Linklaters Business Services v Sir Robert McAlpine Ltd & Ors

Indemnity costs require conduct or circumstances taking the case out of the norm. Unreasonableness may suffice and moral condemnation is unnecessary. The court may consider conduct throughout the proceedings, including the strength of the claim and the manner in which it was pursued.

Where a claimant’s Civil Procedure Rules 1998 Part 36 offer is bettered by the judgment, the usual enhanced costs and interest consequences apply unless unjust. The court must assess the practical effect and clarity of the offer, the information available, the timing, and the parties’ conduct. Interim payments on account should be based on the likely recoverable costs, allowing an appropriate deduction for uncertainty and assessment.

The judgment concerned costs and interest following an earlier trial in which Linklaters obtained judgment for approximately £2.845 million against the McAlpine and How companies. How was liable to indemnify McAlpine. How’s separate claim against Southern failed.

The court determined the consequences of several settlement offers, including Part 36 offers made by Linklaters, Southern’s offers to resolve the claim against it, and McAlpine’s offer to withdraw in reliance on the indemnity. The issues included indemnity costs, costs of appeals, interim payments on account, copying costs, and enhanced interest.

1. Southern and How. How’s claim against Southern was weak and speculative by the time the expert evidence had been exchanged. Southern’s offers should reasonably have been accepted. How was therefore ordered to pay Southern’s costs on the indemnity basis from 16 July 2010, allowing seven days after expiry of the offer for consideration of the evidence.

2. Costs of the appeals. How was ordered to pay half the costs of and occasioned by the appeals. The offer which could have avoided further proceedings, Southern’s eventual success on the relevant duty issue, How’s success in establishing a duty owed to it, and the timing of the appeals were all relevant.

3. Indemnity costs generally. Applying the principles stated in Three Rivers DC v Governors and Company of the Bank England [2006] EWHC 816 (Comm), indemnity costs require conduct or circumstances taking the case out of the norm. Unreasonableness is sufficient; moral condemnation is not required. How’s conduct before 7 September 2010 did not meet that threshold in relation to Linklaters.

4. Part 36 offers. The offers made by Linklaters complied with Civil Procedure Rules 1998 Part 36.2. Once the clarification of 1 September 2010 made the overall compromise clear, there was no good reason not to accept it. Under Part 36.14(3), Linklaters was entitled to indemnity costs from 7 September 2010, with standard costs before that date, together with interest at 5% above base rate on damages and costs from that date.

5. Interim payments. Applying Mars UK Ltd v Teknowledge Ltd [2008] EWHC 226 (Pat), an interim payment should normally be a lesser sum than the likely full costs. The court should consider the basis of assessment, the likely deduction, and the uncertainty inherent in a summary bill. The court ordered £1.2 million for Linklaters’ costs and £850,000 for McAlpine’s costs.

6. Linklaters recovered only half the costs of copying the maintenance bundles because the documents had been collected without sufficient selection. Judgment-rate interest applied from the judgment date, with payment due by 14 December 2010.

The judgment records that the Court of Appeal declined to deal with one appeal and adjourned another. That procedural history concerned the earlier interlocutory judgments and did not make this costs judgment appellate.