Rawlinson & Hunter Trustees SA v ITG Ltd & Ors

An indemnity costs order requires conduct which is unreasonable to a high degree or a case which is sufficiently out of the norm. Even where an application constitutes an abuse of process, costs may remain subject to the standard basis if the overall circumstances do not meet that threshold.

The default under CPR r. 47.1 is that detailed assessment occurs at the conclusion of proceedings. Immediate assessment may be refused where it could deprive a party of a substantial possibility of setting off a later costs order, particularly where the opposing party’s solvency is uncertain. The same considerations may justify refusing payment on account.

The claimant had previously applied to re-amend its claim. In the earlier judgment, [2015] EWHC 1664 (Ch), Mr Justice Morgan held that the application was an abuse of process and dismissed it.

The parties agreed that the claimant should pay the defendants’ costs of that application but disputed whether those costs should be assessed on the indemnity or standard basis, whether detailed assessment should take place immediately under CPR r. 47.1, and whether the claimant should make a payment on account under CPR r. 44.2(8).

1. Basis of assessment. The court ordered the claimant to pay the defendants’ costs of the application, assessed on the standard basis. An indemnity assessment reverses the usual burden concerning reasonableness and removes proportionality as a restriction. It is justified only where the case is out of the norm or the relevant conduct is unreasonable to a high degree.
2. The application was an abuse of process, and aspects of the claimant’s conduct were disingenuous or distinctly odd. However, other matters relied upon by the defendants did not materially advance their case. Overall, the case was not sufficiently out of the norm and the conduct was not sufficiently unreasonable. The application remained one to which the defendants should have responded proportionately, so proportionality continued to apply.
3. Immediate assessment. Although CPR r. 47.1 permits departure from the default timing of assessment, immediate assessment was refused. The continuing proceedings included a loan claim, and the defendants’ trustees appeared to be insolvent. If the claimant later obtained costs in its favour, immediate payment of the defendants’ costs might prevent effective recovery through set-off.
4. Under CPR r. 44.12, a court may permit set-off between two costs orders, and that process is not equitable set-off. The court applied R (Burkett) v London Borough of Hammersmith and Fulham [2005] 1 Costs LR 104 and followed the approach in Hicks v Russell Jones & Walker [2001] C.P. Rep. 25, where immediate assessment was withheld because it could cause substantial injustice by undermining a possible future set-off.
5. Payment on account. The same considerations justified refusing an order under CPR r. 44.2(8) for payment on account.

The judgment records that an earlier application was dismissed as an abuse of process in [2015] EWHC 1664 (Ch). This judgment determined the consequential costs issues.