Kearns v Kemp & Anor

Indemnity costs require more than an unsuccessful claim or discontinuance. The court must identify conduct or circumstances taking the case out of the norm, involving a significant degree of unreasonableness. Conduct is assessed judicially and may include the way particular allegations or applications were pursued and whether litigation was conducted proportionately. Where costs are subject to detailed assessment, a payment on account should ordinarily be ordered unless there is good reason to withhold it. The amount should reflect the proportion of costs likely to be recovered, while allowing for uncertainty on assessment, including any success fee or indemnity-basis uplift.

The claimant discontinued a libel claim against the first defendant and Twitter Inc. He accepted responsibility for the defendants’ costs. The issues were whether the first defendant’s costs should be assessed on the standard or indemnity basis, and the appropriate payments on account for both defendants.

The court considered the claimant’s conduct in pursuing the claim, an appeal concerning an unless order, enquiries into the first defendant’s means, an erroneous jury-trial order, the addition of the second defendant, the proposed security-for-costs application and payment on account.

1. Applicable principles. Both bases permit recovery only of costs reasonably incurred and reasonable in amount. On the standard basis, doubt is resolved in favour of the paying party and proportionality must also be shown. On the indemnity basis, doubt is resolved in favour of the receiving party. The court has a judicial discretion, but the standard basis is the default and departure requires good reason. Conduct is particularly relevant, and must take the case out of the norm. The relevant test is unreasonableness, not moral condemnation. Failure and discontinuance alone are insufficient.
2. The claimant’s conduct became unreasonable to the required degree. The court did not conduct a mini-trial or strike-out hearing, but was entitled to consider the limited publications and the weakness and proportionality of the litigation. The claimant’s prolonged investigation of the first defendant’s means became disproportionate once the related appeal was substantially moot. His failure to explain the basis on which he opposed security for costs, refusal of an offer to withdraw the tweets and undertaking not to repeat them, extensive pursuit of the mistaken jury-trial order, threat of adverse costs concerning the addition of Twitter, and failure to engage with payment on account were further unreasonable conduct.
3. The costs of the first defendant, including the appeal and security-for-costs application, were to be assessed on the standard basis up to and including 10 May 2013, and thereafter on the indemnity basis. Costs of seeking an extension of time were treated as costs in the case and assessed on the standard basis. The costs of the hearing before the judge were also assessed on the standard basis, because the claimant’s conduct in that hearing was not itself out of the norm.
4. Under CPR rule 44.2(8), a payment on account was required. The first defendant was awarded £82,380, allowing for the likely recoverable costs, an 80 per cent uplift and VAT. The second defendant’s costs were to be assessed on the standard basis, with £18,000 payable on account. Both sums were payable within 14 days.

The claimant’s claim was discontinued on 18 November 2013. An appeal concerning part of an earlier unless order had been discontinued by consent on 23 July 2013, with costs reserved. This judgment determined the consequential costs bases and payments on account.