One Blackfriars Ltd, Re

Indemnity costs require conduct or circumstances taking the case outside the norm. Unreasonable conduct must generally be serious, but moral condemnation or exceptional conduct is unnecessary. The court may make a limited indemnity costs order for discrete aspects of expert evidence or pleaded issues without imposing indemnity costs on the proceedings as a whole.

An interim payment on account of costs is a reasonable estimate, not merely the irreducible minimum. The court should allow for uncertainty and consider factors including likely recovery, assessment difficulties, appeal prospects, means, delay and overpayment. Interest on costs may appropriately be set at 2% above base rate, and judgment interest may be deferred until the receiving party has had a fair opportunity to quantify and present the costs claim.

The joint liquidators of One Blackfriars Limited sought consequential directions after their claim against the former administrators had been dismissed in [2021] EWHC 684 (Ch). The parties agreed that the liquidators would pay the former administrators’ costs, interest on costs and an interim payment.

The court determined the remaining disputes: the costs of a security-for-costs application; whether costs should be assessed on the standard or indemnity basis; the amount and source of an interim payment; liberty to apply under section 51 of the Senior Courts Act 1981; the rate of interest on costs; and the date from which judgment interest should run.

1. Security for costs. The former administrators succeeded in the security application. The application and exchange of evidence materially assisted resolution of the dispute about the form of security. Costs were summarily assessed at £25,000.
2. Indemnity costs. The governing question under CPR 44.2 was whether the conduct or circumstances took the case outside the norm. The test did not require exceptional conduct or moral condemnation. The expert evidence of Mr Clarke was unreasonable to a sufficiently serious degree. The former administrators were therefore entitled to indemnity costs for their valuation evidence and the associated trial work. The sales and marketing case was inadequately particularised and was later pursued through changing, thin and unpleaded allegations. Indemnity costs were ordered for that evidence and for the sales and marketing aspect from 1 August 2019. The claim as a whole was not sufficiently outside the norm to justify a wider indemnity costs order.
3. Interim payment. Under CPR 44.2(8), the appropriate sum was an estimate subject to uncertainty, rather than the irreducible minimum. Having regard to the complexity of the case, expert expenditure and the limited indemnity-costs findings, £6.5 million was ordered as an interim payment on account of costs, payable within 28 days. No direction was made that the sum be taken from security.
4. Other directions. Liberty to apply under section 51 of the Senior Courts Act 1981 was refused because it added nothing and there was no evidence of non-payment.
5. Interest. Interest on costs was awarded at 2% above base rate, following Marathon Asset Management LLP v Seddon and Hosking v Apax Partners LLP. Judgment interest under section 17 of the Judgments Act 1838 was ordered to run from 1 August 2021, three months after judgment, following Involnert Management Inc.

The judgment concerned consequential costs and interest issues following the dismissal of the claim in [2021] EWHC 684 (Ch). The application for permission to appeal was reserved for a separate judgment.