COST BITES 7: INDEMNITY COSTS WHEN A CLAIMANT HAS TRIED TO HAVE A SECOND BITE OF THE LITIGATION CHERRY

In Tinkler v Esken Ltd (Costs) [2022] EWHC 1802 (Ch) Mr Justice Leech ordered indemnity costs against a claimant who, in essence, attempted to relitigate a case he had lost on previously.

“A principal difference between an order for indemnity costs and an order for standard costs is that CPR Part 44.3(2)(a) does not apply and the Court is not required to disallow costs which are not proportionate. In my judgment, these few examples show that Mr Tinkler’s conduct in bringing a second claim to set aside His Honour Judge Russen QC’s judgment was so lacking in proportionality that it justifies an order for indemnity costs however well it was presented at trial.”

THE CASE

The claimant brought an action seeking to set aside a judgement obtained after an earlier trial.  That action was dismissed. The judge considered the issue of whether indemnity costs should be ordered.

THE JUDGMENT ON INDEMNITY COSTS

III. Standard or Indemnity Costs

1. 1. The parties agreed that Mr Tinkler would pay the costs of the action and that he would make an interim payment on account of costs of £1,689,490. The only outstanding issue on costs at the hearing, therefore, was whether Mr Tinkler should be ordered to pay costs on a standard or indemnity basis. Despite this, the parties spent almost a full day of Court time arguing this question. In my view, parties should be discouraged from spending so much Court time on a costs issue which is essentially a matter of discretion and I will attempt to deal with it as briefly as possible,

1. 1. The Court has a discretion whether to order costs to be assessed on the standard or indemnity basis: see CPR Part 44.2 and 44.3. It is appropriate to order a party to pay indemnity costs where the conduct of the parties or other particular circumstances of the case (or both) is such as to take the situation “out of the norm” in a way which justifies an order for indemnity costs: see Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hamer Aspden & Johnson [2002] CP Rep 67 at [31] (Lord Woolf LCJ) and [39] (Waller LJ).

1. 1. Conduct or circumstances will be “out of the norm” if it is something “outside the ordinary and reasonable conduct of proceedings”: see Esure Services Ltd v Quarcoo [2009] EWCA Civ 595 at [17] and [25] Waller LJ). Authorities on this issue usually turn on their own facts and circumstances and are usually no more than illustrations of the kind or type of case in which an indemnity costs order may or may not be appropriate: see Bishopsgate Contracting Solutions Ltd v O’Sullivan [2021] Costs LR 1357 at [16] Linden J).

1. 1. The principal issue between the parties was whether there is a general practice that a party who makes an allegation of fraud and loses should pay costs on an indemnity basis. Mr Leiper and Mr Isenberg relied on the following authorities in support of this proposition: Clutterbuck and Paton v HSBC plc [2016] 1 Costs LR 13 (David Richards J (as he then was)) in PJSC Aeroflot – Russian Airlines v Leeds [2018] 4 Costs LR 775 Rose J ((as she then was)), Stati v Republic of Kazakhstan [2019] Costs LR 1051 (Jacobs J) and Natixis SA v Marex Financial Ltd [2019] EWHC 3163 (Comm) (Bryan J)

1. 1. Mr Wardell and Mr McWilliams argued that Clutterbuck and Paton v HSBC plc was wrongly decided and that there was no general practice that a party who made allegations of fraud and lost was bound to pay indemnity costs. Mr Wardell pointed out that David Richards J cited no authority for this general principle and neither Excelsior nor Quarcoo was cited to him. Indeed, the only authority to which he referred was the decision of Lightman J in Jarvis plc v PricewaterhouseCoopers [2000] 2 ECLC 368. Mr Leiper provided me with a copy after the hearing and it is clear that it was concerned with the late withdrawal of serious but unjustified allegations (as was Clutterbuck itself).

1. 1. I consider it unnecessary to decide whether Clutterbuck was wrongly decided or whether there is a general practice that a party who alleges fraud and loses should pay costs on an indemnity basis. Mr Leiper did not argue that this was an invariable rule or practice and the difference between the parties was really about my departure point. Mr Leiper argued that I should start my enquiry on the basis that Mr Tinkler should pay indemnity costs and ask myself whether there was anything to displace that view. Mr Wardell submitted that I should start my enquiry on the basis that he should pay standard costs and ask myself whether there was any reason to treat his conduct or the circumstances as “out of the norm”.

1. 1. Mr Tinkler fought the 2018 Claim and lost. The Trial was expedited, the Judge heard it over 11 days and gave a very detailed and fully reasoned judgment in which he made findings both for and against Mr Tinkler. But overall Mr Tinkler lost. He applied for permission to appeal and lost again. In my judgment, that really should have been the end of the matter. However, Mr Tinkler tried again before me.

1. 1. To set aside His Honour Judge Russen QC’s judgment, Mr Tinkler was prepared to make allegations of perjury, deliberate non-disclosure and deliberate destruction of documents against Mr Brady, Mr Ferguson and Mr Soanes and Mr Coombs. As Mr Leiper submitted, they all stood to lose their reputations and face criminal prosecution if he succeeded. Mr Wardell submitted that this would have been an inevitable consequence if Mr Tinkler succeeded. But that did not justify Mr Tinkler making such serious allegations when he lost and he lost on every single one.

1. 1. At the hearing on 29 June 2022 I went out of my way to make it clear that I was not critical of the conduct of Mr Tinkler’s solicitors and counsel. Indeed, I paid tribute to the skill and probity with which Mr Wardell had presented his case. Moreover, Mr Leiper did not submit that the claim was unarguable and should have been struck out and I considered that there was a strong circumstantial case against Mr Brady in relation to the deletion of his WhatsApp messages: see [317]. If I had found against him on this issue, it might have had a profound effect on the outcome.

1. 1. In my judgment, it was out of the norm to bring a second claim and to make allegations of perjury, non-disclosure and deliberate destruction which failed. Moreover, I have reached that conclusion whichever departure point I take. I have, however, considered whether the skill with which Mr Tinkler’s solicitors and counsel conducted the case would justify me making an order for costs on a standard basis only. In my judgment, it remains appropriate to make an order for indemnity costs for the following reasons:

(1) Mr Tinkler made very serious allegations and he lost comprehensively. Although I accept that there were one issue on which he was able to advance a strong circumstantial case and others which I had to consider carefully, there were many other allegations which were both weak and speculative. For instance, by trial Mr Tinkler had little or no basis for pursuing the allegation that Mr Ferguson deliberately deleted emails from his Wilton Park account and he should have withdrawn it: see [386].

(2) Mr Tinkler withdrew the allegation of dishonesty against Mr Coombs at trial without apology or explanation and this allegation should never have been made. He also withdrew the allegation that Mr Brady deliberately suppressed the Briefing Note at the start of the trial. It is clear that the original allegation was based on a misunderstanding about its date of creation and, again, this allegation should never have been made either.

(2) Most of the new documents upon which Mr Tinkler relied in this action were peripheral and had little probative value. As I have made clear in refusing permission to appeal, Mr Tinkler was in substance using them as an excuse to relitigate the same issues on the same evidence. It is also clear from the Grounds of Appeal that even now he is not prepared to accept the decision of His Honour Judge Russen QC or, indeed, my own decision in relation to any of these same issues.

(3) A principal difference between an order for indemnity costs and an order for standard costs is that CPR Part 44.3(2)(a) does not apply and the Court is not required to disallow costs which are not proportionate. In my judgment, these few examples show that Mr Tinkler’s conduct in bringing a second claim to set aside His Honour Judge Russen QC’s judgment was so lacking in proportionality that it justifies an order for indemnity costs however well it was presented at trial.

INTEREST ON COSTS

1. 1. Under cover of a letter dated 23 June 2022 Rosenblatt sent a revised draft Order to Clyde & Co. The draft Order contained the following terms:

“1. The Claim is dismissed.

2. The Claimant shall pay the Defendant’s costs of the Claim, such costs to be subject to detailed assessment on the [indemnity] basis if not agreed.

3. The Claimant shall pay the Defendant the sum of £1,689,490 on account of its costs of the Claim by 14 July 2022.

4. The Claimant shall pay interest on all costs incurred by the Defendant at the rate of: a. 2% per annum above the Bank of England base rate prevailing from time to time from the dates of payment by the Claimant until 29 June 2022; b. 8% per annum from 29 June 2022 until the date of payment by the Defendant.”

1. 1. By letter dated 27 June 2022 Clyde & Co replied stating: “We agree the draft wording of the Order attached to your letter dated 23 June 2022.” It is clear from their Skeleton Argument that Mr Leiper and Mr Isenberg considered the issue of interest and costs to be agreed but in their Skeleton Argument Mr Wardell and Mr Isenberg sought to argue that the Court should award interest at 1% above the Bank of England base rate and that interest on costs should only be payable from 29 September 2022.

1. 1. In my judgment, there was agreement between the parties about the rate of interest and the dates from which it should be payable and it is not open to Mr Tinkler to argue the contrary now. Mr Wardell suggested that Clyde & Co had made a mistake. But he did not seek to persuade me that the agreement between the parties was not binding. Moreover, he did not put any evidence before the Court to explain how the mistake was made or why the Court should not give effect to the agreement.

1. In my judgment, it is appropriate to give effect to the parties’ agreement. I am satisfied that there was a binding agreement between the parties as to the terms of the Order with the exception of the basis of assessment (which explains why the word “indemnity” was in square brackets). But even if it did not take effect as a contract, I am satisfied that I should give effect to the agreement as a matter of case management. The Order which SGL sought and to which Mr Tinkler agreed was not unusual and CPR Part 1.3 provides that the parties owe a duty to help the Court to further the overriding objective. This requires parties to assist the Court by agreeing consequential matters wherever they can and not to be permitted to re-open issues without a good reason.