNITY COSTS
- No general principles apply to award of indemnity costs: Court of Appeal decision.
- Indemnity costs against funders: who pays what for when?
- No indemnity costs: Gorgeous Beauty 2
- Indemnity costs, costs budgeting and witness statements
- The risk of indemnity costs: what are you going to tell your client?
- Costs budgeting, indemnity costs and payment on account.
- Anatomy of a post-Denton applciation for relief from sanctions: costs, indemnity costs and everybody is at risk as to costs.
KEY POINTS OF SIEGEL DECISION ON COSTS
- There usually has to be conduct “outside the norm” for indemnity costs to be awarded.
- On the facts of the current case some of the acts of the expert witness led to additional costs being incurred and indemnity costs were awarded for the additional costs of recalling a witness.
THE JUDGMENT ON INDEMNITY COSTS
“The legal principles applicable to indemnity costs
- Costs are governed by CPR 44. CPR 44.2(1) gives the court a discretion as to whether costs are payable by one party to the other. Sub-rules (4) and (5) provide:
“(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances including, –
(a) the conduct of all the parties …
(5) The conduct of the parties includes –
b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and
d) whether a Claimant has succeeded in the claim (in all or in part) exaggerated its claim.”
- CPR 44.3 deals with the basis of assessment as being either on the standard or indemnity basis; the default position is the standard basis (44.3(4)).
- The effect of an order requiring payment of costs on the indemnity basis is to disapply the requirement that, in addition to costs being reasonably incurred, they should also be proportionate to the sums and issues at stake in the litigation and that, in the event of the assessment Judge having a doubt as to whether or not an item of cost has been incurred reasonably, the benefit of such doubt should go to the receiving rather than the paying party.
- The Court of Appeal has declined to define the circumstances in which a court could or should make an order for costs on the indemnity basis. InExcelsior Commercial and Industrial Holdings v Salisbury Hamer Aspden and Johnson  EWCA Civ 879 Lord Woolf, the then Lord Chief Justice, at paragraph 30, cited a judgment of Simon Brown LJ in Kiam v MGN Limited (No. 2)  2 All ER 242 who, at paragraph 12, had said:
“I for my part, understand the court there to have been deciding no more than that conduct, albeit falling short of misconduct deserving of moral condemnation, can be so unreasonable as to justify an order for indemnity costs. With that I respectfully agree. To my mind, however, such conduct would need to be unreasonable to a high degree; unreasonable in this context certainly does not mean merely wrong or misguided in hindsight. An indemnity costs order made under Part 44 (unlike one made under Part 36) does I think carry at least some stigma. It is of its nature penal rather than exhortatory. …”
“… there is an infinite variety of situations that can come before the courts and which justify the making of an indemnity order. … I do not respond to Mr Davidson’s submission that this court should give assistance to lower courts as to the circumstances where indemnity orders should be made and circumstances where they should not. … This court can do no more than draw attention to the width of the discretion of the trial judge and re-emphasise the point that has already been made that, before an indemnity order can be made, there must be some conduct or some circumstance which takes the case out of the norm. That is the critical requirement.”
“The question will always be: is there something in the conduct of the action or the circumstances of the case which takes the case out of the norm in a way which justifies an order for indemnity costs?”
- In Fitzpatrick Contractors Limited v Tyco Fire and Integrated Solutions (UK) Limited  EWHC 1391 (TCC) Mr Justice Coulson, at paragraph 3 subparagraph iv, said as follows:
“Examples of conduct that have led to such an order for indemnity costs include the use of litigation for ulterior commercial purposes … and the making of an unjustified personal attack on one party by the other …”
Submissions and conclusions:
Personal attack on Ms Levett
- The Claimant cites conduct of the Defendant under four principal headings which, individually or cumulatively, he says should persuade me to make the orders sought from the 9th September 2014, which is the date when it is said the inappropriate conduct of the Defendant began.
- The first two headings concern the conduct of Professor Trimble, an expert witness called by the Defendant. It is said that his conduct should persuade me to make an order for costs on an indemnity basis arising out of two linked strands of conduct, namely his engaging in personal attacks against the Claimant’s medical legal experts, particularly against Ms Levett, and his failing to engage with the medical issues and, in particular, deliberately frustrating the process of open litigation by obfuscating these issues and withdrawing from the joint statement process.
- In my judgment, at paragraph 550, I recorded my concern that Professor Trimble in his evidence was combative and dismissive of that of other medical professionals who were not specialists in the same field as himself. I averted to particular problems he had with Ms Levett to which I will return.
- There were three strands to the comments made by Professor Trimble, directed at Ms Levett and her professionalism, to which my attention has been drawn. They were: the propriety, or otherwise, of her continuing to act as an expert witness for the Claimant whilst being his treating psychotherapist providing services for which she was charging him; the assertion by Professor Trimble that Ms Levett expressed opinions as an expert witness which went beyond the ambit of her professional expertise as a clinical psychologist; and the fact that, as is a matter of record, from the first of November 2013 her name had been struck off the Health and Care Professions Council Register of Practitioner Psychologists.
- I have been taken through the extensive correspondence between the parties’ legal advisors and reports and letters written by Professor Trimble relating to the court ordered joint statement process involving Ms Levett and Professor Trimble. The Claimant contends that the fact that this process was unsuccessful and that Master Leslie, on 17th October 2014, made an order dispensing with the requirement for such a joint statement, could be laid at the door of Professor Trimble and his obstructive attitude towards engaging in, or completing, that joint statement process.
- As a third issue, the Claimant contends that the way in which Professor Trimble presented his written evidence and gave his oral evidence at trial necessitated the court requesting him, in the course of his evidence, to provide a written document setting out the gist of his evidence which required the Claimant to recall one of his expert witnesses, Dr Allder, to respond, should also persuade me to make an order for indemnity costs.
- I was critical of certain aspects of the way that Professor Trimble prepared and gave his evidence. It was apparent during the trial that there was a degree of animus between Professor Trimble and Ms Levett. The matters of concern, however, which Professor Trimble raised concerning Ms Levett were matters which, in my judgment, were properly available to be raised by the Defendant, whether or not it was appropriate for Professor Trimble to take the lead in raising them. In dealing with Ms Levett’s evidence I expressed the need for particular caution by reason of, in particular, the decision of the HCPC. Her being a treating psychotherapist of the Claimant and an expert witness called by the Claimant in relation to the same symptoms is unusual and it was something to which I was obliged to have regard when considering the reliance upon which I could put on Ms Levett’s evidence as an expert. I was also careful to ensure that, as with any expert witness, the opinions she was expressing were properly expressed by her, within the ambit of her expertise.
- In my judgment, whilst there was an unpleasant edge to the proceedings by virtue of the attitude, principally of Professor Trimble towards Ms Levett, in my judgment, it fell significantly short of conduct which was out of the norm in a way which, on its own, would justify an order for indemnity costs.
The Joint Statement process
- It is clear from the extensive correspondence that there was a series of obstacles and difficulties being presented by both sides in relation to that process. It is, however, also the case that the two experts did engage with one another in an attempt to pursue that process to a successful conclusion. They had a four hour long face-to-face meeting following which Ms Levett produced a first draft of a joint statement which was extensive in length. There then followed a written response by Professor Trimble which did not complete the process. By the 17th October 2014 both parties were seeking the assistance of the court as to how that process might be completed or whether, by that stage, it had become counter-productive and disproportionate in terms of costs and effort expended in the light of the apparent inability of the two experts to reach agreement on the joint statement. It was no surprise that Master Leslie considered that the joint statement process should be abandoned and ordered accordingly.
- In my judgment, the solicitors on both sides were genuinely trying to advance the process but were hamstrung by, on each side, the attitude of, respectively, Professor Trimble and Ms Levett who were incapable of approaching the exercise in anything like the cooperative spirit which it requires. In those circumstances I am not prepared to conclude that the conduct of the Defendant was such that it should be visited by an order for indemnity costs in favour of the Claimant.
Improperly alleging dishonesty
- The third piece of conduct relied on by the Claimant is the contention that the Defendant made allegations of dishonesty against Mr Seigel without having properly pleaded them and without proper evidence to do so.
- The Defendant had made a Part 36 offer of £55,000 on 22nd April 2013. The Claimant, for his part, made a Part 36 offer of £1.25 million on 20thOctober 2014. On the same day, the Defendant made a further Part 36 offer of £550,000. On 17th November 2014, after the conclusion of his evidence, the Claimant withdrew his Part 36 offer. The Claimant has contended that he was obliged to do so because, by that stage, the Defendant was making allegations of dishonesty against him, in particular during cross-examination, and that he required a judgment from the Court to clear his name.
- The Defendant contends that at no stage did he make any allegation of dishonesty against the Claimant. There was never any evidence upon which it would have been proper for him to do so. At its highest, Professor Swash, one of the Defendant’s experts had indicated that, in the light of certain answers given by the Claimant to Professor Swash when he was examined by him, a question might have to be determined whether his description of his symptoms was “factitious” that is to say false.
- In my judgment, the Defendant never did make any allegation that the Claimant was seeking to mislead the court or was lying in his accounts given to the court. There were moments during the cross-examination of the Claimant by Mr Leighton Williams QC when I saw fit to seek clarification from the Defendant whether or not he was alleging that claims being made by the Claimant were fraudulent. Mr Leighton Williams was very clear in the answer which he gave to my enquiry, namely that it was not being suggested that the Claimant was being dishonest. He was suggesting that the symptoms of which the Claimant was complaining were genuine but the suggestion that they were due to brain injury rather than psychological causes had been induced by the fact that he had been told that he might have a brain injury by his medical experts (the iatrogenic effect). It was also being said that as part of his personality the Claimant was prone to exaggerate, but it was not being put that he was dishonest.
- In my judgment, there was nothing in the conduct of Mr Leighton Williams QC in putting the Defendant’s case in this respect which was improper or was out of the norm. I do not accept that this head of complaint gives rise to any argument for awarding costs on an indemnity basis.
Serving late evidence and late witness statements in unsatisfactory circumstances
- This complaint focuses on witnesses called by the Defendant who were, or had been, employed by Hewlett Packard, namely Mr Waterfield, Ms Ben Fredj and Mr Parry.
- I have considered the evidence of Mr Wright, solicitor for the Defendant, and Mr Dickinson, solicitor for the Claimant in this respect. The Claimant had been in litigation with Hewlett Packard in the United States which was settled on 12th December 2013. Prior to that, it was clear that this litigation, in the United States, had resulted in those employees of Hewlett Packard deciding not to cooperate in the current proceedings and, on 9thDecember 2013, the court, on the Defendant’s application, gave the Defendant permission to serve a witness summary in relation to four witnesses who had been employed by Hewlett Packard. In addition, on 28th Janaury 2014, the Defendant issued witness summonses in relation to those three witnesses and a fourth Hewlett Packard employee, Andrew Guile, which were duly served.
- I accept the evidence of Mr Wright that, as a result of email exchanges between him and Ms Ben Fredj, he legitimately formed the view that he would get no cooperation from the Hewlett Packard witnesses, but that, shortly before the trial, on 21st October 2014, he again contacted Hewlett Packard to see whether such cooperation might now be forthcoming. Once again cooperation was limited and Mr Wright had to obtain a fresh witness summons, on 29th October 2014, requiring Ms Ben Fredj to produce relevant documentation, which she did on 4th November 2014.
- That documentation was disclosed to the Claimant’s solicitors on 5th November 2014.
- Arising out of these events, witness statements were produced by Ms Ben Fredj and Mr Waterfield which were served at the outset of, or shortly after the outset of, the trial. The third witness, Mr Parry, did not contact the Defendant’s solicitors until 10th November, the date the trial had been listed to commence. As a result a witness statement was prepared with him and it was served on 13th November, by which time the Claimant was giving evidence.
- Of the four witnesses from Hewlett Packard one of them, Mr Guile, was called by the Claimant. The Defendant had decided not to call him. His evidence was, I concluded, important.
- In my judgment, in the context of this case, Mr Wright cannot properly be criticised for serving these witness statements as close to the trial as he did. No objection was taken by the Claimant to any of the witnesses giving their evidence and the Claimant had the benefit of seeing their witness statements before they started giving their evidence.
- In the course of my judgment I had certain criticisms to make of Ms Ben Fredj concerning the documentation upon which she initially focussed in her witness statement, but none of that was, in my judgment, the fault of Mr Wright.
- Accordingly, in my judgment, this complaint is not a proper basis for an order for indemnity costs.
Professor Trimble’s final written statement
- In my judgment, however, the fact that the court was obliged to ask Professor Trimble, in the middle of his evidence, to provide a written statement as to what exactly his evidence was and the basis upon which he was saying that the Claimant’s continuing symptoms were psychogenic did arise from serious shortcomings in the way in which Professor Trimble approached the giving of his evidence. It was helpful to the court to have that material but it was necessary for the Claimant to recall Dr Allder to deal with this new basis upon which Professor Trimble was finally presenting his evidence.
- In my judgment, that conduct on the part of Professor Trimble was so out of the norm that it justifies an order for indemnity costs.
- Accordingly, I order that the costs of the recall of Dr Allder, occasioned by the production by Professor Trimble of the final written statement of his position shall be awarded on an indemnity basis. I make an order for indemnity costs but limited in that way.
The reserved costs of 17th October 2014
- Master Leslie, when he ordered dispensing with the joint statement on 17th October 2014, reserved the costs of that application to the trial judge. I have indicated that, by that stage, it was obvious that the joint statement process was no longer contributing to an effective and proportionate disposal of the litigation. That circumstance had arisen out of the mutual intransigence and disrespect between Professor Trimble and Ms Levett and their mutual unwillingness to cooperate with one another. In my judgment, therefore, the costs reserved to the trial judge on that issue should reflect the outcome of the litigation and, accordingly, I award the costs of that application to the Claimant, to be added to the costs of the litigation, and to be assessed on the standard basis, if not agreed.