Kerry Underwood

INDEMNITY COSTS ORDERED ON LATE DISCONTINUANCE

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In PJSC Aeroflot – Russian Airlines v Leeds and another (Trustees of the estate of Berezovsky) and others [2018] EWHC 1735 (Ch) (6 July 2018) (Rose J).

the High Court ordered the claimant to pay the defendants’ costs on an indemnity basis, following its application to discontinue the claim shortly before trial.

The defendants applied for an order that the claimant pay their costs on an indemnity basis following its discontinuance of the claim, without explanation, shortly before trial.

The Court considered that where a claimant made serious allegations of fraud, conspiracy and dishonesty as here, and then abandoned those allegations, an order for indemnity costs was likely to be the just result, unless the claimant could explain why it had decided those allegations were bound to fail.

This was on the basis that such conduct deprived the defendant of any opportunity to vindicate its reputation.

 

It followed the approach in

 

Clutterbuck and another v HSBC plc and others [2015] EWHC 3233 (Ch),

 

In the alternative, the court considered that circumstances “out of the norm” justified indemnity costs and took into account factors including, inaccurate statements made by the claimants during interlocutory proceedings and the aggressive stance adopted by the claimants during the litigation.

In particular, the judge criticised correspondence from the claimant’s solicitors following the death of the second defendant as “losing sight of any basic standard of decent and compassionate behaviour.”

The judge’s comments on the effect of the defendants’ refusal to mediate are also worth noting.

She did not consider it appropriate to take this into account when assessing costs, because she stated that where allegations of fraud and serious wrongdoing were made, proceedings were intrinsically unsuitable for mediation.

In her view, this would be penalising the defendants for insisting on their right to have their reputations vindicated through the trial process.

Her experience in case managing this case meant that she was satisfied that there was no possibility of the parties making progress through alternative dispute resolution.

She did not consider that they would have been able to agree a mediator.

Given the general trend towards encouraging parties to mediate and the mechanisms which can be used to deal with deadlock over choosing a mediator, it may be risky to rely, in insolation, on an argument that the parties would have been unable to agree a mediator as good reason for refusing to mediate.

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Written by kerryunderwood

July 26, 2018 at 9:24 am

Posted in Uncategorized

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