Puharic v Silverbond Enterprises Ltd

Indemnity costs require conduct or circumstances taking the case outside the norm of ordinary and reasonable litigation. A failed claim, without more, does not justify that basis of assessment. Where costs are subject to detailed assessment, the court should ordinarily order a reasonable payment on account. For costs covered by an approved budget, the court should recognise that the costs judge will not depart from it without good reason. A payment of 90% of the approved budget may therefore be appropriate where no such reason is identified. Incurred costs not subject to approval require a separate assessment of what is reasonable, having regard to the relevant circumstances and guidance.

The court had already given judgment for the defendant in a reserved judgment dated 19 February 2021. The parties agreed that the claimant should pay the defendant’s costs, subject to detailed assessment, and that a payment on account should be ordered.

The consequential issues were whether costs should be assessed on the standard or indemnity basis, whether interest should be awarded on costs incurred before judgment, and what amount should be paid on account.

1. Costs basis. Indemnity costs may be appropriate where conduct of the action or the circumstances of the case take it outside the norm of ordinary and reasonable proceedings. The claimant’s unsuccessful claim and the manner in which it was conducted did not meet that threshold. Costs were therefore ordered on the standard basis.
2. Interest. Under CPR 44.2(6)(g), the court has discretion to award interest on costs incurred by a successful party for periods before judgment. Such an award was appropriate. Interest was awarded from the dates on which the defendant’s costs were paid, at 2% above the applicable base rate, in the sum of £2,057.75.
3. Payment on account. Under CPR 44.2(8), a party ordered to pay costs subject to detailed assessment should pay a reasonable sum on account unless there is good reason otherwise. In determining that sum, the court should have regard to CPR 3.18, under which the detailed assessment judge will not depart from an approved or agreed budget without good reason. Following the approach in MacInnes v Gross [2017] 4 WLR 49 and Thomas Pink Ltd v Victoria’s Secret UK Ltd [2014] EWHC 3258 (Ch), 90% of the approved budgeted costs was appropriate where no reason to depart from the budget had been identified.
4. Costs incurred before costs management were not subject to the same constraint. Applying the guidance in Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm), 70% of the incurred costs was reasonable for the purposes of an interim payment. Half of the budgeted costs for the vacated PTR phase and the defendant’s budgeting costs were also allowed.
5. The claimant was ordered to pay £187,121.13 on account, inclusive of VAT, together with the defendant’s costs on the standard basis and pre-judgment interest of £2,057.75.