INDEMNITY COSTS DO NOT AMOUNT TO A BLANK CHEQUE: EVEN IN LARGE CASES

In Louis Dreyfus Company Suisse S.A. v International Bank of St. Petersburg (Joint-Stock Company) [2021] EWHC 1039 (Comm) Mr Justice Calver reduced a claim for costs substantially, even though costs were being awarded on the indemnity basis.

 

“it may be entirely reasonable from the point of view of a party incurring costs to spare no expense that might possibly help to influence the result of the proceedings. It does not follow, however, that such expense should be regarded as reasonably or proportionately incurred or reasonable and proportionate in amount when it comes to determining what costs are recoverable from the other party. What is reasonable and proportionate in that context must be judged objectively.”

THE CASE

The judge made an anti-suit injunction against the defendant.   Thereafter the costs were considered.   The judge held that costs should be awarded on an indemnity basis but that the costs claimed were too high and reduced them by almost a third.

THE JUDGMENT ON COSTS

Costs sought in paras 7-9 of the draft Order
    1. Finally, the Claimant seeks its costs of these ASI proceedings on the indemnity basis reflecting the “usual practice” where contractual ASI relief is granted by the Commercial Court: see RiverRock (final judgment) at [11].[5]
    1. The Claimant’s Schedule of Costs has been provided to the court. The total amount claimed of £292,066 is surprisingly large, despite the fact that there have been three unopposed hearings.
    1. CPR 44.3 and 44.4 provide that where costs are to be assessed on an indemnity basis, the court (1) will not allow costs which have been unreasonably incurred or are unreasonable in amount; (2) will have regard to all the circumstances in deciding whether costs were unreasonably incurred or unreasonable in amount; and (3) will resolve any doubt which it may have as to whether costs were unreasonably incurred or were unreasonable in amount in favour of the receiving party (“the receiving party presumption“).
    1. Whilst there was the need for some Russian law advice on RiverRock issues, this was a relatively straightforward application. A sum of £292,066 appears to me to be excessive in amount for such an application. The three hearings were uncontested and relatively short and straightforward. On a taxation I am sure that the costs would be heavily taxed down, even after the application of the receiving party presumption.
    1. I bear in mind the words of Leggatt J (as he was) in Kazakhstan Kagazy plc v Zhunus [2015] EWHC 404 (Comm) at [13]:
In a case where very large amounts of money are at stake [or I would add, important points of principle], it may be entirely reasonable from the point of view of a party incurring costs to spare no expense that might possibly help to influence the result of the proceedings. It does not follow, however, that such expense should be regarded as reasonably or proportionately incurred or reasonable and proportionate in amount when it comes to determining what costs are recoverable from the other party. What is reasonable and proportionate in that context must be judged objectively. The touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances. Expenditure over and above this level should be for a party’s own account and not recoverable from the other party. This approach is first of all fair. It is fair to distinguish between, on the one hand, costs which are reasonably attributable to the other party’s conduct in bringing or contesting the proceeding or otherwise causing costs to be incurred and, on the other hand, costs which are attributable to a party’s own choice about how best to advance its interests. There are also good policy reasons for drawing this distinction, which include discouraging waste and seeking to deter the escalation of costs for the overall benefit for litigants.
    1. It is of course the entitlement of the Claimant (and any Claimant) to appoint Counsel of its choice and here to appoint leading counsel, Mr. Houseman QC, who has conducted and presented the case throughout with his customary skill, rather than instructing him with junior counsel and allowing the bulk of the work to be carried out by junior counsel. However, that does not mean that the Claimant should be entitled to recover from the Defendant, even on an indemnity basis, costs which are significantly greater in amount than it might otherwise reasonably have incurred, whilst still having its case conducted and presented proficiently.
  1. In all the circumstances, I consider that the appropriate sum to award on an indemnity basis is £200,000.