O'Neill v AVIC International Corporation (UK) Ltd

The successful party ordinarily recovers its costs, but the usual standard basis should be displaced only where the conduct is out of the norm or unreasonable to a high degree. Deliberate misconduct, dishonesty or moral blame is unnecessary. A litigant in person’s status is a relevant contextual factor, although it does not confer immunity from costs consequences. Rejection of reasonable settlement offers will not ordinarily justify indemnity costs by itself. The court may award enhanced interest on costs following a defendant’s Part 36 offer, subject to the applicable statutory limit. A payment on account should be reasonable and should take account of the assessed costs, the paying party’s resources and any possible appeal.

The claimant’s substantive claim against the defendant had been dismissed on 1 February 2019, and permission to appeal had been refused. The court reserved consequential issues concerning the incidence and basis of costs, interest on costs, and payment on account.

The defendant sought costs on the indemnity basis, relying on the claimant’s pre-action and litigation conduct and his rejection of settlement offers. The court also had to determine the appropriate rate and commencement date for interest on costs, and the amount and timing of any payment on account.

1. Costs. The defendant, having succeeded, was entitled to its costs under Civil Procedure Rules 1998, r 44.2(2)(a). There was no reason to depart from that starting point.
2. Basis of assessment. The discretion to order indemnity costs is broad and fact-sensitive. Standard-basis assessment remains the usual order. Indemnity costs require conduct out of the norm, or unreasonable conduct to a high degree; deliberate misconduct, dishonesty and moral blame are not essential. The court applied the principles in Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson (Costs) [2002] EWCA Civ 879.
3. The claimant’s rejection of three settlement offers was not, by itself, conduct out of the norm. The court applied Kiam v MGN Ltd (No 2) [2002] EWCA Civ 66 at [13]. The claimant’s status as a litigant in person, the stress of the litigation and the fact that the allegations did not materially lengthen the trial were relevant mitigating considerations. The appropriate order was therefore costs on the standard basis.
4. Interest. The court ordered interest on costs under Civil Procedure Rules 1998, r 40.8(2), together with the enhanced-interest powers under rr 36.17(1)(b) and 36.17(3). Interest was awarded at 1% above base rate for earlier costs and 4% above base rate from 3 September 2016, subject to the 10% ceiling.
5. Payment on account and permission to appeal. Under r 44.2(8), the claimant was ordered to pay £140,000 on account within eight weeks. The court treated any application for permission to appeal against this consequential judgment as separate from the earlier application, and adjourned any such application in accordance with Jackson v Marina Homes Inc [2007] EWCA Civ 1404.

This was a first-instance consequential judgment. The substantive claim had been dismissed on 1 February 2019, and permission to appeal against that judgment had been refused. The present judgment determined consequential costs and related matters.