MacInnes v Gross

Indemnity costs require conduct that is unreasonable to a high degree and takes the case out of the norm. A weak but properly arguable claim does not meet that threshold merely because it fails on several grounds.

Where costs are subject to an approved budget, that budget is the proper starting point for an interim payment on account. The court will ordinarily proceed on the approved figure unless there is good reason to depart from it. A costs order is not generally a full compensatory award, so an open-ended allowance for currency losses should not be made without a sound and practical basis.

This was a first-instance consequential costs judgment following the principal judgment, [2017] EWHC 46 (QB), in which the claimant’s claims against the first defendant had failed.

The court determined the basis of the first defendant’s costs, interest on those costs, an application for currency-fluctuation losses, and the appropriate interim payment on account. The central issues were whether the claimant’s conduct justified indemnity costs, whether the judgment date for post-judgment interest should be deferred, and how an approved costs budget should affect an interim costs order.

1. The first defendant was entitled to costs on the standard basis, not the indemnity basis. Applying Kiam v MGN Limited [2002] 1 WLR 2810 and Excelsior Commercial and Industrial Holdings Limited v Salisbury Hammer Aspden and Johnson [2002] EWCA Civ. 869, indemnity costs require highly unreasonable conduct which takes the case out of the norm. The claimant’s case had been properly arguable, his evidence did not warrant such a costs sanction, and the litigation had been conducted reasonably and proportionately.

2. Pre-judgment interest on costs was ordered at 4% above base rate, consistently with McPhilemy v Times Newspapers Limited (No. 2) [2002] 1 WLR 934 (CA). For post-judgment interest, the judgment date was deferred by three months to 27 April 2017. The court applied the approach in Involnert Management Inc v Aprilgrange Limited and Others [2015] EWHC 2834 (Comm), so that the paying party would have time to receive and consider the costs claimed before interest at the judgment-debt rate ran.

3. The application for an open-ended order for currency-fluctuation losses was refused. The court distinguished Elkamet Kunststofftechnik GmbH v Saint-Gobain Glass France S.A. [2016] EWHC 3421 (Pat), which concerned a summary assessment supported by evidence and specific figures. A standard-basis costs order does not compensate every actual expense, and currency loss is not closely analogous to interest on costs.

4. Under CPR 3.18, the approved costs budget of £570,000 was the proper starting point for the interim payment. The court made a 10% reduction and added £15,000 for interest. It ordered an interim payment on account of costs of £528,000.

This was a first-instance consequential costs judgment. It followed the principal judgment [2017] EWHC 46 (QB) , in which the claimant’s claims against the first defendant had failed. No appellate history is stated.