Carmela De Sena v Joseph Notaro
| Jurisdiction | England & Wales |
| Judge | Paul Matthews |
| Judgment Date | 01 June 2020 |
| Neutral Citation | [2020] EWHC 1366 (Ch) |
| Docket Number | Case No: D30BS912 |
| Date | 01 June 2020 |
| Court | Chancery Division |
[2020] EWHC 1366 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BRISTOL DISTRICT REGISTRY
Bristol Civil Justice Centre
2 Redcliff Street, Bristol, BS1 6GR
HHJ Paul Matthews
(sitting as a Judge of the High Court)
Case No: D30BS912
John Blackmore (instructed by Tozers LLP) for the Claimants
Dov Ohrenstein (instructed by Ashfords LLP) for the First and Second Defendants
Clare Dixon and Hannah Daly (instructed by Kennedys Law LLP) for the Third Defendant
Imran Benson (instructed by DAC Beachcroft LLP) for the Fourth Defendant
Consequential matters dealt with on paper
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
INTRODUCTION
On 1 May 2020 I handed down judgment after the trial of this claim, dismissing the claimant's claims in their entirety. In view of the coronavirus pandemic, I invited written submissions on consequential matters. The first round of such submissions was lodged on or before 12 May 2020, and submissions in reply were lodged on or before 21 May 2020, with one final short submission (for which in fact I had not given permission) lodged by the first and second defendants on 22 May 2020, and a short submission in reply to this (to which the same point applies) by the claimants on 27 May 2020. I have taken them all into account.
The claimants accept that costs should follow the event, and that they should be ordered to pay the defendants' costs (with one exception), and on the standard basis. They also accept that the defendants are entitled to reasonable payments on account pending detailed assessment of their costs. The one exception is that the claimants say that they should not have to pay the costs of and associated with the expert evidence put forward on behalf of the third defendant by Mr Plaha and Mr Pooler, because I held that this evidence was inadmissible, the witnesses not having sufficient expertise in the subject matter, as well as the fact that most of the evidence was directed to matters of fact or law which were for the court rather than the witnesses. I will return to this.
The claimants accept that they should pay interest on the costs awards to the first and second defendants, but at the rate of 1% above base rate from the date of payment of their solicitors' invoices. They do not accept that they should pay interest on the costs awards to the third and fourth defendants, because these costs have been paid by those defendants' insurers. As to the payments on account of costs, the claimants offer 50% of the first and second defendants' and (it would seem) fourth defendant's prebudget costs and 80% of their budgeted costs. It is not clear what the claimants are offering in relation to the third defendant, as they take issue with the claim to a payment on account as being in excess of its budgeted costs. Finally, the claimants seek 28 days from the date of the order in which to pay the sums ordered. It appears that they have ‘after the event’ insurance to cover their adverse costs exposure, and need time for their application for payment to be processed and drawn down.
The defendants however all seek an order that costs be paid to them on the indemnity basis. They also seek pre-judgment interest on costs from the dates on which they paid their costs at 2% over base rate. The first and second defendants and the fourth defendant seek a payment on account of 70% of their prebudget costs and 90% of their budgeted costs. The third defendant seeks a payment on account based on a starting point of its actual costs (rather than budgeted costs) on the basis that an award of indemnity costs means that the budget can be exceeded. The first and second defendants and the fourth defendant seek an order that the payments on account be paid within 14 days of the court's order. So far as I can see, the third defendant makes no express submission about the timing of the payment.
COSTS GENERALLY
In line with the submissions of the parties, I will order the claimants jointly and severally to pay the defendants' several costs. As is well-known, costs are in the discretion of the court ( CPR rule 44.2(1)), but, if the court decides to make an order, then CPR rule 44.2(2)(a) provides that
“the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party”.
In my judgment it is appropriate to make a costs order in the present case. There can be no doubt that the defendants are the successful parties, and the claimants the unsuccessful. Subject to the point immediately following, there is no reason not to apply the general rule.
Inadmissible opinion evidence
So far as concerns the question of the costs of the expert evidence of Mr Plaha and Mr Pooler, in my judgment I said this:
“163. Overall, therefore, in relation to the evidence on accountants' liability, I have disregarded both sides' reports. I deprecate the (undoubtedly significant) expense which has been wasted on this aspect of the case, but it behoves the parties and their lawyers, when permission is given for such evidence to be obtained and adduced, in implementing that permission to pay close attention to the rules regarding the admissibility of expert evidence. Permission to adduce expert evidence on a topic by calling an accountant (or anyone else), is not a licence to ignore the rules as to what expert evidence is, and who can give it, or the conditions under which it is admissible in legal proceedings.”
The claimants invite me expressly to disallow the costs (which I understand to be significant) of providing this inadmissible evidence, rather than leaving the issue to a detailed assessment. The basis for my disallowing them is argued to be that the costs were not reasonably incurred. Whether costs are assessed on the indemnity or the standard basis, “costs which have been unreasonably incurred” will not be allowed: CPR rule 44.3(1). In response to this, the third defendant points out (correctly) that the terms in which permission to adduce “expert evidence from an accountant” were given referred to “the issue of scope and breach of duty so far as the claimant's case against the Third and Fourth Defendants is concerned…” It is also said, again correctly, that though Mr Plaha did not have direct experience of demerger transactions, he did have the experience of acting as an expert in a professional negligence claim arising out of the demerger of a solicitor's practice. Finally, the two partners at the third defendant who were involved in the demerger had different specialisms, but the third defendant only had permission for one liability expert. The third defendant submits that it “needed to strike a balance to ensure its expert was able to comment on the areas of expertise of these two partners and form an opinion of each of their actions”.
Having considered these points, I have concluded that the costs of providing this evidence were not reasonably incurred, and therefore should be disallowed at this stage. A reference to the ‘scope and breach of duty’ in the order giving permission does not, as I said in my judgment, turn that which is inadmissible opinion evidence into admissible expert evidence. Nor is Mr Plaha's single experience of acting as an expert in a professional negligence action about a solicitors' practice demerger sufficient to make him an expert in corporate demergers. (And, in any case, most of the evidence proffered was still inadmissible.) I accept that, where there are multiple specialisms to be covered in a claim of this kind, it becomes difficult to find a single person with the expertise in all the specialisms concerned. But in my judgment that goes to the question how many experts are needed. If a clinical negligence case involves allegations against both a gynaecologist and an intensivist, you probably need two experts, not one.
BASIS OF ASSESSMENT
Next I will deal with the basis of assessment of costs. In Hosking v APAX Partners LLP [2019] 1 WLR 3347, [37]–[42], after the claimants discontinued their claim, based on allegations of commercial impropriety, the defendant sought costs on the indemnity basis because (they said) the claim was hopeless. So far as is most relevant to this case, the judge said this:
“37. The standard basis of costs is, as its description denotes, the norm. Only if the case is ‘out of the norm’ may the indemnity basis be justified.
[…]
39. … Morgan J [in Digicel (St Lucia) Ltd v Cable and Wireless plc [2010] 5 Costs LR 709, [9]] asked whether the ‘conduct of the paying party was at a sufficiently high level of unreasonableness or inappropriateness to make it appropriate to order indemnity costs’.
40. More recently, the Court of Appeal said the following on the subject in Excalibur Ventures LLC v Texas Keystone Inc (No 2) [2017] 1 WLR 2221, para 21:
“… To award costs on an indemnity scale is a departure from the norm and one therefore looks for something, whether it be the conduct of the relevant party or parties, or the circumstances of the case, which takes the case outside the norm …”
41. In the passage from her judgment in Euroption Strategic Fund Ltd v Skandinaviska Enskilda Banken AB [2012] EWHC 749 (Comm) … Gloster J said the following:
“… Fourth, to demonstrate that a case has gone outside the norm of behaviour, it is not necessary to show that the paying party's...
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Paul and Teresa Rodrigues v Clearwater Development Ltd
...or otherwise of the refusal to accept the offer.” Law on Indemnity Costs 25 The case of De Sena and another v Notaro and others [2020] EWHC 1366 (Ch) cited various authorities indicating when the Court might award indemnity costs. The Court referred to the Court of Appeal case of Lejonvarn......