INDEMNITY COSTS AFTER A JUDGMENT DEBTOR WAS EXAMINED: IN ADDITION THERE IS GOING TO BE A SECOND MATCH…

In Shearer v Neal [2020] EWHC 3148 (QB) Deputy Master Hill QC ordered that a debtor pay costs on the indemnity basis after she heard a Part 71 hearing. The case was also remitted to the High Court Judge on the grounds that the debtor was in breach.

 

THE CASE

The judgment debtor owed the claimant £232,262.00. On the 9th July 2018 he indicated “ “...[t]he  threat of a judgment is futile as you are fully aware I’m non resident UK and have no UK assets“.  The claimant applied for an order that the debtor be examined under CPR Part 71. There were major difficulties in getting a date for the debtor to attend.  The Deputy Master felt that the debtor had not complied fully with the obligations to disclose.

THE JUDGMENT

 

    1. To the extent that it provides any assistance to the High Court judge I can indicate that my assessment of Mr Neal’s evidence and the manner in which he gave it was much closer to the characterisation offered by the judgment creditor’s counsel than by his own (see the differing descriptions at paragraphs 25 and 29 above). I note in particular that the assertions made on his behalf in his solicitor’s letter of 8th June 2020 can only be interpreted in one way – that he was in Spain at the time of the injury – and he later indicated that this was not correct. If I have understood matters correctly, it appears that this indication was only given after surveillance evidence appeared to show him in the UK on 26th June 2020 and 6th July 2020. I also noted that the evidence he gave as to having a bank in Dubai, provided in a formal witness statement supported by a statement of truth on 7th September 2020, was later entirely resiled from. These two factors, and his demeanour generally, adversely impacted on my assessment of his credibility.
    2. I therefore intend to refer the case to a High Court judge under CPR 71.8(1)(c), certifying that Mr Neal was in breach by failing to provide the requisite statements from his Spanish and English bank accounts and the complete copy of the undated Sub-distribution Agreement between him and Bluefin.
Costs
(a) The parties’ submissions
    1. Counsel for the judgment creditor argued that he should be awarded his costs of the examination, in the sum of £55,843, on an indemnity basis. It was argued that all of these costs were reasonably incurred and reasonable in amount.
    2. Counsel for Mr Neal referred me to CPR 45.8 and the very modest fixed costs regime which can apply when a CPR 71 examination occurs before a court officer and not a judge. He argued that this is a good indication of the level of costs envisaged in CPR 71 examinations. He relied on the principles set out in the first Deutsche Bank case to the effect that that a CPR 71 examination is intended to be a summary and straightforward process and noted that the underlying sum in issue in this case is “not large” by the standards of the Commercial Court. He questioned different items of the judgment creditor’s legal team’s work (in particular the reliance on Grade A and B fee earners and leading counsel) and argued that the figure of over £50,000 in costs claimed by the judgment creditor was, overall, “astonishing“.
(b) Entitlement to costs and basis of assessment
    1. I agree that the CPR 71 process is intended to be a summary and straightforward process. However, the general costs provisions under CPR 44 apply. I consider that the judgment creditor is entitled to his costs of the examination process.
    2. An award of costs on an indemnity basis can only be made where there has been “some conduct or some circumstance which takes the case out of the norm” (Lord Woolf CJ in Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson (A Firm) [2002] EWCA Civ 879 at [19]).
    3. Applying that test, I consider that the following conduct by Mr Neal and/or consequential circumstances in the case merit an award of indemnity costs:
(i) It is now clear that the second adjournment decision was taken on the basis of an incorrect factual scenario placed before the court by those acting for Mr Neal, no doubt on his instructions. Had it been appreciated by the Court that he was in fact in the UK the second adjournment may not have been granted and the examination might have proceeded on that occasion.
(ii) The third adjournment was necessitated in large part by the fact that documentation was not available to the judgment creditor or the court when Mr Neal and his then solicitors had had many months to prepare.
(iii) The need for further submissions since the examination has arisen due to concerns that Mr Neal has still not been sufficiently forthcoming with information about his means, at least some of which concerns are merited.
(c) Method of assessment
    1. I consider that the costs should be summarily assessed: while this case has had a complex procedural history it has resulted in one short hearing and one half a day hearing. It is therefore analogous to the examples of where summary assessment is appropriate given in PD 44, para 9.2(b). The last hearing before me may well “dispose of” the examination element of the CPR 71 proceedings and so I consider it appropriate to “deal with the costs of the whole claim” within PD 44, para 9.2(b).
(d) The amount of costs
    1. When assessing costs on an indemnity basis, under CPR 44.4(1)(b) regard must be had to “all the circumstances” in deciding whether costs were unreasonably incurred or unreasonable in amount.
    2. CPR 44.3 sets out a series of other factors to which the court should have regard, namely
(a) the conduct of all the parties, including in particular –

(i) conduct before, as well as during, the proceedings; and

(ii) the efforts made, if any, before and during the proceedings in order to try to resolve the dispute;

(b) the amount or value of any money or property involved;
(c) the importance of the matter to all the parties;
(d) the particular complexity of the matter or the difficulty or novelty of the questions raised;
(e) the skill, effort, specialised knowledge and responsibility involved;
(f) the time spent on the case;
(g) the place where and the circumstances in which work or any part of it was done; and
(h) the receiving party’s last approved or agreed budget.
  1. Of those factors, I consider the following relevant here: (i) Mr Neal’s conduct, which has led to much additional work (see paragraph 40 above); and (ii) the complexity of Mr Neal’s business arrangements and the need for some specialised knowledge to understand those arrangements, analyse the evidence and identify what was still allegedly missing.
  2. Here, I had doubts about some elements of the costs incurred in the reliance on Grade A and B fee earners and on leading counsel. However in accordance with CPR 44.3(3) I resolve those doubts in favour of the judgment creditor as the receiving party. On that basis I consider that the order for costs in the judgment creditor’s favour should be for the £55,843 claimed.