OVERTURNING THE SUMMARY ASSESSMENT OF COSTS FOR A COMMITTAL: THE AMOUNTS INVOLVED WERE “DISPROPORTIONATE AND WRONG

The previous post looked at the Court of Appeal decision today in Solanki v Intercity Telecom Ltd [2018] EWCA Civ 101.   A third element of that judgment was the defendant’s successful appeal against the costs of a committal application.   The Court held that the costs, as assessed, appeared unreasonable and disproportionate.

“I have no doubt that, taking into account the chronology of this case, and the conduct of both the respondent and the appellant in relation to the contempt application, the judge’s order was wrong and contrary to the basic principle that costs in relation to a contempt application should be reasonable and proportionate, and not penal.”

THE CASE

The defendant admitted several breaches of an order and that he had been in contempt of court.  He was ordered to pay £2,500 as a fine. He was also ordered to pay the claimant’s costs of the application in the sum of £83,583.77.  He appealed against the sums in costs he was ordered to pay.

THE JUDGMENT

“The costs appeal

1. 1. Mr Small took us through the chronology of the injunction and committal proceedings to support his submission that the judge’s decision in his order dated 15 June 2015 summarily to assess the costs of the committal proceedings in the sum of £83,583.73 was disproportionate and wrong. He submitted that the summary assessment should be set aside and that the matter should be remitted for a detailed assessment on a proportionate basis by a costs judge.

   2. Mr Pritchard on the other hand sought to support the judge’s order for the reasons which the latter gave.

   3. I have no doubt that, taking into account the chronology of this case, and the conduct of both the respondent and the appellant in relation to the contempt application, the judge’s order was wrong and contrary to the basic principle that costs in relation to a contempt application should be reasonable and proportionate, and not penal. Accordingly, I would remit the matter to the Birmingham District Registry for a detailed assessment of the respondent’s costs of the contempt applications taking into account the following reasons why I consider that the judge’s approach was wrong and disproportionate.

   4. In order to assess whether the judge’s order was proportionate it is necessary to bear in mind the key features of the chronology of the committal proceedings. I summarise this briefly as follows.

   5. On 27 May 2014, at the hearing of the respondent’s application for an injunction, the appellant gave various undertakings including an undertaking in the following terms:

“where the Defendant has retained any information or data referred to in this paragraph 3 in electronic format the same is to be copied on to a USB memory stick and the Defendant is required to deliver up such information to the Claimants.”

Pursuant to that undertaking, the appellant delivered up a Kingston USB stick.

1. 1. On 4 September 2014 the respondents applied for an order to enforce the appellant’s undertakings and to obtain delivery up of further specifically named USB sticks and specific disclosure.

   2. On 24 September 2014, on the hearing of the respondents’ application, HHJ Simon Brown QC ordered specific delivery of the two USB sticks. The appellant delivered up the sticks to the respondents’ solicitors at the end of the hearing and in open court explained that he was impecunious, unemployed and insolvent.

   3. On 16 October 2014 the respondents made an application to the court for the appellant’s committal inter alia on the grounds that he had deleted material on two USB memory sticks, but also on numerous other grounds. On 30 October 2014 the appellant applied to adjourn the first hearing of the respondents’ contempt application on the grounds that he was without solicitors.

   4. On 3 November 2014 the respondents made a further application for committal on the basis that the appellant had knowingly sworn false affidavits and knowingly made false statements and representations in court. On the same date the applications were heard for the first time by HHJ Simon Brown QC and adjourned by consent because of the appellant’s lack of representation. The judge gave directions as to the service of an affidavit by the appellant which was to provide certain further information. For reasons which are unclear, the judge ordered that the appellant should pay the costs of the hearing, which were summarily assessed at £6,425, but that otherwise costs were reserved. It is not clear, at least from the terms of the order, why the judge ordered the appellant to pay those costs in circumstances where, in the absence of solicitors available to act for him in connection with the contempt applications, an adjournment was inevitable.

   5. The contempt applications came on for hearing for the second time on 17 November 2014, when they were adjourned by consent until 26 January 2015 with further directions given by the judge and costs reserved. It appears that by this time the respondents had allegedly incurred some £31,000 in respect of their costs of the committal applications.

   6. The committal applications came on for the third time on 26 January 2015. Critically, at this stage, the appellant admitted (at paragraphs 23 and 24 of his affidavit dated 14 November 2014, and again at the hearing itself) that paragraphs 4 (d) and (e) of his affidavit dated 8 October 2014 had been in contempt of court because documents had in fact been deleted from 2 memory sticks in March/April and September 2014. (In his affidavit he had stated that the only steps which he had taken in relation to the memory sticks was that he had taken them to his solicitors. In fact, a number of documents had been deleted from the memory sticks.) In the annex to the order made on 26 January 2015 (in which the appellant was represented by counsel) the appellant stated that the reason why he had done so was that he thought they would mislead the court, but that he now knew that it was wrong to have done so. The order also recited that the appellant had agreed to purge his contempt and, importantly, that the respondents had agreed not to proceed with the very many additional allegations as specified in their two committal applications. These amounted to 38 additional allegations of some complexity which the respondents indicated they would not pursue. HHJ Simon Brown QC directed that the question of the appropriate sanction for his contempt should be reserved to himself for determination after the trial of the substantive claim in the action.

   7. In addition, the judge made an order that the appellant should pay the respondents’ costs on the standard basis of the contempt applications, such assessment, if not agreed, being reserved until after the trial of the action. The judge also ordered that the appellant should make a payment on account of the respondents’ costs in the sum of £20,000. It appears that, as at 26 January 2015, the respondents’ costs of the committal application allegedly stood at approximately £69,000 in total. The judge also gave directions for trial. Although made on 26 January 2015, the order bore the date of 13 February 2015.

   8. The sanction hearing for the appellant’s admitted (but purged) contempt for deleting files on two USB memory sticks was originally listed for 23 April 2015 before HHJ Simon Brown QC. At a hearing on that date, the case was adjourned until 15 June 2015 at the Royal Courts of Justice in London because of the sudden death of the appellant’s father the day before and his consequent inability to appear. At the hearing, the judge made an order for delivery up by the appellant of various items of financial information for the purpose of considering his means in relation to any sanction for contempt. The appellant complied with this order and delivered up the relevant documents to the respondents’ solicitors on 2 June 2015. Contrary to the appellant’s own submissions (not repeated by Mr Small), I do not regard it as inappropriate or disproportionate that the respondents requested that information – at least in general terms.

   9. Prior to the adjourned hearing on 15 June 2015, an associate solicitor employed by the respondents’ solicitors’ firm produced a further witness statement dated 12 June 2015, referring to further investigations on behalf of the respondents having been carried out by third-party investigators. These apparently identified concerns as to the level of information provided by the appellant and purported to show that the information which he had provided may not have been complete. In my judgment, whatever the inadequacies of the information which had been provided by the appellant, it is highly doubtful whether the employment of third-party investigators by the respondents could have been justified as proportionate in the circumstances of a case of this sort, where the contempt for which sanctions were going to be ordered was extremely limited, the appellant had already provided evidence to show that he was unemployed and insolvent, and the requirement that a defendant should pay a fine was not, in any event, going to compensate the respondents for any loss which they had suffered as a result of the contempt.

   10. The second hearing of the contempt sanctions took place on 15 June 2015 before HHJ Simon Brown QC. At that hearing the judge ordered that the appellant should pay a fine to the court for his admitted contempt of court in the sum of £2,500, by 15 June 2016. The appellant duly paid that sum on 9 March 2017. The judge also ordered that the appellant should pay the respondents’ costs of the contempt applications in accordance with the order dated 13 February 2015, which he assessed in the sum of £69,933.73. He further ordered that the appellant should pay the respondents’ costs described as “of and occasioned by the hearing on 15 June 2015 to determine sanction” in the sum of £13,650, making a total of £83,583.73. There is no indication in the transcript of the hearing on that date as to why the judge considered that, what he himself referred to as “extremely high costs”, were proportionate or appropriate, or whether they reflected standard costs, in the context of litigation against an apparently insolvent defendant who had admitted his breaches and who had only been penalised (in relation to limited contempts) to pay a fine of a relatively small amount. The only explanation he gave was that:

“this is a case where they [the respondents] have had to deal with Mr Solanki in person throughout, who has contested these matters throughout from the word go until he had to admit his contempt.”

That to my mind is not an adequate summary reflecting the chronology of these proceedings nor amounts to any adequate consideration as to whether, in the event, it was proportionate in a case of this sort for the respondents to have incurred such substantial costs merely in connection with what, in the event, turned out to be limited committal applications. It is to be noted that the respondents’ costs of the substantive trial were some £15,000 less than this figure.

1. Accordingly, I would allow the appellant’s appeal in relation to the judge’s decision summarily to assess the costs of the committal proceedings and his actual summary assessment and the figures which he awarded the respondents. The judge failed adequately to consider whether, as a matter of principle and in the particular circumstances of this case, the considerable alleged expenditure by the respondents in pursuing the committal proceedings was proportionate or justified. Whilst, in light of the appellant’s admission that he had, to a limited extent, been in contempt of court, the judge was entitled to make an order for payment of standard costs against the appellant in relation to the committal proceedings, he was not, in my judgment, by virtue of his summary assessment, entitled to require the appellant to pay the entirety of the respondents’ alleged costs of what appears to have been a wholly disproportionate exercise, without further enquiry into issues such as the level of those costs, whether they were reasonably incurred and their overall proportionality. I also suspect that the judge’s views were coloured by what I regard as his inadequate determination of the substantive merits of the case, to which I have already referred.

2. Accordingly, I would set aside the judge’s summary assessments. I would remit the issue of the assessment of the costs of the committal proceedings to be determined by way of a detailed assessment by the costs judge at the Birmingham Registry. Such detailed assessment should take place after the retrial. Whilst I would leave in place the judge’s order that the appellant should pay the respondents’ reasonable costs of the committal proceedings on the standard basis, the quantum of those costs will have to be determined by the costs judge. He or she will need to consider not only whether, and to what extent, such costs were reasonably incurred, but also whether, in all the circumstances of this case, the incurring of such costs in the context of (effectively) satellite litigation of contempt proceedings against someone who appeared to be an insolvent defendant, was proportionate. He or she will have a wide discretion, therefore, as to whether to disallow all, or any proportion of, the respondents’ incurred costs on the grounds that there was no, or little, utility in their expenditure.”