Deutsche Bank (Suisse) SA v Khan & Ors

A contractual indemnity covering all costs ordinarily entitles the beneficiary to recover costs on the indemnity basis, subject to costs being reasonably incurred and reasonable in amount. The burden lies on the party challenging the costs. Where proceedings are conducted as a common enterprise by several defendants, a joint and several costs order may be appropriate, particularly where the contract supports that result. The court retains discretion over interim payments on account and may allow a short period for redemption before making possession effective, while protecting the relevant property meanwhile.

Following an earlier trial judgment in favour of Deutsche Bank (Suisse) SA, the court determined consequential matters concerning the money judgment, counterclaims, costs, payment on account, detailed assessment, interest, use of disclosed documents and possession of charged properties.

The principal disputes concerned whether the defendants’ contractual liability for costs was joint and several, whether costs should be assessed on the indemnity basis, the appropriate interim payment, and the period to be allowed for redemption before possession was enforced.

1. Costs liability. Clause 16 of the Facility Agreement distinguished between obligations owed by an individual borrower and obligations owed by the borrowers collectively. In its natural meaning, “Borrowers” in clause 16 referred to all the borrowers. The clause addressed general costs, including preparation, negotiation, registration and enforcement costs. The defendants were therefore jointly and severally liable for those costs.
2. The litigation had in substance been conducted collectively. The defendants advanced a common case on virtually all issues and did not take steps to protect or extricate the Khan family from the proceedings after the claim against them was reduced. A joint and several costs order was therefore appropriate.
3. Indemnity basis. The clear weight of authority supported construing “all costs” in a mortgage or similar agreement as all costs reasonably incurred and reasonable in amount. That was equivalent to assessment on the indemnity basis. The burden of showing that costs were unreasonable lay on the party making that allegation. The contractual bargain justified exercising the court’s discretion under the CPR to order indemnity costs.
4. The separate contention that indemnity costs should follow from unreasonable litigation conduct was left undecided, as was the proposed disclosure application concerning litigation funders.
5. Other consequential orders. The appropriate payment on account of costs was £2,100,000. Interest on costs was payable from payment at base rate plus 1%. The defendants were allowed two months to pursue redemption of the charges, rather than the three months sought, and payment on account was tied to that period. During it, no person was to be allowed to enter into leases or other arrangements concerning the properties. The remaining orders were made substantially in the terms sought.

First-instance consequential judgment following a trial. No appellate history is stated in the judgment.