Richmond Pharmacology Ltd v Chester Overseas Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Stephen Jourdan |
| Judgment Date | 10 November 2014 |
| Neutral Citation | [2014] EWHC 3418 (Ch) |
| Docket Number | CLAIM NO HC12FO4579 |
| Court | Chancery Division |
| Date | 10 November 2014 |
[2014] EWHC 3418 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Rolls Building, Fetter Lane
London EC4A 1NL
Stephen Jourdan QC
SITTING AS A DEPUTY HIGH COURT JUDGE
CLAIM NO HC12FO4579
Robert Deacon and Shawna Pasquale (instructed by EMW LLP) for the Claimant
Brian Doctor Q.C. and Giles Robertson (instructed by Berwin Leighton Paisner LLP) for the Defendants
Hearing date: 1 August 2014
Stephen Jourdan QC sitting as a deputy High Court judge
Introduction
On 1 August 2014 I handed down my written judgment in this claim, and heard submissions on costs. For reasons I gave in an extempore judgment delivered on 1 August 2014, I ordered the Claimant to pay the Defendants' costs of the claim, and it was agreed that a payment on account of those costs should be ordered. I then heard an application by the Defendants that those costs should be assessed on the indemnity basis. This application was very well argued on both sides, and I reserved judgment. This is my judgment on that issue. I will use the same abbreviations as in my main judgment.
The applicable principles
There are two differences between assessment of costs on the standard and on the indemnity basis in a case such as this, commenced before 1 April 2013:
(a) On the standard basis, the court will only allow costs which are proportionate to the matters in issue. On the indemnity basis, there is no such restriction, and so costs may be allowed even though they were disproportionate to the matters in issue.
(b) On the standard basis, the court will resolve any doubt which it may have as to whether costs were reasonably incurred or reasonable and proportionate in amount in favour of the paying party. On the indemnity basis, any doubts which the court may have as to whether costs were reasonably incurred or were reasonable in amount will be resolved in favour of the receiving party.
The Civil Procedure Rules themselves do not contain any guidance as to the basis on which the Court should direct assessment. However, there are many cases in which the Courts have considered that issue. I was referred to the principles set out in the judgment of Tomlinson J in Three Rivers District Council v Bank of England [2006] 5 Costs LR 714 at 731, and in the judgment of Sir Anthony Colman in National Westminster Bank Plc v Rabobank Nederland [2008] 3 CLR 396 at [28]. I have also considered the subsequent summaries of the applicable principles by Morgan J in Digicel (St Lucia) Ltd v Cable & Wireless plc [2010] EWHC 888 (Ch), [2010] 5 Costs L.R. 709, Gloster J in Euroption Strategic Fund Limited v Skandinaviska Enskilda Banken AB [2012] EWHC 749 (Comm) at [8]–[15], and Coulson J in Elvanite Full Circle Ltd v AMEC Earth & Environmental (UK) Ltd [2013] EWHC 1643 (TCC) at [16] as amplified by Akenhead J in Courtwell Properties Ltd v Greencore PF (UK) Ltd [2014] EWHC 184 (TCC), [2014] 2 Costs L.O. 289 at [22]–[23].
I consider that the applicable principles, in a case where indemnity costs are claimed on the ground that the paying party's conduct was unreasonable, so far as relevant to this claim, are as follows:
(a) As the very word 'standard' implies, the standard basis will be the normal basis of assessment where the circumstances do not justify an award on an indemnity basis. For there to be an order for assessment on the indemnity basis, there must be some conduct or some circumstance which takes the case out of the norm. That is the critical requirement.
(b) Dishonesty or moral blame does not have to be established to justify indemnity costs. But indemnity costs are appropriate only where the conduct of the paying party was unreasonable to a high degree. "Unreasonable" in this context does not mean merely wrong or misguided in hindsight.
(c) The court must therefore decide whether there is something in the conduct of the action, or the circumstances of the case in general, which takes it out of the norm in a way which justifies an order for indemnity costs.
(d) The discretion to award indemnity costs is a wide one and must be exercised taking into account all the circumstances and considering the matters complained of in the context of the overall litigation. Cases vary very considerably and each case is highly fact-dependent.
(e) It is important not to lose sight of the essential requirement of unreasonable or inappropriate conduct overall and not to treat examples of such which may amount to such conduct as necessarily constituting it. The essential question is whether the relevant conduct makes it just as between the parties to remove from the paying party the twofold benefit of an order on the standard basis, as compared with an order on the indemnity basis, that is to say, to enable the receiving party to recover its costs, reasonably incurred and reasonable in amount, with the benefit of the doubt being given to the receiving party and without the receiving party having to address (and persuade the court upon) the subject of proportionality.
(f) The pursuit of a weak claim will not usually, on its own, justify an order for indemnity costs, provided that the claim was at least arguable. However, the pursuit of a hopeless claim (or a claim which the party pursuing it should have realised was hopeless) may lead to such an order. In Wates Construction Ltd v HGPGreentree Alchurch Evans Ltd [2006] BLR 45 at [27] HHJ Coulson QC said: "I consider that to maintain a claim that you know, or ought to know, is doomed to fail on the facts and on the law, is conduct that is so unreasonable as to justify an order for indemnity costs."
(g) If a claimant casts its claim disproportionately wide, and requires the defendant to meet such a claim, there may be no injustice in denying the claimant the benefit of an assessment on a proportionate basis or in the claimant forfeiting its normal right to the benefit of the doubt on reasonableness.
(h) The making of a grossly exaggerated claim may be a ground for indemnity costs.
(i) The rejection of reasonable attempts to settle will not normally, by itself, justify an award of indemnity costs. In Kiam v MGN Ltd (No. 2) [2002] EWCA Civ 66, [2002] 1 WLR 2810 at [13], Simon Brown LJ said: "… it will be a rare case indeed where the refusal of a settlement offer will attract under Part 44 not merely an adverse order for costs, but an order on an indemnity rather than standard basis." However, if coupled with other factors, it may do so: for an example see Barr v Biffa Waste Services Ltd (Costs) [2011] EWHC 1107 (TCC); 137 Con. L.R. 268 (Coulson J).
Mr Doctor argued that there is no requirement that the conduct of the paying party was unreasonable to a high degree; all that is necessary is that the conduct is enough to take the case out of the norm. I do not think that is right. I think it is clear from the authorities referred to above that, for the paying party's conduct to be unreasonable enough to take the case out of the norm, it must be unreasonable to a high degree. I think that the reason for that is that there needs to very strong grounds for depriving the paying party of the twofold benefits of an assessment on the standard basis. Proportionality is an important safeguard; as Lewison J said in Easyair Ltd (t/a Openair) v Opal Telecom Ltd [2009] EWHC 779 (Ch) [2009] 6 Costs L.R. 882 at [7], in refusing to order indemnity costs: "… the requirement of proportionality is a useful brake on the escalation of costs." The direction that doubts as to reasonableness should be resolved in the paying party's favour which applies where costs are assessed on the standard basis is inherently fair, as the receiving party is going to be much better placed than the paying party to enable the court to resolve such doubts.
The grounds on which the Defendants seek indemnity costs
The Defendants contend that this claim had the requisite significant level of unreasonableness, for essentially three reasons.
First, it was bound to fail. Mr Doctor argued that, on the major factual issues of importance, Richmond's case was not merely weak, but simply unsustainable even on its own evidence.
Second, it was pursued irrespective of the facts and what the Defendants said or did. When the allegations of loss caused by disclosure of confidential information were first made, the Defendants explained what had happened. Richmond did not accept the explanation, and simply pursued the claim to trial without any reasonable foundation. They pursued the claim despite disclosure which showed that the Defendants' account of what had happened was accurate, and despite the making of a reasonable offer of settlement.
Third, it was pursued in an unreasonable way. Four specific examples of unreasonableness were relied on by Mr Doctor:
(a) The Defendants wished to serve an Amended Defence and first sent it to Richmond on 29 August 2013. The Defendants had to chase for a response five times before finally getting agreement to the amendment.
(b) Richmond failed to review the disclosure documents requiring the Defendants to answer queries that could have been answered by reading the documents themselves.
(c) Richmond forced the Defendants to issue two applications to obtain copies of documents that should have been disclosed and were referred to in Richmond's expert report and witness statements. To avoid a costs only hearing, the parties agreed that the costs of these two applications would be costs in the case.
(d) The Defendants' solicitors had to manage the whole trial bundle process with limited input from EMW and were only reimbursed for a small proportion of the copying costs and EMW sent through a further bundle update containing a one-sided run of correspondence from the unfair prejudice...
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