Koza Ltd & Anor v Koza Altin Isletmeleri As

An indemnity costs order may be justified where a party’s conduct is outside the norm, including where the resistance to an application is inherently weak, inconsistent with earlier decisions, and involves a direct-interest party who has made no contribution to the relevant costs. Costs relating to a distinct application may nevertheless remain payable on the standard basis where no exceptional conduct is established. Under CPR 44.2(8), a payment on account should ordinarily be ordered when costs are subject to detailed assessment. The sum should be a reasonable estimate of likely recovery, with an appropriate margin for error. Difficulty in estimating the sum is not, by itself, a good reason to refuse an order.

The judgment determined the costs of applications made by Koza Altin Isletmeleri AS. Those applications had sought restraints on Koza Ltd’s expenditure on legal costs and the New Authority Claim, restraints on a US$9 million commitment to the SAM project, and financial information. The substantive applications had been determined in the March judgment, with the legal costs and financial information relief granted and the SAM relief refused.

The issues were whether Hamdi Akin Ipek should pay the successful application costs on the indemnity or standard basis, and what sums should be paid on account pending detailed assessment.

1. Indemnity costs. Mr Ipek was ordered to pay the costs of the legal costs applications on the indemnity basis. His defence was outside the norm because it challenged the characterisation of the dispute as substantially one between shareholders, despite decisions of the Supreme Court, the Court of Appeal and Mr Cousins QC, and despite his direct interest as a shareholder and failure to contribute to the costs. The principles concerning conduct outside the norm, referred to in Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson [2002] CP Rep 67 at [31], were applied.
2. The costs of the financial information application were payable on the standard basis. No grounds justifying indemnity costs had been advanced or established. That application concerned the wider dispute and policing of the Asplin order rather than the legal costs applications specifically.
3. Payments on account. Since the parties accepted that detailed assessment was appropriate, Civil Procedure Rules 1998 rule 44.2(8) required a reasonable sum on account unless there was good reason not to order one. The relevant sum was not the irreducible minimum. It was an estimate of likely recovery, subject to a suitable margin for error. The guidance in Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC (Comm) 566 at [22]–[23] was applied.
4. Koza Altin was awarded £140,000 on account of its legal costs and financial information applications. Koza was awarded £190,000 on account of its SAM application. The difficulty of assessing the apportionment and validity of the costs schedule did not justify refusing payment altogether; it required a cautious estimate and an appropriate margin.
5. No special direction was made concerning how sums paid to Koza should be applied. Any such restriction or sanction would require a properly issued application identifying the relief sought and its grounds.