Payroller Ltd & Ors v Little Panda Consultants Ltd & Ors

An indemnity costs order is exceptional but appropriate where the conduct of a party or other particular circumstances take the case out of the norm. Continuing with a dishonest defence, without evidence or participation at trial, may justify indemnity costs where it causes unnecessary costs to be incurred. A payment on account of costs is ordinarily appropriate under CPR 44.2(8), and the court may order a modest sum where the likely recoverable costs comfortably exceed it.

The claimants succeeded against the fourth defendant and obtained judgment against him. The court then determined consequential matters concerning interest, the basis of assessment of costs and payment on account of costs.

The fourth defendant had pleaded a defence denying dishonesty and asserting that the transactions were legitimate, but ceased participating after disclosure. He did not serve evidence, attend trial or withdraw the defence. The central issues were whether the circumstances justified indemnity costs and whether a payment on account should be ordered.

1. Interest. Interest against the fourth defendant was ordered at 2 per cent above base rate. The rate was not treated as binding merely because it had been agreed with other defendants or ordered following default judgment, but those outcomes were informative of what was commonly awarded. The rate was appropriate in the circumstances.
2. Indemnity costs. The court referred to Excelsior Commercial and Industrial Holdings Limited v Salisbury Hammer Aspden & Johnson [2002] EWCA Civ 879, where the Court of Appeal declined to replace the language of the rules with more detailed guidance and stated that indemnity costs may be appropriate where the conduct of the parties or other particular circumstances take the case out of the norm.
3. The fourth defendant’s conduct satisfied that standard. The defence denied dishonesty and advanced a commercial explanation, although the transactions were found to be dishonest. By maintaining the defence while providing no evidence, attending no trial and offering no explanation, he caused the claimants to incur additional costs in proving their case and disproving the defence. Continuing with a defence known to be unsupported, rather than withdrawing it, took the case out of the norm.
4. Payment on account. The starting point under Civil Procedure Rules 1998 CPR 44.2(8) was that an order for payment on account should be made. The costs budget and the costs incurred, including costs relating to the freezing injunction, supported the conclusion that the recoverable costs against the fourth defendant would comfortably exceed £50,000. A payment on account of £50,000 was therefore ordered.