Shackleton And Associates Ltd v Shamsi & Ors

Indemnity costs require conduct or circumstances taking the case out of the norm, usually involving a significant level of unreasonable conduct. Refusal of a settlement offer will rarely suffice without more. The court may consider the party’s conduct as a whole, including later conduct, when deciding whether bad faith and deliberate delay can be inferred.

A successful corporate litigant may recover a reasonable and fair amount for professional work performed by its solicitor-advocate shareholder, even where the company has no contractual liability to pay that person. The indemnity principle is not infringed where the company suffers a broadly understood loss, subject to deductions for duplication, unnecessary work and an appropriate hourly rate.

The claimant had obtained ICC arbitration awards for legal fees owed by its former clients. The defendants resisted enforcement while pursuing a jurisdictional challenge in France. After the French proceedings ended unsuccessfully, the claimant sought orders determining reserved costs, indemnity costs and recovery for work performed by its sole shareholder, Mr Shackleton.

The court had to determine the appropriate costs order for one earlier hearing, whether the defendants’ conduct justified indemnity costs, and whether the claimant could recover costs for Mr Shackleton’s work despite not being liable to remunerate him.

1. The claimant was awarded 80% of its costs of the hearing before Flaux J. The remaining 20% was subject to no order as to costs. The allocation reflected the claimant’s ultimate success in enforcing the award, while recognising the issues on which the defendants had succeeded.

2. An indemnity costs order is justified where conduct or circumstances take the case out of the norm, usually through a significant level of unreasonable conduct. The proportionality requirement is removed, although costs must still have been reasonably incurred.

3. The court was entitled to consider the defendants’ conduct in the proceedings as a whole, including events after the hearing at which costs had been reserved. The defendants’ weak jurisdictional challenge, repeated delays in providing security, attempts to raise unparticularised public-policy objections, and delayed payment of a further award showed that they lacked a genuine defence and were acting to delay payment. That conduct justified indemnity costs.

4. Following Kiam v MGN [2002] 1 WLR 2810, refusal of a settlement offer was not, in these circumstances, sufficiently unreasonable to justify indemnity costs.

5. The claimant could recover a reasonable and fair amount for Mr Shackleton’s professional work. The authorities, including London Scottish Benefit Society v Chorley [1884] 13 QBD 874 and Malkinson v Trim [2003] 1 WLR 463, established that the indemnity principle does not require liability to pay for professional services where the litigant has suffered a broadly understood loss. The claimant’s inability to use Mr Shackleton’s time to earn fees was sufficient.

6. The recoverable amount was for detailed assessment. Relevant considerations included duplication with Gateleys’ work, the appropriate hourly rate, and whether particular items were reasonably necessary. A reasonable rate might be the rate charged by the instructed solicitor rather than Mr Shackleton’s substantially higher rate.