MORE ON INDEMNITY COSTS AND THE SUMMARY ASSESSMENT OF COSTS AT TRIAL: INTERCITY TELECOMS -v- SOLANKI

NOTE THAT THIS JUDGMENT HAS BEEN OVERTURNED BY THE COURT OF APPEAL, SEE THE POST HERE 

In Intercity Telecom -v- Solanki [2015] Judge Simon Brown QC awarded indemnity costs and assessed costs at the end of a trial. It is another useful example of costs being assessed summarily and of a case where conduct has led to indemnity costs being awarded.

THE CASE

The claimants brought an action for breach of contract and database rights, delivery up of confidential information and injunctive relief against a former employee. The defendant admitted, during the course of the action, that he had copied information and used it and was in contempt of court. The matter had been listed for a speedy trial and, upon the non-attendance of the defendant at trial, the defence was struck out. The judge found the defendant had committed numerous breaches of contract and awarded damages of £209,009 and injunctions to prevent further breaches.

THE ORDER AS TO COSTS

Costs

1. The Claimants seek their costs to be summarily assessed (CPR 44.7) on an indemnity basis (CPR 44.4).
2. Steven Jourdan QC sitting as a Deputy High Court Judge in Richmond Pharmacology limited v. Chester Overseas Limited, Levine and Levine[2014] EWHC 3418 (Ch) rehearsed the following guidance:

‘The applicable principles, in a case where indemnity costs are claimed on the ground that the paying party’s conduct was unreasonable, so far as relevant to this claim, are as follows:

(a) As the very word ‘standard’ implies, the standard basis will be the normal basis of assessment where the circumstances do not justify an award on an indemnity basis. For there to be an order for assessment on the indemnity basis, there must be some conduct or some circumstance which takes the case out of the norm. That is the critical requirement.

(b) Dishonesty or moral blame does not have to be established to justify indemnity costs. But indemnity costs are appropriate only where the conduct of the paying party was unreasonable to a high degree. “Unreasonable” in this context does not mean merely wrong or misguided in hindsight.

(c) The court must therefore decide whether there is something in the conduct of the action, or the circumstances of the case in general, which takes it out of the norm in a way which justifies an order for indemnity costs.

(d) The discretion to award indemnity costs is a wide one and must be exercised taking into account all the circumstances and considering the matters complained of in the context of the overall litigation. Cases vary very considerably and each case is highly fact-dependent.

(e) It is important not to lose sight of the essential requirement of unreasonable or inappropriate conduct overall and not to treat examples of such which may amount to such conduct as necessarily constituting it. The essential question is whether the relevant conduct makes it just as between the parties to remove from the paying party the twofold benefit of an order on the standard basis, as compared with an order on the indemnity basis, that is to say, to enable the receiving party to recover its costs, reasonably incurred and reasonable in amount, with the benefit of the doubt being given to the receiving party and without the receiving party having to address (and persuade the court upon) the subject of proportionality.

(f) The pursuit of a weak claim will not usually, on its own, justify an order for indemnity costs, provided that the claim was at least arguable. However, the pursuit of a hopeless claim (or a claim which the party pursuing it should have realised was hopeless) may lead to such an order. InWates Construction Ltd v HGP Greentree Alchurch Evans Ltd [2006] BLR 45 at [27] HHJ Coulson QC said: “I consider that to maintain a claim that you know, or ought to know, is doomed to fail on the facts and on the law, is conduct that is so unreasonable as to justify an order for indemnity costs.”

(g) If a claimant casts its claim disproportionately wide, and requires the defendant to meet such a claim, there may be no injustice in denying the claimant the benefit of an assessment on a proportionate basis or in the claimant forfeiting its normal right to the benefit of the doubt on reasonableness.

(h) The making of a grossly exaggerated claim may be a ground for indemnity costs.

(i) The rejection of reasonable attempts to settle will not normally, by itself, justify an award of indemnity costs. In Kiam v MGN Ltd (No. 2) [2002] EWCA Civ 66, [2002] 1 WLR 2810 at [13], Simon Brown LJ said: “… it will be a rare case indeed where the refusal of a settlement offer will attract under Part 44 not merely an adverse order for costs, but an order on an indemnity rather than standard basis.” However, if coupled with other factors, it may do so: for an example see Barr v Biffa Waste Services Ltd (Costs) [2011] EWHC 1107 (TCC); 137 Con. L.R. 268 (Coulson J). ‘

1. As the trial only lasted one day in the absence of the Defendant and the Claimants have worked to a budget in From H format, it would be in accordance with the overriding objective to summarily assess their costs (CPR 44.7).
2. The conduct of this action by the Defendant has been well ‘out of the norm’, in my judgment. He has been disingenuous, untruthful and dishonest. He has wilfully flouted court orders and deliberately hidden key evidence from the court and the Claimants. Moreover, The Claimants offered a ‘Without Prejudice save as to Costs’ offer on 19^th May 2014 at the outset of these proceedings to settle the case on an undertakings basis only; this was spurned. I accept the submissions of the Claimants that indemnity costs are entirely appropriate.
3. The Claimants’ costs budget of 11^th August 2014 anticipating a 3 day trial amounted to £82,307.50. In each phase of work apart from Disclosure, Trial preparation and Defendant’s applications and ADR/Settlement they have come in well under budget. In each of those phases where costs incurred have exceeded budget, it is due to the erratic conduct of the Defendant who has mainly been representing himself throughout. In my judgment, the total costs incurred of £68,959.25 is ‘not unreasonable’, nor are they phase by phase. Even on a standard basis the costs are ‘proportionate’ to what is at stake; not just £290,009 but also to the importance of the case to the Claimants’ business which may be in danger of losing £2.7m in revenue by virtue of Mr Solanki’s illegal activities. Further, in my judgment, the costs incurred are ‘reasonable’ even if assessed on a ‘standard’ basis.
4. I assess the Claimants costs at £68,959.25.

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