Phaestos Ltd & Anor v Ho (Costs)

An indemnity costs order requires conduct taking the case outside the norm, although moral condemnation is unnecessary. The abandonment of a substantial claim after a summary judgment application does not automatically justify indemnity costs, particularly where the claim was reasonably advanced, withdrawn promptly and supported by arguments requiring proper consideration. Costs should ordinarily be assessed summarily only where the bill contains sufficient detail and is not so disproportionate that a reliable assessment cannot be made. Where substantial reservations arise, the court may make an interim payment and remit the balance to detailed assessment.

The claimants obtained the defendants’ withdrawal of claims to equity interests and a higher profit share. They accepted entitlement to costs on the standard basis but sought indemnity costs. The court also had to determine whether to summarily assess the claimants’ costs bill and the defendants’ costs arising from unsuccessful strike-out and security-for-costs applications.

The central issues were whether the defendants’ conduct justified indemnity costs and whether the respective costs bills could fairly be assessed summarily.

1. Indemnity costs. The claimants were entitled to costs on the standard basis, but not on the indemnity basis. The applicable question was whether the circumstances took the case outside the norm; moral condemnation was not required. The defendants had reasonably considered the equity-share claim, withdrew it within a short period, and had not been shown to know or ought to have known that it was doomed to fail.
2. The fact that a substantial or significant part of a party’s case fails at summary judgment does not automatically warrant indemnity costs. The same applies where the defendant abandons the relevant issue before the hearing. The pleaded allegations concerning the alleged personal attack did not justify indemnity costs.
3. Claimants’ costs. The claimants’ bill of £165,733.50 appeared disproportionately large and lacked sufficient detail for summary assessment. An interim payment of £40,000 was ordered, with the balance to proceed to detailed assessment on the standard basis.
4. Defendants’ costs. The defendants’ costs of the strike-out application were reduced by 10 per cent to reflect issues capable of resolution by cooperation and amendment, then by a further 30 per cent on general standard-assessment grounds, producing £61,600. Their security-for-costs costs of £54,178 were reduced by 30 per cent to £37,900. Those sums were payable within 14 days.