Kerry Underwood

INDEMNITY COSTS

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There have been three recent Court of Appeal decisions involving indemnity costs.

 

Guidance

In Whaleys (Bradford) Ltd v Bennett& Anor [2017] EWCA Civ 2143 (15 December 2017) 

the Court of Appeal gave guidance in relation to the correct test when considering indemnity costs.

 

This was not in the context of Part 36.

 

Here the Defendants had been avoiding enforcement action in relation to a judgment debt and the judge awarded costs to the Claimants for three scheduled oral examination hearings, but only on the standard basis.

 

The Court of Appeal held that the conduct of the Defendants warranted indemnity costs.

 

Despite having the means to pay, they deliberately sought to avoid payment and were arrogant and disobedient towards court orders and evaded service of the order for oral examination.

 

They failed to comply with orders for rearranged hearings and were uncooperative.

 

All of this put the Claimants to unnecessary and considerable trouble and expense.

 

The judge had used the word “exceptional” instead of the phrase “out of the norm” when considering the application and the Court of Appeal said that “exceptional” suggests a stricter test and is best avoided and judges should use the test of whether conduct is “out of the norm” as previously established by the Court of Appeal in

 

 

Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson (a firm) [2002] EWCA Civ 879.

 

 

This had been further explained by the Court of Appeal in

 

 

Esure Services Ltd v Quarcoo [2009] EWCA Civ 595

 

 

where the Court of Appeal said that a court can take account of conduct, whether it occurred frequently or was rare, and the word “norm” was not intended to reflect whether what occurred was something that happened often, so that it could be described as “normal”, but rather “something outside the ordinary and reasonable conduct of proceedings”.

 

Thus even ordinary conduct could be unreasonable and therefore render the party guilty of such conduct liable to an indemnity costs order against it.

 

Here the judge’s failure to award indemnity costs on the basis that debtors often avoid paying debts, and that he had seen more sophisticated attempts to avoid judgments, was an error of law justifying the Court of Appeal  overturning the decision.

 

This was a fixed costs case under CPR 45.8 which lays down fixed costs for enforcement.

 

Here the Trial Judge had allowed standard costs rather than fixed costs, and as we have seen the Court of Appeal substituted an order for indemnity costs.

 

The principles are the same in relation to fixed costs cases generally under CPR 45, including low value personal injury cases.

 

 

Indemnity Costs Ordered Against Home Secretary 

In Secretary of State for the Home Department v Barry [2018] EWCA Civ 790

the Court of Appeal was hearing a second-tier appeal by the Home Secretary against a decision of the Upper Tribunal (Immigration and Asylum Chamber).

The Home Secretary claimed that there had been a systemic failure by the Tribunals properly to apply the law, but that allegation was abandoned at the appeal, which failed, and the Court of Appeal then considered the issue of costs.

The Court of Appeal referred to the conduct of the Home Secretary as “troubling” (paragraph 31).

Here the Secretary of State had made what the Court of Appeal described as “an unusual allegation and a serious one” and said that that was clearly the basis on which the Single Judge of the Court of Appeal granted permission to appeal.

Having obtained that permission the Home Secretary failed either to make the sufficient good with evidence or to pursue the argument, but rather abandoned it “without even explaining why”.

The Court of Appeal found the Home Secretary’s conduct “unreasonable to a high degree”.

Consequently the Court of Appeal ordered the Home Secretary to pay costs on the indemnity basis, due to her unreasonable conduct.

 

Lawyers ordered to pay Indemnity Costs of Assessment

In GSD Law Ltd v Wardman & Ors [2017] EWCA Civ 2144

the Court of Appeal upheld a District Judge’s order in detailed assessment proceedings under CPR 44.11 whereby the judge had disallowed all costs claimed by the Claimant because of misconduct by their lawyers and ordered those lawyers, GSD Law Limited, to pay all of the costs of the assessment on the indemnity basis.

 

The court exercised its power under CPR 44.11 and rejected the solicitors’ argument that that was a summery jurisdiction akin to the wasted costs jurisdiction and therefore not suitable where there were detailed allegations of dishonest conduct.

 

GSD’s admitted conduct included forging a Conditional Fee Agreement. Other conduct including claiming for work which was not done and deliberately falsifying the status of the fee earner who had carried out work and claiming at a higher hourly rate than in the solicitor and own client retainer.

 

The Court of Appeal held that the guidance in relation to wasted costs matters was not relevant in relation to CPR 44.11.

 

For applications under CPR 44.11, the court should bear in mind the overriding objective and, particularly, proportionality.

 

It was possible to deal with applications under CPR 44.11 in the course of a pending assessment and conduct alleged as justifying the disallowance of costs may also be relevant as to how costs of the detailed assessment proceedings should be assessed.

 

In contrast a wasted costs application was a free standing one usually made when the litigation was over.

 

It was easier to determine unreasonable or improper conduct in relation to assessment proceedings than in relation to substantive proceedings.

 

Furthermore, unlike wasted costs applications, no issues of privilege could arise and there was no need for any investigation into the merits of the substantive claim.

 

There was a strong public interest in ensuring that solicitors did not dishonestly certify costs figures.

 

Given the seriousness of the allegations and the money at stake, it was not disproportionate to have held a three day hearing.

 

It was also important that the profession and parties generally maintained faith in the integrity of the costs negotiation system, as otherwise all matters would end up at detailed assessment.

 

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Written by kerryunderwood

May 11, 2018 at 8:19 am

Posted in Uncategorized

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