Simmons & Simmons Llp v Hickox

Indemnity costs may be ordered where a party’s conduct takes the litigation out of the norm and is unreasonable to a high degree. That may include seeking summary judgment on a point of foreign law without supporting expert evidence, abandoning the application only after the opposing party has incurred substantial costs, and failing to plead a defence to the remaining claim.

Costs caused by the application, including expert fees, should not be excluded merely because they might later prove useful. An interim payment may be assessed by reference to the proportion of costs commonly used as a guide. A further payment into court should not ordinarily be ordered to punish the same conduct twice where indemnity costs provide an adequate consequence.

The claimant, a firm of solicitors, brought claims for outstanding fees and a further sum said to arise under a contingency fee agreement connected with litigation in Anguilla. The defendant sought an extension of time to serve a defence, but on expiry of the extension applied for summary judgment on the contingency-fee claim.

The application depended on expert evidence about Anguillan law. The defendant’s expert report was served late and was too equivocal to establish that the agreement was plainly unenforceable. The application was abandoned after the claimant served responsive expert material. The court therefore determined the parties’ dispute about costs, the defendant’s obligation to plead a defence, payment into court and case-management directions.

1. The summary judgment application was abandoned and the defendant was ordered to pay the claimant’s costs of it. The costs were to be assessed on the indemnity basis.

2. Indemnity costs were justified because the defendant’s conduct, viewed in the round, was out of the norm and unreasonable to a high degree. The defendant had twice sought extensions for serving a defence, then issued a substantial summary judgment application on the day the final extension expired. The application was unsupported by the expert report served in support of it, which was too equivocal to establish that the claim was plainly unenforceable. The absence of any explanation for the change of course supported the inference that the application was a delaying tactic.

3. The defendant’s failure to serve a defence to the separate claim for outstanding fees was also significant. Although the summary judgment application prevented default judgment under CPR 12.3(3), it did not prevent service of a defence. In practical terms, a defence was required, particularly because the application did not address the whole claim and the legal point could have been pleaded shortly.

4. The indemnity costs order included the experts’ fees and associated costs. The defendant had caused those costs to be incurred and could not exclude them merely because some material might later prove useful. It was also unclear whether the existing report, or the same expert, would be relied upon at trial.

5. An interim payment on account of costs of £40,000 was ordered. The figure represented approximately 40 per cent of the costs incurred and reflected the guide referred to in Mars v Te Knowledge [1999].

6. The court refused to order payment of the outstanding-fees claim into court under CPR 3.1 or CPR 3.5. Indemnity costs already penalised the defendant for the relevant default, and a further order would impose a disproportionate double penalty. However, an unless order required the defence and counterclaim, if advised, to be served by 19 June 2013, failing which the claimant would be entitled to judgment on the full amount.

7. The court decided to make detailed trial directions immediately, notwithstanding the possibility that a counterclaim might later require modification.

The judgment records no determination by an appellate court. The defendant’s intended summary judgment application was abandoned, and this court determined the resulting costs and case-management issues.