Criterion Buildings Ltd v McKinsey & Company Inc (United Kingdom) & Anor

A contractual provision requiring payment of costs may justify assessment on the indemnity basis where its wording is inconsistent with proportionality, even if it refers to costs properly incurred. The court may depart from an indemnity costs award based on contract only where the circumstances justify doing so. Weakness in a losing party’s case does not, by itself, take litigation out of the norm, but cumulative litigation failures, an unaccepted settlement offer and the contractual allocation of costs may justify indemnity costs. Permission to appeal requires a prospect of success that is not unreal, or another compelling reason. An appellate court will not interfere with a finding of fact unless it is plainly wrong.

The judgment concerned consequential matters following an earlier judgment in proceedings between the claimant, Criterion Buildings Ltd, and the defendants, McKinsey & Company Inc (United Kingdom) and McKinsey & Company Inc. The defendants accepted liability for the claimant’s costs, and the parties agreed the amount payable on account, but disputed the basis of assessment.

The court decided whether lease covenants supported indemnity costs, whether the defendants’ conduct independently justified that basis, whether permission to appeal should be granted on five proposed grounds concerning service-charge apportionment and sinking funds, and whether time for lodging an appellants’ notice should be extended.

1. Costs. The lease covenants required the defendants to pay costs and expenses without restricting recovery to proportionate costs. Under the Civil Procedure Rules 1998, the principal distinction between standard and indemnity assessment is proportionality. The expressions “properly incurred” and “reasonable” did not prevent an indemnity costs order. The court therefore declined to follow Primeridge Ltd v Jean Muir Ltd and ordered indemnity costs.
2. The contractual provisions were not conclusive, but they were an important factor. Even assuming that Primeridge Ltd v Jean Muir Ltd prevented an indemnity award based solely on contract, the defendants’ cumulative conduct, including pursuing unsupported points, raising new arguments, failing to plead opposition to one issue, abandoning issues late, and rejecting a time-limited Part 36 offer, justified indemnity costs. Losing badly, without more, does not take a case out of the norm.
3. Permission to appeal. Under CPR rule 52.6, a first appeal requires a real prospect of success, meaning a prospect that is not unreal, or another compelling reason. The threshold does not oblige the court to grant permission once met. Grounds 1 and 2 were misstated or unsupported by pleaded facts and evidence. Ground 3 required an unwarranted implication into the lease. Ground 4 challenged factual findings without showing that they were plainly wrong. Ground 5 failed because the protection clause formed part of the contractual machinery and applied to the operation of the service-charge provisions.
4. Permission to appeal was refused because none of the proposed grounds met the CPR rule 52.6 threshold. Time for lodging an appellants’ notice was nevertheless extended to 11 March 2021, given the short extension sought, counsel’s intended input and the absence of real delay.

The judgment dealt with consequential matters following an earlier first-instance judgment in the same proceedings. No citation for that earlier judgment is stated in the judgment. Permission to appeal was refused, but time for lodging an appellants’ notice was extended to 11 March 2021.