Ikos Cif Ltd & Ors v Hogan Lovells International LLP

An unexplained abandonment of an otherwise proper application does not, without more, justify indemnity costs. The conduct must go beyond the norm and be sufficiently serious, in its nature and context, to warrant the court’s censure or an equivalent enhanced costs order. Relevant considerations include whether the conduct caused additional costs and whether it was independently deserving of censure. Where a party’s conduct has materially contributed to costs disputes, the court may depart from the usual costs rule and order each side to bear its own costs.

IKOS brought proceedings against Hogan Lovells seeking delivery up of alleged infringing software under sections 99 and 114 of the Copyright, Designs and Patents Act 1988. Hogan Lovells applied to strike out the claim or obtain summary judgment, seeking indemnity costs. The application was abandoned before determination.

IKOS accepted standard-basis costs up to abandonment but sought indemnity costs. Hogan Lovells sought their own costs after abandonment, also on an indemnity basis. The issues were whether the conduct surrounding the application and its unexplained abandonment justified indemnity costs, and how the post-abandonment costs should be allocated.

1. The court refused IKOS’s application for indemnity costs and rejected Hogan Lovells’ application for costs incurred after the abandonment, including indemnity costs.

2. Following Excelsior Commercial and Industrial Holdings v Salisbury Ham Johnson [2002] EWCA Civ 879, indemnity costs require conduct beyond the norm and conduct sufficiently serious, in its nature, consequences and context, to justify the stronger costs order. Relevant considerations may include whether the conduct caused costs to be incurred and whether it was independently deserving of censure.

3. Mere abandonment of an application is insufficient. An unexplained abandonment may be abnormal, but it does not itself establish impropriety or justify indemnity costs. The original strike-out application was not hopeless or improper, although aspects of the supporting evidence were unwise and excessively cautious.

4. The absence of a proper explanation for abandonment, together with the wording of the second witness statement, amounted to culpable conduct to a limited extent. It did not, however, justify indemnity costs because the abandonment itself caused no additional costs and was not an improper procedural step.

5. IKOS was entitled to the costs of reasonably considering the abandonment, as part of its standard-basis costs. Thereafter, neither side should recover the costs of the indemnity-costs dispute. Each party was therefore to bear its own costs for that period.