Catalyst Investment Group & Ors v Lewinsohn & Ors

An indemnity costs order is exceptional. The normal basis is standard costs, and the question is whether the conduct of the action or the circumstances of the case take it outside the norm. Indemnity costs are compensatory rather than penal and do not require dishonesty or moral condemnation. A payment on account may be ordered under Civil Procedure Rules 1998, rule 44.3(8), where the court is satisfied that the receiving party is entitled to costs and can estimate an amount likely to be recovered. Capitulation, abandoned points, excessive evidence and poor bundles do not necessarily justify indemnity costs, particularly where those features are common in litigation.

The judgment determined costs applications arising from three sets of proceedings after the court had dismissed Part 11 applications challenging jurisdiction in the Main Judgment, [2009] EWHC 1964 (Ch). ARM and Catalyst had brought declaratory proceedings responding to fraud proceedings commenced in Utah. The Utah proceedings were later dismissed, and the defendants admitted liability for the declarations sought in England. Catalyst also sought costs arising from unsuccessful jurisdiction applications in the continuing Noteholder Proceedings.

The issues were whether costs should be assessed on the indemnity or standard basis, whether payments on account should be made, whether costs should be apportioned, and whether disputed contractual or summary judgment issues justified deferring costs orders.

1. General principles. The ordinary order is for costs on the standard basis. Indemnity costs require conduct or circumstances taking the case out of the norm. They are compensatory, not penal, and may be ordered without proof of fraud, dishonesty or conduct deserving moral condemnation. The assessment removes proportionality and gives the receiving party the benefit of reasonable doubt: [2002] EWCA Civ 365; [2002] EWCA Civ 879; [2001] EWCA Civ 1723.
2. Under Civil Procedure Rules 1998, rule 44.3(8), a court which has ordered costs may order payment on account before detailed assessment. The court should ordinarily make such an order where it has adjudicated the relevant dispute, but must consider all the circumstances, including any appeal and the parties’ financial circumstances. The amount should be one which the court is confident will ultimately be recovered: [2007] EWHC 3499.
3. ARM was entitled to indemnity costs. The allegation of fraudulent misrepresentation against ARM was serious, apparently unsubstantiated, maintained through the jurisdiction application and abandoned only shortly before a defence was due. Those circumstances took the case outside the norm. ARM was also awarded 60 per cent of its estimated costs on account, payable within 14 days.
4. Catalyst and Mr Roberts were entitled to costs on the standard basis. The defendants’ capitulation and withdrawal of the Utah proceedings did not, without more, justify indemnity costs. The bitter history of the dispute and the fact that the allegedly misrepresentative letters were written by Mr Roberts on behalf of Catalyst distinguished the case from ARM’s position. Mr Roberts was awarded 50 per cent of the estimated costs on account. No apportionment was appropriate.
5. In the Noteholder Proceedings, the abandonment of jurisdiction points, irrelevant or late evidence, abandoned arguments and poorly organised bundles, whether considered separately or together, did not take the case outside the norm. Catalyst was therefore awarded standard costs against Micropower, Mr Lewinsohn and Maximillian, together with 50 per cent of the estimated costs on account. A disputed contractual indemnity and possible summary judgment application in separate proceedings did not justify deferring those orders.
6. Catalyst, and Catalyst and Mr Roberts in the declaratory proceedings, were awarded 50 per cent of the costs of the Friday hearing, including the costs of the present hearing. Payment was allowed within 28 days.

This was a first-instance costs judgment following the court’s earlier decision on jurisdiction in the same proceedings, reported at [2009] EWHC 1964 (Ch). No appeal is stated in the judgment.